Civil aerospace decline cuts into Meggitt’s finances

Harry Lye 10 November 2020 (Last Updated November 10th, 2020 12:44)

BAE Systems has awarded Meggitt a £4.2m contract to supply nose radome technology for the Eurofighter Typhoon’s Multi-Function Array radar system.

Civil aerospace decline cuts into Meggitt’s finances
Image: Meggitt.

BAE Systems has awarded Meggitt a £4.2m contract to supply nose radome technology for the Eurofighter Typhoon’s Multi-Function Array radar system.

The radome developed by Meggitt protects instrumentation from environmental effects and prevents electromagnetic interference with the equipment.

BAE Systems is working with Leonardo to equip some UK Typhoons with the new European Common Radar Systems Mk 2 (ECRS Mk 2) which gives the fighters the ability to locate, identify and suppress adversaries air defences.

Meggitt’s Airframe division president Chris Allen said: “This next-generation radar will provide game-changing capabilities to the Typhoon. Our Stevenage facility is a specialist site for this class of cutting-edge radome development and manufacture.

“We are so proud to be associated with this programme, working with BAE Systems and Leonardo to meet the future ongoing operational needs of the RAF.”

Meggitt also announced today it has been contracted to supply fuel bladders for the F/A-18 Super Hornet, under a $5.5m deal with the US Defense Logistics Agency. Deliveries are scheduled to begin this month.

Allen said: “We thank the DLA Philadelphia for their continued endorsement of our fuel bladder solutions.

“We are proud to be playing our part in safeguarding the lives of active servicemen and women around the world with our pioneering technologies.”

The bigger financial picture

The news of the two contracts came as Meggitt released its third-quarter trading statement and guidance for the full year 2020. The company estimates its full-year profits will be between £180m and £200m.

While the decline of civil aviation has delivered a blow to the company’s finances, its defence business has recouped some of that damage growing by 9% in Q3 and up 8% for the first nine months of 2020.

In its Q3 trading statement, Meggitt wrote: “In defence, conditions in our core US market remained positive, with 4% growth in overall US DoD outlays during the quarter ended 30 September.

“Improving fleet readiness and modernisation remain core priorities within the US defence budget for 2021, and consequently, the external environment is expected to remain supportive in the near-term.”

Across the group, revenue in the third quarter of 2020 was down by a quarter to £384m compared with the same period last year, with group revenue for the past nine months down by 18% to £1.3bn.

Meggitt CEO Tony Wood wrote: “While conditions in the global civil aerospace sector remained weak during the third quarter, our top line performance slightly improved, with revenue down 25% in the period, compared with down 30% in the second quarter, reflecting the breadth of our end markets and the continued strong performance of our defence business and growth in energy.

“Although expectations of the extent of the recovery in civil aerospace in the important final quarter have softened in recent weeks, our global teams continue to focus on actions within our control, including our cost and cash actions where we have made strong progress.”