In double-quick time Meggitt (OTC:MEGGF) has developed a strong position in the aerospace composites market, focusing on civil engine components and structures. The rapid capital deployment into this high-growth segment should improve perception following recent travails, and start to move focus away from the issues at the smaller oil & gas exposure at Heatric. The recent acquisitions are a reinforcement of Meggitt’s aerospace credentials and should lead to some recovery in the rating decline seen over the last two years.
Meggitt (LONDON:MGGT) growing in civil aero composites
Following on from the $200m acquisition of Cobham’s (LONDON:COB) advanced composites business in mid-August, Meggitt is acquiring the composites division of EDAC for $340m. Both are to be integrated into Meggitt Polymers & Composites (MPC). The latest acquisition has 579 employees generating FY15 revenues of $104m from four manufacturing sites in North America. FY15 EBITDA is expected to be just over $25m, leading to an EBIT margin of 22.5%, slightly above FY14 and well above existing MPC margin levels. 85% of the EDAC business is civil aero engine related. Revenue growth in the current year of 15% is likely to be broadly sustained as the new civil engine programmes are ramped up, notably CFM’s LEAP and Pratt & Whitney’s PurePower variants for the narrowbody market. The ramp-up requires significant manufacturing capex over the next two years of around 10% of sales.