When seven out of every 10 products you sell is sole-source with your customer – as well as your own invention – it is easy to take things for granted as a first-tier aerospace manufacturer. “We had become a bit complacent sitting on that [intellectual property] position,” admits Tony Wood, who is halfway through his second full year as chief executive of Meggitt.
The UK firm, whose portfolio spans aircraft wheels and brakes to engine controls and fuel-containment systems, today delivered another set of solid six-month results. The figures reflect some of the strategies that the former Rolls-Royce executive has initiated.
A key change by Wood, who took the reins in January 2018 after a year as chief operating officer, was a new corporate structure – with the aftermarket business as one of four divisions. This helped to give a fresh focus to Meggitt’s approach to airline customers and other end-users, says Wood. The company had always been renowned for its technology, and this won it an impressive array of original equipment contracts. However, he says, it was less good at securing long-term support packages, which reduce competitive risk and uncertainty by ensuring a steady revenue stream from the aftermarket.
An example of its new approach is a contract with Lufthansa Technik, signed at June’s Paris air show, which will see Meggitt staff embedded in the German maintenance provider’s Shenzhen complex in China. Under the arrangement, which will come on stream in the next few weeks, that team will directly handle any Meggitt-made content on the aircraft. “A key benefit from this is that we receive all the data, which helps us predict the parts and resources we will need in the future,” says Wood. It is one of seven contracts won under Meggitt’s Smart Support aftermarket proposition in the first half.
The attention to the aftermarket – which currently makes up just under half of Meggitt’s revenues, a proportion likely to rise as the ramp-up on a number of commercial and military programmes eases back – is just one of several corporate shake-ups at the Bournemouth-headquartered firm. In fact, the company will soon not be Bournemouth-headquartered at all. In the first quarter of 2020, it will open a greenfield facility at the Ansty technology park near Coventry that will house a new HQ and parts hub, as well as consolidating four existing UK factories into a single location.
Reducing Meggitt’s sprawling global industrial footprint without damaging capacity or capabilities has been a priority of the company, which, in 2016, had set a target of a 20% reduction in its 56 sites. That number is already down to 42 and will reduce to 35 once Ansty opens next year, and Wood is not ruling out further closures. The moves have seen the average workforce in a Meggitt operation rise from 200 to more than 300, with around 1,000 at the bigger sites. “It means we are now a more grown-up company in terms of career paths,” he says. “It also means we can get a better cost structure and efficiencies.”
In the six months to 30 June, Meggitt reported a 12% increase in revenues to £1.07 billion ($1.3 billion), with 9% coming from organic growth. This reflected, says the company, a “strong trading performance in civil OE and defence”. Underlying operating profit was up 7% to £161 million. Both main sectors contributed to the performance, with revenues in civil aerospace – the largest proportion of Meggitt’s business – up 9% organically, and defence growing 13% on the same basis.
In civil aerospace, there was “particularly good growth” on the Boeing 787 and Airbus A320neo family, as well as the 737 Max. Wood says the company is still delivering 42 shipsets a month for the grounded narrowbody – it supplies $150,000 worth per aircraft of sensors and cockpit equipment, as well as composite parts for the CFM International Leap engine – although it took a hit on the aftermarket side in the first half as airlines cut back on spares provision.
On the business aviation side, Meggitt announced new contracts to supply the braking system for the Embraer Praetor 500/600, worth $500 million over the programme, and the braking and tyre monitoring system on the Dassault Falcon 6X, worth $1.2 billion over the aircraft's lifetime. The company also says that growth in defence orders has been particularly strong, with an organic book-to-bill of x 1.33. Aside from a previously announced 10-year deal for high-temperature composite components on the Pratt & Whitney F-135 engine for the Lockheed Martin F-35, there was new business from Lockheed, Boeing and the US Defense Logistics Agency.
Source: FlightGlobal.com
