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Article Excerpt
TERRY TWIGGER, CHIEF EXECUTIVE, MEGGITT PLC: Good morning ladies and gentlemen and welcome to the 2008 preliminary results for Meggitt PLC. I am going to talk briefly about the business overview and what an outstanding year we had in 2008. Stephen will take you through what we think are an excellent set of financials. Then I will describe the operational highlights and some scenarios for where our markets might be going and what our contingency plans are.
Meggitt had a great performance in 2008. Orders, revenues and underlying earnings have all shown significant double digit increases. We continue to invest in new products and programs, leaving us well placed to respond to the future.
We had some important program wins in our key markets which will position us for growth in the long term. I'll touch on these later in the presentation.
We beat our 2008 synergy target for K&F by GBP2.5 million; that's a 25% increase. And we're on track to achieve our target synergies of GBP22 million in 2010.
The program of operational excellence initiatives we've put in place continued to benefit margins. We continued to consolidate businesses, we expanded our low cost manufacturing, and we delivered global procurement savings of GBP11 million in 2008. And very importantly in today's credit markets, we extended the maturity of our bank facilities. So we're well positioned to face a challenging environment in 2009.
The current economic crisis will impact on the Group's markets, although at this stage, the precise effects are still unclear. What we are confident of is Meggitt's portfolio is well balanced; we're on most platforms; we're not dependent on any single customer, program or market segment; our proprietary technology, predominantly sole source positions and large installed base, will continue to generate substantial aftermarket revenues.
Ongoing operational excellence programs, such as global procurement and low cost manufacturing, will continue to reduce cost increases.
Our crystal ball is no better than anyone else's, but what we've done is drawn up plans which address a substantial deterioration in the civil market, and I'll discuss these in more detail later. But the bottom line is we will reduce our costs in 2009 by GBP20 million, and by a run rate of GBP50 million a year by the end of 2010.
Meggitt has a strong balance sheet. We're well within our covenants, and because of the prompt action taken last summer, we don't need to renew facilities until 2012.
And last but not least, at current exchange rates, Meggitt will benefit from a positive currency tailwind. Every $0.01 movement from $1.83 is worth GBP1 million of PBT. We know what to do, and we're well positioned to respond.
So now I'll hand you over to Stephen, who will put some more flesh on the bones of the 2008 results.
STEPHEN YOUNG, GROUP FINANCE DIRECTOR, MEGGITT PLC: Thank you, Terry, and good morning. Starting with the income statement, and as always, I'm going to concentrate on the underlying trading results for the Group highlighted here in yellow.
We had a very good 2008, which included double digit organic growth, plus the benefit of a stronger dollar and the full year effect of the K&F acquisition.
In summary, revenue was up 32% to GBP1.163 billion. Underlying operating profit increased 37% to GBP296 million. The increase in finance costs largely reflects the full year impact of the K&F acquisition debt, after which underlying PBT was up 36% to GBP243 million.
After tax at 28%, underlying EPS increased 20% to 26.5p, and with a flat final dividend, the full year dividend payment is 8.45p per share, up 3% on 2007.
Two other points to make before leaving this slide. The pension finance cost, which is a non-cash item, will increase by approximately GBP10 million in 2009, mainly because of movements in asset values, and we expect our tax rate to remain at 28% in 2009.
This slide adjusts for the impact of currency and acquisitions, so what I'm doing here is coming up with, down the bottom of the slide, the organic growth in the business at constant exchange rates. So the top line is our reported results and our reported growth. On the next line, I adjust 2008 back to 2007 exchange rates, so you can see on the third line that our growth in constant currency was 23% for revenues, 28% for operating profit, and 27% for PBT.
On the next line, we add in K&F's unaudited results for the first half of 2007, so that on the last line of the table, we...
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