Defence engineering firm Meggitt spends £5m on Brexit stockpiling

Defence engineering firm Meggitt has spent as much as £5m stockpiling parts and hiring extra customs officials as part of its plans to mitigate a potential no-deal Brexit.

The firm’s shares slumped this morning as it announced in its full-year results it would take around two years before its operating margins significantly improve after being dragged down by its composite materials business in 2018.

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The figures

Statutory operating profit was £256.6m for the year ending 31 December, down six per cent from £272.7m in 2017, while revenue was up four per cent from £1.99bn to £2.08bn.

Net debt increased to £1.07bn, up one per cent year-on-year, while orders rose eight per cent from £2.08bn to £2.24bn.

Meanwhile statutory earnings per share plummeted to 23.2p, down 39 per cent from 37.8p the year before.

Why it’s interesting

Despite being a major supplier to Airbus, Meggitt said it is not expecting to be hit hard by Brexit, “given that less than 5 percent of the group's revenues are transacted between the UK and the EU”.

But it said it still needed to "buffer stocks" to mitigate against the effects of a potential no-deal scenario, in which pan-European supply chains might be disrupted.

The company’s margins were weighed down by its polymers and composites division, which makes sophisticated engine parts which can withstand high temperatures from composite materials.

Meggitt supplies parts such as wheels and brakes for military fighter jets in the US, and its shares have soared nearly 20 per cent in the first months of 2019, amid repeated commitments to spend more on defence by President Donald Trump.

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After an initial 10 per cent drop this morning, the firm's share price eventually recovered to one per cent down at 559.1p this afternoon.

What Meggitt said

Tony Wood, chief executive, said: “We have a clear growth strategy and remain focused on driving further improvements in customer and operating performance through our new customer-aligned organisation and the sustained deployment of the Meggitt Production System.”