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Meggitt on track as military orders offset energy declines

By Sarah Young

LONDON (Reuters) - British engineering components firm Meggitt stuck by its annual guidance after a boost from higher spending on military aircraft offset declines in its energy business in the first half of the year, lifting its shares.

Meggitt, which generates half its revenues from supplying parts for commercial aircraft, reported a 6 percent rise in half-year profit, helped by rising demand for spare parts for business jets and as planemakers Airbus and Boeing ramp up production of jets.

In its military business, which accounts for a third of revenues and where it primarily serves the U.S. Department of Defense, sales were better than expected, which Meggitt said partly reflected more repair work on helicopters.

Meggitt also sells valves used in oil and gas equipment, where it saw an 18 percent drop in first-half organic revenues as customers scrapped projects due to the lower oil price.

For 2015, Meggitt maintained its guidance to deliver organic revenue growth -- which excludes the impact of acquisitions, disposals and currency moves -- in the low to mid-single digit percentage points.

Shares in Meggitt jumped 4.8 percent to 486.8 pence at 0737 GMT (0837 BST), among the top risers on Britain's bluechip index <.FTSE>. The stock had fallen about 5 percent in the two weeks ahead of the results.

RBC analyst Robert Stallard said the reaction showed some relief the company remained on track.

"The progress in defense is also a positive, as we think trends in this area are improving, and as Meggitt's second largest end market this could be a source of earnings per share upside going forward," he said. RBC has an "outperform" rating on the stock.

Meggitt shares rose in July on media speculation the company was a takeover target, but Chief Executive Stephen Young said such rumours were a regular feature.

"We've been a really, really strong takeover target now for the thirteen years I've been at Meggitt," he said in a telephone interview. "Lots of people want to be aerospace, lots of people want to have strong aftermarket positions. It's no surprise that the odd rumour pops up."

He said the company had not hired an investment bank to draw up a defence plan.

Meggitt reported underlying pretax profit of 152 million pounds in the six months ended June 30, compared with the 144 million pounds in the same period last year, in line with forecasts.

It raised its interim dividend by 8 percent to 4.6 pence a share. (Thhis version corrects paragraph 8 to show RBC rating is "outperform" not "neutral")

(Editing by PauSandle and MarPotter)