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UPDATE 2-Shares in GKN, Meggitt jump on aerospace, defence outlook
February 28, 2017 / 7:56 AM / 9 months ago

UPDATE 2-Shares in GKN, Meggitt jump on aerospace, defence outlook

* GKN says will outperform both civil aerospace and auto markets

* Engineer reports 12 pct rise in adjusted pretax profit

* Meggitt says it has ‘good momentum’ going into 2017

* GKN shares up 6 pct, Meggitt up 14 pct (Adds comments by CEO, share price)

By Paul Sandle

LONDON, Feb 28 (Reuters) - Shares in GKN and Meggitt rose after both British engineering companies reported better than expected results and predicted that their investments in technology in aerospace markets were beginning to pay off as new aircraft production rates increase.

Analysts said share prices across the defence sector had also got a boost on Tuesday from U.S. President Donald Trump’s promise on Monday to seek an “historic increase” of $54 billion in the U.S. defence budget.

GKN said both its aerospace division and its automotive engineering Driveline power transmission business outperformed their markets last year and had won significant new business, underpinned by investment in new technology.

“Organic sales growth in commercial aerospace was fuelled by stronger production of Airbus A350 and A320 (aircraft), and this outweighed a continued slight decline in organic military sales,” Chief Executive Nigel Stein said.

Commercial aerospace sales rose 3 percent on an organic basis, GKN said, partly offset by a 2 percent drop in military sales, while Driveline increased comparable sales by 6 percent.

Stein said Driveline had gained market share, after strong sales to Fiat Chrysler, Volvo and Daimler’s Mercedes, and its investment in hybrid and electric vehicles was also starting to pay off, with contract wins at BMW.

The company said it expected organic sales in its aerospace division to rise “slightly above” the 2 percent market growth forecast by independent analysts this year, while automotive sales would grow ahead of independent predictions of around a 2 percent growth in the global market.

Shares in GKN rose as much as 7 percent to a 20-month high of 366 pence, topping the FTSE 100 index.

The company reported a 12 percent rise in adjusted pretax profit of 678 million pounds ($842 million) on sales up 22 percent at 9.4 billion pounds.

Meggitt, which makes a diverse range of aircraft components, said it too was benefiting from its technology going into new commercial aircraft, such as the Airbus A350XWB and Boeing 777X.

“Our content on the new programmes is between 20 and 250 percent higher than on the old programmes, so as these programmes ramp up in the next few years, that should drive our growth to above market levels,” said Chief Executive Stephen Young.

Meggitt will also benefit from any increases in defence spending, led by the United States.

“Military budgets around the world are set to grow from here, and we are on the growing fleets with good content,” Young said.

Shares in Meggitt, which have fallen 12 percent in the last three months, were trading 14 percent higher at 474 pence.

It reported a 13 percent rise in adjusted pretax profit to 352.1 million pounds, and said a strong finish to the year gave it good momentum going into 2017. ($1=0.8050 pounds) (Editing by Kate Holton, Greg Mahlich)

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