Institutional Comment: Q3 IMS: Slow trading, but quick buyback launch
Meggitt’s IMS was a curate’s egg: a pretty material cut to 2015 guidance, coupled with an admission that surplus/cannibalised aircraft parts are probably a far broader and systemic threat to the aftermarket than had been assumed. However, the surprise unveiling of an immediate share buyback, albeit only c 6% of the share capital, both reduces the near-term likelihood of a major acquisition and demonstrates that the board understands both this risk and the undesirable impact of an over-strong balance sheet. The shares trade at a premium to their aero engine peers, a level that could be supported over the next c 12 months by the buyback.Meggitt is the parent company of a group whose principal activities are the design and manufacture of components and sub-systems for aerospace, defense and other markets. Co. has five segments: Meggitt Aircraft Braking Systems, a providers of aircraft wheels, brakes and brake control systems; Meggitt Control Systems, which comprised of aircraft fire protection and control systems; Meggitt Polymers and Composites, which comprised of engine and aerodynamic seals, flexible fuel tanks and fuel systems; Meggitt Sensing Systems, a provider sensing and monitoring systems for aircraft; and Meggitt Equipment Group, which include unique heat transfer equipment for hydrocarbon processing.
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