Having announced both a divisional restructuring and increased revenue guidance for the year to end December 2018 earlier in the week, Meggitt CEO Tony Wood together with the Mayor for the West Midlands, Andy Street will this morning conduct the formal ground breaking ceremony on Meggitt’s 2 million sq. ft / 200 acre Ansty Park technology and innovation hub development in Coventry. One of the most important developments ever undertaken by Meggitt in its long history, the investment in infrastructure and state-of-the-art facilities at Ansty Park will in my view open the door to new opportunities and place the company is an excellent position to achieve and sustain medium and long term growth.
Headquartered in the UK, for those that may not know the company as well as I do, Meggitt is an international group that operates in North America, Europe and Asia. Employing over 11,000 people worldwide and located in over 40 different manufacturing facilities and regional offices worldwide, Meggitt can be said to specialise in extreme environment engineering. To that end the company is a world leader in its many highly specialist aerospace, defence and energy activities.
Located within a stone’s throw of the M6 and M69 motorways and the A45 trunk road in the large city of Coventry, the Ansty Park site was previously part of Rolls-Royce. Development by Meggitt of Ansty Park marks the start of a project that has at its heart advancing development of Meggitt’s global engineering and manufacturing capabilities. Importantly, from an operational efficiency viewpoint, combining a range of operations on one site location will bring additional benefits.
The underlying strategy behind this development is to provide Meggitt with the infrastructure and facilities that will see its Ansty Park based activities regarded as being within a world-class aerospace engineering and technology environment. Along with becoming the location where various existing Meggitt subsidiary operations, many of which are currently located in Coventry together with other parts of the country, will be moved, Ansty Park will also become the new home for Meggitt’s international headquarters.
When completed, Ansty Park will not only provide a base for around 1,000 Meggitt employees and allow for significant increase as growth is achieved but it will also be the hub for next-generation aerospace innovation and research and development. Importantly, Ansty Park will act as catalyst for world class operational performance.
To that end, Meggitt has formally announced today the introduction of a new Corporate Apprentice Programme which is designed to ensure that the company continues to nurture the right levels of skills and engineering talent to meet its future needs. The programme announced today includes training in partnership with the Manufacturing Technology Centre and which neighbours the Ansty Par site as interestingly does also, the Advanced Manufacturing Centre.
Great for Meggitt as this £130 million super-site development at Ansty Park is, it is also fantastic news for the West Midlands and particularly Coventry. As one of the largest industrial projects in the Midlands for well over a decade, the decision by Meggitt to centralise the majority of its operations on the Ansty Park site means that majority of existing plants in Holbrook Lane, Coventry, Wharfdale Road, Birmingham and Maidenhead will be closed as they move onto the Ansty Park site.
The intention behind the plan was always to bring world-class innovation and operational delivery together onto one site in order to meet expanding current and future customer needs worldwide. Planned to be fully operational by the end of 2019, the Ansty Park development is intended to strategically position Meggitt for planned future growth and improved operational performance.
With planning permission granted for 440,000 sq. ft of buildings so far on the 200 acre site one can easily imagine the vastness of the complex. When the development is completed the facility aims to have combined a range of Meggitt operations that include parts of the Aircraft Braking Systems, Control Systems, Customer Services & Support and Corporate Shared Services. Plans include an engineering and manufacturing Centre of Excellence for future aerospace thermal management technology and which has already been supported by the UK Aerospace Technology Institute (ATI) with a research and development award from the Department for Business, Energy and Industrial Strategy of £3.7m. The initiative is intended to underpin Meggitt’s ability to secure strong market positions on new aircraft programmes and as mentioned, with the development being adjacent to both the Manufacturing Technology Centre and Advanced Manufacturing Training Centre, positioning is very appropriate.
For Meggitt, the Anstey Park development marks a major advance to its global manufacturing footprint and without doubt will, when completed and operational by the end of 2019 will in my view position the company very well for sustainable growth.
2018 Revenue Guidance Upgrade
Earlier this week Meggitt which specialises in high performance components and sub-systems for the aerospace, defence and energy markets, announced an upgrade to its revenue guidance for FY18. With good second quarter growth reported in the Civil Aftermarket, Military and Energy market segments and reasoned by a combination of strong growth in air traffic and low levels of aircraft retirements, all of which contributed to an increased demand for spare parts.
In terms of revenue growth Meggitt now anticipates full year organic revenue growth of 4 to 6% in Civil Aftermarket (up from previous guidance of 3 to 5%). In regard of Military based activities, the strong order book momentum has continued and this, the company said, had translated into good revenue growth with particular strength seen in relation to training equipment and in regard of retrofit fuel tanks for Boeing F/A-18 military jets. Organic revenue guidance growth in Military was increased to 6 to 8% from a previous 3 to 5% expectation.
Similarly, Energy activities have improved due to increased confidence seen combined with recovery at Heatric. Organic revenue guidance for FY18 is now expected to exceed 5%. Overall, Meggitt now expects to see total FY18 organic revenue growth in the 4% to 6%. Region although, due to Polymers, operating margins overall are anticipated to be in the lower end of the guidance range of 17.7% to 18.0%. Interim Results are due on 7th August.
Finally, in regard of the announced divisional restructuring and which I understand has been designed to align the divisions more closely with the customer base and to support the company’s plans to accelerate organic growth, with effect from 1 January 2019, the current structure of capability-based business units will be replaced by four customer-focused divisions as follows:
The Airframe Systems division will bring together the Group’s capabilities which serve the world’s leading commercial, business and military aircraft manufacturers, including the braking systems, fire and safety systems and electrical power capabilities.
The Engine Systems division will aggregate the Group’s offering to aero-engine manufacturers including flow control, thermal management, sensors and engine composites.
The Energy & Equipment division will encompass the Group’s strong niche positions in selected energy markets, together with its training systems and defence systems capabilities.
The Services & Support division (formerly Customer Services & Support) will continue to provide a full range of spare parts distribution, MRO (maintenance, repair and overhaul) services to support the Group’s aftermarket customers and maximise the value of Meggitt products and systems throughout their life cycle.
CHW (London – 6th July 2018)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785