LONDON (Reuters) – British engineer Meggitt said that it could return to profit growth in 2021 provided there are no further lockdowns, despite a weakening in the struggling aviation market at the end of 2020 and early this year.
Pandemic restrictions halted much flying globally last year and forced plane makers Boeing and Airbus to cut production rates, dragging down suppliers like Meggitt, which makes and services parts for such aircraft.
Meggitt’s underlying operating profit plunged by 53% to 191 million pounds ($267 million) in 2020, it said on Thursday, despite continued growth in its defence business which makes parts for military jets and accounts for about 45% of the business.
Meggitt, however, said it expected air traffic to recover in the second half of the year which would help it return to profit growth over the year, although its guidance for flat revenue disappointed analysts who had expected growth of 6%.
Meggitt’s Chief Executive Tony Wood said in November that he had expected flying to start to recover by Easter, but new variants have led to more restrictions and delayed the recovery.
“It has gone back a couple of months… it’s now very much in the summer,” Wood said of the recovery in an interview on Thursday.
Further in the future, Meggitt is positioning itself for the move to lower emissions flying, and its sensors and electric motors will be used on electric urban air mobility platforms, such as flying taxis, and in hybrid aeroplanes being developed.
But Meggitt said new tax breaks announced in Britain’s annual budget on Wednesday aimed at encouraging investment would not change its plans.
“Yes, it will be a benefit. Are we looking at any acceleration as a result specifically of that? Not really,” Woods said.
Shares in Meggitt were down 1% to 427 pence at 0943 GMT. The stock has risen by 50% since news of a COVID-19 vaccine last November, but is still down 23% on where it was pre-pandemic.
($1 = 0.7165 pounds)
(Reporting by Sarah Young; Editing by Alistair Smout and Susan Fenton)