pr_interims_2004.pdf

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Interim Statement Page 1 www.meggitt.comRegistered office As aboveRegistered in England and Wales

number 432989

FOR IMMEDIATE RELEASE 7 September 2004

Contacts: All parties on 7 September 2004 on Tel: 020 7466 5000

Meggitt PLC Tel: 01202 847847Terry Twigger, Chief ExecutiveStephen Young, Group Finance DirectororBuchanan Communications Tel: 020 7466 5000Charles RylandJeremy Garcia

MEGGITT PLC

Unaudited Interim Results for the Six Months Ended 30 June 2004

Strong underlying growth leads to record first half profit

2004 2003

Group Turnover 206.0m 191.0m + 8%

Group Turnover Continuing Operations1 206.0m 187.3m + 10%

Profit Before Tax, Goodwill Amortisation

and Exceptional Items2

37.5m 35.7m + 5%

Profit Before Tax 27.8m 12.5m + 122%

EPS IIMR3 4 8.0p 7.7p + 4%

Dividend4 2.20p 2.09p + 5%

Turnover from continuing operations up 10%. Up 20% before currencytranslation impact.

Profit before tax, goodwill amortisation and exceptional items up 5%. Up 19%before currency translation and investment in China start up costs

Continued strong cash flow from operating activities (92% profit converted tocash)

Interim dividend up 5% to 2.2p (2003: 2.09p) Order book at July 2004 9% up on December 2003 at constant exchange rates.

408m acquisition of the Design & Manufacturing Division of the DunlopStandard Aerospace Group completed on 24 August.

Terry Twigger, Chief Executive, commented:

This is another set of strong underlying figures. Demand for spares and

repairs in the civil aftermarket is steadily improving and civil original

equipment manufacturers have raised their estimation of future deliveries.

Military equipment sales remain strong. With the order book up over 9%

compared with December 2003 and the completion of the Dunlop acquisition

in August, the enlarged Group is well placed for an exciting future.________________________1

Excludes business disposed of in 20032Excludes FRS3 exceptionals (2003: 13.3m loss)3See note 4 page 144Adjusted for bonus element of the rights issue

Farrs HouseCowgroveWimborneDorset BH21 4ELEnglandtel +44 (0) 1202 847847

fax +44 (0) 1202 842478


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Interim Statement Page 2

RESULTS

Meggitt has achieved a sales increase of 8% and record profits in the first half as aresult of strong underlying growth and a good performance from recent acquisitions.

Group turnover in the first half was 206.0m (2003: 191.0m), an increase of 8%.The translation of overseas sales into sterling at less favourable exchange rates than2003 adversely impacted reported sales growth by 17.9 million. At constantcurrency, underlying turnover from continuing operations increased by 20%. Militarysales, including recent acquisitions, now account for 48% of Group turnover (2003:39%), civil aerospace, which includes sales to regional, business and general aviationaircraft as well as large jets, accounts for 31% (2003: 37%) and other marketsincluding medical account for 21% (2003: 24%).

Operating profit before goodwill amortisation increased by 5% to 41.5m(2003: 39.5m). This was after a 4.9m adverse impact from currency translation and

the planned 0.7m initial revenue cost of setting up our manufacturing facility inChina. Excluding these two items underlying operating profit before goodwillamortisation increased by 19%.

Net interest costs increased slightly to 4.0m (2003: 3.8m) leaving profit beforetaxation, goodwill amortisation and exceptional items at a record level for the firsthalf of the year at 37.5m (2003: 35.7m), a 5% increase. Before the impact ofcurrency translation and China costs, the underlying increase was 19%.

Profit before tax on a statutory basis increased 122% to 27.8m (2003: 12.5m).

The Group continued its outstanding track record of strong cash generation with cashflow from operating activities at 92% of operating profit. Net cash inflow after

paying interest and taxation was 19.6m and interest cover was 10.3 times (2003:10.4 times). Gearing reduced to 42% at the end of June which compares to 53% at

both December 2003 and June 2003 respectively.

With the effective tax rate for the Group remaining at 28% for the first half of theyear, earnings per share (adjusted for the bonus element of the rights issue) on anIIMR basis increased by 4% from 7.7p in 2003 to 8.0p in 2004.

As a result of the Groups strong performance the Board is proposing a 5% increasein the interim dividend to 2.20p (2003: 2.09p).

CORPORATE ACTIVITY

The acquisition of the design and manufacturing division of the Dunlop StandardAerospace Group (Dunlop Aerospace) for 408.4m was completed on 24 August2004. Dunlop Aerospace is a designer and manufacturer of aviation components(wheels, braking systems, polymers & composites and fluid dynamics) and providesrelated aftermarket service and spare parts for the civil and defence aerospace sectors.The acquisition is a close fit with the existing Meggitt Group. Polymers and

composites and fluid dynamics will be integrated into Aerospace Equipment andwheels and brakes will be organised as a separate business unit. The enhanced


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product range, complementary businesses and technologies and mix of originalequipment and aftermarket sales are expected to enhance the opportunities for theenlarged Meggitt Group and to be significantly earnings enhancing (before goodwillamortisation and exceptional items) in 2005.

BOARD OF DIRECTORS

On 1 July 2004 Mr Mike Stacey stood down from his position of Chairman and aDirector of Meggitt PLC. Mr Stacey joined Meggitt in 1990, becoming ChiefExecutive in 1995 and non-executive Chairman in May 2001. Having served on theBoard for 12 years, and with the Company well positioned for further growth, he feltit was the right time to hand over his responsibilities.

Mr Stacey has been succeeded as Chairman by Sir Colin Terry, who joined the Boardof Meggitt as a non-executive director in February 2003. Sir Colin is also Chairmanof the Engineering Council (UK). In over 37 years of public service he reached the

rank of Air Marshal and has held the positions of Chief Engineer of the RAF and AirOfficer Commander-in-Chief, Logistics Command.

The Board of Directors thanks Mike for his invaluable contribution to the Group andwishes him well for the future.

OPERATIONAL HIGHLIGHTS

AEROSPACE

Turnover increased 12% to 171.1m (2003: 152.1m). At constant exchangerates this equates to a 22% increase.

Operating profit increased 7% to 35.3m (2003: 32.9m). Excluding theadverse impact of currency translation the increase was 20%.

The four acquisitions made in 2003 are performing in line with or better thanexpectations.

Order book at end July up 9% compared with December 2003 at constantexchange rates.

Turnover at Meggitt Aerospace Systemsincreased by 1% (6% at constant exchangerates). Sales of Avionics solid state instruments continued to be strong and will beenhanced further in the second half of the year following a 2m order from Pilatus fordisplays for the Royal Australian Airforce PC-9 training aircraft. The 3 inch solidstate instrument continues to attract significant interest in the military retrofitmarketplace, where it offers both a low cost and flexible upgrade to frequentlyunreliable mechanical and/or CRT based instruments and the capability to reduce thenumber of dedicated displays required on older aircraft. The instrument has mostrecently been selected for inclusion on the 66 Hawks to be exported by BAESYSTEMS to India, further increasing Meggitt Avionics substantial content on eachHawk aircraft. Given the selection of the Hawk for the RAF Advanced Jet Trainer

requirement and increased interest in Hawk for export this will lead to continued salesover the next 5 years on this platform.


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Meggitt has continued to work closely with the US Navy in support of their ConditionBased Maintenance initiative and has recently been awarded two contracts, supported

by US Congressional funding, to develop prognostic optical sensor systems for theAllison GTG-501K and General Electric LM2500 gas turbine engines. These

systems detect abnormal combustion processes, monitor sodium contamination levelsand will offer prognostic health monitoring of the engines fuel and air filtrationsystems.

Vibro-Meter has continued its excellent record of customer service by beingrecognised by Airbus as one of its top three providers of outstanding customersupport in a ceremony at the Farnborough airshow. A further highlight in the firsthalf year was the successful first flight of the Vibro-Meter Engine Monitoring Unitand the associated sensor package on the TRENT 900 engine which is theRolls-Royce engine for the A380 aircraft. The complete condition monitoring systemhas performed as expected. Meggitt is also developing, with BAE SYSTEMS, the

on-engine, vibration monitoring unit for the Alliance engine, the GP7200, for thisaircraft. First units for engine testing have recently been delivered.

After having delivered the first concept proving prototypes, a contract has beenawarded to cover the second phase of the development of a new generation bi-axialwide band vibration sensor for the JSF aircraft.

An advanced engine vibration monitoring system (AAVM) has now been certified foruse on all Boeing 737 aircraft. The system provides early warning of engine bearingdeterioration by analysing data from engine sensors using advanced algorithmsdeveloped by CFMI for their CFM-56 series of engines. The product is undergoing

in-service evaluation by five different airlines prior to general release into thisimportant retrofit marketplace of over 1,000 aircraft.

Meggitt Aerospace Equipments turnover increased by 6% (16% at constantexchange rates). Important progress was made during the period with severalcontractual wins both in the commercial and military sectors. Among the awardsreceived were orders for testing of the E2C cooling system for Northrop Grumman, acontract for environmental control systems for Israeli Aircraft Industries, contractswith Kawasaki Heavy Industries for fire and smoke detection and bleed air leakdetection on the new P-X and C-X aircraft.

The industrial gas turbine market is showing steady signs of recovery and AerospaceEquipment is increasing its market share. It has now won over $150,000 per shipseton the GE LM100 turbine with equipment ranging from purge and water injectionvalves to inlet bellows. Similar success has been enjoyed on the Rolls-Royce Trentand RB211 industrial turbines.

In order to capitalise on Meggitts position as the leading aviation ground fuellingproduct supplier in the USA, a new sales and service office in the UK has beenestablished with the objective of increasing its market share in Europe.


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During the first half, significant progress was made in developing the inorganic cablebusiness. Of particular interest was an agreement with Lockheed Martin to supplyElectronic Warfare System Cables for the F-22 fighter aircraft. Over the life of the

programme this is expected to be worth in excess of $25m. Safety Systems is also

working with Boeing to provide a replacement for the current organic based wiringon Boeings 737 NG aircraft. Continued progress in the companys actuator programresulted in delivery of Boeing 777 flight lock door actuators and an order for F-16canopy actuators from Bahrain.

In order to develop further its position in naval products, where Whittaker Controlshas recently won orders for ice, bleed and sonar evasion valves, Safety Systems

purchased the Securaplex Fire Protection System product line for the US Navy DDGclass of destroyers for $0.3m. Similarly, to develop its position in military vehicles itsigned marketing and licensing agreements with Spectronix, a well-establishedsupplier of explosion suppression systems for military vehicles, and Aerojet, a

developer of non-halon based extinguishing agents for aircraft and military vehiclefire protection systems.

Despite the current high levels of oil and gas prices our Heatric business has seenseveral contract placements deferred during the first half of 2004. However, (basedon the number of bids in progress) the outlook for 2005 looks significantly more

positive.

Meggitt Defence Systemshas continued to make excellent progress in the first halfof 2004 with turnover increasing by 72% (91% at constant exchange rates) mainly asa result of the two acquisitions made last year. The first of these, Caswell

International Corporation, which specialises in ground targetry and live fire trainingranges for the US military and law enforcement agencies, is performing better thananticipated. The continuing conflicts in Iraq and Afghanistan and the increasingthreat from terrorism is driving significant increases in training requirements.

The second acquisition, Western Design, has made Meggitt a world leader inAmmunition Handling Systems (AHS) and Environmental Control Systems (ECS)for armoured vehicles and is performing in line with expectations at the time ofacquisition. Multiple contracts to develop a large calibre autoloader for the USFuture Combat System, a 120mm mortar autoloader for the US Armys Research &Development Center and a 30mm MK44 ammunition system for the AC130 Gunshiphave been received. Low rate initial production is underway for a helicopter-bornelaser mine detection and clearing system, whilst production continues for many ECSretrofit programmes, such as the MIA2 Thermal Management System.

Responding to future customer requirements, Meggitt has been funded to extend thetechnology used in Aerial Weapons Scoring by developing a Sea Target Laser AimScoring System (STLASS) for the US Navy. This product will provide criticalobjective scoring data used in analysing the effectiveness of simulated laser guidedweapons and crew performance against remote controlled watercraft without theexpense of live-fire.


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The divisional sales and marketing organisation across electronics is being integratedto leverage more effectively existing resources, and the Nacesa sales structure inEurope has been restructured in advance of complete integration with the other sensor

businesses. The Nacesa facility in Spain will also be utilised for manufacture of

Endevco sensing designs for European military customers including CASA in Spain.

CHINA

Construction of the new China facility has been completed on time and budget.Initial production has commenced ahead of schedule. Employee training is on-goingin parallel with the product transfer process. In all, nine product lines, consisting ofmore than 100 different part numbers will be moved to China from the existingfacility in the US Virgin Islands. Of these, two lines are already qualified, with theremainder due to complete by the year end. The new facility will ramp up to fullcapacity in 2005. A strategic inventory build-up to support the transition is well

advanced. Upon completion of the production transfer in the first half of 2005, theUS Virgin Island facility will be closed.

In addition to the current project, the China unit is also working closely with otherMeggitt businesses worldwide to support market development in China, strategicsourcing of materials and identifying opportunities to expand the scope ofmanufacturing in 2005. Integration with the Asia operations of Dunlop Aerospace isalready underway leveraging respective regional capabilities in parts distribution,repair services and customer support.

OUTLOOK

The markets we operate in continue to improve although the effects of the weakdollar are expected to continue to influence our reported performance in the secondhalf. Demand for spares and repairs in the civil aftermarket is improving steadily andthe major civil original equipment manufacturers have raised their estimates of futuredeliveries. Military equipment sales remain strong. The acquisitions made in 2003are performing well and our investment in China is ahead of schedule.

The purchase of Dunlop Aerospace is a transformational acquisition for Meggitt. Itincreases our presence in the Aerospace sector and strengthens our polymers andvalving businesses significantly. The addition of wheels and braking systems will

provide new opportunities to grow our business. The integration of Dunlop is a keypriority for the next few months. Considerable planning has already taken place andteams have been established for the essential tasks.

With the order book at constant currencies at the end of July 2004 up 9% overDecember 2003, the Group is on track to deliver a strong underlying performance forthe year.


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CONSOLIDATED UNAUDITED PROFIT & LOSS ACCOUNTfor the six months ended 30 June 2004

Six months

ended

30 June2004

Total

'000

Six monthsended

30 June2003Total'000

Yearended

31 December2003Total'000

Turnover 205,989 190,976 402,441

Cost of sales (112,706) (104,873) (219,879)

Gross profit 93,283 86,103 182,562

Net operating expenses before amortisation of goodwill (51,744) (46,572) (98,871)Amortisation of goodwill (9,677) (9,891) (20,185)

Net operating expenses (61,421) (56,463) (119,056)

Operating profit before amortisation of goodwill 41,539 39,531 83,691Amortisation of goodwill (9,677) (9,891) (20,185)

Operating profit 31,862 29,640 63,506

Loss on disposal of discontinued operations - (13,334) (13,334)

Profit on ordinary activities before interest 31,862 16,306 50,172

Interest payable (net) (4,033) (3,789) (8,174)

Profit on ordinary activities before taxation 27,829 12,517 41,998

Tax on profit on ordinary activities (10,502) (10,008) (21,100)

Profit for the financial period 17,327 2,509 20,898

Dividends (9,405) (7,032) (22,113)

Retained profit / (loss) for the period 7,922 (4,523) (1,215)

Earnings per share basic * 5.1p 0.8p 6.3pEarnings per share diluted * 5.1p 0.8p 6.2pEarnings per share IIMR * 8.0p 7.7p 15.9p

Profit on ordinary activities before taxation, goodwill

amortisation and exceptional items

37,506 35,742 75,517

* Adjusted to reflect bonus element of rights issue


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CONSOLIDATED UNAUDITED BALANCE SHEETas at 30 June 2004

30 June 30 June 31 December2004 2003 2003

'000 '000 000

Fixed assets

Goodwill 305,270 320,238 318,877Licences, patents and trademarks 425 863 637Tangible assets 52,546 54,684 53,312Investments 837 1,216 1,139

359,078 377,001 373,965

Current assetsStocks 81,126 76,845 73,539Debtors amounts falling due within one year 97,197 94,054 97,956Debtors amounts falling due after more than one year 20,778 25,728 24,343Cash at bank and in hand 30,792 39,698 22,670

229,893 236,325 218,508Creditors - amounts falling due within one year (129,119) (141,612) (117,151)

Net current assets 100,774 94,713 101,357

Total assets less current liabilities 459,852 471,714 475,322

Creditors - amounts falling due after more than oneyear (143,484)

(157,684) (159,195)

Provisions for liabilities and charges (41,553) (49,202) (48,666)

Net assets 274,815 264,828 267,461

Capital and reserves

Called up share capital 14,796 14,482 14,761Share premium account 156,731 159,740 155,475Other reserves 14,064 - 14,064Revaluation reserve 54 56 55Profit and loss account 89,170 90,550 83,106

Shareholders' funds - equity 274,815 264,828 267,461


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CONSOLIDATED UNAUDITED CASH FLOW STATEMENTfor the six months ended 30 June 2004

Six

months

ended

30 June2004

Sixmonths

ended

30 June2003

Yearended

31

December2003

'000 '000 '000

Cash inflow from operating activities 38,076 40,514 81,659

Returns on investments and servicing of financeInterest received 188 493 866Interest paid (4,191) (3,926) (8,406)Debt Issue Costs - (123) (731)

(4,003) (3,556) (8,271)

Taxation (10,638) (6,045) (12,728)

Capital expenditure and financial investmentPurchase of tangible fixed assets (5,224) (5,631) (10,307)Sale of tangible fixed assets 233 48 401Sale of investments 302 185 262

(4,689) (5,398) (9,644)

Cash inflow before corporate items 18,746 25,515 51,016

Acquisitions and disposals

Purchase of subsidiary undertakings 898 (34,375) (60,454)

Net cash acquired with subsidiaries - - 11Disposal of subsidiary undertakings - 3,181 3,181Cash disposed with subsidiaries - - -

898 (31,194) (57,262)

Equity dividends paid - - (12,162)

Cash inflow / (outflow) before financing 19,644 (5,679) (18,408)

Financing

Issue of ordinary share capital 1,291 432 1,876

Debt due within one year:increase in short term borrowings 46,127 38,224 26,574repayment of short term borrowings (45,763) (28,511) (36,567)

Debt due beyond one year:increase in long term borrowings 45,384 149,138 163,030repayment of long term borrowings (59,254) (140,495) (140,861)

(12,215) 18,788 14,052

Increase / (Decrease) in cash in the period 7,429 13,109 (4,356)


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CONSOLIDATED UNAUDITED CASH FLOW STATEMENT (continued)for the six months ended 30 June 2004

Six months

ended

30 June

2004000

Six monthsended

30 June

2003000

Yearended

31 December

2003000

Reconciliation of net cash flow

to movement in net debtIncrease/(Decrease) in cash in the period 7,429 13,109 (4,356)Decrease/(Increase) in debt financing 13,506 (18,733) (12,176)

Change in net debt resulting from cash flows 20,935 (5,624) (16,532)Cash acquired with subsidiaries - - 11Exchange differences 2,866 4,079 15,673

Decrease/(Increase) in net debt in the period 23,801 (1,545) (848)Opening net debt (140,526) (139,678) (139,678)

Closing net debt (116,725) (141,223) (140,526)

Reconciliation of operating profit

to operating cash flowOperating profit 31,862 29,640 63,506Depreciation and amortisation 14,925 15,382 30,969Stock (9,083) (488) 3,237

Debtors 5,469 (3,675) (10,192)Creditors (5,126) (341) (5,846)Loss / (Profit) on sale of fixed assets 29 (4) (15)

Cash flow from operating activities 38,076 40,514 81,659


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UNAUDITED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESfor the six months ended 30 June 2004

Six months

ended30 June

2004

000

Six months

ended30 June

2003000

Year

ended31 December

2003000

Profit for the financial period 17,327 2,509 20,898Currency translation differences

on foreign currency net investments (1,859) (2,298) (13,051)

Total recognised gains and losses 15,468 211 7,847


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NOTES

1. UNAUDITED SEGMENTAL ANALYSISfor the six months ended 30 June 2004

Sales Operating Profit Operating Assets

Six months Six months Six months Six months Six months Six monthsended ended ended ended ended ended

30 June 30 June 30 June 30 June 30 June 30 June

2004 2003 2004 2003 2004 2003Restated Restated Restated

000 000 000 000 000 000

Segments

Aerospace 171,121 152,105 35,348 32,907 110,524 103,937

Electronics 34,868 35,201 6,191 6,660 18,062 17,128Unallocated - - - - (6,078) (6,742)Goodwill amortisation - - (9,677) (9,891) - -Continuing 205,989 187,306 31,862 29,676 122,508 114,323Discontinued - 3,670 - (36) -

205,989 190,976 31,862 29,640 122,508 114,323

Country of origin

UK 45,719 50,413 1,392 2,647 29,271 30,704Rest of Europe 27,960 27,297 3,635 3,504 26,863 27,058

North America 132,310 113,266 27,036 23,491 65,832 56,552Rest of World - - (201) (2) 542 9

205,989 190,976 31,862 29,640 122,508 114,323

Geographical market

UK 28,707 28,192Rest of Europe 42,734 46,324

North America 115,225 98,569Rest of World 19,323 17,891

205,989 190,976


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NOTES (continued)

2. The Directors have declared an interim net dividend of 2.20p per ordinary share (2003 - 2.09p)which will be paid on 3 December 2004 to shareholders on the register on 15 October 2004. Thesedividends have been adjusted for the rights issue approved by the shareholders on 21 July 2004. A

scrip dividend will be available for shareholders who wish to take the dividend in the form of sharesrather than cash.

3. The tax charge has been based on the expected tax rate for the year on the Groups profit before tax,goodwill amortisation and exceptional items.

4. The calculation of earnings per ordinary share is based on profits of 17,327,000 (2003 -2,509,000), and on the weighted average 339,570,264 (2003 332,181,452) ordinary shares in issueduring the six months to 30 June 2004 and adjusted for the bonus element of the rights issueapproved by the shareholders on 21 July 2004.

The calculation of diluted earnings per ordinary share is based on the same profits as used in thecalculation of basic earnings per ordinary share. The weighted average number of shares of

341,299,020 (2003 332,994,790) used in the calculation is based on the weighted average numberof shares used to calculate basic earnings per ordinary share adjusted for the effect of options andadjusted for the bonus element of the rights issue approved by the shareholders on 21 July 2004.

The Institute of Investment Management and Research (IIMR) has devised a headline measure ofearnings per share which provides an alternative measure assessing performance excludingexceptional items and goodwill amortisation.

2004 2003

Basic earnings per share 5.1p 0.8pAdd back goodwill amortisation 2.9p 3.0pAdd back loss on disposal of discontinued operations - 3.9p

Earnings per share IIMR basis 8.0p 7.7p

5. Operating assets exclude investments, goodwill, proposed dividends, net debt, net interest liabilitiesand tax balances.

6. The unaudited interim financial statements for the six months ended 30 June 2004 have beenprepared on the basis of accounting policies consistent with those adopted for the year ended31 December 2003. The full financial statements for the year ended 31 December 2003, which have

been summarised for comparison purposes, were reported on by the auditors without qualificationsor statements under Section 237(2) or (3) of the Companies Act 1985 and have been delivered to theRegistrar of Companies.

7. A copy of the Interim Report will be sent to all shareholders and will be available to the public at the

Companys registered office at Farrs House, Cowgrove, Wimborne, Dorset, BH21 4EL from30 September 2004.

8. These interim results were approved by the Board of Directors on 6 September 2004.

- E N D S -

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