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Annual Report & Accounts 2019

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Annual Report & Accounts 2019 Annual Report & Accounts 2019 OUR STRATEGY Working closely with our customers, we deliver technologically differentiated systems and products with high certification requirements in aerospace, defence and selected energy markets. Through focusing on engineering and operational excellence, we build broad installed bases of equipment for which we provide support and services throughout their lifecycle. Our ambitious and diverse teams act with integrity to create superior and sustainable value for all of our stakeholders. 001 Strategic Report What’s in the report Contents Strategic Report Our Vision 03 Highlights 04 At a glance page 02 With innovation at the heart of Governance 06 Chairman’s statement what we do, we’ve been enabling 08 Chief Executive’s statement the extraordinary for over 160 12 Our business model years and continue to redefine 14 Our strategy our world through pioneering, 24 Market review sustainable technology for the 30 Divisional reviews page 08 38 Key performance indicators most extreme environments. 44 Risk management Financial Statements 46 Principal risks and uncertainties CEO 52 Chief Financial Officer’s review Statement 58 Corporate responsibility In 2019, we delivered Governance another year of strong 74 Chairman’s introduction organic growth and made 76 Board of Directors continued progress on our 80 Corporate governance report strategic initiatives. 86 Audit Committee report 90 Nominations Committee report 92 Directors’ remuneration report Other Information page 12 117 Directors’ report page 14 Group Financial Statements 121 Independent auditors’ report Business Model to the members of Meggitt PLC Differentiated technology, Our Strategy 129 Consolidated income statement 130 Consolidated statement of world‑class services and support We are focused and an installed base of over comprehensive income on enhancing our 131 Consolidated balance sheet 73,000 aircraft provide annuity‑ portfolio, improving 132 Consolidated statement like revenues, the returns from our ability to serve of changes in equity which are reinvested to sustain customers, increasing 133 Consolidated cash flow statement market‑leading positions over our competitiveness 134 Notes to the consolidated financial the long term. and developing a High statements Performance Culture. Company Financial Statements page 30 186 Company balance sheet 187 Company statement of changes in equity Divisional Reviews 188 Notes to the financial statements of the Company Our new, customer‑aligned organisation has supported a Other Information year of further important wins, 198 Five‑year record built around our differentiated 199 Investor information technology and closer alignment 200 Glossary with our customers. page 22 Our Culture We continue to build our High Performance Culture, with a focus on diversity & inclusion and improved employee engagement enabling us to accelerate strategy execution. Download the 2019 Meggitt PLC Annual Report and Accounts from www.meggitt.com Meggitt PLC Annual Report and Accounts 2019 002 Strategic Report OUR VISION Every second To Fly of every day a Meggitt Expertise relied upon by Customers enabled‑ to enable safe, sustainable and aircraft cost-effective flight. takes off. Enabling To Power advances in cleaner Products and Services that enable energy with Customers to reliably operate critical innovative infrastructure without disruption. technology. Investing at least To Live two‑thirds of our innovation budget Innovative technologies which on technologies enhance lives and make the world for sustainable more secure. aviation; working to ensure a sustainable future for generations to come. Meggitt PLC Annual Report and Accounts 2019 003 2019 HIGHLIGHTS Strategic Report Governance Financial Statements Operational Financial Other Information • Continued deployment of the Meggitt Production System (‘MPS’), with 33% of sites now in the Bronze or above stages £2,276m 37.3p of the programme. Revenue Underlying basic earnings per share1 2018: £2,081million 2018: 34.2p • 2.2% net cost down on purchasing achieved in 2019. • 2021 footprint consolidation target £403m £287m surpassed – 25% reduction in sites Underlying operating profit2 Statutory profit before tax since 2016. 2018: £367million 2018: £216million • Over 1 million production hours completed in our low cost manufacturing site in Vietnam in 2019. 17.50p 29.5% Dividend per share Return on trading assets4 2018: 16.65p 2018: 28.2% £268m £367m Free cash flow3 Cash from operating activities 2018: £167million 2018: £295million 1. Underlying earnings per share is reconciled to basic earnings per share in note 14 to the Group’s consolidated financial statements on page 155. 2. Underlying operating profit is reconciled to operating profit in note 9 to the Group’s consolidated financial statements on page 151. 3. Free cash flow is reconciled to cash from operating activities in note 41 to the Group’s consolidated financial statements on page 182. 4. The calculation of return on trading assets is detailed within the KPIs on page 38. Meggitt PLC Annual Report and Accounts 2019 004 Strategic Report AT A GLANCE We deliver innovative solutions for the most demanding environments Our differentiated products and technologies satisfy the highest requirements for product safety, performance and reliability and we continue to prioritise investment in sustainable solutions for our customers. In 2019, the Group transitioned to four vertically integrated customer‑aligned divisions. Our Divisions Airframe Engine 01 Systems 02 Systems Market‑leading industry provider Market‑leading position in aero of braking systems for commercial, engine sensing and safety systems business and defence aircraft, fire with a broad range of technologies protection and safety systems, power and sensor applications including and motion, fuel systems, avionics vibration monitoring and engine and sensors and advanced polymer health management systems. This seals for around 51,000 in‑service division also provides aerospace civil and 22,000 defence aircraft. engine heat exchangers, flow control and advanced engine composites. 47% 14% of revenue of revenue See more on page 30 See more on page 32 Energy & Services 03 Equipment 04 & Support Specialises in energy and defence Provides a full service aftermarket equipment ranging from electronics offering including spares distribution cooling to ammunition handling and maintenance, repair and overhaul systems and heat transfer equipment (MRO) to our commercial, business jet for off‑shore oil and gas facilities and and defence customers throughout renewable energy applications. the lifecycle of our products. 18% 21% of revenue of revenue See more on page 34 See more on page 36 Meggitt PLC Annual Report and Accounts 2019 005 Strategic Report Our Markets Governance Aerospace Defence Energy Through engineering expertise, Trusted by defence Keeping the we take the world further forces worldwide lights on Civil aerospace accounts for 54% of Defence represents 36% of Group Energy and other revenue comes from Financial Statements Group revenue, with products and revenue. We have equipment on an a variety of industries including power sub‑systems installed on almost every installed base of around 22,000 fixed generation and oil and gas and jet airliner, regional aircraft and wing and rotary aircraft and a accounts for 10% of Group revenue. business jet in service today. significant number of ground vehicles and training applications. Other Information See more on page 26 See more on page 28 See more on page 29 Global Solutions, Local Support. North America UK 19 11 Locations Locations 6,765 2,988 Employees Employees Europe 5 Locations 1,172 Employees Rest of World 7 Locations Over 1,674 12,500 Employees Employees worldwide Meggitt PLC Annual Report and Accounts 2019 006 Strategic Report CHAIRMAN’S STATEMENT A driving force for A key area of focus in 2019 has been to sustainable aviation ensure the smooth transition to our new, Aerospace is a remarkable industry customer‑aligned organisation enabling us connecting countries, populations and to simplify our customer interactions and Continuing to develop families. Over the years it has played a I am pleased to report that the new structure vital role enriching lives and as a facilitator has been successfully embedded and very sustainable and of global trade it has been a key driver well received by customers. This will remain differentiated of global economic growth; and with a a key focus area for us as we look to further significant proportion of the world’s strengthen our relationships with customers technologies, world‑class population yet to take their first flight, in 2020 and beyond. it will remain an important industry in facilities and recruiting the future. We have also been busy preparing for the move to our UK campus at Ansty Park, and retaining the best As we look back on 2019 in years to come, and remain on track to conduct a phased talent are critical to our it will be remembered as a year with a transfer into the site from April 2020. This significant increase in the quantity and represents an important and exciting future success breadth of news flow about climate milestone for Meggitt and we look forward change, greater awareness of its causes, to realising the benefits from bringing the threat it poses to our way of life and together people from a number of our UK the challenge this provides to a number facilities in one central location, further of industries, including aerospace. consolidating our footprint
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