MARKET REPORT: Defence and aerospace engineer Meggitt takes a drubbing on rumours of a £445m cash call
Meggitt shares lost altitude after reports surfaced that the group may want to raise an extra £455million.
After the deluge of fundraisings that have flooded the stock market this year, it is no longer much of a surprise when rumours like this surface – particularly for companies in the hard-hit aerospace and defence sector.
Reports of the potential share sale first appeared in Bloomberg late on Wednesday.
Reports of the potential share sale at defence and aerospace firm Meggitt first appeared in Bloomberg late on Wednesday
In response, the group yesterday said it would consider any and all options if a second wave of coronavirus triggered the same shutdown of global air travel as earlier this year, which would hammer its plane-making customers such as Boeing and Airbus.
Or, in business speak, the company ‘continues to review a range of trading scenarios and associated actions to mitigate any material adverse change to the industry outlook’.
Meggitt has been quick to point out it had £856million of cash available at the last count – at the end of June – and is also eligible to tap into the Government’s Covid Corporate Financing Facility if it needs to.
Stock Watch – Verditek
Solar power group Verditek has bagged a £1.7million contract with SAF Group, an engineering firm tasked with bringing clean energy to Pakistan’s south-eastern Sindh province.
This is a follow-on order, as AIM-listed Verditek has worked with SAF before, supplying its easy-to-assemble ‘power in a box’ to replace diesel generators.
It comes a day after finance boss Tim Lord resigned.
Shares lit up – surging 18.5 per cent, or 2.45p, to 15.7p.
Even though it makes parts for planes, a hefty chunk of its business comes from defence firms and means it is a strategically important supplier.
The share sale may not happen – but the fact that shares in FTSE 250-listed Meggitt fell 4.3 per cent, or 12.7p, to 282.5p by last night’s close shows that investors reckon it could.
Such fundraisings usually price the new stock being sold at a slight discount – so the fall could be seen as the market factoring this in to its share price.
Bearing in mind another of its customers, plane engine-maker Rolls-Royce (down 2.1 per cent, or 5.4p, to 253.1p), is thought to be on the brink of raising new funds, this is unlikely to be the last we hear of aerospace companies preparing plans for safety nets in case their worst-case scenarios play out this winter.
Fellow mid-cap group Serco was also in the red. The contractor’s profits rocketed to £76.4million in the first six months of the year, compared with £6.7million in the same period of last year, and revenue soared 24 per cent.
Serco is one of the outsourcing groups to have been rapidly awarded Government contracts to manage the pandemic response.
It reckons its coronavirus-related revenues – which include supporting the NHS Test & Trace programme – total around £130million.
But shares sank 15.2 per cent, or 25.7p, to 143.7p as it warned of looming uncertainty and analysts were left scratching their heads at how long the coronavirus boost to its coffers will last.
The wider stock market was also lower, breaking a three-day winning streak. The FTSE 100 fell 1.3 per cent, or 77.78 points, to 6026.94, while the FTSE 250 was down 0.9 per cent, or 158.92 points, to 17479.38.
The Footsie was partly held back by a slump in house builder shares, which fell after housing secretary Robert Jenrick said there could be a 40 per cent fall in the number of new homes built this year as he unveiled proposals to reform Britain’s planning regime.
Taylor Wimpey shed 4.3 per cent, or 5.35p, to finish at 118.35p, while Barratt Developments dropped 3.9 per cent, or 20.2p, to 500p and Persimmon fell 3.8 per cent, or 92p, to 2364p.
Paper and packaging group Mondi, on the other hand, was one of the bright spots on the blue-chip index.
It rose 3.1 per cent, or 44.5p, to 1469.5p after saying it would pay shareholders a smaller version of its cancelled 2019 final dividend and an additional payout for the first half, even though profits have slid 26 per cent.
Estate agent Savills managed to close up 0.3 per cent, or 2.5p, to 773p, after reporting that housing markets around the world going into hibernation wiped 69 per cent off first-half profits.