Good day and welcome to the Meggitt PLC third quarter trading statement call. Today's conference is being recorded. At this time, I would like to turn the conference over to Tony Wood. Please go ahead. Thank you operator, and good morning everybody, and thank you for joining us for the Meggitt PLC quarter three update today. I am joined by Louisa Burdett, our CFO, who you know well, and also Mathew Wootton, who leads our investor relations team, who I know you know as well. We are very pleased to have delivered another period of revenue growth for the company, up 5% year-on-year and 4% sequentially. We've had good order intake, with the book-to-bill up by 1.03, sorry, for the whole company and the civil aftermarket, and then 1.19 times in energy. We've had very strong growth in civil aftermarket, up 44% year-on-year and 12% sequentially. Obviously the reopening of the Transatlantic corridor in November also bodes well for the future. A good outlook on the civil recovery. We have, however, had a continuation of some of the trends we saw in the first half in defense, where our revenue was 12% lower in the quarter. But internal management controls and controlling what we can internally has led to strong cash performance, with particularly good management of our working capital and lower CapEx investment as we roll off some of the major investment programs. We have, however, had some supply chain disruption, and the combination of that and soft defense is constraining our profit in the quarter and also our full year outlook. As you all know, in terms of the status that we're in at the moment, we did receive approval from our shareholders on the twenty-first of September for the acquisition by Parker Hannifin, and we are proceeding to plan on our antitrust and FDI filings. In summary, we are upbeat on the civil recovery, but there are clearly some near-term headwinds, meaning we're updating our outlook for the full year today as a result of the quarter three detail. With that, I'd like to open it up to your questions and I'll hand back to the operator who can open the lines in the usual way. Thank you very much. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Please state your name before posing your question. Again, press star one to ask a question. We will pause for just a moment to allow everyone an opportunity to signal for question. We will take our first question. The line is open. Please go ahead. Sorry, I think that was me. Tony, a quick question on the aftermarket. I was wondering if you could just unpack the various components there, sort of large aircraft, regional jets and that kind of thing. Secondly, on the supply chain, obviously a big topic across the aerospace and defense industry. I was wondering if you could elaborate on what specific problems you're having. Is it related to raw materials or parts or labor or whatever it might be? Thank you. No, very, very happy to. Was that Rob Stallard? Yes, it is. I don't know what happened with my phone. It went a bit berserk. That's fine. Sorry. I was just making sure I get the right person. Good morning, Rob. Yes. To break down the civil aftermarket, to give you a bit more color, the split of the growth rates are large jets is up 35% quarter three this year versus quarter three last. Regional jets up 58% and biz jets up 53%. That's the aggregate of the 44 that we've announced this morning. On the supply chain? Supply chain specifics for our business. Obviously we do carry quite a lot of electronics in our brake control systems, engine monitoring units and such like that we supply into the platform makers and the tier ones. Certainly ongoing disruption. We're sort of working on a day-to-day basis to try and mitigate and curtail lead times, look for alternatives on electronics still. And in the U.S. particularly, challenges really as the industry starts to sort of rebuild itself after the reductions that were made in our supply chain during the pandemic. It's labor and material issues, but most acute really in the castings area and in machining, where basically recruiting and retraining people to bring back capacity into the industry is causing us some challenges. We're putting quite a lot of our teams into our supply chain to ensure we're getting both prioritization right, but also that we're helping them to make sure that they're planning correctly for, you know, the build rates that we anticipate into next year as the recovery continues. Okay. In terms of who this impacts, is this impacting more the defense side of the house or commercial aerospace? No, it's across the board. You know, most of our suppliers, you know, deal with defense products as well as civil products feeding into us. It's pretty much across the board, in terms of the products we make, we don't separate our defense activities out from civil activities in our factories. We run them pretty much as parallel lines or on the same lines even. Yeah. Makes sense. Thank you very much. Just one Tony, it's Louisa. If I could just add, Rob, the electronics piece is more civil on sort of the power and sensing and engine sensing side. We have said in the statement that, Part of the softness in defense is market driven, but we've also got some quite long lead time products which are overlapping with the supply chain issue as well. Supporting what Tony said, that it's a little bit of both civil and military. Okay. Thanks, Louisa. If you find your question has been answered, you may remove yourself from the queue by pressing star two. We'll take our next question. The line is open. Please go ahead. Hello. Can you hear me? It's Li Dunlop from J.P. Morgan. We can, Li, yes. Very clearly. Oh, thank you. I just wanna thank you for the update, and also in regards to the Parker Hannifin transaction. I just was hoping you might be able to clarify the transaction is expected to close around Q3, and you said you are now progressing with some of the regulatory approvals. Just when I looked at the presentation, I think Parker Hannifin gave, it seemed to show there are pretty limited overlap. I was just wondering if you can explain why it can potentially take quite some time to get to the end. Is this more FDI or is it just a little bit complex because of the scale of the two different portfolios? Maybe just your view on the U.K. intervention order and your comfort zone with that. Thank you. Yes. No, we can't really add very much, Li, to what we've already announced. Obviously, the process is in full flow in terms of provision of data packs for antitrust and FDI reviews to take place. We've been very transparent, I think, of the countries that Parker will need to file in. We've supported them with providing the data and such like. There's really no change to what we said right at the outset of the recommendation for the deal, which is that there are limited overlaps between the two companies, but the detail of those overlaps is obviously one that I wouldn't wanna get ahead of in terms of the various reviews that are ongoing at the moment. They are limited. The timescales, again, you know, it depends on how different countries run their own processes. The processes are different in just about every country that they go through. In some countries it'll be FDI that'll be the long lead. In some countries it'll be antitrust. Difficult to break that out, really. I'm not trying to be, you know, to not say something we don't know. It is just different in every country and we work their processes just by feeding them with the data that they need. We're still, as far as we're concerned, on track for quarter three next year. We're very respectful of the referral to the CMA and fully supporting and engaging with Parker in their process for that CMA referral phase one to take place. The date for that is the eighteenth of March, as you're probably aware. No later than the eighteenth of March, that first phase report would be issued. Thank you very much. We'll take our next question. Your line is open. Please go ahead. Hello, this is George Zhao here from Bernstein. I think my line's open here. I guess when you think about the supply chain challenges and the reduced revenue outlook for the year versus what you had in Q2, I guess, how are you thinking about how much of that is just timing and revenue pushed out into next year versus what is lost? Certainly on the supply chain side of things, you know, the vast majority of it is timing, as you rightly say, George. On defense, harder to call really. I mean, the DLA are definitely going through a period of destocking. They're reducing. You know, we've had a period coming into COVID where they were buying more than they were consuming, and they were building higher stock levels. That's pretty well understood, I think, across the industry. We're now clearly in a period where they're consuming more than they're buying, so they are bringing stock levels down. I think it rather depends what impact that has on fleet readiness as to at what point might those two numbers start to inflect and go the other way again. It does tend to be a bit of an evolving sine wave in terms of buying ahead versus destocking. It's difficult to call that at the moment, but definitely some defense revenue that's lost in this period. You know, remains to be seen exactly how that evolves over the next couple of years. On that, you know, F-35 has really been in the news recently. Could you just remind us how much of your defense portfolio is exposed to F-35 at this point? We've got very good ship set content on the F-35, and we've managed to grow that even over the last few years where we've displaced some competitors with some of our technology. In terms of ship set content, we certainly disclose that. Mathew Wootton's on the line. Matt, I'm just wondering if you've got the current ship set content for that. Yeah. It's about $500,000 on that, George. Okay. Thank you. We've just seen the latest lot order coming through, George, as you know, that's the next 750 aircraft. Hopefully that gives you a ready reckoner to sort of calculate it as a slice of our total defense revenues. Thanks. Once again, if you would like to ask a question, please press star one. We'll take our next question. Your line is open. Please go ahead. Hi there, Tony and Louisa. It's Mike Tyndall from HSBC. At the risk of sounding a little daft, can you just translate the supply chain issues to profitability for me? I'm just wondering to what degree is this extra freight costs because you've got to fly parts in or you've got to pay up because you've got to find a different source or it's labor is actually now more expensive. I guess the follow-on question for me is: how much of that can you actually pass on to customers? This, I guess, comes back to that timing issue. Are we looking at paying this year, but effectively you will end up charging customers for those incremental costs? Thanks. No, thank you for the question, Mike. Louisa, I'm just thinking, I know you're pretty well placed- Yeah. No. I'm happy to take that, Tony. Mike, if I take labor first, clearly, like, others, particularly in the U.S., the cost of hiring labor is marginally increased. We talked about that, first of all, in Q1 as the economy has been opening up. The other piece of the bit that's impacting our profitability, which overlays with the supply chain, is that because we are suffering from not getting in certain raw materials on time as we support the supply chain behind us, we lack that planning flow through the factory. We tend to get more lumpiness and more carry in our standard cost effectively. The labor piece is both input cost, but also just bumpiness in the factory. As Tony has already alluded to, you know, we are seeing some price rises in sort of metal components and others which is probably in common with our peer group. In terms of price, we did go through a price increase at the beginning of this year, and we will put through our normal price increases at the end of this year as well. We have historically been able to generate around a 3%-4% price increase on average across the patch, with obviously different pricing depending on the parts, but on average around 3%-4%. But in some of our long-term contracts, there will be some constraints around that. We are mitigating it to the degree that we can. Sorry, I'll shut up in a minute. We've had quite a good successful track record in previous years of getting TCV in supply chain of around 2%, and that is helping us to offset some of this. We do need to balance that with supporting some of the smaller suppliers as we go through this rather bumpy period. Just to add to Louisa's comments, Mike, the increase in pricing, we will be passing price increases through and the prices are obviously going up at a greater rate next year than they have been for the last few years, as we seek to pass it on. You know, there are some timing effects in there as well, as you rightly say, because we do have long-term contracts in some places that prohibits our ability to make those price increases straight away. Certainly in the aftermarket and some of the areas where we have less constraints, we will be passing those price increases on from the first of January next year. Got it. Thank you. Again, press star one to ask a question. We'll take our next question. Your line is open. Please go ahead. Oh. Tony, this is David Perry. Am I next? Question? I wasn't introduced. You are very clear, David. Good to speak. Okay. Hi. Hope you're well. Apologies because of the Airbus call, I missed the first few minutes. I don't know if you made any intro comments or not, so apologies if I ask something you addressed. But thanks for the update. I just had two questions. I was just curious on your thoughts on defense, whether you felt that this year the softer trends you've seen were temporary and about the comps that you had or whether you actually felt that the market, perhaps the U.S. market, was starting to roll over. Just wondered what your thoughts were going for perhaps next year. Then just on the civil aftermarket, just any thoughts you have at the moment about Q4 and what you might be thinking about next year would be great. Thank you. Okay. Well, no, I didn't talk about next year in my opening remarks, David, but on the defense question specifically, I mean, clearly we have seen softness this year. We can relate that very directly to, you know, pretty good information that we get on DLA spending and stocking trends. What we saw coming into COVID, I don't know if you heard my answer to one of the earlier questions, is that they were buying ahead of requirement and building stock, and that was all driven by a policy doctrine to try and improve availability across the U.S. fleet. We were benefiting from that. We now entered a period where, as we progressed through 2021, we saw some of this at the end of 2020, but really it's been more pronounced this year, that they are destocking. I think when you start to look forward, we'll be tracking their forward budget plans fairly carefully, so we don't yet know exactly what the pattern's gonna be for next year. They're driving a lot of stock out into the fleet and reducing their purchases. Definitely a near-term action. Difficult to say at this stage, whether the budget appropriations are going to sustain at current levels or whether they would go lower in 2022, 2023. We're not expecting them to go higher, but we're not yet clear on exactly what the trajectory is. I think there's a reasonable expectation that they next year will look similar to this year. You know, we don't yet have confirmation of that. We're still waiting. On civil aftermarket, in terms of quarter four, certainly some of the physical changes in the reopening of country borders, but particularly the Transatlantic corridor, bodes well. We don't think it's going to be a snapback increase, but we do expect progressive improvement through quarter four in civil aftermarket and, you know, our forecast is very much predicated on that. Can't give you specifics on this call at this stage, you know, but our assumptions are obviously contained within the update we've given this morning. Okay. Any thoughts on 2022, even just high level? Not at this stage, no. I think I'll leave that for our updates when we do year-end and we've got better clarity on some of the defense and other areas. I think of the three big areas of the business, we're still positive on the recovery that we're seeing in civil aerospace. We're gonna get a better view on exactly what the sort of duration and the outlook is on some of the headwinds that we've been describing this morning on defense and supply chain, and we're pretty positive on energy. We've had some very nice order wins over the last few months, and a combination of our exposure to LNG and renewables is positioning us very well. Those are the high level views on our three end markets. No, we'll be providing a more detailed update obviously early in the new year. All right. Thank you. Appreciate it. Once again, if you would like to ask a question, please press star one. We're, we'll wait for a minute. Let's have our next question. Your line is open. Please go ahead. Oh, hello. Yeah, good morning. It's Nick Cunningham from Agency Partners. I just wanted to follow up, if I could please, on the defense side. The year-on-year decline of 12%, is it possible to parse that between, if you like, the supply side effects, the constraints, and the demand side from DLA? As far as the DLA demand is concerned, is that mostly R&M related, or is any of it procurement equipment procurement related? Is there any sort of subsector pattern to it, in terms of which of the forces it's affecting and so on? Thank you. Okay. Thanks, Nick, and good morning. On the defense side of things, yes, we have got supply disruption, as I said earlier, that it pretty much affects us uniformly across civil and defense. At the high level, our updating of guidance today is broadly about half affected by supply chain effects and half affected by the softening in defense. Most of the defense softening we're seeing is through the purchase of spare parts, and as you know, we're reasonably agnostic as to whether it's a spare or an OE part in terms of the margin that it generates, because most of our business is price controlled. We don't have a lot of commerciality in our portfolio. It's really in the procurement of spares to support the fleet that we're seeing the reduction. It's DLA, reduced spending rather than the sort of platform spend, where you know most of the platform confirmations that are coming through you know look pretty good and pretty much in line with our forecast. The only real change is the DLA side. Thank you. Just sort of follow up on that, both houses of Congress have are suggesting $24 billion-$25 billion plus-ups to the PBR. Given that sort of relatively short cycle exposure that you have, would that, if that came through, would that suggest that next year would see some benefit for you? It all depends on the programs. I mean, the one thing, you know, I know we've been sort of quizzed on this in the past and, I mean, we've got our small team in Washington that track this very carefully. We need to know, you know, should that plus-up happen, where does that appropriated money land in terms of which programs? You know, there's a whole range of equipment, not all of which we supply, in terms of, you know, does it go to space? Does it go to cyber? Does it go to some of the sort of land force activity that we don't support typically through our technology? We've got to see more detail. I can't say at this range what it looks like in terms of exactly how that's gonna pan out for next year. Thanks, Tony. Presumably it's not unhelpful if it happens. Oh, no, if a plus-up happens, then we'll be tracking it very closely. I, you know, it's all of the usual sort of air platforms that we're strong on, we'll be looking for those lines straight away. We have been a net beneficiary of that over the last few years on the reset programs and such like on, you know, F-18, F-15 and some of the helicopter programs. While they were both building stock to improve availability levels, but they were also putting specific programs to get aircraft back and airworthy again. If we do see a plus-up, then yes, that would be net positive, but you know, yet to see exactly what that means for us. Well, thank you very much. Again, press star one to ask a question. There are no questions at this time. I would like to turn the conference back to Tony for any additional or closing remarks. Thank you very much, operator. Well, thank you again, everybody, for joining. We will be updating in the course of normal business, obviously as we work through the final quarter and look forward to speaking again in the new year. Thank you very much. Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.