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Senior struggles with weak markets

The engineer struggled with weak industrial vehicle markets and volume reductions on mature aerospace programmes
March 1, 2016

Weak industrial vehicle markets and volume reductions on mature aerospace programmes were among the chief culprits of a steep 19 per cent fall in operating profit at Senior (SNR). Throw in a disappointing outlook statement warning that continued difficulties in Flexonics will offset progress made elsewhere, and it's no surprise that investors reacted badly to these results.

IC TIP: Hold at 210p

Depressed commodity prices and waning demand for trucks in North America were mainly to blame for Flexonic's poor performance. Worst affected was the US off-highway market, where feeble appetite for agriculture and mining vehicle parts sent revenues plummeting 32 per cent.

Fortunately, the core aerospace division was in better shape. Increased volumes here were driven by higher Boeing 737 and 787 deliveries and Airbus expanding production on its A350 jet. But declining build rates of Airbus' A330, together with lower aluminium prices, a material which the group recycles and sells on the market, saw divisional adjusted operating profit tumble 5 per cent to £77m.

Chief David Squires is confident that the aerospace business will generate a profit in 2016, but warned that continued weakness in Flexonics will offset this. He responded by announcing further restructuring, coupled with plans to invest in growth and develop leadership talent.

Broker N+1 Singer plans to downgrade its adjusted EPS forecasts for 2016 by about a tenth to 17.5p.

SENIOR (SNR)
ORD PRICE:210pMARKET VALUE:£881m
TOUCH:210-210.6p12-MONTH HIGH:362pLOW: 190p
DIVIDEND YIELD:3.0%PE RATIO:18
NET ASSET VALUE:103p*NET DEBT:45%

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201162271.713.73.80
201271283.416.34.65
201377583.817.25.12
201482180.615.35.63
201585063.811.66.20
% change+3-21-24+10

Ex-div: 28 Apr

Payment: 31 May

*Includes intangible assets of £357m, or 85p a share