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Rollins leaves Senior in good shape

RESULTS: A rise in civil aviation receipts has buoyed full-year prospects for aeronautical parts supplier Senior
August 5, 2014

Mark Rollins, chief executive of Senior (SNR), accompanied the group's half-year report with notice of his intention to retire, after seven years at the helm. The interim figures suggest he can enjoy his retirement in the knowledge that the aeronautical parts supplier is in robust health.

IC TIP: Buy at 258p

Strip out foreign exchange movements and a steady rise in civil aviation business underpinned an 11 per cent increase in adjusted operating profits, to £54.6m. That was partly thanks to a 40 basis point improvement in the margin (at constant currencies) to 13.6 per cent. Demand for Senior’s kit is being driven both by US airlines replacing aging fleets and newcomers from Asia expanding in emerging markets.

The aggregate order book for Boeing and Airbus is up by over a fifth from a year ago, which is highly encouraging for a major supplier like Senior. The step up in civil aviation is also welcome in light of the contrasting fall away in defence contracts. Military contracts represented 12 per cent of group sales, down from 15 per cent.

With the bulk of its revenues denominated in foreign currencies, the strength of sterling inevitably ate into the top line. Meanwhile, April’s £74m acquisition of Malaysian engineer Upeca pushed net debt up to £114m, even though the rise was mitigated by strong free cash flow.

Investec anticipates adjusted 2014 EPS of 19.1p, rising to 20.5p for the following year.

SENIOR (SNR)
ORD PRICE:258pMARKET VALUE:£1.1bn
TOUCH:258-259p12-MONTH HIGH:320pLOW: 250p
DIVIDEND YIELD:2.0%PE RATIO:14
NET ASSET VALUE:90p*NET DEBT:30%

Half-year to 30 JuneTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201339937.18.01.52
201440045.18.71.67
% change-+22+8+10

Ex-div: 22 Oct

Payment: 28 Nov

*Includes intangible assets of £290m, or 69p a share