Senior's revenue rises as plane production takes off

Senior (SNR) lifted its revenue by a fifth in its results for the half year to 30 June, propelled by “green shoots” in plane production following a drop due to Covid-19. However, the engineering group, which supplies parts for plane manufacturers, warned investors against being too optimistic. 

“Volatility in the aerospace supply chain continues,” it said. "While we are starting to see the first green shoots of improvement, we continue to believe that it will be well into 2024 before we see normalisation in the supply chain”.

Indeed, investors were far from enthusiastic about such sentiments, with the shares down 2 per cent by mid-morning on results day. With a price/earnings ratio of 32, you could forgive them for expecting more, especially when they have also had to put up with a dividend hiatus during the pandemic. But Senior insists good times are on the way, describing the doubling of its half-year dividend as “reflecting confidence in performance, financial position and future prospects”.

The aerospace side of its business is not the only reason for this. The company forecasts growth in demand for car manufacturers and the energy sector, predicting that it is well placed to benefit from growing demand for electric vehicles and green energy specifically. Meanwhile, it expects to see further demand from its customers in the world of defence after the US upped its military budget by 3 per cent.

According to analyst consensus from FactSet, earnings per share will hit 13.1p by the end of 2025, with the stock currently trading at 12.6 times those forecasts. Should those predictions prove correct, the price looks reasonable. But we advise caution for now. Hold.

Last IC View: Hold, 170p, 27 Feb 2023