As guided in an update from July, technology and components supplier Senior (SNR) saw its revenue drop by 30 per cent year-on-year in the six months to 30 June, to £409m. This came as its aerospace business was hampered by the ongoing grounding of Boeing’s (US:BA) 737 Max jet and then hit by the Covid-19 pandemic in the second quarter.
Aerospace sales account for almost three-quarters of the group total and nosedived by 31 per cent to £300m. This was despite a 5 per cent increase in revenue from the military and defence sector as production of the Joint Strike Fighter ramps up. The division was weighed down by weakness in civil aerospace where sales fell by more than two-fifths.
With the collapse in global air traffic, airlines are retiring older aircraft and looking to defer new plane orders. This has fed through to original equipment manufacturers cutting production rates on the programmes for which Senior is a supplier. For example, Airbus (FR:AIR) has reduced the expected build rate of its widebody A350 jet from 9-10 per month to 5 per month, and anticipates deliveries will remain subdued throughout 2021.
The poor aerospace outlook has triggered Senior to take an £111m impairment on the business. Alongside restructuring costs, this swung the group into an operating loss of £126m, down from a £39m profit a year earlier and far worse than the £24m loss analysts had predicted. The adjusted picture is not much better – adjusted operating profit tumbled to £9m, versus £46m a year earlier, on just a 2.2 per cent margin.
Net debt (including lease liabilities) has ticked up 4 per cent since the December year-end to £239m, equivalent to 1.6 times cash profits (Ebitda). The group’s lenders have agreed to relax their covenants for the testing dates in December this year and June and September in 2021. The previous limit had been that net debt excluding lease liabilities not exceed 3 times cash profits. Senior does have £162m of headroom on its borrowing facilities and lower capital expenditure and tighter inventory management saw free cash flow jump by a fifth year-on-year to £16m. Still, there’s no interim dividend.
