Engineering firm reported PBT down a hefty 18%

Companies: Senior plc



Technology components manufacturer Senior plc (LSE: SNR), issued a profit warning this morning saying Group revenue for the nine months to 30 September 2016 increased by 7% to £682m, but that underlying revenue had decreased 4% and PBT had fallen a hefty 18%.


The groups results, which included a favourable exchange rate impact of £48m and £26m from acquisitions, highlight the company's ongoing issues as its struggling Flexonics division fell 18% and its Aerospace Division stuttered in the face of challenges in its own market.


"Underlying Group revenue from organic operations was down 4% on a constant currency basis as growth from the Aerospace Division (up 2%) was offset by lower Flexonics revenue (down 18%) due to weaker truck and off-highway, and oil and gas markets."

N+1 Singer said senior had given a "highly disappointing" trading update with a number of issues adding to the group being behind expectations:


"Following the Flexonics issues over the past 12 months, there are now issues on the Aerospace side which are affecting the outlook. In a period when some stability was required, this is disappointing. We have downgraded FY16 EPS by 6.8% and, whilst we see Senior remaining a US takeover target, we move from Buy to Hold (target price down from 262p to 196p) until more clarity is available on the direction of the Group."

Adj PBT fell 18% to £58.5m, from £71.6m, and net debt was a higher than expected £222.7m. Senior management attributed the higher debt to an anticipated increase in working capital, continued investment in CAPEX in support of organic growth, as well as negative currency impacts.


Management were keen to stress that bid activity for new business remained high and important wins were secured in Q3 for its Structures business on the 777X and A320neo, but conceeded performance in the Aerospace Division hadn't been good. As N+1 Singer mention, its Aerospace Division saw challenges and slower than anticipated performance as the business jet market continued to decline:


"...the performance of the Aerospace Division in the third quarter was below expectations due to slower than anticipated ramp-up of new production programmes. The Division's performance has also been impacted by certain supplier issues which have impacted some of our US and UK operations.  


Further, the Division has also been affected by some programme specific price increase discussions not yet concluding and discussions are continuing with customers to bring these to resolution."

The Flexonics Division also reflected challenging market conditions, with the outlook for North American heavy truck production declining in Q3, resulting in a "further deterioration" in its performance. SNR said the division:


"... continues to focus on short-term cost management actions and good progress has been made in the third quarter with projects to transfer production to new facilities in cost competitive countries. 

Senior's share price fell off a cliff this morning as the market reacted badly to its update, falling more than 20%:


SNR Share Price



The information contained within this post is based on personal experience and opinion and should not be considered as a recommendation to trade nor financial advice.