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03 Aug 2020
First Take: Senior - Braced for downgrades
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First Take: Senior - Braced for downgrades
Senior plc (SNR:LON) | 169 -6.4 (-2.2%) | Mkt Cap: 710.5m
- Published:
03 Aug 2020 -
Author:
Ben Bourne | Rory Smith -
Pages:
4
1H trading
The 1H20 outturn has been impacted by a high level of operational gearing on reduced volumes, as expected (Revenue £409m, -30%), with adjusted operating profit of £9m (1H19: £46m) representing an operating margin of 2.2% (1H19: 8%) in the first half. Goodwill impairment, primarily in the Aerostructures business, drove a reported loss of £(126)m (1H19: £39m profit). Return on Capital Employed as a result declined to 6.8% (1H19: 11.6%).
Adjusted EPS reduced 91% to 0.72p. The interim dividend will not be paid, as expected.
FCF has increased 21% to £16m, largely driven by inventory reduction, and net debt decreased by £29m to £239m, representing 1.6x ND/EBITDA, within the level of pre-relaxed covenants. A further relaxation has been secured for the June 2021 test, with an additional test instated for September 2021.
Actions underway
The Group has taken advantage of customer site closures to accelerate the planned transfer of some work packages to SE Asia. Group headcount has been reduced by 17%, with a further 9% reduction to come in H2. Total restructuring costs this year will be £35m, with £35m of cumulative savings this year and annualised run rate savings of £45m.
Outlook
Guidance remains withdrawn.
We expect downgrades to consensus given lower build rates in Aerospace, and uncertain recovery in Flexonics end markets, through H2 and into 2021 and the level of profitability implied by these results, pre-restructuring benefits.
Analyst presentation at 11am