2nd Mar 2015 14:08
LONDON (Alliance News) - Manufacturing and engineering group Senior PLC on Monday said its pretax profit fell in 2014 due to the strength of sterling against the euro and the dollar, though it hiked its final dividend and sees a robust medium-term outlook for its aerospace arm.
The FTSE 250 constituent said its pretax profit for the year was GBP80.6 million, down from GBP83.8 million in 2013, although profit would have risen 2% if exchange rates had remained the same. Revenue rose to GBP820.8 million, from GBP775.1 million in 2013, but operating profit fell to GBP89.6 million from GBP93.3 million due to acquisition costs and a weaker operating margin of 13.6% against 13.9% a year earlier.
Revenue increased in both its Aerospace and Flexonics divisions, with the former boosted by increased work from Airbus and Boeing jet programmes and the latter by a North American petrochemicals contract and a strong North American truck market.
The company hiked its final dividend to 3.96 pence from 3.6 pence in 2013, despite the lower profit, bringing its total dividend for the year up to 5.63 pence per share against 5.12 pence.
"2014 was another year of healthy progress," said Mark Rollins, Chief Executive of Senior. "Continued positive operating cash flows resulted in a net debt to EBITDA ratio of 0.8 times at year-end, leaving the group well placed for future organic and acquisitive growth."
Shares in Senior were down 1.5% to 335.3 pence on Monday.
Constant currency revenue in its Aerospace division rose to GBP536.6 million from GBP486.4 million a year earlier, though operating margin weakened to 14.5% from 15.2% due to higher development costs. The Aerospace division provides a range of structural products to commercial and military aircraft.
The revenue growth was driven by 10% organic revenue growth in its large commercial aircraft business, boosted by market share gains and increasing build rates for Airbus and Boeing commercial jet platforms. Senior has a record net order intake for Boeing and Airbus, with the build rate on the Airbus A320 to increase to 50 per month in 2017 and the rate on the Boeing 737 to increase to 52 per month in 2018. At current build rates, it could take more than nine years to fulfil existing order books for the two manufacturers, Senior said.
Senior also said it expects UPECA Technologies, which it acquired in April last year for GBP75.5 million, to further boost the commercial aerospace unit by providing exposure to another market, adding UPECA added further content to Senior's exposure to the A350 and Boeing 787 programmes.
Regional and business jet organic revenue increased 11%, boosted by work on the Bombardier CRJ series and the Russian Sukhoi Superjet 100. Senior expects its market share in the segment to increase in the medium term as platforms like the Bombardier CSeries, Mitsubishi MRJ and Embraer E2-jet.
But revenue for its military aerospace business dropped 7% due to lower demand for the V22 Osprey helicopter and Eurofighter Typhoon. Senior expects 2015 military revenue to be more stable as an increase in build rates for the Airbus A400M military transport plane offset the end of C-17 production and declines in V-22 Osprey and CH47 Chinook demand. Senior is also confident on the long-term outlook for the division based on the schedule significant ramp-up of the Joint Strike Fighter programme and on the A400M reaching full-rate production.
Senior's Flexonics division, which makes emission control and fuel distribution products for the transport sector along with engineered expansion joints and dampers for industrial process control applications, saw constant currency revenue increase to GBP284.6 million from GBP252.4 million last year and said its operating margin improved to 15.3% from 14.8%.
Truck and off-highway sales for its emission control and fuel distribution products rose 13%, boosted by growth in the North American truck market and the ramp-up of new platforms in Europe. Passenger vehicle sales rose 4% on the back of growth in most European markets and a good performance in China, though this was offset in part by weaker demand in Brazil and India.
Revenue for the industrial process control unit was marginally higher year-on-year, boosted by the start of shipments of expansion joints for an unnamed large North American petrochemical client in the last quarter. That helped to offset weaker trading in power and energy, heating, ventilation and air conditioning and renewables markets, in particular in Brazil and Germany.
Senior expects the division to get a boost from the shipments remaining on the petrochemical contract in the first half of 2015, though it said the outlook for industrial sales outside North America is weaker.
N+1 Singer said the results were in line with expectations and said the outlook for Senior remains solid, adding it sees a limited risk to the company's Boeing and Airbus order books from falling oil prices.
The key risk N+1 sees is the ability of Senior to gear up successfully for the increasing production rates that are being demanded by Boeing and Airbus. However, it noted that management has been aware of this for many years and has been planning ahead.
By Sam Unsted; [email protected]; @SamUAtAlliance
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