Hertfordshire-based FTSE 250 engineering company Senior (SNR) surpassed £1bn in sales for the first in 2017. However, adjusted operating profit dropped by 4% to £82.6m.
Investors appear to be focused on the sales breakthrough as well debt reduction, given that its share price has risen 4.1% to 296.6p following the news.
Its performance for 2017 was in line with the forecasts.
Senior’s chief executive David Squires says the first half of 2017 was challenging for some of its markets. However, market conditions and performance improved in the second half ‘as expected’.
These improved conditions have continued into 2018 and should go into 2019, he adds.
HOW DID THE COMPANY PERFORM IN 2017?
While Senior’s revenues of £1.02bn, earnings before interest and tax of £82.6m and earnings per share of 14.39p were in line with market forecasts, the company beat predictions for its debt position as well as free cash flow.
The company’s debt position was reduced by £42.8m to £155.3m while free cash flow improved by 20% to £58.3m. These figures beat broker Investec’s estimates of £171m and £45m respectively.
Senior’s dividend is proposed to increase by 5.8% to 6.95p per share and Squires says the dividend will continue to rise in 2018 as well.
Its shares are trading on 20.7-times forecast earnings for 2018.
WHAT’S BEEN DRIVING REVENUE?
The company has been winning more work on aircrafts made by Airbus and Boeing which are ramping up production to deal with growing demand.
In 2017, air traffic grew by 7.6% and is forecast to grow by 4% per annum for the next 20 years.
Commercial aircraft is a large part of Senior’s offering compounded by the fact the company is involved in more work on new engines such as the A320neo, 737 MAX and A330neo. The growing aircraft market therefore bodes well for the company.
Senior has also benefited from increased US military spend with production of the Sikorsky CH-53K King Stallion military helicopter and the Joint Strike Fighter jet being ramped up in the next five years.
