Shares at Senior rise on improved margins, acquisitions seen

Aeronautics and industrial component manufacturer Senior has today unveiled somewhat mixed figures, albeit accompanied by an improvement in margins, an upbeat outlook and while delivering a 22% increase in its full-year dividend.

The company's profit before taxes grew by 16% to £83,4m on the back of an increase in revenues from continuing operations of 14% to £712m. The latter was modestly less than forecast by analysts.

The firm's most important other metrics of financial performance also improved. Hence, its free cash flow gained 4% to £57.6m while its net debt decreased by £22m to £70.9m. On this point the group's Chief Executive highlighted that Senior's net debt to EBITDA ratio stood at only 0.6 times at year-end. Hence, in his own words, the Group: "[is] well placed to fund future organic and acquisitive growth."

Adjusted operating margins rose by one tenth of a percentage point versus last year, to 13.9%.

The first few weeks of 2013 saw the Group perform 'in-line' with the Board's expectations. The Flexonics Division - which includes equipment for emissions control as well as for industrial processes - is benefiting from solid sales to the North American heavy-truck market, but being impacted by weakening European passenger vehicle production, and the Aerospace Division is seeing healthy volumes from large commercial aircraft but a continuing decline in the military and defence market, Senior explained.

Analysts highlight lower taxes, improved marginsCommenting on the results this is what analysts at Investec had to say: "Following the lower tax guidance (22.5% from 23.0%) and improved margins, we expect to upgrade our estimated fiscal year 2013 earnings per share of 18.0p by 2-3% although we need to understand the revenue miss in more detail.

"With many moving parts, we see headwinds from European autos and on-going concerns about the important B787 programme, and tailwinds from FX (strengthening US$) and improving Flexonics revenue mix. We don't see a major catalyst on the near-term horizon."

Dividend cover to remain at 3.8

Significantly, the company points out that, at the level recommended, the full-year dividend would be covered 3.8 times (2011 - 3.8 times) by adjusted earnings per share.

As of 09:19 shares of Senior were rising by 5.92% to 234.4p.

AB