Aerospace group meets expectations

Senior believes market activity in 2009 will be slower but intends to counteract this with cost saving measures such as staff reductions

Morningstar.co.uk Editors 16 December, 2008 | 9:03AM
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Hertfordshire-based aerospace and defence company Senior said it is on track to deliver pretax profits of £55m for 2008, up from £37m achieved last year. The FTSE 250 company attributes some £2.7m of the expected gain to beneficial currency movements arising from the sterling/dollar exchange rate.

The share price of Senior responded positively to today’s announcement, rising almost 5% by 8:45am.

Senior, which designs and manufactures technology components and systems for the aerospace, defence and diesel engine markets, said it is to enter 2009 with strong order books at its largest industrial operations. Although it expects the aerospace market will be healthy next year, it is anticipating continuing weak land vehicle markets and as such expects 350 job losses before the final quarter as it restructures in anticipation of lower volumes arising from this area of its business. The cost of this headcount reduction is expected to come in at £1.7m but the firm believes it will achieve more than £4.5m of cost savings in 2009.

Land vehicle markets (automobiles, light and heavy trucks and off-road vehicles) have been weak world-wide and Senior said any meaningful improvement is unlikely to occur until later in 2009 at the earliest.

The group said cash generation will be fundamental going forwards and as such working capital and capital expenditure controls have been enhanced and incentive schemes modified to increase the focus on this area. In addition, the group said it is prepared to act quickly if the aerospace market deteriorates. With nine out of the 14 operations in the group’s aerospace division located in North America, Senior’s board said it is well placed to implement rationalisation plans.

Also expected to benefit the group next year is lower raw material costs and the absence of a Boeing strike. Boeing is the group’s largest customer and its new 787 aircraft, in which Senior has worked on, is now due for its first flight in the second quarter of 2009 and for delivery to customers to start in the first quarter of 2010.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Senior PLC164.40 GBX0.37

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