TIDMSNR
RNS Number : 5609S
Senior PLC
07 November 2019
Trading Update
Senior plc ("Senior" or the "Group"), an international
manufacturer of high technology components and systems, principally
for the worldwide aerospace, defence, land vehicle and power &
energy markets, issues this trading update for the ten months ended
October 2019 (the "Period").
David Squires, Group Chief Executive of Senior plc said:
"Senior is focussed on delivering improved returns for
shareholders with many of our operating businesses performing well.
However, in recognition of the challenges in some of our Flexonics
and Aerospace markets, Senior is implementing a restructuring
programme to drive improved returns. These actions and our "prune
to grow" strategy will strengthen our business. Combined with a
slightly lower forecast tax rate and lower central costs, this
means that the Group's performance in 2019 will be broadly in line
with our expectations."
Flexonics
Activity in the Flexonics Division in the Period has been
broadly in line with expectations with markets weakening in the
last four months as anticipated. We continue to expect the full
year margin progression in the Division to offset the sales decline
with the benefits from our focus on cost management and efficiency
initiatives being delivered.
The truck, off highway and passenger vehicle markets in North
America, Europe and Asia have softened over the last four months.
Current economic forecasts suggest that our Flexonics cyclical end
markets will continue to decline through the rest of 2019 and into
2020, before starting to recover in 2021. We will continue to take
appropriate steps to protect our returns and position the Group to
take advantage of future recovery in our end markets.
Aerospace
We have seen year-on-year sales growth in the ten months of 2019
compared to the previous year. However, revenue in the last four
months has been lower than our previous expectations due to
weakness in wide-body commercial aircraft engine demand and further
impact of the 737 MAX situation as some customers balance inventory
to demand. Despite the lower revenues, we expect to maintain
Aerospace margins at a similar level in the second half of the year
compared to the first half of the year.
Senior continues to make good progress on new product
introduction and industrialisation activity. In those businesses
where this activity is near completion, we continue to see
improving returns. We have seen some customers delay the production
ramp of certain contracts, where we are displacing incumbent
competitors, and we now expect these to be at full rate production
in 2021 instead of 2020.
In a highly competitive environment, we are maintaining our
pricing and return on capital discipline. While we have
successfully renewed a number of important long-term contracts, in
line with our strategy to improve returns across our businesses, we
have decided not to renew certain contracts which did not meet our
returns requirement. As a result of this, our current view is that
sales in our Aerospace Division will be lower in 2020 than in 2019
before returning to growth in 2021.
Restructuring
Management is taking actions to mitigate the challenges
described above. We are implementing a restructuring programme
across the Group, which includes:
-- Aligning direct headcount to match capacity to sales demand
profile
-- Further efficiency improvements resulting in overhead cost
reductions
-- Transferring major work packages to South East Asia, taking
advantage of our global footprint and cost competitive
country strategy
-- Closure of Senior Aerospace AMT's South Carolina facility
by early 2020
The opportunities currently identified will result in a total
exceptional restructuring charge of around GBP20m, with a
significant portion coming from headcount reductions as we match
capacity to demand. The cash cost of this is approximately GBP15m,
of which GBP6m is expected to be incurred in 2019 and will be
financed by improvements in operating cashflow. The balance of the
cash cost is expected to be incurred in 2020. The cost of this
restructuring programme is expected to be largely recovered in 2020
and 2021.
Prune to grow
The Group has continued with its "prune to grow" activities and
recently disposed of two more non-core businesses, in addition to
Senior Flexonics Blois which was disposed of at the start of the
year.
In September 2019, the Group disposed of its Flexonics operating
company in Brazil, Senior Flexonics Brazil Ltda ("São Paulo"),
serving the local automotive and power & energy markets.
In October 2019, the Group completed the sale of Absolute
Manufacturing ("Absolute"), part of our Aerospace Structures
Division, focused on small built-to-print precision machining
components.
These disposals enable us to have greater focus on our core
activities and to deploy capital in other parts of the Group that
have higher returns. These two businesses represented less than 2%
of Group revenue in 2018 and the transactions are slightly
accretive to the Group's adjusted earnings for 2019.
Pensions
The latest triennial actuarial valuation of the Senior plc
Pension Plan ("the UK Plan"), which is a funded scheme in the UK,
has been completed. As a result, and effective from April 2019, the
Group's cash contributions to the UK Plan have reduced from an
annual amount of GBP8.1m to an annual amount of GBP5.5m. These
contributions are payable over the three year period to March 2022
and are subject to review and amendment as appropriate at the next
funding valuation in 2022.
Summary and Outlook
Many of our operating businesses are performing well with
improving returns. However, as described above, we are dealing with
some challenges in some of our Flexonics and Aerospace markets. The
Group is taking actions to address these by implementing a
restructuring programme and by continuing its "prune to grow"
programme. Combined with a slightly lower forecast tax rate and
lower central costs, this means that the Group's 2019 performance
remains broadly in line with our expectations.
We continue to manage capital expenditure and working capital
and, together with the benefit from the reduction in pension
contributions, this enables us to fund our restructuring programme
without impacting net cashflow for the year.
The 2019 full year results will be announced on Monday 2 March
2020.
Conference Call
There will be a call for investors and analysts at 8.30am GMT
today. The dial-in details are as follows:
International access number: +44 (0)20 3003 2666
UK toll free number: 0808 109 0700
Password: Senior
Further information
Group Finance Director, Senior
Bindi Foyle plc +44 (0) 1923 714 725
Philip Walters Finsbury +44 (0) 20 7251 3801
About Senior
Senior is an international manufacturing group with operations
in 13 countries. It is listed on the main market of the London
Stock Exchange (symbol SNR). Senior designs, manufactures and
markets high technology components and systems for the principal
original equipment producers in the worldwide aerospace, defence,
land vehicle and power and energy markets. Further information on
Senior plc may be found at: www.seniorplc.com
Cautionary Statement
This announcement contains certain forward-looking statements.
Such statements are made by the Directors in good faith, based on
the information available to them at the time of the announcement,
and they should be treated with caution due to the inherent
uncertainties underlying any such forward-looking information.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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