TIDMSNR
RNS Number : 0131E
Senior PLC
03 November 2020
3 November 2020
Senior plc: Q3 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, today issues this trading update for the
nine-month period ended September 2020 (the "Period").
Trading update
At our 2020 Interim Results we highlighted that the lower level
of activity seen in Q2 2020 due to the impact of COVID-19 on some
of our key end markets was likely to persist for the remainder of
2020; and that remains our view.
In Aerospace, for the Period, sales were 36% lower than for the
same period in 2019 on a constant currency basis. On a quarterly
basis, Aerospace sales declined 22% in Q1, 40% in Q2 and 45% in Q3,
year-on-year. This was as expected, with our 2020 Aerospace
revenues significantly reduced as a result of the ongoing impact of
COVID-19 and the 737 MAX situation. On a sequential basis,
Aerospace sales in Q3 declined 18% relative to Q2 reflecting the
ongoing production cuts by civil aerospace original equipment
manufacturers (OEMs) along with the rebalancing of inventory
throughout the supply chain; an activity that is continuing.
In Flexonics, sales for the Period were 27% lower than for the
same period in 2019 on a constant currency basis. On a quarterly
basis, Flexonics sales declined 23% in Q1, 33% in Q2 and 25% in Q3
year-on-year. As we expected, our customers continued to be
impacted by the challenging end market conditions. On a sequential
basis, Flexonics sales in Q3 were 1% below Q2. Whilst the
performance in Q3 benefited from improved conditions in the
heavy-duty truck and passenger vehicle markets compared to Q2, this
was offset by continuing weakness in the oil & gas sector.
Financial position
The Group continues to focus on cash preservation and Q3 was in
line with expectations. Headroom on our committed borrowing
facilities was GBP142m at the end of September 2020. We are
confident that at the year-end we will have sufficient liquidity
under our existing committed facilities and that we will remain
comfortably within our agreed covenant levels.
Market update
There is some evidence that when people are able to fly, demand
will recover strongly: for instance, domestic air travel in China
is now above pre-COVID levels. However, overall, IATA
(International Air Travel Association) anticipates demand for air
travel in 2020 to fall by 66% year-on-year as a result of the
impact of the pandemic. While narrow-body production rates from the
civil aerospace OEMs remain unchanged since our Interim Results,
the outlook for wide-body platforms has become more challenging.
Most industry commentators expect air traffic to return to 2019
levels by around 2023/24 and commercial aircraft production rates
to recover to pre-COVID-19 levels by 2024/25. Beyond this, the
drivers supporting air traffic growth over the long-term remain in
place. Senior has good content on all the newer, more fuel
efficient, aircraft so is well positioned to benefit from the
expected medium-term market recovery.
In Flexonics, some of our Land Vehicle customers saw their end
markets improve in Q3, in particular, heavy-duty truck. Whereas at
the time of our Interim Results, ACT Research predicted that North
American heavy-duty truck production in 2020 would be down by 51%
year-on-year, this outlook has improved, and production levels are
now only expected to be down by 42% year-on-year. Similarly, for
2021, production is now expected to increase by 40% year-on-year,
up from 27% at the time of our Interim Results. Oil and gas markets
continue to be challenging in the near term given the low levels of
drilling activity.
Throughout the Period, other markets important to Senior, such
as defence and semiconductor equipment, remained healthy.
Management actions
Our restructuring programme is delivering the expected benefits
and we continue to adapt our plans to further reduce costs in light
of the ongoing challenging market conditions. As part of that, we
have merged our Aerospace Structures Division and Aerospace Fluid
Systems Division to form one Aerospace Division. The new Aerospace
Division is led by Launie Fleming who previously ran our Aerospace
Fluid Systems Division.
In addition, we have taken the decision to close our Senior
Aerospace Bosman operating business in the Netherlands in 2021 and
relocate production to our Aerospace facilities in France.
The additional restructuring activities mean we now expect the
total restructuring charge for FY 2020 to be around GBP37m. The H2
2020 charge is expected to be GBP14m higher than stated at the time
of the Interim Results. The associated cash outflow for FY 2020 is
now expected to be around GBP20m, with an increase in the H2 2020
cash outflow of around GBP3m. A further cash outflow of around
GBP8m is expected in 2021. Cumulative savings for FY 2020 are still
expected to be around GBP35m. The annualised run-rate of savings is
expected to increase from GBP45m in 2021 to around GBP50m from 2022
once the Bosman closure has completed.
David Squires, Group Chief Executive of Senior plc said:
"Our highest priority continues to be the health and welfare of
our employees. They have worked tirelessly and skilfully in
response to the changing environment; however, we have had to take
some very difficult decisions across Senior with many loyal and
highly valued colleagues leaving the organisation.
Turning to the outlook for the remainder of the year, it is
clear that we are in the midst of a second wave and the Coronavirus
pandemic is continuing to have a profound effect on some of our
markets. We may yet see some short-term changes in customer
requirements due to COVID-19 which could impact Q4 2020, however,
overall, the Board's current expectations for 2020 are broadly in
line with market expectations(1) .
In the near term, the Board believes that the consequences of
the pandemic will continue to impact our business. While it is too
early to be definitive about the timing of the recovery, given the
unpredictable nature of the pandemic, it is likely to be 2022
before we see a meaningful recovery in Group revenues. In 2021,
Aerospace is set to be at least as challenging as 2020 given the
current production rates which our customers are advising. This
highlights the importance of both the comprehensive restructuring
actions which we are taking and the relentless and effective focus
on cash preservation and liquidity.
Looking further ahead, our differentiated offering in fluid
conveyance and thermal management products; our investment in low
carbon and advanced manufacturing technology; our global footprint;
and our positioning in attractive and diverse end markets will help
to ensure that we emerge strongly as the recovery starts to take
shape. In that regard, we are encouraged by recently announced new
contract awards and the high levels of bid activity in both our
Aerospace and Flexonics Divisions".
Notes
This announcement contains inside information.
(1) Company compiled consensus for FY20 adjusted profit before
tax is GBP(11.2)m loss based on the nine analysts that have updated
their forecasts since our 2020 Interim Results. Adjusted profit
before tax is before amortisation of intangible assets from
acquisitions, goodwill impairment, restructuring and disposal
activities.
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 +44 (0) 1923 714
Bindi Foyle plc 725
Director of Investor Relations, +44 (0) 1923 714
Jennifer Ramsey Senior plc 722
+44 (0) 7796 708
Richard Webster-Smith Finsbury 551
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 & 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.
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END
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