Final results4 Mar 2024 12:45
This isn’t one of those companies that I delve too deeply into. Mainly, because when I try, I see too many moving parts to have confidence in my numbers. Rather, I trust Senior’s management to be capable of running the business effectively; a business operating in growth markets.
I was encouraged by the presentation and Q&A.
It reminded me that the build rates of Boeing and Airbus are still well below the rates of 2019, and will not return to those rates until 2025/6, with growth continuing beyond.
The business is well diversified, with 6% of total revenues in the troubled 737Max program.
In answer to a question on the likely timeline to a ROC target of 13.5%, the CFO didn’t hesitate to reiterate the previous expectation and gave end 2025 as a target.
FCF largely went to the dividend with costs relating to the acquisition of Spencer largely responsible for the increase in debt.
As we move through 2025/6, with ROC greater than the 13.5% targeted there’ll be a significant step up in profitability. A normalization of the growth rate and improvements in the supply chain will reduce WIP from last year’s £28m to a more normal c.£5m. In the absence of acquisitions, debt and associated interest costs will fall. All these components should contribute to FCF levels at or better than the c.£60 we saw in 2019.
Barring any jarring adverse company related event, which I see as unlikely given the product diversification, this is still a stock I’m comfortable to hold into the 2025/6 timeframe, when I’ll reassess my position.