Senior Share Price (SNR)

Thanks Londoner

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.

FCF has been unimpressive for a couple of years, and is a wee bit of a worry. "Provisions" implies there may be a bad debt or compensation arising, I think. An uncertain element, and undoubtedly the reason for both the muted response here, and the continued languishing of the share price.

Rise today short lived. Must be ripe for a takeover at these levels...

The results are good, apart from one niggle: FCF. I'm sure it's not a big issue but I'd like to understand what is buried in the drop:

- we started with more OP (38 vs 32m)

- but then 'increase in payables and provisions' is lower (17 vs 38)

- and we paid more interest (17 vs 10)

What's the story with those two items? Especially the 'payables and provisions' item which looks weaker than last year.