Senior keeps an eye on US-China talks

4th Mar 2019 08:34

(Sharecast News) - Aerospace and defence engineer Senior grew profits ahead of sales last year and said it expected 2019 will see further improvement, with ongoing trade talks between the US and China key for its Flexonics arm.The FTSE 250 group landed revenue of £1.08bn for 2018, up 5.7% over the prior year of almost 8% if excluding currency swings, as order intake was maintained with a book-to-bill ratio of 1.1.Group adjusted profit before tax increased 14% to £83m and adjusted earnings per share by 12% to 16.08p.Although free cash flow shrank 22% to £45.3m, net dent was trimmed to £153m from £155.3m and the total dividend was hiked 7% to 7.42p per share.Aerospace turned over £760.4m, up 7%, with adjusted operating profit also up 7% to £80.4m as margins remained unmoved.Sales in the large commercial aircraft sector increased 7% amid increased production of Boeing's 737 MAX and 787 and Airbus's A320neo and A350 but partly offset by decreased production of other lines. Smaller jet sales were up more than 11% and military and defence sector revenues rose 5% primarily due to the ramp-up of the Lockheed Martin F-35 fighter jet that was partially offset by the reductions in build rates for Sikorsky's Black Hawk helicopter.Prospects for this division are "visible and strong", said chief executive David Squires, having won significant additional content on Boeing's 777X, which is due to enter service in 2020, and Bombardier's Global 7500, which began service in December.Flexonics, which serves land vehicle emission control and industrial markets, lifted sales 10% to £322.9m thanks to strong sales in the US and European heavy duty vehicle markets but offset by a fall in China as part of the transition to a joint venture. Profits jumped 33% to £26.1m, helped by stronger margins.Market conditions in Flexonics are less certain, Squires said. After selling sale French land vehicle business Blois, a slight decline in the Flexonics top line is expected, due to softer demand in some of industrial markets, though margin progression is hoped will offset the sales decline.End markets are "somewhat dependent on geopolitical factors such as the ongoing trade discussions between the US and China", Squires added, citing industry analyst forecasts for a low level of production growth for North American heavy-duty trucks in 2019, with growth in the first half partly offset by a decrease in the second.Upstream oil and gas markets may be restricted due to infrastructure constraints in the US in the first half, while downstream activity is expected to remain stable for 2019."2019 trading has started in line with expectations," Squires said. "The board anticipates that, even with changeable geopolitical conditions, 2019 will be another year of improvement in performance for the group."