LONDON (ShareCast) - (Sharecast News) - Senior bumped up its interim dividend payout, even as it said it was "watching with care" for any impact from the geopolitical trade discussions, thanks to an improved performance at both of its main divisions.
The aerospace and automobile engineering group said in a statement that trading was ahead of expectations for the six months ending on 30 June, raising its interim dividend by 6.8% to 2.19p.

Profits before tax meanwhile were 20% higher at £39.0m (Numis: £37.0m).

"Trading across the Group in the first half of 2018 has been slightly ahead of expectations with margin progression in both Aerospace and Flexonics and the Group delivered another strong cash performance," said group chief executive David Squires.

On an adjusted basis, operating margins improved by 90 basis points to 8.3%, driving a 9% improvement in free cash flow to £32.2m, even as the company cut its net debt by £33.0m to £148.8m or 1.2 times' EBITDA.

Total sales on the other hand only rose by 2.6% to £523.3m, as negative exchange rate effects wiped £22.4m from the firm's top-line.

As expected, Senior benefitted from a 30% jump in the production of North American heavy-duty trucks during the first half, which benefited its Flexonics division.

However, although the upstream oil and gas markets were continuing to see increased drilling activity, the downstream O & G market remained "flat", management said.

That stood in apparent contradiction to talk among some analysts of a nascent recovery in the downstream sector.

Regarding the outlook for commercial aerospace, Senior said it "continues to be strong with good visibility due to the production ramp-up of new, more efficient, large commercial aircraft programmes."

Among those new programmes was Boeing's 737 Max, Airbus's A320neo, A350, C-Series and the F35 figher jet.

Reflecting the strong conditions across most of its businesses, the company's book-to-bill ratio for the first six months of the year stood at 1.2, with directors adding that they expected margins to improve on a full-year basis.

"At current exchange rates, the Board's expectation of making good progress in 2018 is unchanged, with performance still expected to be slightly weighted to the second half," Senior said.

"Looking further ahead, Senior is competitively positioned. We expect to make continued improvement as more new programmes and products enter production and ramp-up, and as the benefits from implementation of the Senior Operating System and cost saving actions continue to be delivered.

"[...] Overall, end markets are generally healthy, though we are watching with care any impact from the ongoing geopolitical trade discussions."

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