Senior PLC (LON:SNOR), the manufacturer of high-tech components, said trading in the first quarter of 2020 was slightly ahead of expectations.
The outperformance was despite the tangible impact of the coronavirus outbreak.
The engineering group said almost all of its operations have remained open during the coronavirus pandemic. The only operations shut down have been the ones where national governments have insisted on their closure.
On the other hand, the pandemic is causing significant disruptions to Senior’s end markets and their respective supply chains, with customer demand falling as activity levels have reduced.
As a consequence, it has been necessary for Senior to furlough significant numbers of its employees in those businesses most affected by the downturn. Where government assistance is not available to financially support furloughs, such as South Africa, Senior has carried on paying its employees.
At the end of 2019, Senior’s committed borrowing facilities were £305mln with an average maturity of 4.4 years and the group had headroom of £159mln under these committed facilities.
Net debt was £230mln, including £84mln of capitalised leases following the adoption of the IFRS 16 accounting standard; these leases do not form part of the definition of debt under the committed facilities and do not affect the engineer's lending covenants.
The group’s US and UK banks have agreed on covenant relaxations concerning the June and December 2020 testing periods to provide flexibility should this be needed. Senior said it is concluding discussions with its four US private placement investors to agree on covenant relaxations.
The company has crunched the numbers on several scenarios and believes it has sufficient liquidity under its existing committed facilities without using other funding sources that would be available to it; however, it won’t be getting any cash from the mooted sale of its Aerostructures business as it has decided to retain the business.
Notwithstanding the above, the group is continuing with its restructuring plan and says this has been delivering the expected benefits.
“Our defence and industrial power & energy after-market businesses are robust, which is helping to partially offset the impact of the coronavirus pandemic on civil aerospace, land vehicle and oil & gas markets,” the company said.
Nevertheless, while the short-term outlook remains clouded by the coronavirus pandemic, guidance for 2020 remains suspended.
Shares in Senior were down 0.2% at 60.75p in early deals.