Good morning. Welcome to Senior plc's 2024 full-year results presentation. Thank you for making the effort to get here. Our thanks also go to Deutsche Numis for hosting us here at their auditorium. A warm welcome too for those of you joining remotely. Before I continue, I just wanted to mention that this is actually going to be Bindi Foyle's last set of results, because Bindi is retiring on May the 16th this year. Hopefully we'll get out in a hi, Bindi. I also want to introduce Alpna Amar. Alpna, if you could raise your hand, maybe, if that's all right. Alpna is our new incoming CFO, joining us in April. Bindi and Alpna are already working on a smooth handover. We've also got Sylvia. Where's Sylvia?
Sylvia's our new group HR director, who's joining us today, succeeding Jane, who's retiring in a few weeks' time. Welcome to you both. In terms of our itinerary today, we have a different format compared to our usual results day. We'll start by running through our 2024 results, focusing on the financials and outlook for 2025, followed by Q&A on that. We will then take a 15-minute coffee break and come back at 10:00 A.M. to run through an investor event, which focuses on Senior as the market-leading pure-play fluid conveyance and thermal management business. We will allow plenty of time for Q&A after that as well. Let me first comment on progress with our strategic review of our Aerostructures business. Senior is committed to a sale of our Aerostructures business, and we are making good progress. There is good buyer interest.
We are now at an advanced stage of a sale process with a small number of parties, and negotiations are progressing positively. We are focused on completing the sale process and maximizing value for shareholders, and we will update the market in due course. This is in line with our strategy to position Senior as the market-leading pure-play fluid conveyance and thermal management business, focused on custom-designed products and systems with rich IP content. You will hear much more about this at the investor event starting at 10:00 A.M. this morning. For 2024, trading was in line with our revised expectations, and we had strong free cash flow. Group sales and profits were up, and Bindi will describe that later. Order intake was once again strong, with a book-to-bill of 1.12, which underpins confidence in future growth. We had notable contract wins in both Aerospace and Flexonics divisions.
In the two years since acquisition, sales for Spencer Aerospace have grown by 135%. We are delighted with how Spencer's performance continues to improve, and there is much more to come. I'll talk more about our standard parts strategy in our next session after the break. Reflecting the group's performance and the board's confidence in its future prospects, the board has approved a final dividend of GBP 1.65 per share, bringing full-year dividend to GBP 2.4 per share, an increase of 4% compared to 2024. For the year ahead, the board anticipates good growth for the group, in line with its expectations. I'll say more about the different elements of that when I cover outlook at the end of this presentation. Sustainability is a central theme of our purpose, our strategy, and indeed our technology roadmap.
Importantly, therefore, we are making great progress as an organization in terms of our own sustainability actions. With regard to our actions on climate change, in 2024, we achieved our near-term Scope 1 and 2 greenhouse gas emission reduction targets a year ahead of schedule, delivering a 33% reduction against a 2018 baseline, and we remain on track for our Scope 3 near-term commitment. Our focus is now in progressing against our long-term net zero targets, which were approved and verified by SBTi in 2023. For the third year running, we were delighted to have recently been informed that we are one of a small number of companies to be awarded the prestigious A rating from CDP for our climate disclosure and actions. Our focus on the social and governance aspects of ESG is unwavering, with continued high performance and progress on aspects such as safety, diversity, and inclusivity.
In particular, our strong performance on safety saw our lost-time injury rate reducing to 0.19. This is truly world-class performance. We're never complacent and work hard to continuously improve our behavioral safety program. Before I talk about the detailed outlook for 2025, I will hand over to Bindi to take us through the financial results.
David, good morning. Senior delivered 2024 trading in line with revised expectations, which we set out in October as a consequence of the Boeing strike and an Airbus Tier 1 supplier temporarily reducing build schedules in Q4 of 2024 and Q1 of 2025. Free cash flow performed stronger than expected. On a constant currency basis, revenue grew 4%, adjusted operating increased 5%, and margins expanded in both divisions. Adjusted profit before tax was GBP 33 million, and adjusted earnings per share was GBP 7.17, both lower than last year. The prior year benefited from interest and tax provision releases that did not repeat in 2024. The 2023 EPS benefit from this was 2.54 pence. The group recorded free cash inflow of GBP 17.3 million, an improvement over last year. Net debt, excluding capitalized leases, was GBP 153 million. The strong performance at Spencer meant we paid the first earnout in 2024.
That, together with payments for dividends and share purchases to hedge our share award commitments, led to a year-on-year increase in net debt. Net debt to EBITDA was 1.8 times. Return on capital employed decreased by 30 basis points to 6.8%, with higher inventory and investment in growth not yet fully offset by growth in profit, which was impacted by the near-term temporary customer-led headwinds. Group revenue increased by GBP 13.6 million to GBP 977 million, despite adverse exchange rate translation of GBP 25.5 million. Looking at divisional performance on a constant currency basis, Aerospace revenue increased by 10%, a notable achievement given 737 MAX volumes were subdued following the Alaska Airlines incident in January 2024 and the Boeing employee strike in September 2024.
Civil Aerospace sales were up 11.6%, reflecting increased deliveries to Airbus programs, activity levels increasing in our Thailand business as a key supplier recovers from a fire in 2023, as well as continued strong growth in revenue from Spencer. Revenue from the defense sector grew 1.4% as our sales to the F-35 program increased and legacy programs remained stable. A number of our Aerospace businesses supplied product to adjacent industrial markets. Revenue from these markets increased by 15.4%, largely due to the rebound in demand from semiconductor equipment market. In Flexonics, revenue was down 6%. Strong revenue growth from downstream oil and gas and nuclear was offset by lower oil and upstream oil and gas business and the anticipated softness in land vehicle markets. Revenue from land vehicle markets decreased 3.7%.
This was a resilient performance as a launch and ramp-up of new program wins helped partly mitigate the softer market conditions. Our sales to the North American truck market decreased 2%, benefiting from higher service demand and therefore slightly outperformed the end market, which was down 2.3%. Senior's North American off-highway sales decreased 13.5%, reflecting softer market conditions. Sales to other truck and off-highway regions, primarily Europe and India, were flat as growth from India and higher sales from the launch and ramp-up of new program wins, as well as a one-off short-term order offset reduced customer demand in Europe. Sales to passenger vehicle markets decreased by 1.7%. Group revenue from power and energy markets decreased by 9.5%.
Sales to oil and gas customers decreased by GBP 17.4 million, with robust demand in our downstream business partially offsetting a reduction in sales from our upstream business due to a lower share of this very competitive work. Sales to other power and energy markets increased by GBP 4.8 million, reflecting growth in power generation, nuclear, and renewables. The increase in the group's adjusted operating profit was driven by Aerospace more than offsetting the expected volume-related reduction in profit in Flexonics. In Aerospace, adjusted operating profit increased by 14.3% to GBP 30.4 million, and the adjusted operating margin increased by 20 basis points to 4.6%. The division continued to make steady progress operationally, responding dynamically to the temporary headwinds that were experienced in the year.
Boeing faced challenges in 2024, suppressing production volumes, and our operating businesses most exposed to this customer, both directly and through tier one suppliers, took mitigating actions to control and reduce costs to align with the lower volumes required. Although OEMs continue to face challenges with the supply of certain product categories, Senior's own supply chain became more stable as a consequence of specific actions taken by us and our suppliers. A few hotspots remain, and we are continuing to work with our customers and suppliers to resolve these. In Flexonics, with the expected reduction in revenue, adjusted operating profit decreased by 3% to GBP 35.1 million. Nevertheless, operational efficiencies, lower costs, and favorable product mix helped increase the division's adjusted operating margin by 30 basis points to 11%.
The increase in central costs was largely due to GBP 0.4 million higher U.K. pension plan running costs and higher health and life assurance costs. This slide shows the reconciliation of adjusted operating profit to the statutory reported profit for the period. It also highlights our interest and tax charges. Net borrowing costs increased by GBP 1.9 million -GBP 12.1 million due to higher interest rates on higher variable-rate debt and higher levels of indebtedness compared to last year. We expect these costs to increase in 2025, reflecting higher indebtedness and higher weighted average interest on our loan notes as we refinance lower interest notes that have matured. IFRS 16 interest charge on lease liabilities increased to GBP 3.4 million due to higher interest rates. Net finance income from pension plans decreased slightly to GBP 2 million.
A reminder on the comparative, in 2023, we simplified our America's legal entity ownership structure and, having reassessed provisions for estimated uncertain tax positions, provisions of GBP 7 million and associated interest of GBP 3.5 million were released in 2023. This benefit, therefore, did not repeat in 2024. A tax charge of GBP 3.3 million was recognized on the group's adjusted profit before tax, an effective rate of 10%. This was lower than expected as we benefited from the recognition of a deferred tax asset in respect of historical tax losses. Looking ahead to 2025, we currently expect the group's effective tax rate on adjusted profit before tax to return to a more normal level of around 22%. In terms of reconciling adjusted profit to statutory reported profit, we recognize site relocation costs of GBP 3.5 million.
This relates to GBP 3 million of this relates to the transfer of some Aerospace manufacturing from California to Mexico, and GBP 500,000 relates to the transfer of our Flexonics Crumbling business to a nearby high-tech facility. The GBP 1.1 million charge associated with U.S. class action relates to the settlement of wage and hour class action claims. Corporate undertakings include GBP 1.2 million of costs primarily associated with potential divestment activities. The rest of the items excluded from adjusted profit measures relate primarily to the acquisition of Spencer, namely GBP 1.6 million for amortization of intangible assets from the acquisition and GBP 2.2 million of income under corporate undertakings for change in fair value of contingent consideration. At the October trading update, I guided for free cash inflow to be low single digit, so it was positive to have delivered free cash inflow of GBP 17.3 million.
Operating cash flow was GBP 39.3 million, a cash conversion of 85% of adjusted operating profit. Working capital cash outflows were GBP 17 million, with GBP 26.6 million of outflow related to increase in inventory, partly offset by inflows from receivables and payables. Inventory was higher in Aerospace with planned investment to enable us to meet the increase in demand from our customers and because of the impact of the Boeing strike and certain customer schedule changes in Q4. Working capital was 18.3% of sales. We are likely to see an increase in absolute working capital over the year to support growth in Aerospace, but overall, we expect working capital as a percentage of sales to come down to 17%-18%. Capital expenditure of GBP 43 million was 1.1 times depreciation. For 2025, CapEx is expected to be above pre-IFRS 16 depreciation.
The majority of this investment is in support of growth projects, particularly in Flexonics where contracts have already been secured. Net payments for interest and tax total GBP 22 million. Below free cash flow, after payment of dividends and acquisition of shares by the Employee Benefit Trust, we were cash neutral. Overall, the group's net cash outflow of GBP 9.8 million in 2024 was therefore for the payment of the first Spencer Aerospace earnout following its strong sales growth performance. Based on Spencer's 2024 performance, we expect to pay the second earnout amount of GBP 13.5 million in 2025. The group's net debt to EBITDA was 1.8 times in December, and we had liquidity headroom of GBP 158.5 million under our committed borrowing facilities.
During the year, we issued new $50 million private placement notes carrying interest at 6.26%, maturing in February 2030, and we extended the maturity of the $50 million US RCF out to June 2026. In February 2025, we issued new $40 million private placement notes carrying interest at 5.46%, maturing in February 2029. This replaced the GBP 27 million facility that matured in January 2025. These actions mean the current weighted average maturity of the group's facilities is two and a half years. For my final results, Senior has healthy liquidity with stable finance arrangements, and to support growth from its higher order book. Thank you. I'll now hand back to David to cover Outlook.
Thank you, Bindi. Let me finish this section by summarizing 2024 and going through the Outlook for 2025.
Last year, there is no doubt that the situation at Boeing significantly affected sales, volumes, and profitability. Despite that, revenue, profits, and margins increased. Outside of Boeing, we did see other civil aircraft production rates increasing. Defense also grew, and sales from our Aerospace businesses to adjacent markets, especially semiconductor equipment, also increased. In Flexonics, we've worked hard over recent years to reach double-digit margins in the division, and that continued in 2024. That was helped by robust demand in our downstream oil and gas and nuclear business, and with the new programs we've won in our land vehicle operating businesses. Let me finish by going through the outlook. For the year ahead, the board anticipates good growth for the group in line with its expectations. We are closely monitoring the impact on global trade from potential tariff changes.
Increasing aircraft build rates, operational efficiency benefits, and improved contract pricing are expected to drive good growth in Aerospace in 2025, with H2 expected to be higher than H1. For the full year, Aerostructures is expected to improve from a loss-making position in 2024 to an operating profit range of GBP 9 million-GBP 11 million in 2025, with the large majority of that being earned in H2. We expect Flexonics performance in 2025 to be broadly similar to 2024. In land vehicles, the ramp-up of programs recently won means we expect our 2025 performance to be broadly similar to 2024, despite some softness in North America and Germany. In power and energy, activity levels are also expected to be similar to 2024.
Our strategy of positioning Senior as a pure-play fluid conveyance and thermal management business in attractive and structurally resilient core markets, with active portfolio management combined with our highly relevant technical capabilities and sector-leading sustainability credentials, provides confidence of continuing performance improvements for the group. That finishes this part of the section on the results. All the usual market materials are in the back of the pack, of course, we will be talking much more about strategy and markets in the second half of this morning's presentations at the investor event. That starts at 10:00 A.M. In the meantime, Bindi and I would be delighted to take any questions you might have on the results.
Good morning, both. It is Andrew Douglas from Jefferies. I will keep my strategy questions for later, but just on the results, I have four quick ones, please.
Can you just explain to us semicon recovery? We're seeing lots of other companies with semicon exposure struggling, recovery deferred to the right. I just want to figure out what's going on with you guys that other people maybe aren't having. On the Boeing challenges, clearly that's now behind us. Can you just talk about the pace of the ramp? Is that getting back to where we thought at the pace that you thought, or are there any lock jams there? You've had another cracking year of market share gains in 2024. Well done. What's the outlook for 2025 market share gains and kind of new contracts? Last but by no means least, Spencer, another hell of a year from the top line. Can you just give us an update on what's going on at the bottom line in terms of margin?
Okay.
I'll leave my 12 questions for later.
Thank you, Andy. I'll do a bit of a double act on this one. Firstly, on semiconductor, the bulk of our semiconductor business is with Lam Research out of our Metabellas business in Massachusetts. I think that had fallen greatly from the previous highs over the last couple of years. It was really in trough. Now we are absolutely seeing the sign of that picking up. For us, it's not making chips that's important. It's the ordering of the equipment. If you like, that's maybe a leading indicator. We are seeing the start of some good pickup in semiconductor equipment-related orders coming in for the stuff we make from there, which is like pin lift actuators that go into the place of wafers very carefully into the equipment. That's good to see.
I think on the pace of ramp at Boeing, where are we? Coming out of the strike, they got going again around the 13th of March in terms of manufacturing, fairly soft start in December, but then rapidly picking up the pace. I'm privileged to be involved in a regular CEO call with the head of supply chain in Boeing, and they're quite open with us on how things are going. Their first objective is to get up to over rate 30, and I think they'll get there quite quickly. The cap is still rate 38, and obviously, therefore, the second aspiration is to get to that cap. Thereafter, I think they would hope by the end of the year to be beyond the cap. That depends on the FEA giving them approval to increase production.
I asked a specific question on that call, what are the factors that need to happen to allow that? I think they've been quite open about it. They have a set of KPIs with the FEA that's really built around empirical data from certain key performance indicators that are under statistical process control. Once they've addressed those, they'll have a constructive dialogue on increasing the cap. They're very close, I can tell you. You can really see things stabilizing within the production system at Boeing, which is very good to see. Therefore, I'm optimistic that we won't have another year like last year and that we will actually get through that. New CEO is doing a good job. It seems to be really driving the necessary improvements.
For us specifically, you might remember I said that last year we'd agreed to a level loading with Boeing so that we continue to deliver at the same pace. That paused during the strike, but it's picked up again now. We're back at that rate now, and that will continue for the bulk of this year. That's at a level to help them drive down their inventory, but once they get over a certain production, then we'll start to see our rates improving from there. Long answer to the question, I think the summary is the rates are picking up at Boeing, and I'm optimistic that they will get the cap lifted later in this year because they're optimistic. Back on the comment, Spencer, and I'll come back and do the market share gains, Bindi.
Yeah.
Spencer, as David said, since we acquired it, their sales have gone up 135% over the two-year period, and last year they grew 54%. Their margins did get to a run rate of double-digit in the second half of 2024, and we're expecting them to then continue to climb into the teens into 2025. There is more margin expansion and more sales growth to come beyond that as well.
Yeah, we're very pleased with Spencer. It's going to be a great driver. I think I'll talk more about it in the next event because it's not just a one-off acquisition itself. It was the launch pad to help us grow organically with our standard parts expansion, and we'll come back to that after 10:00 A.M. Market share gains, yeah. We've had some great wins in the land vehicle side.
Part of the reason for that is that some suppliers rushed to get out of internal combustion engine sales and into all electric. You have heard us talk about our one foot in today, one foot in tomorrow, making sure that we can provide parts to whatever our customers need. I firmly believe for some time the people that manage their transition the best will be the winners. We appear to be doing a pretty good job there. We have actually picked up quite a lot of work for the more efficient petrol engines on the passenger vehicle side, as well as some really cracking and very cool new products on the electric side.
On the truck side as well, we continue to work with all the key players, Cummins and Daimler being the two biggest, and on the off-highway side, CAT and JCB are our two largest customers there. We seem well positioned with all of those customers to continue growing. On the Aerospace side, I will talk about some new wins on the fluid conveyance side after the break. On the standard part side with the organic investments we have been making to introduce flanges, the Humboldt flange as one of our products. I will describe more about that. That was a real landmark award that we have just received. There are still more opportunities. We won the Dodge Aircraft complete EBU and Blade Air System ducting contract last year. That will slowly come into production. We are in the middle of development now.
There are opportunities on the fluid system side, equally with some really good wins on the Aerostructures side. Obviously, that helps as we are selling the business for prospective buyers to see the confidence we have and the growth that is coming with that business.
Thank you.
Morning. It is Rich Page from Deutsche Numis.
Morning, Rich. Morning.
Three, if I may, please. First off, just could you confirm, looking back at the FY2024 performance, it looks like it was Aerostructures that caused the sort of a lot of the October, just to confirm how the core fluid conveyance business performed in the latter part of the year, please. On the Airbus Tier 1 issue, just to confirm the run rate on that side, please, for this year. You have obviously some very interesting pricing agreements coming through this year.
Could you just remind us the sort of timing of those as well, please? Just finally, you've mentioned H2 weighting. Could you give a bit more around the divisional aspects of that, please?
Sure. Right. Sorry. The first one was it looked like Aerostructures was the—did you?
Yeah. In terms of the 2024 performance at the end of last year, how that weighted across Aerostructures versus the underlying.
Yeah. Indeed. Yeah. The bulk of the reason why we had to issue the revised prediction in October was because of Aerostructures, because they were the most affected by Boeing. Specifically, our Pacific Northwest business, which is AMT and DMAR, for those who have been following us for a long time, it's all Boeing. It's largely Boeing.
They have some SpaceX work as well, but most of that's Boeing, some of it directly, some of it into people like Spirit. Really across from the middle of September through October, November, and even up to the middle of December, they were only doing some 787 work and some SpaceX work. All the other models, particularly 737 MAX, 777X, was all on hold. Boeing put all its suppliers on hold at that time. We had 95% of the workforce on furlough, 50% full-time, 45% part-time throughout that period. Yeah, that was a huge impact on us in the final quarter. That's why we had to issue that trading update, unfortunately, in October. Yes, it really was concentrated primarily in structures.
Now, we have some business with Boeing as well on the fluid system side, but those businesses have greater opportunities to make up for changes during the year because of a more diverse customer base. I think on the Airbus Tier 1 side, let me cover that next. Yes, we announced in October that there seemed to be an imbalance between wing delivery and other deliveries, particularly around engines and interiors, which Guillaume Faury, the CEO at Airbus, has been very open about. He joked about, "If you want some gliders, we can get them provided. You don't want to sit down in them." I think they are making progress. He gave a bit more upbeat talk about that at the earnings presentation. Was that last week? Signs of that stabilizing.
What that meant was they really had to slow down a bit on the other parts of the aircraft that were not late. As an on-time supplier, unfortunately, we fell foul of that. Yes, that Tier 1 supplier took schedule. They did not take them out. They postponed them to later because the demand has not gone away. Through quarter four and into quarter one, and given their credit, that is exactly what is happening. We have had a soft start. This is mainly in Yupeka in Malaysia. We have had a soft start in January, slightly higher volume in February. It will be slightly higher volume again in March, and then full bore from April. All the orders are coming through in that. The temporary reduction in schedules is just that, temporary. Bindi, do you want to cover the weighting?
I'll come back and talk about the other ones.
Yeah. In terms of weighting from an Aerostructures point of view, we said we expect most of the profits to come in the second half of the year. Small amount or break even, basically in half one, and then the rest of it in half two. On the fluid system side, at the moment, we're looking at it will be around the edges, but around 40-60, half one to half two. Some of that is because we are having price increases kick in from July 2025 in fluid systems. On Flexonics, at the moment, it looks like a sort of close to a 40-60 split, half one to half two.
That is because with the end market dynamics, first half of this year, particularly in land vehicles, is expected to be softer and then picking up again in the second half of the year. We have had a good start to the year in Flexonics, so it may be slightly more balanced by the time we get to the half year. I think Bindi covered the price agreements as well. We have got one sizable contract kicks in April- May, and then the rest of the second half of the year. Just remind me, I have written down fluid conveyance for the second question.
What was the context? On the second, I think you have covered it all. Did I?
Actually, it was just on the pricing. Pricing. Oh, it was just the timing of the pricing and then what you have got beyond.
Yeah. Yeah.
Okay. Thank you. Yes.
That's all right. Thanks. Hi, Andrew Humphrey from.
Hi, Andrew. How are you? Just a couple, if I may. On structures, that's clearly a kind of the expectation for 2025 is clearly strong in terms of profitability. I wanted to ask, given that business is doing sort of half of the 2019 peak on revenue, more or less, what is the incremental drop through on that as we kind of get through into a point where volumes can be growing again? Secondly, just any further restructuring costs expected in 2025?
Are you going to ask us to keep structures now, Andrew? Look, we've said consistently these are good businesses. I'll cover more about this in the next presentation, but this is not some kind of fire sale of toxic assets. Far from it.
They've had some lean years because there's a high fixed cost base in those structures businesses. Everybody goes right down in the factories. You'll see big heavy-duty equipment that costs a lot of money. If you're not manufacturing the right volumes, then you've got an underabsorbed fixed overhead that you can't get rid of. Great to see it improving. We'll put some specific comments about what happened between 2023 to 2024 in our next presentation. We're going to split out structures from fluid systems and show you the relative performance. There'll be a lot more detail after this. Once you get over that certain point, the drop through is pretty good in our structures businesses. That's one of the attractions for the prospective buyers. In the years ahead, you can see the volumes that are coming through.
This is going to be a good business for whoever buys it. In the meantime, it is very much under our control, and will be until the sale happens. We continue to manage them very responsibly, and we will be driving very hard for the best possible result from that.
Yeah. In terms of restructuring, I mean, in 2024, we did do some restructuring to align our headcount to the volumes we were seeing. This was on the Aerostructures side because of what happened with the Alaska Airlines incident. We took headcount out. In the second half of the year, also realigning when the strike impact hit, although the furloughs that we did helped as well. On Inflexonics, as land vehicle volumes were softer, we anticipated that and took headcount out to align to the new volumes.
All of that restructuring was taken above the line in 2024, so we have not taken it below the line. In 2025, most of the headcount has now been aligned. There is a little bit more perhaps in the upstream oil and gas business in Flexonics, where revenues are expected to come down a little bit as well. Just realigning that. Again, all of that is being taken above the line.
Thanks.
Any more questions on the results? I think we are itching to get on to the meaty stuff in the next presentation. Okay. We are going to break now, and we are going to start at 10:00 A.M. There is a webcast, so it will be sharp at 10:00 A.M. Please take 20 minutes, and we will look forward to seeing you soon. Thank you.
Thank you.