Senior did not disclose the size of the claim, which concerns contract problems at its Thermal Engineering division, where a new chief executive and management have been installed.
The group, which yesterday announced a £6m fall in taxable profit to £18.1m in 1994, had already set aside about £3.5m to sort out Thermal Engineering's legal difficulties.
Don McFarlane, Senior's chairman, said the action was being vigorously defended and further provisions were unnecessary. He said: "A claim for damages substantially in excess of the provision has been received. However, the claim includes consequential losses in respect of which the board has been advised there is no material liability."
The dispute involves reliability problems on a completed contract still under guarantee.
Profits at Thermal Engineering last year fell from £8.73m to £1.68m, on sales down from £157.2m to £118.8m. Mr McFarlane said problems at Thermal were being tackled and the operation had repositioned its global activities into two areas - boiler products and turbine products.
He said the problems should not overshadow progress at the engineered products operation where sales grew 33 per cent to £218.5m. Operating profits rose 68 per cent to £17.3m.
The construction services division halved operating profit to £3.3m, but Mr McFarlane forecast a period of stability in the UK construction industry.
Although Senior's profits were hit by losses on discontinued businesses and £4.2m on disposals, Mr McFarlane said: "There are good reasons for expecting a return in the current year to previous levels of profitability. The group's strong financial position lead us to believe that 1995 will be a much better year for the group."
Last October Senior warned that profits for the year would be substantially lower than the £24.4m achieved in 1993.
A final dividend of 2.1p makes 3.4p (3.27p) for the year.Reuse content