The Investment Column: New doubts over Senior

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The Independent Online
Senior Engineering is another company which has in the past failed to live up to expectations. Its reputation for taking two steps forward and one step back will be reinforced by yesterday's news that the pounds 28.3m sale of the struggling Thermal Engineering business has been delayed.

The announcement of the disposal in October, quickly followed up by news that Andrew Parrish, a director of Williams Holdings, was filling the chief executive's post after an eight-month vacancy, was seen as marking a revival in the group's fortunes. But at the very least, this new delay puts a question mark over that.

Senior is selling Thermal Engineering to Thermal Engineering Corporation, a highly geared management buyout vehicle. The group blames higher costs in the UK industrial boiler business and the failure to win the expected level of repair work in the US for its inability to complete the deal by the end of October, as originally scheduled. The intention now is for the sale to go through by 20 December.

Terry Garthwaite, Senior's finance director, says the buyers remain committed to Thermal Engineering, pointing out that the large debts being taken on in the MBO make its finances particularly sensitive to changes in the performance of the business. He insists that there is no sense of them trying to reduce the price.

His confidence is not shared by the stock market, which marked Senior's shares down 7p to 114.5p yesterday. Thermal Engineering lost pounds 237,000 in the first half and the latest problems have caused Senior to warn that the forecast profit from the business has been cut by pounds 1m. It remains to be seen whether the important pre-Christmas repair contracts from US utilities have been deferred, or cancelled completely.

Assuming flat profits of pounds 22m this year from Senior, the share price, standing on 22 times forward earnings, leaves little room for disappointment. Despite suggestions of a bid from TI, the shares look unattractive.

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