Concerns that slower growth in China will hurt Fenner's Australian coal business have dogged its shares recently. Yet there's no evidence of that in these results, and, although well-flagged, the numbers have been met with the customary round of earnings upgrades. With momentum maintained since the year-end, recent weakness provides a clear buying opportunity.
Fenner's core conveyor belting business is actually taking market share in Asia-Pacific and demand for heavy-duty steel cord belting among Australian miners is increasing. And they're still digging for all they're worth, understandable given China and India open a new coal-fired power station every three days. That means belts need servicing or replacing regularly and puts concerns about the impact of shale gas exploration on US coal production into perspective. Indeed, divisional sales were up a quarter at £295m, generating underlying operating profit of £39.8m, up almost two-thirds on last year. Elsewhere, and in spite of a warm winter and rock-bottom gas prices, supplying seals to the oil and gas industry proved lucrative, driving profits at the higher-margin AEP unit up 23 per cent to £20.5m.
Broker Numis Securities expects 2012 adjusted pre-tax profit of £102m and EPS of 36.2p (from £80.2m and 28.1p in 2011).
FENNER (FENR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 449p | MARKET VALUE: | £868m | |
| TOUCH: | 448-449p | 12-MONTH HIGH: | 505p | Low: 270p |
| DIVIDEND YIELD: | 2% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 151p* | NET DEBT: | 41% | |
| Half-year to 28 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 333 | 26.6 | 9.2 | 2.65 |
| 2012 | 412 | 41.7 | 14.8 | 3.50 |
| % change | +24 | +57 | +61 | +32 |
Ex-div. 25 Jul Payment: 5 Sep *Includes intangible assets of £230m, or 119p a share | ||||
