A 15 per cent drop in first-half underlying operating profit at Fenner (FENR), partly currency-driven, was well-flagged, but full-year results will depend heavily on events in the US coal industry. Bullish external indicators appear to justify optimism, however.
Low coal prices, destocking and bad weather in the US cut interim profit by 17 per cent at Fenner's core conveyor belt division. But things may be about to change. Natural gas prices have risen steadily, making coal more competitive. Coal's share of US electricity generation is also rising, just as stockpiles hit multi-year lows and power stations need more fuel to cope with summer air-conditioning demand. That hasn't helped Fenner's order book yet, but chief executive Nicholas Hobson expects it will "in the next few months".
Meanwhile, Australia - Fenner's second largest market - has recovered faster than expected and "will be an improving story through the second half". South Africa and China, as well as newer markets like South America, West Africa and the Middle East, have also impressed.
Fenner's smaller engineered products business AEP is selling plenty of plastic seals, bearings and pipes to the oil and gas industry, but profit fell 8 per cent on account of heavy spending on research. Expect a busy second half: broker Numis Securities forecasts full-year adjusted pre-tax profit to fall to £80m, giving EPS of 28p (from £86.9m and 30.1p in 2013), before recovering in 2015.
FENNER (FENR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 401p | MARKET VALUE: | £778m | |
| TOUCH: | 401-403p | 12-MONTH HIGH: | 488p | Low: 303p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 166p* | NET DEBT: | 40% | |
| Half-year to 28 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 391 | 26.1 | 8.5 | 3.75 |
| 2014 | 360 | 17.6 | 7.5 | 4 |
| % change | -8 | -33 | -12 | +7 |
Ex-div: 30 Jul Payment: 8 Sep *Includes intangible assets of £226m, or 117p a share | ||||
