Stringent cost control and selective acquisitions were unable to compensate for a further deterioration in Fenner 's (FENR) end markets. Despite cost reductions of £38m, adjusted operating profit sank 29 per cent, prompting investors to send shares in the troubled conveyor belting and polymer products group down 7 per cent.
The engineered conveyor solutions unit, which sells conveyor belts for the removal of coal from mines, was once again the major talking point. Cash-strapped customers in key US and Australian markets continued to defer belt replacements, even seeking out second-hand ones from closed mines. That backdrop meant that, even after an 11 per cent reduction in headcount, divisional adjusted profits at constant currencies still tanked 47 per cent to £23m.
Trading at the group's advanced engineered products arm was slightly more encouraging. Turnover increased marginally to £266m, although was flat at constant currencies, as management's investment in medical operations limited the impact of plummeting oil and gas sales.
Given the worrying outlook for the coal industry, and the distinct possibility that oil and gas markets will remain in the doldrums for the foreseeable future, management stressed investment opportunities will take precedence over future dividend growth.
Broker Investec believes insufficient cash flow will force Fenner to cut its dividend to 6p a share in the year to August 2016. And, while its adjusted EPS forecast of 12.1p is under review, it expects consensus forecasts to fall by roughly a tenth.
| FENNER (FENR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 146p | MARKET VALUE: | £283m | |
| TOUCH: | 145.5-146.3p | 12-MONTH HIGH: | 310p | LOW: 144p |
| DIVIDEND YIELD: | 8.2% | PE RATIO: | na | |
| NET ASSET VALUE: | 151p* | NET DEBT: | 46% | |
| Year to 31 Aug | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 718 | 69.6 | 24.6 | 8.0 |
| 2012 | 831 | 88.6 | 30.3 | 10.5 |
| 2013 | 821 | 66.4 | 22.9 | 11.3 |
| 2014 | 729 | 29.2 | 11.7 | 12.0 |
| 2015 | 667 | -5.3 | -5.4 | 12.0 |
| % change | -9 | - | - | - |
Ex-div: 28 Jan Payment: 9 Mar *Includes intangible assets of £189m, or 97p a share | ||||
