A strong pound and deteriorating mining markets contributed to another difficult year for conveyor belting and polymer products group Fenner (FENR). Its core Engineered Conveyor Solutions (ECS) division, which sells conveyor belts for the removal of coal from mines, continued to struggle with depressed levels of activity in its main US market and pricing pressures from customers in Australia.
Even after stripping out the effects of a strong pound, ECS revenues fell 8 per cent to £464m. That prompted chief executive Nicholas Hobson to announce that steps are being taken to reduce costs and increase "operational flexibility".
Mr Hobson now wants to transform the smaller Advanced Engineered Products (AEP) division, which sells plastic seals, bearings and pipes to various industries, into the group’s key profit contributor. But investments in technology and staff to support future growth hit the margin during the year, so that underlying operating profits fell 4 per cent to £42.3m despite top-line growth (at constant currencies).
Due to its "superior growth, margins and returns", management will focus future acquisition activity on AEP, yet warned that growth there will probably continue to be offset by "weakness" in the mining market. Broker Investec expects adjusted pre-tax profit of £63.5m for the current financial year, giving EPS of 21.6p, down from £64.7m and 22.8p respectively.
| FENNER (FENR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 289p | MARKET VALUE: | £561m | |
| TOUCH: | 289.1-289.3p | 12-MONTH HIGH: | 488p | LOW: 275p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 167p | NET DEBT: | 35% | |
| Year to 31 Aug | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 553 | 37.2 | 14.6 | 7.20 |
| 2011 | 718 | 69.6 | 24.6 | 8.00 |
| 2012 | 831 | 88.6 | 30.3 | 10.50 |
| 2013 | 821 | 66.4 | 22.9 | 11.25 |
| 2014 | 729 | 29.2 | 11.7 | 12.00 |
| % change | -11 | -56 | -49 | +7 |
Ex-div: 29 Jan Payment: 9 Mar *Includes intangible assets of £213m, or 110p a share | ||||
