Fenner's (FENR) pleasing half-year performance is best illustrated by the strong recovery in underlying margins at its engineered conveyor solutions division. The 240 basis point improvement to 6.1 per cent was largely due to in-house efficiencies rather than higher orders for replacement belts. This mirrored the rise in the group’s underlying operating margin, while underlining our January assertion that “self-help measures should flow through into improved margins in 2017” .
The restructuring of the Yorkshire-based manufacturer is thus delivering tangible benefits, and although activity levels in some of its end markets remain subdued, it is gaining market share through new product launches and growing demand for higher technical specification; the latter dynamic should also bolster the margin progress.
Those benefits are also reflected in the balance sheet and cash flow statement; although they would have been more pronounced save for unfavourable currency movements. Reduced capital and dividend commitments saw free cash flow more than triple to £23.9m. Net debt fell £28.7m at constant currencies.
JPMorgan Cazenove is guiding for adjusted operating profits of £49m and EPS of 13p for the August 2017 year-end, up from £37m and 8.4p in FY2016.
| FENNER (FENR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 327p | MARKET VALUE: | £634m | |
| TOUCH: | 326.8-327p | 12-MONTH HIGH: | 351p | LOW: 129p |
| DIVIDEND YIELD: | 1.0% | PE RATIO: | 218 | |
| NET ASSET VALUE: | 161p* | NET DEBT: | 47% | |
| Half-year to 28 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2016^ | 277 | -23.1 | -9.8 | 1.0 |
| 2017 | 307 | 13.8 | 5.3 | 1.4 |
| % change | +11 | - | - | +40 |
Ex-div:27 Jul Payment:07 Sep *Includes intangible assets of £182m, or 94p a share. ^Half-year to 29 Feb. | ||||
