RNS Number:4650A
Fenner PLC
9 November 1999
Contact: Colin Cooke
Chairman
Mark Abrahams
Chief Executive
Telephone: 0171 282 8000 until 12.00pm
Thereafter: 01482 626501
Fenner PLC
Preliminary results for the year ended 31 August 1999
Chairman's Statement
1999 1998
Financial
Highlights #000 #000
Turnover* 196,112 215,893
Operating profit
before exceptional
items* 16,053 22,622
Earnings per
share - before exceptional
items/loss
on sale
of operations 9.18p 14.02p
- after exceptional
- items/loss on sale
- of operations 6.40p 7.23p
Dividends per
share 5.675p 5.60p
Gearing 23.0% 13.8%
*Continuing operations
We have experienced challenging conditions in all our markets. A
satisfactory underlying performance by the majority of the Group's
businesses has been held back by significantly reduced volumes in
our UK automotive business.
We continue to have a strong balance sheet which will enable us to
make strategic investments.
Turnover, Profits and Dividends
The year to 31 August 1999 has seen challenging trading conditions
in all our markets, characterised by adverse price pressures.
Despite market conditions, the Group's underlying performance has
been satisfactory, notwithstanding substantial trading losses in
our UK automotive plant which continues to suffer from reduced
volumes.
In the low inflation and highly competitive environments in which
the Group operates we continue to retain market share. Group
turnover for the year from continuing operations amounted to #196m
(1998: #216m), generating an operating profit before exceptional
items of #16.1m (1998: #22.6m). A strong operational cashflow
performance in the second half of the year has left net borrowings
at a low level.
Cost reduction and reorganisation programmes, in particular in our
automotive business, have absorbed #3.3m of exceptional costs
during the year, leaving a profit before tax of #11.1m (1998:
#15.2m) and underlying earnings per share of 9.18p (1998:14.02p).
The continued strength of the majority of our businesses has led
the Board to recommend an increased final dividend of 3.75p
(1998:3.70p) which, when taken together with the interim dividend
of 1.925p (1998:1.90p), gives a total for the year of 5.675p
(1998:5.60p).
Investment and Shareholder Value
Following the heavy capitalexpenditure programmes of the
last three years 1999 has seen a lower level of expenditure (#6.7m against
depreciation of #8.8m).We continue to provide the necessary development
resources to those areas of the Group's activities which offer the best
opportunity for growth and value enhancement.
The Group's recent share price performance, in common with many
smaller market capitalised groups, continues to be disappointing
and fails to recognise the very real value and future potential of
the businesses. We remain committed to developing investment
programmes and pursuing opportunities to create further prospects
for value-enhancing growth in all our operations.
Divisional Trading
Turnover Return on
Year ended 31 August 1999 #m sales %
Advanced Engineered
Products 51.6 6.0
Conveyor Belting 103.0 11.0
Fluid Power 42.3 10.3
Whilst turnover and margins in our Advanced Engineered Products
Division were, as outlined above, significantly depressed by lack
of volume at our UK automotive plant, both Conveyor Belting and
Fluid Power achieved satisfactory margins, albeit on slightly
reduced turnovers.
People
Many challenges have faced our business teams during the
year and the overall financial results fail to reflect the
successes which have been achieved. Thanks to the commitment and
dedication shown by our employees, we remain confident that each
of our businesses retains good prospects and I thank them on
behalf of the shareholders for their individual and collective
contributions to progress.
Outlook
Following recent awards an increase in both enquiry levels
and order schedules provides a more encouraging outlook for the
automotive business. The mining markets worldwide remain variable
although in some territories there are signs of improvement.
In the absence of buoyancy in the majority of our markets, current
results are benefiting from the efficiency improvements carried
out last year. The Group continues to derive a large proportion of
turnover and profit from North America and this, combined with the
improving Asian economies, represents the best prospect for
growth.
Colin Cooke, Chairman
Group Profit and Loss Accountfor the financial year ended 31
August 1999
1999 1998
BeforeExceptional Before Exceptional
exceptional items exceptional items
items (note 3)Total items (note 3) Total
Note #000 #000 #000 #000 #000 #000
Turnover
Continuing operations 2 196,112 - 196,112 215,893 - 215,893
Discontinued
operations 2 - - - 69,172 - 69,172
---- ---- ---- ---- ---- ----
196,112 - 196,112 285,065 - 285,065
Cost of sales (146,563)(2,910)(149,473)(200,085) - (200,085)
---- ---- ---- ---- ---- ----
Gross profit 49,549 (2,910) 46,639 84,980 - 84,980
Distribution costs (16,610) (180) (16,790) (34,130) - (34,130)
Administrative expenses (16,886) (257) (17,143) (26,190) - (26,190)
---- ---- ---- ---- ---- ----
Operating profit
Continuing operations2 16,053 (3,347) 12,706 22,622 - 22,622
Discontinued
operations 2 - - - 2,038 - 2,038
16,053 (3,347) 12,706 24,660 - 24,660
---- ---- ---- ---- ---- ----
Share of
operating profit
in associated
undertaking 799 832
Loss on sale
and termination
of operations - (6,942)
---- ----
Profit on
ordinary activities
before interest 13,505 18,550
Net interest
payable (2,271) (3,108)
Share of
net interest
payable in
associated undertaking (139) (248)
---- ---
Profit on
ordinary activities
before taxation 11,095 15,194
Taxation on
profit on
ordinary activities 4 (4,374) (7,449)
---- ----
Profit on
ordinary activities
after taxation 6,721 7,745
Minority equity
interests (186) (349)
---- ----
Profit for
the year 6,535 7,396
Dividends 5 (5,799) (5,732)
---- ----
Retained profit
for the
year 736 1,664
Retained byFenner PLC
and subsidiary
undertakings 405 1,388
Associated undertaking 331 276
---- ----
736 1,664
Earnings per shareBasic - before
exceptional items
/loss on
sale of operations 6 9.18p 14.02p
Basic -after
exceptional items
/loss on
sale of operations 6 6.40p 7.23p
Diluted - after
exceptional items/
loss on sale
of operations 6 6.39p 7.22p
Group Balance Sheetat 31 August 1999
1999 1998
Note #000 #000
Fixed assets
Intangible assets 52 60
Tangible assets 65,998 68,416
Investments -
Associated undertaking 2,716 2,359
- Other 1,021 1,523
---- ----
69,787 72,358
---- ----
Current assets
Stocks 29,431 30,800
Debtors
- Amounts
falling due
within one year 38,097 42,710
- Amounts falling
due after
more than
one year 2,262 3,508
Cash at bank
and in hand 71,845 75,386
---- ----
141,635 152,404
Creditors - Amounts
falling due
within one year (49,334)(56,453)
---- ----
Net current
assets 92,301 95,951
---- ----
Total assets
less current
liabilities 162,088 168,309
Creditors - Amounts
falling due
after more
than one year (81,954)(84,791)
Provisions for
liabilities and
charges (7,764)(11,978)
---- ----
Net assets 72,370 71,540
Capital and reserves
Called up
share capital 25,589 25,589
Share premium account 432 432
Revaluation
reserve 4,392 5,077O
ther reserve 6,392 6,392
Associated undertaking 2,582 2,225
Profit and
loss account 29,632 28,685
---- ----
Shareholders' funds
- Equity interest 7 69,019 68,400
Minority equity
interests 3,351 3,140
---- ----
Total funds employed 72,370 71,540
Group Cash Flow Statementfor the financial year ended 31 August
1999
1999 1998
#000 #000 #000 #000
Net cash
inflow from
operating activities 14,570 17,929
Dividends received
from associated
undertaking 151 93
Returns on
investments and
servicing of finance
Interest received 3,357 2,856
Interest paid (5,850) (5,866)
Interest element
of finance
lease rental
payments (41) (16)
Dividends paid
to minority
shareholders (281) (292)
---- ----
Net cash
outflow from
returns on
investments and
servicing of finance (2,815) (3,318)
Taxation (5,293) (7,387)
Capital expenditure
and financial
investmentPurchase of
tangible fixed
assets (6,690) (15,375)
Purchase of investments - (500)
Sale of
tangible fixed
assets 1,300 803
---- ----
Net cash
outflow on
capital expenditure
and financial
investment (5,390) (15,072)
Acquisitions and
disposals
Purchase of
subsidiary undertakings (821) (5,159)
Sale of
subsidiary undertakings (571) 48,581
---- ----
Net cash
outflow on
acquisitions and
disposals (1,392) 43,422
Equity dividends
paid (3,781) (5,523)
Financing
Issue of
ordinary share
capital - 217
Capital element
of finance
lease repayments (325) (91)
Repayment of
bank borrowings (231) (9,381)
New bank
borrowings - 2,961
----- ----
Net cash
outflow from
financing (556) (6,294)
----- ----
Decrease in cash (4,506) 23,850
The purchase of subsidiary undertakings represents the payment of
deferred consideration in respect of prior year acquisitions.
The sale of subsidiary undertakings principally represents
expenses paid during the year in respect of prior year disposals.
Reconciliation of Operating Profit to Net Cash Inflow from
Operating Activitiesfor the financial year ended 31 August 1999
1999 1998
#000 #000
Operating profit
after exceptional
items 12,706 24,660
Non cash items
Depreciation and
related items 9,289 7,988
Others including
the effect
of foreign
exchange rate changes (362) (1,075)
Working capital movements
Stocks 2,344 (3,912)
Debtors 5,415 (5,503)
Creditors (14,822) (4,229)
--- ----
Net cash
inflow from
operating activities 14,570 17,929
Reconciliation of Net Debt for the financial year ended 31 August
1999
1999 1998
#000 #000
Decrease in cash (4,506) 23,850
Cash outflow
from decrease
in loans and
finance leases 556 6,511
---- ----
Increase in
net debt
resulting from
cash flows (3,950) 30,361
Loans and
finance leases
disposed of
with subsidiaries - 303
Inception of
finance leases - (256)
Effect of foreign exchange
rate changes (2,480) 512
---- ----
Increase In
net debt (6,430) 30,920
Opening net
debt (9,420) (40,340)
---- ----
Closing net
debt (15,850) (9,420)
---- ----
Gearing (closing
net debt/
shareholders' funds) 23.0% 13.8%
Notes
1 Basis of preparation
The preliminary announcement, which was approved by the Board on 9
November 1999, has been prepared on the basis of the accounting
policies as set out in the 1998 Annual Report except for the
implementation of new accounting standards becoming effective
during the year ended 31 August 1999.
Following the implementation of Financial Reporting Standard (FRS)
10 Goodwill and intangible assets, the Group's accounting policy
has been amended to capitalise goodwill arising on acquisitions
made after 31 August 1998 and to amortise it over its estimated useful
economic life. Previously, all goodwill was written off to
reserves on acquisition.
Following the implementation of FRS 14 Earnings per share, shares
in the Company held by the Employee Share Ownership Plan Trust are
now deducted from the total weighted average number of ordinary
shares in issue used to calculate earnings per share and dividends
received by the plan are excluded from earnings. The impact of FRS
14 on prior periods is not material and accordingly comparative
figures have not been restated.
The profit and loss account, balance sheet and cash flow statement
are abridged from the Group's full accounts on which the auditors,
PricewaterhouseCoopers, have given an unqualified opinion which
did not include a statement under section 237(2) or 237(3) of the
Companies Act 1985. The statutory accounts will be filed with the
Registrar of Companies in due course.
The profit and loss account for the year ended 31 August 1998 and
the balance sheet as at that date are an abridged version of the
statutory accounts for that period which, together with an
unqualified audit report, have been filed with the Registrar of
Companies.
2 Segmental information
Operating profit before
Turnover exceptional items
1999 1998 1999 1998
#000 #000 #000 #000
Continuing operations
Advanced Engineered
Products 51,584 62,273 3,070 6,953
Conveyor Belting 102,995 110,445 11,284 13,631
Fluid Power 42,347 45,166 4,342 4,662
Common costs - - (2,643) (2,624)
Inter-segment
sales (814) (1,991) - -
---- ---- ---- ----
196,112 215,893 16,053 22,622
---- ---- ---- ----
Discontinued operations
Power Transmission - 69,231 - 2,038
Inter-segment sales - (59) - -
---- ---- ---- ----
- 69,172 - 2,038
3 Exceptional items 1999 1998
#000 #000
Redundancy and rationalisation costs 3,347 -
The exceptional charge principally relates to labour reduction and
business rationalisation programmes incurred by the Group's UK
automotive operation. The tax credit in respect of exceptional
items amounts to #500,000.
4 Taxation on profit on ordinary activities
The charge, based on the profit for the year comprises
United Kingdom (412) 651
Overseas 4,786 6,798
---- ----
4,374 7,449
5 Dividends
Ordinary shares
Dividend payable
- interim 1.925p(1998:1.90p) 1,970 1,945
Dividend proposed
- - final 3.75p(1998:3.70p) 3,838 3,787
---- ----
5,808 5,732
Amount due
to the Employee
Share Ownership
Plan Trust (9) -
---- ----
5,799 5,732
If approved, the final dividend of 3.75p per share (1998:3.70p)
will be paid on 17 January 2000 to shareholders on the register on
3 December 1999. UK income tax at the lower rate of 10% is deemed
to have been paid in respect of these dividends but will not in
most cases be recoverable by shareholders.
Following the implementation of FRS 14 Earnings Per Share,
dividends paid to the Employee Share Ownership Plan Trust are now
excluded from earnings and deducted from the aggregate of
dividends paid and proposed. The impact on the prior period is not
material and accordingly comparative figures have not been
restated.
6 Earnings per share
In view of the significance of the exceptional costs and loss on
sale of operations in the current and prior years, the directors
consider it appropriate to disclose earnings per share calculated
both before and after these items.
Earnings
Profit on
ordinary activities
attributable to
Fenner PLC 6,535 7,396
Exceptional items/
loss on
sale of operations 3,347 6,942
Taxation attributable
to exceptional
items/loss
on sale
of operations (500) -
---- ---
Earnings for
the year before
exceptional items/
loss on sale
of operations 9,382 14,338
Number Number
Weighted average number of ordinary shares
in issue during the year
Weighted average
number of
shares in issue 102,357,208 102,282,662
Weighted average
number of shares
held by the
Employee Share
Ownership Plan Trust (173,333) -
---- ----
Weighted average
number of shares in
issue - basic 102,183,875 102,282,662
Weighted average
effect of
share options 147,396 138,504
---- ----
Weighted average
number of
shares in
issue - diluted 102,331,271 102,421,166
6 Earnings per share - continued 1999 1998
Basic Basic Pence
PenceEarnings per share
Before exceptional
items/loss
on sale
of operations 9.18 14.02
Exceptional items
/loss on sale
of operations (3.27) (6.79)
Taxation attributed
to exceptional
items/loss on
sale of operations 0.49 -
--- ---
After exceptional
items/loss
on sale of
operations 6.40 7.23
Diluted earnings per share after exceptional items/loss on sale of
operations amount to 6.39p (1998: 7.22p).
In accordance with FRS 14 Earnings Per Share, the shares held by
the Employee Share Ownership Plan Trust have been deducted from
the weighted average number of ordinary shares in issue. The
impact on the prior period's earnings per share calculation is not
material and accordingly comparative figures have not been
restated.
7 Reconciliation of movements in shareholders' funds
1999 1998
#000 #000
1 September 1998 68,400 67,157
Profit for
the year 6,535 7,396
Dividends (5,799) (5,732)
New share
capital subscribed - 217
Goodwill written
off on acquisitions - (1,695)
Goodwill written
back on disposals - 6,590
Unrealised deficit
on revaluation
of investments
and properties (661) 52
Currency translation
differences on
foreign currency
net investments 544 (5,585)
---- ----
Net increase
in shareholders' funds 619 1,243
---- ----
31 August 1999 69,019 68,400
END
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