RNS Number:2143L
Fenner PLC
19 April 2005
19 April 2005
Fenner PLC
2005 Interim Results
Fenner PLC, the global engineer specialising in reinforced polymer technology,
today announces its interim results for the six months ended 28 February 2005.
Fenner is the world leader in the global conveyor belting market and its
products include light and heavyweight conveyor belting for the mining and power
generation markets, and precision motion control products for the computer,
copier and mechanical equipment markets.
Group Highlights:
* Improved operating performance and financial results in rising markets
* Operating profit before goodwill amortisation and exceptional items up
21% to #6.6m (2004: #5.5m) on turnover up 17% to #141.3m (2004: #120.8m)
* Profit before tax more than doubled to #3.6m (2004: #1.6m)
* Heavyweight conveyor belting operations performed strongly, led by a
recovery in demand from the coal sector in North America
* Specialist polymer operations traded well across all businesses
* Recent investment programmes in South Africa, Australia, China and India
have all produced excellent results and justified confidence in these
operations
* Demand and order books remain strong
Colin Cooke, Chairman, commented:
"Heavyweight conveyor belt operations have benefited from an increasing
realisation in the energy sector of the value of coal as a strategic resource
for the generation of primary power supplies.
"Our substantial investments in recent years in growing capacity to serve the
emerging, fast growing markets of the Far East are now showing high returns. Our
investments in the Specialist Hose operations are likewise developing and
demonstrating excellent prospects for the future.
"Second half volumes are expected to remain high with strong order books and we
remain confident of a satisfactory year end outturn."
THERE WILL BE AN ANALYSTS' BRIEFING AT 9.30 TODAY AT THE OFFICES OF WEBER
SHANDWICK SQUARE MILE, FOX COURT, 14 GRAY'S INN ROAD, LONDON WC1 8WS
For Further Information:
Fenner PLC
Mark Abrahams, Chief Executive 19 April 2005: 020 7067 0700
Richard Perry, Finance Director Thereafter: 01482 626501
Weber Shandwick Square Mile
Nick Oborne / Stephanie Badjonat 020 7067 0700
Chairman's Statement
Operating profit increased 69% during the period as a result of increased sales
and reduced exceptional costs. Heavyweight conveyor belt operations have
benefited from an increasing realisation in the energy sector of the value of
coal as a strategic resource for the generation of primary power supplies.
Our substantial investments in recent years in growing capacity to serve the
emerging, fast growing markets of the Far East are now showing high returns. Our
investments in the Specialist Hose operations are likewise developing and
demonstrating excellent prospects for the future.
Our seasonal cash outflow is in line with our plans and we have secured a new,
five year, #60m Revolving Credit Facility with three leading UK banks.
Second half volumes are expected to remain high with strong order books and we
remain confident of a satisfactory year end outturn.
Turnover and Profits
Turnover for the first six months of the year increased 17% to #141.3m (2004
#120.8m) driven by strong demand for our heavyweight belting products from a
burgeoning energy sector. Operating profit before goodwill amortisation and
exceptional items increased 21% to #6.6m (2004 #5.5m).
Exceptional items reduced during the period to #0.6m (2004 #1.8m) and
principally related to investment write-downs and legal costs. Profit before tax
more than doubled to #3.6m (2004 #1.6m). Earnings per share before goodwill
amortisation and exceptional items rose 22% to 2.77p per share (2004 2.27p per
share).
Cash Resources and Investment
The seasonal first half increase in net debt associated with dividend payments
and increased sales volumes amounted to #12.7m after benefiting from #3.7m of
translation credit in respect of US$ weakness on our US Private Placement debt.
Our organic investment programme is continuing and the extension to our
Shanghai, China facility is due for completion by the end of the current year.
In anticipation of a heavy capital expenditure programme, potential bolt on
acquisitions and the repayment of our US$50m Private Placement Note in March
2006, we have secured a new, five
year, #60m Revolving Credit Facility with three leading UK banks. This also
gives us flexibility for the company's future debt financing options.
Dividends
The Board recommends a maintained interim dividend at 1.975p per share.
Operations
The Group's heavyweight conveyor belting operations have performed strongly in
the opening six months of the year, led by a recovery in demand from the coal
sector in North America. Order intake levels have remained high throughout the
period as demand returned to levels not experienced in recent years. A growing
global awareness of the strategic value of coal as a primary source of power
generation to many countries has accelerated demand for our products.
Price increases driven by underlying feed stock price pressures and global
capacity constraints have necessitated constant price reviews in our North
American operations in order to maintain profitability.
In Europe our UK belting operation has strengthened its export base in response
to reducing demand in the home market, however, the weakness of the US$ has
reduced the profitability of its North American sales. Developments in Eastern
Europe and the former Soviet Union are encouraging. Sales in continental Europe
are satisfactory albeit that margins are such that improvements in productivity
and capacity are needed to achieve acceptable levels of return.
The recent investment programmes in South Africa, Australia, China and India
have all produced outstanding results during the period and fully justify our
confidence in these operations. Improvements in turnover arising from the
commissioning of further capacity have resulted in higher levels of activity,
significantly increased profits and strong returns on the investment capital.
The Precision Polymers operations in North America have seen a steady increase
in activity in line with the improvement in the US industrial sector. The
European operations are growing strongly. Despite the weakness of the US$
reducing gross margins, our specialist hose business is performing well.
Environmental regulations have raised demand levels for these products within
our growing customer base in this area of specialist expertise.
Outlook
Our outlook remains positive, with volumes strong in most of our major markets.
The margin pressure in Conveyor Belting arising from rapidly increasing raw
material costs has hitherto been met with selling price increases in order to
maintain profitability.
The Precision Polymers business continues both to improve profitability and
market position.
As we enter the second half of the year, we remain optimistic that the benefits
of increased volumes, together with recovering margins, will maintain the
forward momentum of the Group.
Colin Cooke
Chairman
19 April 2005
Fenner PLC
Group Profit and Loss Account
for the half year ended 28 February 2005 (unaudited)
Year Half year Half year
ended ended ended
31.08.04 28.02.05 29.02.04
#000 Note #000 #000
260,595 Turnover 2 141,339 120,836
Operating profit before goodwill amortisation
16,101 and exceptional items 2 6,571 5,453
(1,149) Goodwill amortisation (691) (550)
(6,214) Exceptional items 3 (556) (1,756)
--------- --------- ---------
8,738 Operating profit 5,324 3,147
489 Share of operating loss in associated undertaking (5) 269
695 Profit on sale of associated undertaking - -
--------- --------- ---------
9,922 Profit on ordinary activities before interest 5,319 3,416
(3,458) Net interest payable (1,695) (1,778)
Share of net interest payable in associated
(69) undertaking (22) (34)
--------- --------- ---------
6,395 Profit on ordinary activities before taxation 3,602 1,604
(3,052) Tax on profit on ordinary activities 4 (1,332) (819)
--------- --------- ---------
3,343 Profit on ordinary activities after taxation 2,270 785
(976) Minority equity interests (384) (378)
--------- --------- ---------
2,367 Profit for the period 1,886 407
(6,324) Interim dividend 5 (2,151) (2,148)
--------- --------- ---------
(3,957) Transfer from reserves (265) (1,741)
--------- --------- ---------
Earnings per share
Adjusted - before goodwill amortisation and
7.83p exceptional items 6 2.77p 2.27p
Basic - after goodwill amortisation and
2.23p exceptional items 6 1.74p 0.39p
Diluted - after goodwill amortisation and
2.21p exceptional items 6 1.72p 0.39p
All of the Group's activities are continuing operations.
Fenner PLC
Group Balance Sheet
at 28 February 2005 (unaudited)
31.08.04 28.02.05 29.02.04
#000 Note #000 #000
Fixed assets
20,676 Intangible assets - Goodwill 19,885 19,149
5 - Other 3 6
57,513 Tangible assets 56,042 55,125
344 Investments - Associated undertaking 299 3,648
262 - Other 262 262
-------- -------- --------
78,800 76,491 78,190
Current assets
43,391 Stocks 49,173 42,041
55,456 Debtors 62,607 54,150
32,229 Cash at bank and in hand 19,846 24,425
-------- -------- --------
131,076 131,626 120,616
(82,718) Creditors - Amounts falling due within one year (80,415) (66,255)
-------- -------- --------
48,358 Net current assets 51,211 54,361
-------- -------- --------
127,158 Total assets less current liabilities 127,702 132,551
Creditors - Amounts falling due after more
(55,037) than one year (53,766) (57,076)
(7,670) Provisions for liabilities and charges (7,969) (7,823)
-------- -------- --------
64,451 Net assets 65,967 67,652
-------- -------- --------
Capital and reserves
27,150 Called up share capital 27,190 27,150
4,238 Share premium account 4,401 4,248
3,991 Revaluation reserve 4,056 4,108
16,758 Other reserve 17,073 16,909
8,602 Profit and loss account 9,254 12,005
-------- -------- --------
60,739 Shareholders' funds - Equity interest 7 61,974 64,420
3,712 Minority equity interests 3,993 3,232
-------- --------
64,451 Total funds employed 65,967 67,652
Fenner PLC
Group Cash Flow Statement
for the half year ended 28 February 2005 (unaudited)
Year Half year Half year
ended ended ended
31.08.04 28.02.05 29.02.04
#000 #000 #000 #000 #000 #000
Net cash outflow from operating
21,899 activities before exceptional items (2,000) 1,543
(7,708) Net cash outflow on exceptional items (779) (2,766)
------- ------- -------
Net cash outflow from operating
14,191 activities (2,779) (1,223)
Dividends received from associated
77 undertaking - -
Returns on investments and servicing
of finance
1,142 Interest received 450 535
(4,874) Interest paid (2,173) (2,508)
Interest element of finance lease
(2) rental payments (1) (1)
Dividends paid to minority
(511) shareholders (308) (297)
------- ------- -------
Net cash outflow from returns on
(4,245) investments and servicing of finance (2,032) (2,271)
(2,591) Taxation (1,948) (816)
Capital expenditure and financial
investment
(7,999) Purchase of tangible fixed assets (3,045) (3,313)
(744) Purchase of investments and secured loans - (744)
43 Sale of tangible fixed assets 25 26
------- ------- -------
Net cash outflow on capital expenditure
(8,700) and financial investment (3,020) (4,031)
Acquisitions and disposals
(2,796) Purchase of subsidiary undertakings (254) (2,628)
11 Sale of subsidiary undertaking - 16
Net proceeds on disposal of associated
undertaking and purchase of related
1,279 subsidiary - -
------- ------- -------
Net cash outflow on acquisitions and
(1,506) disposals (254) (2,612)
(6,015) Equity dividends paid (6,324) (6,015)
------- ------- -------
(8,789) Net cash outflow before financing (16,357) (16,968)
Financing
4,684 Issue of ordinary share capital - 4,694
68 Loan repayment from associated undertaking 34 35
(11) Capital element of finance lease repayments (6) (6)
(3,968) Repayment of bank and other borrowings (197) (141)
916 New bank and other borrowings 2,187 487
------- ------- -------
1,689 Net cash inflow from financing 2,018 5,069
------- ------- -------
(7,100) Decrease in cash (14,339) (11,899)
Fenner PLC
Statement of Total Recognised Gains and Losses
for the half year ended 28 February 2005 (unaudited)
Year Half year Half year
ended ended ended
31.08.04 28.02.05 29.02.04
#000 #000
2,367 Profit for the period 1,886 407
Currency translation differences on foreign
1,378 currency net investments 1,125 2,789
------- ------- -------
Total recognised gains and losses relating to the
3,745 period 3,011 3,196
Reconciliation of Operating Profit to Net Cash Outflow from Operating Activities
for the half year ended 28 February 2005 (unaudited)
8,738 Operating profit 5,324 3,147
Non cash items
7,097 Depreciation and amortisation 4,328 3,807
Others including the effect of foreign exchange
1,040 rate changes 444 396
Working capital movements
(119) Stocks (6,314) 525
(1,898) Debtors (8,134) (2,198)
(667) Creditors 1,573 (6,900)
------- ------- -------
14,191 Net cash outflow from operating activities (2,779) (1,223)
Reconciliation of Net Cash Flow to Movement in Net Debt
for the half year ended 28 February 2005 (unaudited)
(7,100) Decrease in cash (14,339) (11,899)
Cash inflow from increase in loans and finance
3,063 leases (1,984) (340)
------- ------- -------
(4,037) Increase in net debt resulting from cash flows (16,323) (12,239)
- Loans and finance leases acquired with subsidiaries (31) -
9,117 Effect of foreign exchange rate changes 3,678 11,964
------- ------- -------
5,080 Increase in net debt (12,676) (275)
(44,496) Opening net debt (39,416) (44,496)
------- ------- -------
(39,416) Closing net debt (52,092) (44,771)
------- ------- -------
64.9% Gearing (closing net debt / Shareholders' funds) 84.1% 69.5%
Fenner PLC
Notes
1 Basis of preparation
The interim financial information, which was approved by the Board on 19 April
2005, is unaudited and has been prepared on the basis of the accounting policies
set out in the 2004 Annual Report.
The Group profit and loss account for the year ended 31 August 2004 and the
Group 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 by geographical origin
Operating profit
before goodwill amortisation
Turnover and exceptional items
Half year Half year Year Half year Half year Year
ended ended ended ended ended ended
28.02.05 29.02.04 31.08.04 28.02.05 29.02.04 31.08.04
#000 #000 #000 #000 #000 #000
Europe 42,032 39,440 80,298 (443) 827 2,145
North America 64,209 53,789 119,413 2,876 1,246 5,471
Africa 14,357 12,298 26,594 1,949 1,883 4,402
Rest of world 23,139 18,069 39,237 2,189 1,497 4,083
Inter-segment sales (2,398) (2,760) (4,947) - - -
------- ------- ------- ------- ------- -------
141,339 120,836 260,595 6,571 5,453 16,101
3 Exceptional items
The exceptional charge for the current period amounting to #556,000 (31 August
2004 #6,214,000; 29 February 2004 #1,756,000) principally comprises an asset
impairment relating to the Group's investment in United Polymers Limited and
professional costs relating to proceedings against the Welsh Development Agency
(WDA) for damages in relation to the provision by the WDA of defective
manufacturing facilities. The related tax credit amounted to #125,000 (31 August
2004 #735,000; 29 February 2004 #358,000).
4 Taxation on profit on ordinary activities
Year Half year Half year
ended ended ended
31.08.04 28.02.05 29.02.04
#000 #000 #000
The tax charge, based on the profit for the
period comprises
256 UK taxation 10 116
2,796 Overseas taxation 1,322 703
------- ------- -------
3,052 1,332 819
5 Interim dividend
The interim dividend of 1.975p per share (2004 1.975p) will be paid on 5
September 2005 to shareholders on the register on 5 August 2005, except to the
holders of shares issued after 28 February 2005 and before 5 August 2005 which
require shareholder approval.
6 Earnings per share
In view of the significance of the goodwill amortisation and the exceptional
costs in the current and prior periods, the directors consider it appropriate to
disclose earnings per share calculated both before and after these items.
Year Half year Half year
ended ended ended
31.08.04 28.02.05 29.02.04
#000 #000 #000
Earnings
2,367 Profit for the period 1,886 407
6,668 Goodwill amortisation and exceptional items 1,247 2,306
(735) Tax attributable to the exceptional items (125) (358)
----------- ----------- -----------
Earnings for the period before goodwill
8,300 amortisation and exceptional items 3,008 2,355
Number Number Number
Weighted average number of ordinary shares
in issue during the period
106,197,546 Weighted average number of shares in issue 108,667,227 103,741,359
Weighted average number of shares held by
(132,010) the Employee Share Ownership Plan Trust (131,859) (132,165)
----------- ----------- -----------
Weighted average number of shares in issue -
106,065,536 basic 108,535,368 103,609,194
Weighted average effect of share options and
930,783 contingent long term incentive plan shares 963,151 919,687
----------- ----------- -----------
Weighted average number of shares in issue -
106,996,319 diluted 109,498,519 104,528,881
Pence Pence Pence
Earnings per share
Basic - after goodwill amortisation and
2.23 exceptional items 1.74 0.39
6.29 Goodwill amortisation and exceptional items 1.15 2.23
(0.69) Tax attributable to exceptional items (0.12) (0.35)
----------- ----------- -----------
Adjusted - before goodwill amortisation and
7.83 exceptional items 2.77 2.27
Diluted earnings per share after goodwill amortisation and exceptional items in
the half year ended 28 February 2005 and 29 February 2004 were 1.72p and 0.39p
respectively.
7 Reconciliation of movements in shareholders' funds
Year Half year Half year
ended ended ended
31.08.04 28.02.05 29.02.04
#000 #000 #000
58,428 Opening shareholders' funds 60,739 58,428
2,367 Profit for the period 1,886 407
(6,324) Dividends (2,151) (2,148)
4,684 Share capital issued - 4,694
206 UITF17 share award accrual 375 250
Currency translation differences on foreign
1,378 currency net investments 1,125 2,789
------- ------- -------
2,311 Net increase in shareholders' funds 1,235 5,992
------- ------- -------
60,739 Closing shareholders' funds 61,974 64,420
This information is provided by RNS
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