RNS Number:7497T
Fenner PLC
8 November 2000
Fenner PLC
Preliminary results for the financial year ended 31 August 2000
Reshaped Fenner Bounces back
. Operating profit in H2 of #10m up 216% from H1;
. Turnover in H2 for continuing operations up 19% from H1 and 9% from prior
year;
. Turnover for the year #158m, operating profit #15.7m and ROS 10% for
continuing operations reflecting high margin business;
. Strong balance sheet and cash flow with net cash of #8m (1999:Net
borrowings of #16m);
. Disposals of Fluid Power and Maerdy leaves the Group's focus on specialised
reinforced polymers;
. Loss on sale of businesses (#9.9m) unchanged from H1 and sales now
completed;
. #100m to spend on acquisitions;
Business Description:
Fenner is a leader in specialist reinforced polymer products in which it has
substantial market shares in each area of activity.
Chairman's Statement
2000 1999
FINANCIAL HIGHLIGHTS #000 #000
--------------------------------------------------------------------
Turnover* 157,580 154,107
Operating profit before
exceptional items* 15,686 17,965
Earnings per share
before exceptional items
/loss on sale of operations 8.17p 9.18p
after exceptional items/
loss on sale of operations (5.97)p 6.40p
Dividends per share
5.675p 5.675p
Gearing - 23.0%
--------------------------------------------------------------------
*Continuing operations
I am pleased to report the completion of a five year restructuring programme
coupled with encouraging signs of recovery in many of our markets. Disposal of
non-core businesses has raised over #32m leaving the Group with a net
cash balance of #7.6m at the year end. Our continuing operations have
experienced a significant recovery in volumes in the second half with
operating profits up 50% on those achieved in the first six months.
Turnover, profits and dividends
Continuing operations achieved turnover of #157.6m (1999 #154.1m), despite
the difficult conditions experienced in our heavyweight belting markets during
the opening six months. Turnover recovered in the second half by 9% over the
same period last year and by 19% over the first six months of the year under
review. Operating profit from continuing operations amounted to #15.7m (1999
#18.0m) with the second half generating #9.4m (1999 #9.5m). The loss on sale
of operations of #9.9m includes a non-cash goodwill charge of #9.7m arising
from the disposal of the Welsh automotive business together with the UK and
US Fluid Power operations which, in aggregate, generated cash of #32.1m before
tax.
Earnings per share before exceptional items amounted to 8.17p (1999 9.18p).
The Board recommends an unchanged final dividend of 3.75p (1999 3.75p) which,
when taken together with the interim dividend of 1.925p (1999 1.925p) gives a
total for the year of 5.675p (1999 5.675p).
Cash generation and investment
We continue to invest in line with market developments whilst benefiting from
the strong investment programmes undertaken during the last few years. Our
divestment activities have increased the available cash balances
significantly and leave the Group debt free and poised for growth with a
capacity for re-investment of over #100m.
People
The disruption resulting from the disposal of three major manufacturing
operations during the year inevitably placed pressure upon our resources.
Nonetheless, the achievements reflect the commitment shown by our employees
during these times of significant change and I thank them on behalf of the
shareholders.
Outlook
All our markets have continued to improve through to the early part of the new
financial year and we look forward with confidence to a period of profitable
growth. Notwithstanding the challenge of rising raw material costs, we expect
to make progress this year and will continue to invest in chosen areas
of our reinforced polymer markets.
Colin Cooke Chairman
Enquiries
Fenner PLC Mark Abrahams 01482 626 501
Citigate Dewe Rogerson Ginny Pulbrook 0207 282 2945
Group Profit and Loss Account
for the financial year ended 31 August 2000
2000
---------
Before
Exceptional Exceptional
Items Items Totals
Notes #000 #000 #000
------------------------------------------------------------------
Turnover
Continuing operations 2 157,580 - 157,580
Discontinued operations 2 22,776 - 22,776
-------- ------ --------
180,356 - 180,356
Cost of Sales (133,332) - (133,332)
-------- ------ --------
Gross profit 47,024 - 47,024
Distribution costs (16,721) - (16,721)
Administrative expenses (16,298) - (16,298)
-------- ------ --------
Operating profit
Continuing operations 2 15,686 - 15,686
Discontinued operations 2 (1,681) - (1,681)
-------- ------ --------
14,005 - 14,005
-------- ------
Share of operating
profit in associated
undertaking 809
Loss on sale of
discontinued operations 4 (9,899)
------
Profit on ordinary
activities before interest 4,915
Net interest payable (1,886)
Share of net interest
payable in associated
undertaking (109)
-----
Profit on ordinary
activities before taxation 2,920
Taxation on profit
on ordinary activities 5 (8,810)
-------
Loss on ordinary
activities after taxation (5,890)
Minority equity interests (212)
-------
Loss for the year (6,102)
Dividends 6 (5,799)
-------
Retained loss for the year (11,901)
-------------------------------------------------------------------
Retained by
Fenner PLC and subsidiary undertakings (12,248)
Associated undertaking 347
-------
(11,901)
-------------------------------------------------------------------
Earnings per share
Basic - before
exceptional items/loss
on sale of operations 7 8.17p
Basic - after
exceptional items/ loss
on sale of operations 7 (5.97)p
Diluted - after
exceptional items/ loss
on sale of operations 7 (5.97)p
-------------------------------------------------------------------
Group Profit and Loss Account
for the financial year ended 31 August 2000
1999
---------
Before
Exceptional Exceptional
Items Items Totals
Notes #000 #000 #000
-------------------------------------------------------------------------
Turnover
Continuing operations 2 154,107 - 154,107
Discontinued operations 2 42,005 - 42,005
-------- ------ --------
196,112 - 196,112
Cost of Sales (146,563) (2,910) (149,473)
-------- ------ --------
Gross profit 49,549 (2,910) 46,639
Distribution costs (16,610) (180) (16,790)
Administrative expenses (16,886) (257) (17,143)
-------- ------ --------
Operating profit
Continuing operations 2 17,965 (785) 17,180
Discontinued operations 2 (1,912) (2,562) (4,474)
-------- ------ --------
16,053 (3,347) 12,706
-------- -------
Share of operating profit
in associated undertaking 799
Loss on sale of
discontinued operations 4 -
------
Profit on ordinary
activities before interest 13,505
Net interest payable (2,271)
Share of net interest
payable in associated
undertaking (139)
-------
Profit on ordinary
activities before taxation 11,095
Taxation on profit
on ordinary activities 5 (4,374)
------
Loss on ordinary
activities after taxation 6,721
Minority equity interests (186)
------
Loss for the year 6,535
Dividends 6 (5,799)
------
Retained loss for the year 736
--------------------------------------------------------------
Retained by
Fenner PLC and subsidiary undertakings 405
Associated undertaking 331
-----
736
--------------------------------------------------------------
Earnings per share
Basic - before exceptional
items/loss
on sale of operations 7 9.18p
Basic - after exceptional
items/ loss
on sale of operations 7 6.40p
Diluted - after
exceptional items/ loss
on sale of operations 7 6.39p
--------------------------------------------------------------
Group Balance Sheet
at 31 August 2000
Note 2000 1999
#000 #000
Fixed assets
Intangible assets 18 52
Tangible assets 44,945 65,998
Investments - Associated undertaking 3,209 2,716
- Other 3,021 1,021
-------- -------
51,193 69,787
-------- -------
Current assets
Stocks 22,485 29,431
Debtors - Amounts
falling due
within one year 35,068 38,097
Amounts falling due
after more than one year 1,324 2,262
Cash at bank and in hand 106,197 71,845
-------- -------
165,074 141,635
Creditors - Amounts falling
due within one year
Loans, overdrafts
and finance leases (9,369) ( 8,490)
Other creditors (40,826) (40,844)
-------- -------
Net current assets 114,879 92,301
--------- --------
Total assets less
current liabilities 166,072 162,088
Creditors - Amounts
falling due after
more than one year
Loans and finance leases (89,227) (79,205)
Other creditors (2,907) (2,749)
Provisions for liabilities
and charges (5,737) (7,764)
------- -------
Net assets 68,201 72,370
Capital and reserves
Called up share capital 25,589 25,589
Share premium account 432 432
Revaluation reserve 4,019 4,392
Other reserve 15,670 6,392
Associated undertaking 3,075 2,582
Profit and loss account 16,160 29,632
------- -------
Shareholders' funds -
Equity interest 8 64,945 69,019
Minority equity interests 3,256 3,351
------- -------
Total funds employed 68,201 72,370
Group Cash Flow Statement
for the financial year ended 31 August 2000
2000
#000 #000
Net cash inflow from
operating activities 20,227
Dividends received from
associated undertaking 108
Returns on investments
and servicing of finance
Interest received 4,178
Interest paid (6,041)
Interest element of
finance lease rental
payments -
Dividends paid to
minority shareholders (314)
--------
Net cash outflow
from returns on
investments and servicing
of finance (2,177)
Taxation (7,268)
Capital expenditure and
financial investment
Purchase of tangible
fixed assets (4,965)
Sale of tangible fixed assets 55
--------
Net cash outflow on
capital expenditure and
financial investment (4,910)
Acquisitions and disposals
Purchase of subsidiary
undertakings (1,075)
Sale of subsidiary undertakings 32,064
---------
Net cash inflow
on acquisitions
and disposals 30,989
Equity dividends paid (5,799)
Financing
Capital element of
finance lease repayments (22)
Repayment of bank
and other borrowings (1,315)
New bank and other borrowings 3,111
-------
Net cash inflow from financing 1,774
--------
Increase in cash 32,944
Group Cash Flow Statement
for the financial year ended 31 August 2000
1999
#000 #000
Net cash inflow
from operating activities 14,570
Dividends received from
associated undertaking 151
Returns on investments
and servicing of finance
Interest received 3,357
Interest paid (5,850)
Interest element of
finance lease rental
payments (41)
Dividends paid to
minority shareholders (281)
------
Net cash outflow
from returns on
investments and servicing
of finance (2,815)
Taxation (5,293)
Capital expenditure and
financial investment
Purchase of tangible
fixed assets (6,690)
Sale of tangible fixed assets 1,300
Net cash outflow -------
on capital expenditure
and financial investment (5,390)
Acquisitions and disposals
Purchase of subsidiary
undertakings (821)
Sale of subsidiary
undertakings (571)
Net cash inflow ------
on acquisitions and disposals (1,392)
Equity dividends paid (3,781)
Financing
Capital element of
finance lease repayments (325)
Repayment of bank
and other borrowings (231)
New bank and
other borrowings -
------
Net cash inflow
from financing (556)
-----
Increase in cash (4,506)
The purchase of subsidiary undertakings represents the payment of deferred
consideration in respect of prior year acquisitions. The sale of subsidiary
undertakings principally represents the net cash inflow from the sale of the
Group's Welsh automotive business and UK and US Fluid Power operations.
Included within the cash flow statement are the following current year cash
outflows in respect of discontinued activities
2000
#000
---------------------------------------------------------------------------
Operating activities (1,093)
Capital expenditure and financial investment (825)
Reconciliation of Operating Profit to Net Cash Inflow from
Operating Activities
for the financial year ended 31 August 2000
2000 1999
#000 #000
Operating profit after
exceptional items 14,005 12,706
Non cash items
Depreciation and related
items 6,372 9,289
Others including the
effect of foreign
exchange rate changes 886 (362)
Working capital movements
Stocks 124 2,344
Debtors (3,106) 5,415
Creditors 1,946 (14,822)
Net cash inflow -------- -------
from operating activities 20,227 14,570
Reconciliation of Net Debt
for the financial year ended 31 August 2000
Increase in cash 32,944 (4,506)
Cash inflow from
increase in loans
and finance leases (1,774) 556
------- ------
Decrease in net
debt resulting
from cash flows 31,170 (3,950)
Effect of foreign
exchange rate changes (7,719) (2,480)
------- -------
Decrease in net debt 23,451 (6,430)
Opening net debt (15,850) (9,420)
------- -------
Closing net cash 7,601 (15,850)
------- -------
Gearing (closing net
debt/shareholders' funds) - 23.0%
Notes
1 Basis of preparation
The preliminary announcement, which was approved by the Board on 8 November
2000, has been prepared on the basis of the accounting policies as set out in
the 1999 Annual Report except for the implementation of new Financial
Reporting Standards (FRSs) becoming effective during the year ended 31
August 2000.
In complying with FRS15, Tangible Fixed Assets, the Group has applied the
transitional rules and retained the book values of previously revalued land
and buildings. With effect from 1 September 1999 the Group's property is no
longer subject to evaluations.
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 1999 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 by geographical origin
Operating
Turnover profit before
exceptional items
------------- ----------------
2000 1999 2000 1999
#000 #000 #000 #000
--------------------------------------------------------------
Continuing operations
United Kingdom 30,655 30,697 2,140 1,919
North America 104,348 102,284 11,217 14,040
Africa 17,340 17,898 2,936 2,876
Rest of World 7,479 7,036 (607) (870)
Inter-segment sales (2,242) (3,808) - -
-------- ------- ------- -------
157,580 154,107 15,686 17,965
-------- ------- ------- --------
Discontinued operations 23,031 42,599 (1,681) (1,912)
Inter-segment sales (255) (594) - -
------- ------ ------ --------
22,776 42,005 (1,681) (1,912)
------------------------------------------------------------------
3 Exceptional items
The prior year exceptional charge of #3,347,000 principally related to labour
reduction and business rationalisation programmes incurred by discontinued
operations. The related tax credit amounted to #500,000.
4 Loss on sale of discontinued operations
2000 1999
#000 #000
Loss on sale
of the Welsh
automotive business (26,699) -
Profit on sale
of the UK and
US operations of
the Fluid Power Division 16,800 -
------- ------
(9,899) -
--------------------------------------------------------------
On 23 March 2000 the business and assets of the Group's Welsh automotive
business were sold to United Polymers Limited. Under the terms of the
disposal agreement the Group has retained an interest in the business
through a minority shareholding in United Polymers Limited.
On 31 March 2000 the business and assets of the Group's UK and US Fluid Power
business were sold to SPX Corporation of the USA.
The tax charge in respect of the loss on sale of discontinued operations
amounts to #4,550,000 (1999 #Nil). The Goodwill written back on disposals
amounts to #9,744,000.
5 Taxation on profit on ordinary activities
The charge, based on the profit for the year, comprises
United Kingdom (338) (412)
Overseas 9,148 4,786
------ ------
8,810 4,374
The overseas tax charge includes #5,124,000 arising on the sale of the Group's
US Fluid Power operation. The balance of the net charge of #4,550,000 arising
on the disposal of discontinued operations results from the sale of the UK
businesses.
6 Dividends
Ordinary shares
Dividend payable -
interim 1.925p (1999 1.925p) 1,970 1,970
Dividend proposed -
final 3.75p (1999 3.75p) 3,838 3,838
------ ------
5,808 5,808
Amount due to the
Employee Share
Ownership Plan Trust (9) (9)
----- -----
5,799 5,799
If approved, the final dividend of 3.75p per share (1999 3.75p) will be paid
on 15 January 2001 to shareholders on the register on 1 December 2000. 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.
7 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.
2000 1999
#000 #000
--------------------------------------------------------------
Earnings
Loss on ordinary
activities attributable
to Fenner PLC (6,102) 6,535
Exceptional items/
loss on sale of operations 9,899 3,347
Taxation attributable
to exceptional items/loss
on sale of operations 4,550 (500)
------ ------
Earnings for the
year before exceptional
items/loss on sale
of operations 8,347 9,382
--------------------------------------------------------------
Number Number
--------------------------------------------------------------
Weighted average number
of ordinary shares in
issue during the year
Weighted average number
of shares in issue 102,357,208 102,357,208
Weighted average number
of shares held by
the Employee Share
Ownership Plan Trust (173,333) (173,333)
---------- ---------
Weighted average number
of shares in issue - basic 102,183,875 102,183,875
Weighted average effect
of share options 60,893 147,396
------- --------
Weighted average number
of shares in issue - diluted 102,244,768 102,331,271
--------------------------------------------------------------
Pence Pence
--------------------------------------------------------------
Earnings per share - Basic
Before exceptional items/
loss on sale of operations 8.17 9.18
Exceptional items/loss
on sale of operations (9.69) (3.27)
Taxation attributed to
exceptional items/loss
on sale of operations (4.45) 0.49
------- --------
After exceptional items/
loss on sale of operations (5.97) 6.40
--------------------------------------------------------------
Diluted earnings per share after exceptional items and loss on
sale of operations amount to (5.97)p (1999 6.39p).
8 Reconciliation of movements in shareholders' funds
2000 1999
#000 #000
--------------------------------------------------------------
1 September 1999 69,019 68,400
Loss for the year (6,102) 6,535
Dividends (5,799) (5,799)
Goodwill written back
on disposals 9,744 -
Goodwill written off
on acquisitions (466) -
Unrealised deficit on
revaluation of investments
and properties - (661)
Currency translation differences
on foreign currency net investments (1,451) 544
------- ------
Net decrease in shareholders' funds (4,074) 619
------- ------
31 August 2000 64,945 69,019
The goodwill written off on acquisitions relates to deferred consideration
paid in respect of the acquisition of the business of Efson, Inc. in 1995
(prior to the implementation of FRS10), which was in excess of the amounts
previously provided.
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