RNS Number:7077C
Fenner PLC
10 May 2006
10 May 2006
Fenner PLC
2006 Interim Results
Fenner PLC, the global engineer specialising in reinforced polymer technology,
today announces its interim results for the six months ended 28 February 2006.
Fenner is the world leader in the global conveyor belting market. Its products
include lightweight and heavyweight conveyor belting for the mining and power
generation markets, precision motion control products for the computer, copier
and mechanical equipment markets, and sealing products for the mining,
hydraulics and oil and gas industries.
Highlights:
* Significant growth driven by buoyant energy markets and operational
improvements introduced in recent years
* Profit before taxation increased by 183% to #11.9m (2005: #4.2m), on
revenue up 33% to #182.0m (2005: #137.1m)
Conveyer belting
* Significant growth in the coal sector driven by high demand throughout
the world; unprecedented order intake for heavyweight conveyor belting
* Strong performance in North America, Australia, China, South Africa
and India
* Productivity improvements achieved following recent investments
Advanced engineered products
* Strong oil and gas and mining sales, benefiting from thriving energy
sector
* The advanced sealing technologies businesses acquired in May 2005 have
been successfully integrated and outperformed expectations
* Outlook is positive
Commenting on outlook, Colin Cooke, Chairman, said:
"We have started the second half strongly as we see a continuation of the
conditions we experienced in the first six months.
"As demand from our customers has grown and many of our plants have become full,
we have identified opportunities for expansion within our existing markets. As a
consequence, we have and will be purchasing significant amounts of new plant
which we expect will start to benefit next year.
"We are on track to meet our second half targets albeit that capacity
constraints in some areas are likely to limit second half profitability until
the new investments come on stream."
For Further Information:
Fenner PLC
Mark Abrahams, Chief Executive 10 May 2006: 020 7067 0700
Richard Perry, Finance Director Thereafter: 01482 626501
Weber Shandwick Square Mile
Nick Oborne / Stephanie Badjonat 020 7067 0700
CHAIRMAN'S STATEMENT
I am pleased to report excellent progress in the first half of the year.
Operating profit increased by #8.4m to #14.3m and basic earnings per share grew
by 107%.
Our conveyor belting division continued to experience stronger demand in most of
the markets in which it operates. North American volumes were particularly
encouraging with unprecedented activity in the coal sector.
The advanced sealing technologies businesses (formerly Wellington Holdings plc),
which were acquired in May 2005, have been integrated into the advanced
engineered products division and the market synergies envisaged have started to
be realised. Post-acquisition performance has exceeded expectations, benefiting
from the thriving energy sector.
International Financial Reporting Standards
The results for the half year ended 28 February 2006 have been prepared under
International Financial Reporting Standards (IFRS) and the prior period
information contained within this report has been stated on a comparable basis.
Revenue and Profits
First half revenue increased by 33% to #182.0m (2005: #137.1m) reflecting strong
organic growth, particularly in our conveyor belting division, together with
#19.8m relating to advanced sealing technologies.
Operating profit increased by 141% to #14.3m (2005: #5.9m) which included a
contribution from the advanced sealing technologies businesses of #3.0m. Profit
before taxation increased to #11.9m (2005: #4.2m). Basic earnings per share
increased to 5.34p per share (2005: 2.58p per share).
Cash Resources and Investment
Movements in exchange rates and a seasonal outflow of funds have resulted in an
increase in borrowings of #15.8m (2005: #12.7m) to #50.3m (2005: #52.7m).
Capital investment has grown as we capitalise on the opportunities which have
been created to expand our market positions in a number of territories. This
investment during the period amounted to #7.7m (2005: #2.9m) against a
depreciation charge of #4.0m (2005: #3.6m). Further significant capital
programmes are planned for the future.
Dividends
The Board has indicated that it intends to build dividend cover as earnings
grow. Accordingly we are declaring an interim dividend of 1.975p per share,
maintained at last year's level. In the light of the significant improvement in
performance we intend to review the dividend level at the final stage, but to
maintain a conservative policy.
Operations
Our conveyor belting division continued to experience stronger demand in most of
the markets in which it operates.
In North America improvement was evident across all sectors. Significant growth
was achieved in the coal sector driven by sustained high coal demand in North
America and throughout the world amid further increases in oil and natural gas
prices. These economic fundamentals are encouraging coal-based electricity
plants to increase capacity and new generating plants are being developed at a
record pace across North America and around the world. As a consequence, order
intake for heavyweight conveyor belting reached unprecedented levels.
Productivity improvements were achieved from recent investments to augment
output and manage lead times with plants running at higher capacity levels for
much of the period. Further raw material input cost increases have been incurred
which required regular revisions to selling prices.
In Europe, our UK operation's result improved with higher volumes of heavier
product into export markets, whilst progress continued in developing our
customer base in the former Soviet Union and Eastern Europe. Our Dutch operation
experienced flat industrial demand from most of its major European markets. The
combination of a competitive environment which constrained selling price reviews
and rising raw material costs caused an erosion of margin. This necessitated
action to reduce the cost base and increase the focus of the business on value
added products which will generate better levels of return.
Operations in Australia, China, South Africa and India continued to benefit from
strong mining markets in their respective territories which facilitated solid
performances.
Our advanced engineered products division benefited from the inclusion of the
advanced sealing technologies result which outperformed expectations. Sales into
the oil and gas sectors were extremely strong against a backdrop of a thriving
energy sector. Healthy sales into mining applications were achieved,
particularly in Eastern Europe. The synergies identified from the acquisition to
leverage the Group's existing presence in emerging markets have started to be
realised with new business achieved.
Our specialist hose businesses experienced softer demand from North America
which was somewhat offset by higher volumes from the next generation of silicone
hoses supplied to a major customer. Start-up costs relating to this investment
project and increasing material costs reduced margins, although improved
operating efficiencies were evident as we approached the half year.
Investment to increase capacity at our North American precision polymer business
enabled us to service stronger Asian demand from the computer equipment sector.
Industrial activity at both the UK and North American plants made modest
progress, in line with sector indices.
Outlook
We have started the second half strongly as we see a continuation of the
conditions we experienced in the first six months.
As demand from our customers has grown and many of our plants have become full,
we have identified opportunities for expansion within our existing markets. As a
consequence, we have and will be purchasing significant amounts of new plant
which we expect will start to benefit next year.
We are on track to meet our second half targets albeit that capacity constraints
in some areas are likely to limit second half profitability until the new
investments come on stream.
Colin Cooke
Chairman
Fenner PLC
Consolidated income statement
for the half year ended 28 February 2006 (unaudited)
Half year Half year
ended ended Year ended
28 February 28 February 31 August
2006 2005 2005
Notes #'000 #'000 #'000
__________________________________________________________________________________________
Revenue 2 181,952 137,097 303,644
__________________________________________________________________________________________
Operating profit before amortisation of
intangible assets acquired and
exceptional items 14,535 6,484 20,845
Amortisation of intangible assets acquired (221) - (1,046)
Exceptional items - (556) (3,502)
__________________________________________________________________________________________
Operating profit 2 14,314 5,928 16,297
Finance income 901 451 1,162
Finance costs (3,201) (2,159) (4,945)
Share of result of associate (107) (20) (49)
Loss on disposal of associate 3 (20) - -
__________________________________________________________________________________________
Profit before taxation 11,887 4,200 12,465
Taxation 4 (3,450) (1,318) (4,032)
__________________________________________________________________________________________
Profit for the period 8,437 2,882 8,433
__________________________________________________________________________________________
Attributable to:
Equity holders of the parent 8,357 2,800 8,248
Minority interests 80 82 185
__________________________________________________________________________________________
8,437 2,882 8,433
__________________________________________________________________________________________
Earnings per share
Basic 6 5.34p 2.58p 6.66p
Diluted 6 5.28p 2.56p 6.62p
__________________________________________________________________________________________
The result for the period derives from continuing operations
Fenner PLC
Consolidated balance sheet
at 28 February 2006 (unaudited)
28 February 28 February 31 August
2006 2005 2005
#'000 #'000 #'000
__________________________________________________________________________________________
Non-current assets
Property, plant and equipment 66,057 54,280 60,960
Goodwill 57,910 20,573 57,157
Other intangible assets 9,526 924 9,712
Investment in associates - 306 247
Other investments 291 262 262
Deferred tax assets 19,514 15,535 18,771
__________________________________________________________________________________________
153,298 91,880 147,109
__________________________________________________________________________________________
Current assets
Inventories 58,094 47,092 52,767
Trade and other receivables 71,883 56,376 61,505
Current tax assets 774 631 693
Cash and cash equivalents 50,177 19,215 51,509
Derivative financial instruments 473 - -
__________________________________________________________________________________________
181,401 123,314 166,474
__________________________________________________________________________________________
Total assets 334,699 215,194 313,583
__________________________________________________________________________________________
Current liabilities
Interest bearing loans and borrowings (37,575) (18,172) (36,401)
Trade and other payables (67,935) (54,746) (64,392)
Current tax liabilities (5,109) (3,310) (5,138)
(110,619) (76,228) (105,931)
Non-current liabilities
Interest bearings loans and borrowings (62,892) (53,766) (49,597)
Retirement benefit obligations (40,977) (36,799) (41,068)
Provisions (4,771) (3,601) (4,897)
Other liabilities (74) - (144)
Deferred tax liabilities (6,263) (2,912) (5,684)
__________________________________________________________________________________________
(114,977) (97,078) (101,390)
__________________________________________________________________________________________
Total liabilities (225,596) (173,306) (207,321)
__________________________________________________________________________________________
Net assets 109,103 41,888 106,262
__________________________________________________________________________________________
Equity
Share capital 39,243 27,190 39,141
Share premium 50,728 4,401 50,210
Retained earnings 11,595 (10,823) 11,251
Translation reserve 3,988 946 2,158
Other reserve - 16,758 -
Revaluation reserve 2,904 2,932 2,914
__________________________________________________________________________________________
Shareholders' equity 108,458 41,404 105,674
Minority interests 645 484 588
__________________________________________________________________________________________
Total equity 109,103 41,888 106,262
__________________________________________________________________________________________
Fenner PLC
Consolidated cash flow statement
for the half year ended 28 February 2006 (unaudited)
Half year Half year
ended ended Year ended
28 February 28 February 31 August
2006 2005 2005
#'000 #'000 #'000
__________________________________________________________________________________________
Profit before taxation 11,887 4,200 12,465
Adjustments for:
Depreciation of property, plant and equipment
and amortisation of intangible assets 4,198 3,560 9,148
Decrease in retirement benefit obligations (132) (299) (940)
(Decrease)/increase in provisions (141) 142 1,531
Finance income (901) (451) (1,162)
Finance costs 3,201 2,159 4,945
Share of result of associate 107 20 49
Loss of disposal of associate 20 - -
Other non-cash movements 622 451 280
__________________________________________________________________________________________
Operating cash flow before movement in
working capital 18,861 9,782 26,316
Movement in working capital (11,279) (13,178) (5,936)
__________________________________________________________________________________________
Net cash from/(used in) operations 7,582 (3,396) 20,380
Interest received 831 437 1,120
Interest paid (2,823) (2,174) (4,575)
Taxation paid (3,694) (1,669) (5,161)
__________________________________________________________________________________________
Net cash from/(used in) operating activities 1,896 (6,802) 11,764
__________________________________________________________________________________________
Investing activities:
Purchase of property, plant and equipment (7,721) (2,927) (7,836)
Disposal of property, plant and equipment 29 14 119
Purchase of investments (29) - -
Acquisition of subsidiary undertakings (65) (254) (44,199)
Disposal of subsidiary undertakings - - (19)
Disposal of associate 12 - -
__________________________________________________________________________________________
Net cash used in investing activities (7,774) (3,167) (51,935)
__________________________________________________________________________________________
Financing activities:
Equity dividends paid (8,182) (6,324) (6,324)
Dividends paid to minority shareholders (46) (43) (87)
Issue of ordinary share capital 303 - 56,340
Loan repayment from associate 113 34 70
Repayment of finance leases (125) (6) (106)
Repayment of borrowings (1,279) (197) (7,436)
New borrowings 12,378 2,187 26,332
__________________________________________________________________________________________
Net cash from/(used in) financing activities 3,162 (4,349) 68,789
__________________________________________________________________________________________
Net (decrease)/increase in cash
and cash equivalents (2,716) (14,318) 28,618
Cash and cash equivalents at start of period 51,303 22,865 22,865
Exchange movements 707 (117) (180)
__________________________________________________________________________________________
Cash and cash equivalents at end of period 49,294 8,430 51,30
__________________________________________________________________________________________
Cash and cash equivalents comprises:
Cash and cash equivalents 50,177 19,215 51,509
Bank overdrafts (883) (10,785) (206)
__________________________________________________________________________________________
49,294 8,430 51,303
__________________________________________________________________________________________
Fenner PLC
Consolidated statement of recognised income and expense
for the half year ended 28 February 2006 (unaudited)
Half year Half year
ended ended Year ended
28 February 28 February 31 August
2006 2005 2005
#'000 #'000 #'000
__________________________________________________________________________________________
Currency translation differences 1,854 915 2,173
Actuarial losses on defined benefit
pension schemes - - (115)
Taxation on items taken directly to equity - - 86
__________________________________________________________________________________________
Net income recognised directly in equity 1,854 915 2,144
Profit for the period 8,437 2,882 8,433
__________________________________________________________________________________________
Total recognised income and expense
for the period 10,291 3,797 10,577
__________________________________________________________________________________________
Attributable to:
Equity holders of the parent 10,187 3,746 10,377
Minority interests 104 51 200
__________________________________________________________________________________________
10,291 3,797 10,577
__________________________________________________________________________________________
Consolidated statement of changes in shareholders' equity
for the half year ended 28 February 2006 (unaudited)
Half year Half year
ended ended Year ended
28 February 28 February 31 August
2006 2005 2005
#'000 #'000 #'000
__________________________________________________________________________________________
Total recognised income and expense
for the period 10,187 3,746 10,377
Equity dividends paid (8,182) (6,324) (6,324)
Share capital issued 620 - 57,760
Share-based payments 159 375 254
__________________________________________________________________________________________
Movement in shareholders' equity in the period 2,784 (2,203) 62,067
Shareholders' equity at start of period 105,674 43,607 43,607
__________________________________________________________________________________________
Shareholders' equity at end of period 108,458 41,404 105,674
__________________________________________________________________________________________
Consolidated reconciliation of net cash flow to movement in net debt
for the half year ended 28 February 2006 (unaudited)
Half year Half year
ended ended Year ended
28 February 28 February 31 August
2006 2005 2005
#'000 #'000 #'000
__________________________________________________________________________________________
Net (decrease)/increase in cash and
cash equivalents (2,716) (14,318) 28,618
Increase in borrowings and finance leases
resulting from cash flows (10,974) (1,984) (18,790)
__________________________________________________________________________________________
Movement in net debt resulting from cash flows (13,690) (16,302) 9,828
Loans and finance leases acquired with
subsidiaries - (31) (4,452)
New finance leases (43) - (55)
Exchange movements (2,068) 3,634 214
__________________________________________________________________________________________
Movement in net debt in the period (15,801) (12,699) 5,535
Net debt at start of period (34,489) (40,024) (40,024)
__________________________________________________________________________________________
Net debt at end of period (50,290) (52,723) (34,489)
__________________________________________________________________________________________
Fenner PLC
Notes to the financial information
for the half year ended 28 February 2006
1 Basis of preparation
The interim financial information for the half year ended 28 February 2006,
including comparative financial information, has been prepared in accordance
with IFRS as adopted for use within the European Union (EU) that are expected to
be applicable at 31 August 2006, the Group's first annual reporting date at
which it is required to adopt IFRS.
The Group previously prepared its annual and interim consolidated financial
statements under UK GAAP. On 24 April 2006 the Group published the document
'Restatement of financial information under International Financial Reporting
Standards' which provided revised accounting policies under IFRS and
reconciliations of financial information from UK GAAP to IFRS for the year ended
31 August 2005 and the half year ended 28 February 2005. This is available from
the Group's website at www.fenner.com.
The IFRS that will be effective or available for adoption at 31 August 2006 are
subject to review by the International Accounting Standards Board (IASB) and
endorsement by the EU. The failure of the EU to endorse all standards in time or
the issue of new interpretative guidance by the IASB could result in changes to
the comparative financial information and amendments may be required up to the
point of preparation of the financial statements for the year ending 31 August
2006.
The Group has not adopted IAS 34 'Interim Financial Reporting' which is not yet
mandatory for UK groups.
The financial information is unaudited and does not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985. The
financial statements for the year ended 31 August 2005, which were prepared in
accordance with UK GAAP, have been filed with the Registrar of Companies. They
contained an unqualified audit report and did not contain a statement under
Section 237 (2) or (3) of the Companies Act 1985.
2 Segmental information
Half year Half year
ended ended Year ended
28 February 28 February 31 August
2006 2005 2005
#'000 #'000 #'000
__________________________________________________________________________________________
Revenue
Conveyor belting 129,645 108,463 230,837
Advanced engineered products 52,307 28,634 72,807
__________________________________________________________________________________________
181,952 137,097 303,644
__________________________________________________________________________________________
Operating profit
Conveyor belting 7,974 2,829 9,124
Advanced engineered products 6,340 3,099 7,173
__________________________________________________________________________________________
14,314 5,928 16,297
__________________________________________________________________________________________
3 Disposal of associate
On 31 December 2005 the Group sold its interest in associate, Rob Harvey Pty
Limited, for a cash consideration of #12,000. This resulted in a loss on
disposal of #20,000.
4 Taxation
Half year Half year
ended ended Year ended
28 February 28 February 31 August
2006 2005 2005
#'000 #'000 #'000
__________________________________________________________________________________________
UK taxation (412) 110 (389)
Overseas taxation 3,862 1,208 4,421
__________________________________________________________________________________________
3,450 1,318 4,032
__________________________________________________________________________________________
The tax charge is calculated based on the estimated effective tax rate for the
full year.
5 Dividends
Half year Half year
ended ended Year ended
28 February 28 February 31 August
2006 2005 2005
#'000 #'000 #'000
__________________________________________________________________________________________
Amounts recognised in the period
Interim dividend for the year ended
31 August 2005 of 1.975p
(2004: 1.975p) per share 2,148 2,145 2,145
Final dividend for the year ended
31 August 2005 of 3.85p
(2004: 3.85p) per share 6,042 4,187 4,187
Amount due to the Employee Share Ownership Plan Trust (8) (8) (8)
__________________________________________________________________________________________
8,182 6,324 6,324
__________________________________________________________________________________________
The interim dividend for the year ending 31 August 2006 of 1.975p per share is
due for payment on 4 September 2006 and so has not been recognised as a
liability at 28 February 2006. It will be paid to shareholders on the register
on 4 August 2006.
6 Earnings per share
Half year Half year
ended ended Year ended
28 February 28 February 31 August
2006 2005 2005
#'000 #'000 #'000
__________________________________________________________________________________________
Earnings
Profit for the period attributable to equity
holders of the parent 8,357 2,800 8,248
Amortisation of intangible assets acquired
and exceptional items 221 556 4,548
Taxation attributable to amortisation of
intangible assets acquired and exceptional items (66) (125) (733)
__________________________________________________________________________________________
Profit for the period before amortisation
of intangible assets acquired and exceptional items 8,512 3,231 12,063
__________________________________________________________________________________________
Number Number Number
__________________________________________________________________________________________
Average number of shares
Weighted average number of shares in issue 156,731,895 108,667,227 123,908,805
Weighted average number of shares held by
the Employee Share Ownership Plan Trust (131,859) (131,859) (133,769)
__________________________________________________________________________________________
Weighted average number of shares in issue
- basic 156,600,036 108,535,368 123,775,036
Effect of share options and contingent
long term incentive plans 1,726,231 963,151 735,681
__________________________________________________________________________________________
Weighted average number of shares in issue
- diluted 158,326,267 109,498,519 124,510,717
__________________________________________________________________________________________
Pence Pence Pence
__________________________________________________________________________________________
Earnings per share
Basic 5.34 2.58 6.66
Diluted 5.28 2.56 6.62
Adjusted - before amortisation of intangible
assets acquired and exceptional items 5.44 2.98 9.75
__________________________________________________________________________________________
7 Contingencies
The Group has disposed of certain businesses in prior years, which included
obligations under certain property leases and grants. Should the purchasers of
the businesses default on these commitments, the future obligation could revert
to the Group.
In the normal course of business the Group has given guarantees and counter
indemnities in respect of commercial transactions and has entered into forward
contracts for the sale and purchase of foreign currencies by reference to its
forecast requirements.
Proceedings have continued against the Welsh Development Agency (WDA), claiming
substantial damages in relation to the provision by the WDA of defective
manufacturing facilities. The proceedings are now the subject of litigation.
The Group is involved as defendant in a number of potential and actual
litigation cases in connection with its business, primarily in North America.
The directors believe that the likelihood of a material liability arising from
these cases is remote.
In early October 2004, our conveyor belt operations in Charlotte and Atlanta
received notification from the Anti Trust Division of the US Department of
Justice of their intention to enquire into possible anti trust violations by
Fenner. Every co-operation is being given in order to clarify and expedite the
process.
This information is provided by RNS
The company news service from the London Stock Exchange
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