TIDMFENR
RNS Number : 9952B
Fenner PLC
25 April 2012
25 April 2012
Fenner PLC
2012 Half Year Results
Fenner PLC, a world leader in reinforced polymer technology,
today announces its results for the half year ended 29 February
2012.
Highlights
-- Revenue increased by 24% to GBP412.0m; organic revenue growth was 18%
-- Underlying operating profit(1) increased by 52% to GBP55.7m
-- Underlying profit before taxation(2) increased by 53% to
GBP48.1m; profit before taxation increased by 57% to GBP41.7m
-- Underlying earnings per share(2) increased by 57% to 17.1p
-- Interim dividend increased by 32% to 3.50p per share,
reflecting the Board's confidence in the enhanced quality of the
Group's earnings
-- Continued underlying margin growth, up 250bps to 13.5%
-- Strong trading by both Engineered Conveyor Solutions ("ECS")
and Advanced Engineered Products ("AEP")
- ECS underlying operating profit(1) increased by 62% to
GBP39.8m on revenues up 25% to GBP295.0m
- AEP underlying operating profit(1) increased by 23% to
GBP20.5m on revenues up 20% to GBP117.0m
-- Growth drivers in core markets remain positive
-- Group confident of continued progress in the second half
(1) Underlying operating profit is before amortisation of
intangible assets acquired
(2) Underlying profit before taxation and underlying earnings
per share are before amortisation of intangible assets acquired and
notional interest on defined benefit post-retirement schemes and
the unwinding of discount on provisions
Mark Abrahams, Chairman, commented:
"Trading was very strong in the first half as growth drivers in
our core businesses remained positive, underpinned by continuing
buoyant demand from mineral extraction and energy sectors.
"The fundamentals on which our strategy is based remain strong
and the quality of our earnings continues to improve.
Notwithstanding the influence of the current macro-economic
environment on some of our markets, our order book remains healthy,
we are trading in accordance with expectations and we remain
confident in our ability to continue to make progress in the second
half of the year."
-ends-
A video interview with Nicholas Hobson, Chief Executive and
Richard Perry, Group Finance Director will be available from 7.00am
on the Group's website www.fenner.com.
For further information please contact:
Fenner PLC
Richard Perry, Group Finance Director today: 020 7067 0700
Nicholas Hobson, Chief Executive thereafter: 01482 626501
Officer
Weber Shandwick Financial
Nick Oborne / Stephanie Badjonat 020 7067 0700
Financial Highlights
29 February 28 February
Half year ended 2012 2011
Revenue GBP412.0m GBP332.5m + 24%
Underlying operating profit 1 GBP55.7m GBP36.7m + 52%
Operating profit GBP50.2m GBP32.4m + 55%
Underlying profit before taxation
2 GBP48.1m GBP31.4m + 53%
Profit before taxation GBP41.7m GBP26.6m + 57%
Underlying earnings per share 2 3 17.1p 10.9p + 57%
Basic earnings per share 14.8p 9.2p + 61%
Dividend per share 3.50p 2.65p + 32%
Return on sales 4 13.5% 11.0% + 2.5pts
Return on gross capital employed
5 22.8% 16.4% + 6.4pts
1 Underlying operating profit is before amortisation of
intangible assets acquired.
2 Underlying profit before taxation and underlying earnings per
share are before amortisation of intangible assets acquired and
notional interest on defined benefit post-retirement schemes and
the unwinding of discount on provisions.
3 Underlying earnings per share is based on the basic weighted
average number of shares in issue.
4 Return on sales is underlying operating profit divided by
revenue.
5 Return on gross capital employed is underlying operating
profit divided by gross capital employed. Underlying operating
profit is calculated on a rolling 12 month basis. Gross capital
employed is the average of the opening and closing non-current
assets (excluding deferred tax), inventories, trade and other
receivables and trade and other payables over the 12 month
period.
Interim Management Report
The Group has delivered an outstanding performance in the six
months to February 2012. Underlying operating profit reached a
record level, increasing by 52% to GBP55.7m.
Operations
Trading was very strong as growth drivers in our core businesses
remained positive, underpinned by continuing buoyant demand from
mineral extraction and energy sectors. In both the Engineered
Conveyor Solutions ("ECS") and Advanced Engineered Products ("AEP")
Divisions, revenues and profits were significantly ahead of the
comparable period and at record levels.
In the ECS Division, it was encouraging to see further progress
towards our strategic objectives as the increase in invested
capacity allowed the Group to improve both customer service levels
and market share.
In the Americas, demand from the coal mining sector remained
strong enabling a continued improvement in throughput and
efficiencies from the new plant and equipment. In the second
quarter, our integrated product and service offering was further
strengthened by the acquisition of Allison Custom Fabrication. This
business, which specialises in the design, engineering, machining
and metal fabrication of customised material handling equipment,
strengthens our position in the mining sector as a leading global
provider of engineered conveyor solutions.
In Europe, export markets and a growing service network have
been successfully developed and have compensated for the continuing
softness in traditional bulk materials (construction) markets,
arising from the wider economic environment. Additional installed
capacity and a wider geographical service footprint enabled further
progress in penetrating existing and new territories.
Our operations in Asia Pacific have progressed well with gains
in market share achieved. Demand for our steel cord products in
Australia grew as we expanded our portfolio and became increasingly
established as a local supplier to the mining sectors. The prior
year acquisitions of Belle Banne Victoria, Leading Edge Conveyor
Solutions and Statewide Belting Service have integrated well and
consolidate our engineered conveyor solutions business model.
In the AEP Division, the development of our niche performance
critical products in growth markets, together with acquisitive
growth, has enabled continued good progress.
The Fenner Advanced Sealing Technologies operations have
performed extremely well. Strong demand from the oil and gas sector
with high levels of aftermarket activity improved revenues, despite
the mild winter and lower gas prices. Hydraulic seals demand
benefitted from steady growth in the mining and agriculture
equipment sectors; the latter experiencing some improvement in
available credit. In September 2011, we acquired Transeals, an
aftermarket operation serving the oil and gas and mining sectors on
the Australian west coast; this operation dovetails with our
existing operations in the east and its integration, which includes
a reorganisation of logistics nationwide to better serve our
customers, has progressed to plan.
Precision Polymers has experienced growth in its document
handling and offshore grouting system seals products as markets
reflect steady growth and project work in the renewable energy
sector. Elsewhere, activity in general industrial markets was
modestly ahead of last year.
In our Medical operations, the on-going investments at Secant
increased resource and capacity to deliver growth in our textile
components for medical devices whilst at Xeridiem, deferred
development and project work resulted in softer demand for single
use disposable devices.
Revenue and Profits
Revenue for the period increased by 24% to GBP412.0m (2011
GBP332.5m). Most of the increase was generated organically as
revenue on a constant currency basis, excluding the year on year
effect of acquisitions, grew by 18%.
Reported revenue increased in the ECS Division by 25% to
GBP295.0m (2011 GBP235.3m) and in the AEP Division by 20% to
GBP117.0m (2011 GBP97.2m).
Underlying operating profit increased by 52% to GBP55.7m (2011
GBP36.7m). At constant currencies, and excluding the year on year
effect of acquisitions, the increase was 40%. Underlying operating
profit advanced in the ECS Division by 62% to GBP39.8m (2011
GBP24.5m) and in the AEP Division by 23% to GBP20.5m (2011
GBP16.6m). The favourable effect on the Group's underlying
operating profit of exchange rate translation amounted to
GBP0.6m.
Operating profit increased to GBP50.2m (2011 GBP32.4m) after
charging amortisation of intangible assets acquired of GBP5.5m
(2011 GBP4.3m).
Net finance costs were GBP8.5m (2011 GBP5.8m) which included a
non-cash notional charge of GBP0.9m (2011 GBP0.5m). The increase
principally reflects the effect of the drawdown of long-term
funding from the private placements at the end of the last
financial year compared with the lower rates earned on amounts
deposited, together with the exchange rate effect of retranslation,
mainly in respect of the Australian dollar. Interest cover, on a 12
month rolling basis, was 8.2 times (2011 6.7 times).
Underlying profit before taxation was GBP48.1m (2011 GBP31.4m)
and profit before taxation was GBP41.7m (2011 GBP26.6m). The
average tax rate for the period was 28% (2011 31%).
Underlying earnings per share increased by 57% to 17.1p per
share (2011 10.9p) and basic earnings per share amounted to 14.8p
per share (2011 9.2p).
Cash Resources
Net cash generated from operating activities was GBP27.2m (2011
GBP17.5m). This included an increase in working capital of
GBP20.6m, supporting the 24% revenue growth and improved customer
service levels. Net capital expenditure of GBP14.5m (2011 GBP5.9m),
which was 1.5 times the depreciation charge, reflected strategic
investment to support planned growth. The resulting free cash
inflow was GBP12.7m (2011 GBP11.6m).
Acquisition payments amounted to GBP27.8m (2011 GBP14.9m) which
comprised current year acquisitions of GBP23.1m and prior year
contingent and deferred amounts of GBP4.7m.
After total dividends paid of GBP6.3m (2011 GBP4.7m), finance
leases and other outflows of GBPnil (2011 GBP1.3m) and adverse
exchange rate movements of GBP3.6m (2011 GBP0.3m), closing net debt
rose to GBP126.8m (2011 GBP120.0m).
The net debt to EBITDA ratio, on a 12 month rolling basis,
improved to 1.0 times (2011 1.3 times).
Dividends
Reflecting our confidence in the enhanced quality of the Group's
earnings, a 32% increase in the interim dividend to 3.50p per share
(2011 2.65p) is declared and will be paid on 5 September 2012 to
shareholders on the register on 27 July 2012. It is the intention
of the Board to pursue a progressive dividend policy whilst
maintaining an appropriate level of cover, with approximately
one-third of the full year dividend paid as an interim dividend and
the balance as a final dividend.
Board
In October 2011, we announced the appointment of Vanda Murray as
a non-executive director which was effective from the conclusion of
the January 2012 Annual General Meeting. Vanda became the Senior
Independent Director and a member of the Audit, Remuneration and
Nomination Committees, replacing David Buttfield who relinquished
those positions but remains as a non-executive director.
Principal Risks and Uncertainties
The principal risks and uncertainties affecting the Group remain
those set out in the 2011 Annual Report. Those which are most
likely to impact the performance of the Group in the remaining
months of the financial year are as set out below.
Due to the global nature of the Group, a large proportion of its
revenue is derived from overseas, of which a significant amount is
generated in the USA and Australia. As a consequence, the Group
could be affected by changes in global and country specific
economic or business conditions and movements in exchange rates,
particularly in those territories.
Outlook
Since 29 February 2012, the Group's businesses have traded in
accordance with our expectations.
The fundamentals on which our strategy is based remain strong
and the quality of our earnings continues to improve.
Notwithstanding the influence of the current macro-economic
environment on some of our markets, our order book remains healthy,
we are trading in accordance with expectations and we remain
confident in our ability to continue to make progress in the second
half of the year.
Certain statements in this report are forward-looking. Although
the Group believes that the expectations reflected in these
forward-looking statements are reasonable, we can give no assurance
that these expectations will prove to have been correct. As these
statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by these
forward-looking statements.
In this report, financial performance measures described as
"underlying" are before amortisation of intangible assets acquired
and, where applicable, notional interest on defined benefit
post-retirement schemes and the unwinding of discount on
provisions. Underlying earnings per share is based on the basic
weighted average number of shares in issue.
Consolidated income statement
for the half year ended 29 February 2012 (unaudited)
Half year Half year
ended 29 ended Year ended
February 28 February 31 August
2012 2011 2011
Notes GBPm GBPm GBPm
-------------------------------------- ------ ---------- ------------- -----------
Revenue 412.0 332.5 718.3
Cost of sales (280.9) (232.7) (493.5)
Gross profit 131.1 99.8 224.8
Distribution costs (29.8) (25.6) (58.5)
Administrative expenses (51.1) (41.8) (83.8)
Operating profit before amortisation
of intangible assets acquired 55.7 36.7 91.4
Amortisation of intangible assets
acquired (5.5) (4.3) (8.9)
Operating profit 50.2 32.4 82.5
Finance income 4 1.8 0.7 1.5
Finance costs 5 (10.3) (6.5) (14.4)
Profit before taxation 41.7 26.6 69.6
Taxation 6 (11.5) (8.3) (20.2)
Profit for the period 30.2 18.3 49.4
Attributable to:
Owners of the parent 28.5 17.6 47.2
Non-controlling interests 1.7 0.7 2.2
30.2 18.3 49.4
Earnings per share
Basic 8 14.8p 9.2p 24.6p
Diluted 8 14.7p 9.1p 24.4p
Consolidated statement of comprehensive income
for the half year ended 29 February 2012 (unaudited)
Half year Half year
ended 29 ended Year ended
February 28 February 31 August
2012 2011 2011
Notes GBPm GBPm GBPm
------------------------------------- ------ ---------- ------------- -----------
Profit for the period 30.2 18.3 49.4
Other comprehensive income:
Currency translation differences 2.8 (6.1) (1.0)
Hedge of net investments in foreign
currencies (0.2) (0.5) 1.7
Interest rate and currency swaps 1.4 (0.7) (3.2)
Actuarial (losses)/gains on defined
benefit post-retirement schemes 11 (10.5) 22.0 9.8
Tax on other comprehensive income 1.4 (5.7) (2.1)
Total other comprehensive income
for the period (5.1) 9.0 5.2
Comprehensive income for the period 25.1 27.3 54.6
Attributable to:
Owners of the parent 23.0 26.5 51.5
Non-controlling interests 2.1 0.8 3.1
25.1 27.3 54.6
Consolidated balance sheet
at 29 February 2012 (unaudited)
29 February 28 February 31 August
2012 2011 2011
Notes GBPm GBPm GBPm
---------------------------------- ------ ------------ ------------ ----------
Non-current assets
Property, plant and equipment 9 215.1 202.9 207.6
Intangible assets 10 229.8 186.5 202.1
Other investments 0.1 0.3 0.2
Deferred tax assets 29.8 26.1 30.6
474.8 415.8 440.5
Current assets
Inventories 109.2 80.4 103.4
Trade and other receivables 131.6 117.5 118.0
Current tax assets 0.6 0.5 0.3
Derivative financial assets 0.2 0.5 -
Cash and cash equivalents 13 86.1 53.3 104.3
327.7 252.2 326.0
Total assets 802.5 668.0 766.5
Current liabilities
Borrowings 13 (22.6) (17.0) (16.8)
Trade and other payables (161.7) (137.5) (149.5)
Current tax liabilities (10.4) (7.1) (12.2)
Derivative financial liabilities (1.8) (1.0) (3.3)
Provisions 12 (12.2) (8.1) (12.4)
(208.7) (170.7) (194.2)
Non-current liabilities
Borrowings 13 (190.3) (156.3) (189.3)
Trade and other payables (1.0) (5.4) (5.1)
Retirement benefit obligations 11 (39.8) (21.0) (31.7)
Provisions 12 (32.6) (26.3) (25.4)
Deferred tax liabilities (19.8) (16.0) (19.3)
(283.5) (225.0) (270.8)
Total liabilities (492.2) (395.7) (465.0)
Net assets 310.3 272.3 301.5
Equity
Share capital 48.4 48.1 48.2
Share premium 51.7 51.7 51.7
Retained earnings 82.7 57.0 78.2
Exchange reserve 44.4 37.7 42.0
Hedging reserve (1.7) (2.8) (2.5)
Merger reserve 65.9 64.2 65.9
Shareholders' equity 291.4 255.9 283.5
Non-controlling interests 18.9 16.4 18.0
Total equity 310.3 272.3 301.5
Consolidated cash flow statement
for the half year ended 29 February 2012 (unaudited)
Half year Half year
ended ended Year ended
29 February 28 February 31 August
2012 2011 2011
Notes GBPm GBPm GBPm
-------------------------------------------- ------ ------------- ------------- -----------
Profit before taxation 41.7 26.6 69.6
Adjustments for:
Depreciation of property, plant
and equipment and amortisation of
intangible assets 15.4 13.7 27.3
Impairment of property, plant and
equipment - - 1.0
Impairment of goodwill 1.8 - -
Impairment of associates - - 0.1
Movement in deferred consideration -
on acquisitions (1.7) -
Movement in retirement benefit obligations (2.4) (2.6) (4.9)
Movement in provisions 0.4 (0.7) (1.2)
Finance income (1.8) (0.7) (1.5)
Finance costs 10.3 6.5 14.4
Other non-cash movements 0.3 0.4 1.0
Operating cash flow before movement
in working capital 64.0 43.2 105.8
Movement in inventories (2.6) (2.3) (22.1)
Movement in trade and other receivables (9.8) (22.1) (18.7)
Movement in trade and other payables (8.2) 12.1 29.6
Net cash from operations 43.4 30.9 94.6
Interest received 1.8 0.7 1.5
Interest paid (5.9) (6.0) (12.7)
Taxation paid (12.1) (8.1) (14.8)
Net cash from operating activities 27.2 17.5 68.6
Investing activities:
Purchase of property, plant and
equipment (12.8) (5.8) (14.7)
Disposal of property, plant and
equipment 0.1 0.1 0.7
Purchase of intangible assets (1.8) (0.2) (0.9)
Disposal of investments - 0.1 0.1
Acquisition of businesses 14 (27.8) (14.9) (29.9)
Disposal of businesses - - 0.1
Net cash used in investing activities (42.3) (20.7) (44.6)
Financing activities:
Dividends paid to Company's shareholders 7 (5.1) (4.6) (13.8)
Dividends paid to non-controlling
interests (1.2) (0.1) (0.8)
Repayment of borrowings (4.5) (20.3) (108.3)
New borrowings 6.9 36.4 158.5
Net cash (used in)/from financing
activities (3.9) 11.4 35.6
Net (decrease)/increase in cash
and cash equivalents (19.0) 8.2 59.6
Cash and cash equivalents at start
of period 104.3 44.7 44.7
Exchange movements 0.6 - -
Cash and cash equivalents at end
of period 85.9 52.9 104.3
Cash and cash equivalents comprises:
Cash and cash equivalents 86.1 53.3 104.3
Bank overdrafts (0.2) (0.4) -
85.9 52.9 104.3
Consolidated statement of changes in equity
for the half year ended 29 February 2012 (unaudited)
Attributable to owners of the parent
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Share Share Retained Exchange Hedging Merger Non-controlling Total
capital premium earnings reserve reserve reserve Total Interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------------------------- ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
At 1 September
2010 48.0 51.7 49.4 43.9 (1.8) 64.2 255.4 1.5 256.9
Profit for the
period - - 17.6 - - - 17.6 0.7 18.3
Other comprehensive
income:
---------------------- -------------------------- ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
Currency translation
differences - - - (6.2) - - (6.2) 0.1 (6.1)
Hedge of net
investments
in foreign currencies - - - - (0.5) - (0.5) - (0.5)
Interest rate and
currency swaps - - - - (0.7) - (0.7) - (0.7)
Actuarial gains
on defined benefit
post-retirement
schemes - - 22.0 - - - 22.0 - 22.0
Tax on other
comprehensive
income - - (5.9) - 0.2 - (5.7) - (5.7)
------------------------ ------------------------ ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
Total other
comprehensive
income - - 16.1 (6.2) (1.0) - 8.9 0.1 9.0
Transactions with
owners:
------------------------ ------------------------ ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
Dividends paid/approved
in the period - - (13.8) - - - (13.8) (0.1) (13.9)
Shares issued in
the period 0.1 - (0.1) - - - - - -
Share-based payments - - 0.3 - - - 0.3 - 0.3
Acquisition of
businesses - - (12.5) - - - (12.5) 14.2 1.7
------------------------ ------------------------ ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
Total transactions
with owners 0.1 - (26.1) - - - (26.0) 14.1 (11.9)
At 28 February
2011 48.1 51.7 57.0 37.7 (2.8) 64.2 255.9 16.4 272.3
Profit for the period - - 29.6 - - - 29.6 1.5 31.1
Other comprehensive
income:
------------------------ ------------------------ ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
Currency translation
differences - - - 4.3 - - 4.3 0.8 5.1
Hedge of net
investments
in foreign currencies - - - - 2.2 - 2.2 - 2.2
Interest rate and
currency swaps - - - - (2.5) - (2.5) - (2.5)
Actuarial losses
on defined benefit
post-retirement
schemes - - (12.2) - - - (12.2) - (12.2)
Tax on other
comprehensive
income - - 3.0 - 0.6 - 3.6 - 3.6
------------------------ ------------------------ ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
Total other
comprehensive
income - - (9.2) 4.3 0.3 - (4.6) 0.8 (3.8)
Transactions with
owners:
------------------------ ------------------------ ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
Dividends paid in
the period - - - - - - - (0.7) (0.7)
Shares issued in
the period 0.1 - - - - 1.7 1.8 - 1.8
Share-based payments - - 0.4 - - - 0.4 - 0.4
Tax on transactions
with owners - - 0.4 - - - 0.4 - 0.4
------------------------ ------------------------ ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
Total transactions
with owners 0.1 - 0.8 - - 1.7 2.6 (0.7) 1.9
At 31 August 2011 48.2 51.7 78.2 42.0 (2.5) 65.9 283.5 18.0 301.5
Profit for the period - - 28.5 - - - 28.5 1.7 30.2
Other comprehensive
income:
------------------------ ------------------------ ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
Currency translation
differences - - - 2.4 - - 2.4 0.4 2.8
Hedge of net
investments
in foreign currencies - - - - (0.2) - (0.2) - (0.2)
Interest rate and
currency swaps - - - - 1.4 - 1.4 - 1.4
Actuarial losses
on defined benefit
post-retirement
schemes - - (10.5) - - - (10.5) - (10.5)
Tax on other
comprehensive
income - - 1.8 - (0.4) - 1.4 - 1.4
------------------------ ------------------------ ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
Total other
comprehensive
income - - (8.7) 2.4 0.8 - (5.5) 0.4 (5.1)
Transactions with
owners:
------------------------ ------------------------ ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
Dividends paid/
approved in the
period - - (15.4) - - - (15.4) (1.2) (16.6)
Shares issued in
the period 0.2 - (0.2) - - - - - -
Share-based payments - - 0.5 - - - 0.5 - 0.5
Acquisition of
businesses - - (0.2) - - - (0.2) - (0.2)
------------------------ ------------------------ ------------------------ ----------------------------- ------------------------ ------------------------------ ------------------------ ------------------------------ ------------------------ -----------------------------
Total transactions
with owners 0.2 - (15.3) - - - (15.1) (1.2) (16.3)
At 29 February
2012 48.4 51.7 82.7 44.4 (1.7) 65.9 291.4 18.9 310.3
Notes to the half yearly financial statements
1. Basis of preparation
These condensed half yearly financial statements for the half
year ended 29 February 2012 have been prepared in accordance with
IAS 34 'Interim Financial Reporting' as adopted by the European
Union and the Disclosure and Transparency Rules of the Financial
Services Authority. They should be read in conjunction with the
Group's financial statements for the year ended 31 August 2011.
The comparative financial information for the year ended 31
August 2011 does not constitute statutory accounts within the
meaning of Section 434 of the Companies Act 2006. It has been
extracted from the Group's financial statements for 2011 which have
been filed with the Registrar of Companies. They contained an
unqualified audit report and did not contain a statement under
Section 498 of the Companies Act 2006.
These condensed half yearly financial statements were approved
by the Board of Directors on 25 April 2012.
2. Accounting policies
The accounting policies adopted are consistent with those
applied in the preparation of the Group's financial statements for
the year ended 31 August 2011 except for the following standards
which have been adopted for the first time for the year ending 31
August 2012:
-- IAS 24 (Revised) 'Related Party Disclosures'
-- Amendments to IFRS 1 'First-time Adoption of International
Financial Reporting Standards'
-- Amendment to IFRS 7 'Financial Instruments: Disclosures'
None of these standards has had a significant impact on the
results or net assets of the Group.
3. Segment information
IFRS 8 'Operating Segments' requires segment information to be
presented on the same basis as that used for internal management
reporting.
For the purposes of managing the business, the Group is
organised into two reportable segments: Engineered Conveyor
Solutionsand Advanced Engineered Products.
Engineered Manufacture of rubber ply, solid woven and steel
Conveyor cord conveyor belting for mining, power
Solutions generation and industrial applications with complementary
service operations which design, install,
monitor, maintain and operate conveyor systems for
mining customers
--------------------- --------------------------------------------------------------
Advanced Engineered Manufacture of precision polymer products including:
Products - precision drives for computer peripherals, copiers
and ATMs
- problem-solving power transmission and motion transfer
components
- silicone and complex hoses for heavy duty trucks,
buses and off-road vehicles
- seals and sealing solutions for the fluid power
and oil and gas industries
- technical textiles for medical and industrial applications
and silicone based products for medical applications
- rollers for digital image processing and medical
diagnostics
- fluropolymer components for fluid and gas handling
--------------------- --------------------------------------------------------------
Operating segments within these reportable segments have been
aggregated where they have similar economic characteristics with
similar products and services, production processes, methods of
distribution and customer types.
The Chief Operating Decision Maker ("CODM") for the purpose of
IFRS 8 is the Board of Directors. The financial position of the
segments is reported to the CODM on a monthly basis and this
information is used to assess the performance of the Group and to
allocate resources on an appropriate basis.
Segment performance is reviewed down to the operating profit
level. Financing costs and taxation are managed on a Group basis so
these costs are not allocated to operating segments.
Transfer prices on inter-segment revenues are on an arm's length
basis in a manner similar to transactions with third parties.
3. Segment information (continued)
Segment results are analysed as follows:
Half year ended 29 February 2012
------------------------------------------------
Engineered Advanced Unallocated
Conveyor Engineered corporate
Solutions Products costs Total
GBPm GBPm GBPm GBPm
-------------------------------------- ----------- ------------ ------------ -------
Total segment revenue 295.0 118.4 - 413.4
Inter-segment revenue - (1.4) - (1.4)
Revenue from external customers 295.0 117.0 - 412.0
Operating profit before amortisation
of intangible assets acquired 39.8 20.5 (4.6) 55.7
Amortisation of intangible assets
acquired (3.4) (2.1) - (5.5)
Operating profit 36.4 18.4 (4.6) 50.2
Net finance costs (8.5)
Taxation (11.5)
Profit for the period 30.2
24.8 16.6 (4.7) 36.7
-------------------------------------- ----------- ------------ ------------ -------
Half year ended 28 February 2011
----------------------------------------------------
Engineered Advanced Unallocated
Conveyor Engineered corporate
Solutions Products costs Total
GBPm GBPm GBPm GBPm
-------------------------------------- ----------- ------------ ------------ -----------
Total segment revenue 235.3 98.2 - 333.5
Inter-segment revenue - (1.0) - (1.0)
Revenue from external customers 235.3 97.2 - 332.5
Operating profit before amortisation
of intangible assets acquired 24.5 16.6 (4.4) 36.7
Amortisation of intangible assets
acquired (2.6) (1.7) - (4.3)
Operating profit 21.9 14.9 (4.4) 32.4
Net finance costs (5.8)
Taxation (8.3)
Profit for the period 18.3
Year ended 31 August 2011
----------------------------------------------------
Engineered Advanced Unallocated
Conveyor Engineered corporate
Solutions Products costs Total
GBPm GBPm GBPm GBPm
-------------------------------------- ----------- ------------ ------------ -----------
Total segment revenue 510.7 210.0 - 720.7
Inter-segment revenue - (2.4) - (2.4)
Revenue from external customers 510.7 207.6 - 718.3
Operating profit before amortisation
of intangible assets acquired 61.1 38.2 (7.9) 91.4
Amortisation of intangible assets
acquired (5.5) (3.4) - (8.9)
Operating profit 55.6 34.8 (7.9) 82.5
Net finance costs (12.9)
Taxation (20.2)
Profit for the period 49.4
Segment assets and liabilities are analysed as follows:
29 February 2012
-------------------------------------------------
Engineered Advanced
Conveyor Engineered
Solutions Products Unallocated Total
GBPm GBPm GBPm GBPm
------------------- ----------- ------------ ------------ --------
Total assets 540.6 236.8 25.1 802.5
Total liabilities (191.0) (51.3) (249.9) (492.2)
Net assets 349.6 185.5 (224.8) 310.3
28 February 2011
-------------------------------------------------
Engineered Advanced
Conveyor Engineered
Solutions Products Unallocated Total
GBPm GBPm GBPm GBPm
------------------- ----------- ------------ ------------ --------
Total assets 451.5 201.2 15.3 668.0
Total liabilities (165.7) (60.8) (169.2) (395.7)
Net assets 285.8 140.4 (153.9) 272.3
31 August 2011
-------------------------------------------------
Engineered Advanced
Conveyor Engineered
Solutions Products Unallocated Total
GBPm GBPm GBPm GBPm
------------------- ----------- ------------ ------------ --------
Total assets 506.8 232.8 26.9 766.5
Total liabilities (190.9) (55.9) (218.2) (465.0)
Net assets 315.9 176.9 (191.3) 301.5
4. Finance income
Half year Half year
ended 29 ended Year ended
February 28 February 31 August
2012 2011 2011
GBPm GBPm GBPm
-------------------------- ---------- ------------- -----------
Bank interest receivable 1.8 0.7 1.5
5. Finance costs
Half year Half year
ended 29 ended Year ended
February 28 February 31 August
2012 2011 2011
GBPm GBPm GBPm
--------------------------------------- ---------- ------------- -----------
Interest payable on bank overdrafts
and loans 3.7 3.6 7.4
Interest payable on other loans 5.7 2.4 5.3
Notional interest on defined benefit
post-retirement schemes 0.2 - 0.4
Notional interest on the unwinding of
discount on provisions 0.7 0.5 1.3
10.3 6.5 14.4
6. Taxation
Half year Half year
ended 29 ended Year ended
February 28 February 31 August
2012 2011 2011
GBPm GBPm GBPm
------------------- ---------- ------------- -----------
UK taxation 0.8 0.7 3.5
Overseas taxation 10.7 7.6 16.7
11.5 8.3 20.2
The tax charge is calculated based on the estimated effective
tax rate for the full year.
7. Dividends
Half year Half year
ended 29 ended Year ended
February 28 February 31 August
2012 2011 2011
GBPm GBPm GBPm
------------------------------------------- ------------ ------------- -----------
Dividends paid or approved in the period
Interim dividend for the year ended 31
August 2011 of 2.65p (2010: 2.40p) per
share 5.1 4.6 4.6
Final dividend for the year ended 31 August
2011 of 5.35p (2010: 4.80p) per share 10.3 9.2 9.2
15.4 13.8 13.8
Dividends neither paid nor approved
in the period
Interim dividend for the year ended 31
August 2012 of 3.50p (2011: 2.65p) per
share 6.8 5.1 5.1
The interim dividend for the year ended 31 August 2011 was paid
on 5 September 2011. The final dividend for the year ended 31
August 2011 was approved by shareholders at the Annual General
Meeting on 11 January 2012 and was paid on 5 March 2012. The
interim dividend for the year ending 31 August 2012 is due for
payment on 5 September 2012 and so has not been recognised as a
liability at 29 February 2012. It will be paid to shareholders on
the register on 27 July 2012.
8. Earnings per share
Half year Half year
ended ended Year ended
29 February 28 February 31 August
2012 2011 2011
GBPm GBPm GBPm
--------------------------------------------- ------------- ------------- ------------
Earnings
Profit for the period attributable to
owners of the parent 28.5 17.6 47.2
Amortisation of intangible assets acquired 5.5 4.3 8.9
Notional interest 0.9 0.5 1.7
Taxation attributable to amortisation
of intangible assets acquired and notional
interest (1.8) (1.5) (3.7)
Profit for the period before amortisation
of intangible assets acquired and notional
interest 33.1 20.9 54.1
number number number
Average number of shares
Weighted average number of shares in
issue 193,142,475 192,086,733 192,335,105
Weighted average number of shares held
by the Employee Share Ownership Plan
Trust (114,177) (114,177) (114,177)
Weighted average number of shares in
issue - basic 193,028,298 191,972,556 192,220,928
Effect of share options and contingent
long term incentive plans 1,377,612 1,282,297 1,525,948
Weighted average number of shares in
issue - diluted 194,405,910 193,254,853 193,746,876
pence pence pence
Earnings per share
Underlying - Basic (before amortisation
of intangible assets acquired and notional
interest) 17.1 10.9 28.1
Underlying - Diluted (before amortisation
of intangible assets acquired and notional
interest) 17.0 10.8 27.9
Basic 14.8 9.2 24.6
Diluted 14.7 9.1 24.4
9. Property, plant and equipment
The increase in property, plant and equipment in the period of
GBP7.5m principally comprises additions of GBP12.8m, acquisition of
businesses of GBP1.8m and exchange movements of GBP2.7m less
depreciation of GBP9.7m.
10. Intangible assets
The increase in intangible assets in the period of GBP27.7m
comprises acquisition of businesses of GBP30.5m, additions of
GBP1.8m and exchange movements of GBP2.9m less amortisation of
GBP5.7m and impairment of goodwill of GBP1.8m.
11. Post-retirement benefits
The Group operates a number of defined benefit post-retirement
schemes for qualifying employees in operations around the world.
The assets of the schemes are held in separate trustee administered
funds. The cost of the schemes is assessed in accordance with the
advice of independent qualified actuaries using the projected unit
method.
The principal scheme is the Fenner Pension Scheme which is based
in the UK. The most recent triennial valuation of the Fenner
Pension Scheme was on 31 March 2011.
The principal financial assumptions used for the Fenner Pension
Scheme compared to the 2011 year end are as follows:
29 February 31 August
2012 2011
---------------------------------------- ------------ ----------
Discount rate 4.6% 5.5%
RPI inflation rate 3.0% 3.1%
CPI inflation rate 2.5% 2.6%
Salary increases 4.0% 4.1%
RPI pension increases (capped at 5.0%) 2.9% 3.0%
RPI pension increases (capped at 2.5%) 2.0% 2.0%
CPI pension increases (capped at 3.0%) 2.0% 2.1%
Retirement benefit obligations increased by GBP8.1m in the
period. This principally comprises actuarial losses of GBP10.5m and
service costs of GBP1.3m less employer contributions of GBP3.7m.
The actuarial losses comprise GBP17.2m on the change of
assumptions, principally due to a significant fall in corporate
bond yields which led to a reduction in the discount rate, although
this was partly offset by a GBP6.7m gain due to higher than
expected investment returns on the Scheme's assets.
12. Provisions
Provisions comprise current provisions of GBP12.2m (2011 year
end: GBP12.4m) and non-current provisions of GBP32.6m (2011 year
end: GBP25.4m). The overall increase in the period of GBP7.0m
principally comprises deferred consideration on acquisitions in the
period of GBP11.3m, notional interest of GBP0.7m, new property
provisions of GBP0.6m and exchange movements of GBP0.8m less
payments of deferred consideration on prior year acquisitions of
GBP4.7m and a reduction in deferred consideration payable on a
previous acquisition of GBP1.7m.
13. Reconciliation of net cash flow to movement in net debt
Half year Half year
ended 29 ended Year ended
February 28 February 31 August
2012 2011 2011
GBPm GBPm GBPm
--------------------------------------------- ---------- ------------- -----------
Net (decrease)/increase in cash and
cash equivalents (19.0) 8.2 59.6
Increase in borrowings resulting from
cash flows (2.4) (16.1) (50.2)
Movement in net debt resulting from
cash flows (21.4) (7.9) 9.4
Finance leases on acquisition of businesses - (1.2) (1.2)
New finance leases - (0.2) (0.1)
Exchange movements (3.6) (0.3) 0.5
Movement in net debt in the period (25.0) (9.6) 8.6
Net debt at start of period (101.8) (110.4) (110.4)
Net debt at end of period (126.8) (120.0) (101.8)
Net debt is analysed as follows:
29 February 28 February 31 August
2012 2011 2011
GBPm GBPm GBPm
--------------------------- ------------ ------------ ----------
Cash and cash equivalents 86.1 53.3 104.3
Current borrowings (22.6) (17.0) (16.8)
Non-current borrowings (190.3) (156.3) (189.3)
(126.8) (120.0) (101.8)
14. Acquisitions
On 1 September 2011, the Group acquired the entire share capital
of Transeals Pty Limited ("Transeals"), a privately owned company
based in Perth, Australia. Transeals manufactures and distributes
seals used in hydraulic equipment, currently serving the western
parts of Australia. This strategic acquisition allows the Hallite
operation in Australia, which is mainly east coast based, to
develop its aftermarket presence in the buoyant mining and oil and
gas markets of Western Australia. The cash consideration was
GBP8.1m.
On 1 December 2011, the Group acquired substantially all of the
operating assets of the business being conducted under the name
Allison Custom Fabrication ("Allison") from a group of related
privately owned entities based in Pennsylvania, USA. Allison
specialises in the design, engineering, machining and metal
fabrication of customised material handling equipment, primarily
for the mining markets of Pennsylvania and West Virginia. This
acquisition will strengthen the Fenner Dunlop Americas operation's
strategy of being the supplier of choice for engineered conveyor
solutions in the Americas and will enable mining customers to enjoy
integrated solutions for improving the safety and total cost of
ownership of materials handling, in both underground and above
ground applications. The initial cash consideration was GBP15.3m
with contingent and deferred consideration estimated at GBP11.3m,
based on exchange rates at the date of completion.
From the date of acquisition, Allison contributed GBP3.2m to
Group revenue, GBP0.4m to Group operating profit before
amortisation of intangible assets acquired and GBPnil to Group
operating profit. From the date of acquisition, Transeals
contributed GBP2.5m to Group revenue, GBP0.7m to Group operating
profit before amortisation of intangible assets acquired and
GBP0.4m to Group operating profit.
If the acquisition of Allison had occurred on 1 September 2011,
it is estimated that Group revenue would have been GBP415.3m, Group
operating profit before amortisation of intangible assets acquired
would have been GBP56.7m and Group operating profit would have been
GBP50.8m. The acquisition of Transeals occurred on 1 September
2011. These amounts have been calculated by adjusting the results
of the acquired businesses to reflect the effect of the Group's
accounting policies as if they had been in effect from 1 September
2011.
Details of the provisional aggregate assets and liabilities
acquired, based on exchange rates at the dates of completion, are
given below.
Prior
year
Allison Transeals acquisitions Total
------------ ------------ --------------- ------------
Provisional Provisional Provisional
fair fair Deferred fair
value value consideration value
GBPm GBPm GBPm GBPm
--------------------------------------- ------------ ------------ --------------- ------------
Property, plant and equipment 1.7 0.1 - 1.8
Goodwill 5.6 3.7 - 9.3
Intangible assets acquired:
- customer relationships 14.6 4.0 - 18.6
- non compete agreement 2.4 - - 2.4
- leases - 0.2 - 0.2
Inventories 1.5 0.6 - 2.1
Trade and other receivables 1.9 0.8 - 2.7
Cash and cash equivalents - 0.3 - 0.3
Trade and other payables (1.1) (0.5) - (1.6)
Current taxation - (0.1) - (0.1)
Deferred taxation - (1.0) - (1.0)
Total net assets 26.6 8.1 - 34.7
Consideration:
Cash consideration 15.3 8.1 4.7 28.1
Contingent and deferred consideration
held as provisions 11.3 - (4.7) 6.6
26.6 8.1 - 34.7
Cash paid per cash flow statement:
Cash consideration 15.3 8.1 4.7 28.1
Cash and cash equivalents
acquired - (0.3) - (0.3)
15.3 7.8 4.7 27.8
Provisional fair values of assets and liabilities represent the
best estimate of the fair values at the dates of acquisition. As
permitted by IFRS 3 (Revised) 'Business Combinations', these
provisional amounts can be amended for a period of up to 12 months
following acquisition if subsequent information becomes available
which changes the estimates of fair values at the dates of
acquisition.
Goodwill arising on acquisition principally represents the
workforce and anticipated synergies gained through the
acquisitions. Goodwill in respect of the acquisition of Allison is
deductible for tax purposes. Goodwill in respect of the acquisition
of Transeals is not deductible for tax purposes.
Where material, deferred consideration has been discounted using
suitable risk free, pre-tax rates based on borrowings that match
the maturity of the consideration being discounted.
15. Contingent liabilities
In the normal course of business the Group has given guarantees
and counter indemnities in respect of commercial transactions.
The Group is involved as defendant in a number of potential and
actual litigation cases in connection with its business, the
majority of which are in North America. The directors believe that
the likelihood of a material liability arising from these cases is
remote.
16. Related party transactions
Other than the remuneration of executive and non-executive
directors and members of the Executive Committee, there were no
related party transactions during the period.
Responsibility Statement
We confirm that to the best of our knowledge:
-- the condensed half yearly financial statements contained in
this document have been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the European Union;
-- the Interim management report contained in this document
includes a fair review of the information required by the
Disclosure and Transparency Rules of the Financial Services
Authority: paragraph DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
paragraph DTR 4.2.8R (disclosure of related party transactions and
changes therein).
The directors of Fenner PLC and their respective
responsibilities are as listed in the Annual Report for 2011 except
for Vanda Murray who was appointed to the Board on 11 January 2012.
Vanda became the Senior Independent Director and a member of the
Audit, Remuneration and Nomination Committees, replacing David
Buttfield who relinquished those positions but remains as a
non-executive director.
By order of the Board
Mark Abrahams Richard Perry
Chairman Group Finance
Director
25 April 2012 25 April 2012
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR MMGZDGDKGZZZ
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