9th Nov 2005 07:01
Fenner PLC09 November 2005 9 November 2005 Fenner PLC 2005 Preliminary Results Fenner PLC, the global engineer specialising in reinforced polymer technology,today announces its preliminary results for the year ended 31 August 2005. Fenner is the world leader in the global conveyor belting market. Its productsinclude lightweight and heavyweight conveyor belting for the mining and powergeneration markets, precision motion control products for the computer, copierand mechanical equipment markets, and sealing products for the mining,hydraulics and oil and gas industries. Group Highlights: • The Group has benefited from an unprecedented worldwide demand for energy, particularly in China • Operating profit, before goodwill amortisation and exceptional items, increased by 32% to £21.3m (2004: £16.1m) on turnover up by 20% to £313.0m (2004: £260.6m) • Pre-tax profit increased by 88% to £12.0m* (2004: £6.4m*) • Heavyweight belting made strong progress, particularly in North America; operations in China have been expanded • Precision Polymers in UK and North America performed well, benefiting from recovery in levels of industrial activity • Wellington Holdings, acquired for £45.7m in May 2005, outperformed expectations and has materially grown the Group's higher margin precision polymers operations • Capex and rationalisation programmes have created opportunities for further productivity improvements across all operations • The Group's strengthened balance sheet leaves it well placed to exploit opportunities • Outlook is positive * after exceptional items of £3.5m (2004: £6.2m) and goodwill amortisation of £1.9m (2004: £ 1.1m) Commenting on outlook, Colin Cooke, Chairman, said: "Significant progress has been made during the last year with an increasinglyencouraging trend in performance. "We have made a strong start to the new year with many of our markets showingcontinuing, robust strength. A buoyant energy sector has been a significantfactor in our recent growth and the confidence of our customers in this area isan encouraging sign. "Asian demand has provided the opportunity for further new developments as theregion becomes a more significant part of the Group. Overall we look forward toanother year of healthy progress as we consolidate the benefits of ouracquisition strategy." For Further Information: Fenner PLCMark Abrahams, Chief Executive 9 November 2005: 020 7067 0700Richard Perry, Finance Director Thereafter:01482 626501 Weber Shandwick Square MileNick Oborne / Stephanie Badjonat 020 7067 0700 Chairman's Statement Following a solid first half performance, Group profit before tax for the yearincreased 88% to £12.0m. We have benefited from an unprecedented worldwidedemand for energy particularly in China. Our capital expenditure andrationalisation programmes have created opportunities for productivityimprovements throughout our operations. The acquisition of Wellington Holdings plc ("Wellington") in May has provided avaluable addition to our niche precision polymer businesses. Our strengthenedbalance sheet leaves us well placed to exploit these opportunities. We are encouraged by our strong start to the year and by current positiveindications for the future. Turnover and Profits Group turnover increased 20% to £313.0m (2004 £260.6m) which includes £10.8mfrom the former Wellington businesses acquired on 20 May 2005. Turnover growthin our underlying businesses amounted to 16% reflecting the strong recovery inthe heavyweight belting market driven by global energy demands. Group operating profit for the year before goodwill amortisation and exceptionalitems amounted to £21.3m (2004 £16.1m) including £1.9m from the formerWellington businesses. After goodwill amortisation and exceptional items, Groupoperating profit amounted to £15.8m (2004 £8.7m). Turnover for the second half year reached £171.7m (2004 £139.8m) generating anoperating profit before goodwill amortisation and exceptional items of £14.7m(2004 £10.6m) reflecting a strong second half performance characteristic of themarkets in which the Group operates. Following an improved first half performance, our heavyweight belting businessesmade further progress building on the significant volume recovery particularlyin North America. Despite intense raw material price pressures, profit marginshave continued to improve. The Precision Polymers businesses in both the UK and North America haveperformed well, benefiting from a recovery in levels of industrial activity. The former Wellington businesses outperformed our expectations during the finalquarter of our financial year. Exceptional items of £3.5m (2004 £6.2m) principally arose from impairment costs,giving a Group profit before tax of £12.0m (2004 £6.4m). As a result of the muchimproved operating performance, Group earnings per share before goodwillamortisation and exceptional items increased to 9.34p per share (2004 7.67p) andafter goodwill amortisation and exceptional items to 5.28p (2004 2.19p). Dividends The Board recommends a final dividend maintained at 3.85p, which, together withthe interim dividend of 1.975p, represents a total for the year of 5.825p (20045.825p). The underlying dividend cover is 1.6 after adjusting for goodwillamortisation, exceptional items and the element relating to shares that wereonly in issue for three months of the year. Cash Resources and Investment We have raised a net £56.3m from shareholders during the year. £45.7m wasinvested in the Wellington acquisition. The balance was applied to reducing ourexisting debt levels whilst we examine the opportunities available for furtherinvestment. Net borrowings at the year end amounted to £33.9m (2004 £39.4m). People The progress in improving our margin returns is a demonstration of thecommitment by all our employees, whom I thank for their efforts in this regard. Our AGM in January 2006 will mark the retirement from the Board of TomGlucklich, who has been a non-executive director of the Company for over 10years. I would like to take this opportunity to thank Tom for his support andintellectual contribution during that period and to wish him every success forthe future. I am pleased to announce the appointment on 1 November 2005 of David Campbell asa non-executive director of the Company. David was formerly Chief Executive ofBritish Vita plc and following the retirement of Tom Glucklich in January 2006,will chair the Company's Remuneration Committee. Outlook We have made a strong start to the new year with many of our markets showingcontinuing, robust strength. A buoyant energy sector has been a significantfactor in our recent growth and the confidence of our customers in this area isan encouraging sign. Asian demand has provided the opportunity for further new developments as theregion becomes a more significant part of the Group. Overall we look forward toanother year of healthy progress as we consolidate the benefits of ouracquisition strategy. Colin CookeChairman Chief Executive Officer's Review 2005 saw a transformation in the Group with the acquisition of WellingtonHoldings plc in May. As a result we have now increased the high-margin PrecisionPolymer's turnover to a third of the Group's. We believe this also improves ourprofit and cash generating ability and provides a further platform for growth. Since the acquisition, the Wellington business, now renamed Fenner AdvancedSealing Technologies, has performed above our initial expectations and hasalready started to deliver the synergies envisaged. During the year we saw many of our markets strengthen as the combination ofChinese demand and surging energy prices benefited many of our operations, bothdirectly and indirectly. These developments have been particularly favourable toour Asia Pacific businesses, encouraging us to expand further our operations inChina with three additional new major projects in progress, which are detailedbelow. Asia Pacific Our Chinese conveyor belting operation continued to gain momentum with strongsales growth. As China's burgeoning economy surged ahead on the strength of itsexports and insatiable demand for energy, coal producers endeavoured to matchthe requirements. The ensuing drive for coal productivity improvements has proved beneficial forour heavy duty products, as existing and new customers realise the value ofutilising higher performance belting. This upward trend has supported ourcapital investment to date with further plant expansion planned to service ourbroadening customer base in this increasingly important territory for the Group. The hose operation in Shanghai received additional investment during the year toaccommodate output levels which are increasing as new business is gained. Slowbut steady progress is being made towards tighter truck emissions legislationthat requires changes to be made to original equipment manufacturers' designs,which in turn increases demand for our products. These positive developmentsunderpin our capital expenditure programme for the commissioning of a dedicatedworld-class manufacturing hose facility capable of meeting market demand. The acquisition of Wellington Holdings plc brought numerous new and excitingopportunities to the Group. These included the identification of gaps in theirgeographical coverage in locations where we have existing knowledge andexpertise. To exploit these distinctive competencies, plans are underway forfurther penetration of seals' markets in China with the construction of a newplant. Production of computer peripherals has progressively migrated to South East Asiain recent years, and the overwhelming majority of our mini-pitched timing beltsare shipped into the region. Accordingly, our presence has been strengthened inSouth East Asia to support existing office equipment accounts and to identifyand develop new business opportunities. Australia recorded a solid return from both the heavyweight conveyor belting andservice operations. Strong coal market conditions, enhanced by lower Chinesecoal exports in order to serve their domestic demand, facilitated a year-on-yearimprovement in this sector. The performance was particularly encouraging in ournetwork of national service operations where the focus is on the provision ofsolutions tailored to meet our customers' existing and future requirements. Thisnetwork was further strengthened during the year through the acquisition of L&KConveyor Services which has enhanced our presence in Western Australia andprovides a strong foundation for further penetration of this territory. Our Indian conveyor belting operation enjoyed a successful first full year as awholly owned subsidiary, following the prior year's restructuring of the Group'sinterest. North America Our conveyor belting operations experienced a continuation of the market andproductivity improvements from the latter part of the previous year althoughrising oil prices caused upward pressure on input costs. Sales to the miningsector were particularly strong as reinvestment programmes commenced,underpinned by the buoyant global demand for energy which has held coal pricesat near record levels. Sales to industrial markets improved through acombination of the recovery in the economic conditions and the increasing valueof our organisational support structure. A dedication to solving all conveyingchallenges, with the use of the latest technology, has uniquely positioned thebusiness to develop key partnerships with our customers. Precision polymer operations encountered more volatile demand patterns as USmarkets faced rising oil prices and consequent raw material price inflation.Despite these effects, the industrial products group successfully continued todeploy their strategy of product line expansion and channel exploitation. Thedevelopment programme included the launch of two new products in the year. TheT-Max range of belt and chain tensioners was expanded through the launch of theinnovative, light-duty RT-3000 rotary tensioner. A new, patented variant ofPowerTwist link belt has been developed specifically to meet the market demandfor roller conveyor systems to carry higher loads, faster and more quietly. The markets have responded favourably to both of these carefully targetedproduct launches. These, together with our marketing alliances, have contributedto incremental sales growth. Market demand in the office equipment segment wasslow in the first few months of the year, but recovered considerably in thesecond half. Our continuous improvement programme increased production yields,but nevertheless, capacity was flexed to meet customer demand for mini-pitchtiming belts. Planning is now well advanced for a building extension toaccommodate an increase in capacity with completion scheduled for 2006. The newly-acquired seals operations benefited from buoyant energy markets. Toenhance growth further new applications, including the semi conductor processingindustry, were developed. The design of new sealing solutions, such as thepatented SigmaSeal is encouraging. This seal, which is generating interest innew markets, has unique self-energising and low friction properties suitable tothe control valve industry. Europe The environment for our UK based heavyweight conveyor belting operation becameincreasingly difficult during the year with declining demand from both the UKand German coal industries. Against this, the demand from our worldwide potashcustomers remained robust and further penetration of Eastern European, Ukrainianand Russian coal markets was achieved. Whilst raw material prices increasedsignificantly during the year, sales pricing action coupled with improvedpurchasing enabled margins to be maintained. Weak economic conditions prevailed in most of our major European industrialmarkets, which together with the threat from the competition over an otherwiseflat market, led to a difficult year for our Dutch operation. As a consequence,action to address the cost base was implemented in the second half through areduction in the workforce whilst overall productivity improvements wereachieved through additional investment in new plant and systems. James Dawson at Lincoln built upon the solid foundations established in recentyears to record a good performance overall. Demand from the speciality vehicleand business machine markets was generally strong allowing the benefits fromrecent capital investment programmes to be realised. Further recognition of theaccomplishments of this operation was gained in the year with the Queen's Awardfor Enterprise in International Trade. The Poynton (Cheshire) hose facility, which was acquired in February 2004,continued to perform well. The projected market synergy between Poynton's EPDMhose and Lincoln's silicone hose products is now beginning to be realised and isexpected to lead to continued steady growth of sales of Poynton products. Fenner Drives Europe, formerly BTL in Leeds, experienced a continuing reductionin demand from traditional markets, reflecting the general decline in UKmanufacturing. However, this decline was more than offset as programmes ofinnovative marketing, product line expansion and increased activity in Europetook effect. At the end of the year, the UK operations of both James Dawson and Fenner Driveswere restructured. James Dawson now operates exclusively in the world marketsfor commercial and speciality vehicles, focusing upon capitalising on recentinvestments in the specialist hose business. The industrial rubber and businessmachine products of James Dawson have been brought under the responsibility ofFenner Drives Europe. Sales from our European seals operations exceeded expectations in the periodsince acquisition with strong demand from longwall mining equipment and the oiland gas industry. As we enter the new year, the planned relocation of the UKoperation to a new facility is progressing satisfactorily. The factory andoffices which are currently under construction at Hampton will replace theexisting network of 1920's buildings. The benefits of the move will follow thecompletion which is scheduled for the second half of 2006. Africa An increase in demand for energy in South Africa caused a heightened activity inthe region's coal mining industry and the commissioning of previously mothballedpower generation plants. This environment enabled the achievement of a furthersuccessful year by our conveyor belting operation, despite the keen competitionwithin the local market. The Group's other South African operation, KSB, improved as the year progressedfollowing softer volumes into agricultural markets in the early months andhigher contract volumes in the second half-year. Significant progress has been made during the last year with an increasinglyencouraging trend in performance. As we enter the new financial year we do sowith confidence that most of our businesses are seeing healthy market conditionswith opportunities for growth. Mark AbrahamsChief Executive Officer Fenner PLCGroup Profit and Loss AccountFor the financial year ended 31 August 2005 2005 2004 Note £000 £000-------------------------------------------------------------------------------- Turnover 2 313,012 260,595 Continuing operations 302,193 260,595Acquisitions 10,819 - Operating profit before goodwill amortisation and exceptional items 2 21,255 16,101Goodwill amortisation (1,904) (1,149)Exceptional items 3 (3,502) (6,214) --------- -------- Operating profit 15,849 8,738 Continuing operations 14,775 8,738Acquisitions 1,074 - Share of operating loss in associated undertaking (20) 489Profit on sale of associated undertaking - 695 --------- -------- Profit on ordinary activities before interest 15,829 9,922Net interest payable (3,761) (3,458)Share of net interest payable in associated (43) (69) undertaking --------- -------- Profit on ordinary activities before taxation 12,025 6,395Taxation on profit on ordinary activities 4 (4,514) (3,052) --------- -------- Profit on ordinary activities after taxation 7,511 3,343Minority equity interests (980) (976) --------- -------- Profit for the year 6,531 2,367Dividends 5 (8,174) (6,324) --------- -------- Retained loss for the year (1,643) (3,957)-------------------------------------------------------------------------------- Earnings per share*Adjusted - before goodwill amortisation, exceptional items and profit on sale of operations 6 9.34p 7.67p Basic - after goodwill amortisation, exceptional items and profit on sale of operations 6 5.28p 2.19p Diluted - after goodwill amortisation, exceptional items and profit on sale of operations 6 5.25p 2.17p-------------------------------------------------------------------------------- *Comparative figures have been restated following a placing and open offer on 20May 2005 (note 8). All of the Group's activities are continuing operations. Fenner PLCGroup Balance SheetAt 31 August 2005 2005 2004 Note £000 £000--------------------------------------------------------------------------------Fixed assetsIntangible assets - Goodwill 60,422 20,676 - Other 26 5Tangible assets 62,851 57,513Investments - Associated undertaking 233 344 - Other 262 262 --------- --------- 123,794 78,800 --------- ---------Current assetsStocks 54,922 43,391Debtors 70,255 55,456Cash at bank and in hand 52,091 32,229 --------- --------- 177,268 131,076 Creditors - Amounts falling due within one year (116,214) (82,718) --------- ---------Net current assets 61,054 48,358 --------- --------- Total assets less current liabilities 184,848 127,158Creditors - Amounts falling due after more than one year (49,741) (55,037)Provisions for liabilities and charges (11,948) (7,670) --------- ---------Net assets 123,159 64,451-------------------------------------------------------------------------------- Capital and reservesCalled up share capital 39,141 27,150Share premium account 49,088 4,238Revaluation reserve 3,985 3,991Other reserve 1,122 16,758Profit and loss account 25,489 8,602 --------- ---------Shareholders' funds - Equity interest 8 118,825 60,739Minority equity interests 4,334 3,712 --------- --------- Total funds employed 123,159 64,451-------------------------------------------------------------------------------- The accounts were approved by the Board of Directors on 9 November 2005 andsigned on its behalf by CI Cooke ChairmanRJ Perry Group Finance Director Fenner PLCGroup Cash Flow Statementfor the financial year ended 31 August 2005 2005 2004 Note £000 £000 £000 £000 -----------------------------------------------------------------------------------Net cash inflow from operating activities 21,315 14,191 Dividends received from associated undertaking - 77 Returns on investments and servicing of financeInterest received 1,142 1,142Interest paid (4,565) (4,874)Interest element of finance lease rental payments (10) (2)Dividends paid to minority shareholders (477) (511) -------- ------- Net cash outflow from returns on investments and servicing of finance (3,910) (4,245) Taxation (5,590) (2,591) Capital expenditure and financial investmentPurchase of tangible fixed assets (8,031) (7,999)Purchase of investments and secured loans - (744)Sale of tangible fixed assets 130 43 -------- -------Net cash outflow on capital expenditure and financial investment (7,901) (8,700) Acquisitions and disposalsPurchase of subsidiary undertakings 7 (44,199) (2,796)Sale of subsidiary undertakings (19) 11Net proceeds on disposal of associated undertaking and purchase of related subsidiary - 1,279 -------- -------Net cash outflow on acquisitions and disposals (44,218) (1,506) Equity dividends paid (6,324) (6,015) -------- --------Net cash outflow before financing (46,628) (8,789) FinancingIssue of ordinary share capital 56,340 4,684Loan repayment from associated undertaking 70 68Capital element of finance lease repayments (106) (11)Repayment of bank and other borrowings (7,436) (3,968)New bank and other borrowings 26,332 916 -------- -------Net cash inflow from financing 75,200 1,689 -------- --------Increase in cash 28,572 (7,100)-------------------------------------------------------------------------------------------- Fenner PLCStatement of Total Recognised Gains and Lossesfor the financial year ended 31 August 2005 2005 2004 £000 £000-------------------------------------------------------------------------------- Profit for the year 6,531 2,367Currency translation differences on foreign currency net investments 1,715 1,378 --------- --------- Total recognised gains and losses since last annual report 8,246 3,745-------------------------------------------------------------------------------- Reconciliation of Operating Profit to Net Cash Inflow from Operating Activitiesfor the financial year ended 31 August 2005 2005 2004 £000 £000-------------------------------------------------------------------------------- Operating profit 15,849 8,738Non cash itemsDepreciation and amortisation 10,156 7,097Others including the effect of foreign exchange rate changes 278 1,040Working capital movementsStocks (6,356) (119)Debtors (3,353) (1,898)Creditors 3,259 1,885 Provisions 1,482 (2,552) --------- --------- Net cash inflow from operating activities 21,315 14,191-------------------------------------------------------------------------------- Reconciliation of Net Cash Flow to Movement in Net Debtfor the financial year ended 31 August 2005 2005 2004 £000 £000-------------------------------------------------------------------------------- Increase in cash 28,572 (7,100)Cash inflow from increase in loans and finance leases (18,790) 3,063 --------- --------- Decrease in net debt resulting from cash flows 9,782 (4,037)Effect of foreign exchange rate changes 234 9,117Loans and finance leases acquired with subsidiaries (4,452) -New finance leases (55) - --------- ---------Decrease in net debt 5,509 5,080Opening net debt (39,416) (44,496) --------- ---------Closing net debt (33,907) (39,416) --------- ---------Gearing (closing net debt / shareholders' funds) 28.5% 64.9%-------------------------------------------------------------------------------- Fenner PLCNotes 1 Basis of preparationThe preliminary announcement, which was approved by the Board on 9 November2005, has been prepared on the basis of the accounting policies set out in the2004 Annual Report. The profit and loss account, balance sheet and cash flow statement are abridgedfrom the Group's full accounts on which the auditors, PricewaterhouseCoopersLLP, have given an unqualified opinion which did not include a statement undersection 237(2) or 237(3) of the Companies Act 1985. The statutory accounts willbe filed with the Registrar of Companies in due course. The profit and loss account and the cash flow statement for the year ended 31August 2004 and the balance sheet as at that date are an abridged version of thestatutory accounts for that period which, together with an unqualified auditreport, have been filed with the Registrar of Companies. 2 Segmental information by geographical origin Operating profit before goodwill amortisation Turnover and exceptional items-------------------------------------------------------------------------------- 2005 2004 2005 2004 £000 £000 £000 £000--------------------------------------------------------------------------------Europe 91,585 80,298 167 2,145North America 144,053 119,413 10,584 5,471Africa 30,791 26,594 4,494 4,402Rest of world 50,709 39,237 6,010 4,083Inter-segment sales (4,126) (4,947) - - ------------------------------------------------ 313,012 260,595 21,255 16,101-------------------------------------------------------------------------------- 3 Exceptional itemsThe exceptional charge of £3,502,000 (2004 £6,214,000) comprises:- property and plant impairments of £2,574,000 (2004 £502,000);- acquisition integration costs of £328,000 (2004 £2,175,000)- other amounts of £600,000 (2004 £6,079,000) which principally comprise an asset impairment relating to the Group's investment in United Polymers Limited and professional costs relating to proceedings against the Welsh Development Agency (WDA) for damages in relation to the provision by the WDA of defective manufacturing facilities.During 2004 the re-commissioning of the Canadian facility, which was mothballedin the prior year, gave rise to a provision release of £2,542,000The related tax credit amounts to £378,000 (2004 £735,000). 4 Taxation on profit on ordinary activitiesThe tax charge, based on the profit for the year comprises 2005 2004 £000 £000--------------------------------------------------------------------------------Current taxationUK corporation tax 280 34Overseas taxation 5,104 3,714Deferred taxation (870) (696) ---------- ---------- 4,514 3,052-------------------------------------------------------------------------------- 5 Dividends 2005 2004 £000 £000--------------------------------------------------------------------------------Ordinary sharesDividend payable - interim 1.975p (2004 1.975p) 2,148 2,145Dividend proposed - final 3.85p (2004 3.85p) 6,028 4,181Adjustment to prior year final dividend 6 6 ---------- --------- 8,182 6,332 Amount due to the Employee Share Ownership Plan Trust (8) (8) ---------- --------- 8,174 6,324-------------------------------------------------------------------------------- If approved, the final dividend of 3.85p per share (2004 3.85p) will be paid on16 January 2006 to shareholders on the register on 16 December 2005. UK incometax at the lower rate of 10% is deemed to have been paid in respect of thesedividends but will not in most cases be recoverable by shareholders. 6 Earnings per shareIn view of the significance of the exceptional items, goodwill amortisation andprofit on sale of operations, in the current and prior years, the directorsconsider it appropriate to disclose earnings per share calculated both beforeand after these items. 2005 2004 £000 £000EarningsProfit for the year 6,531 2,367Goodwill amortisation, exceptional items and profit on sale of operations 5,406 6,668Tax attributable to exceptional items and profit on sale of operations (378) (735) ----------- ----------Earnings for the year before goodwill amortisation,exceptional items and profit on sale of operations 11,559 8,300 -------------------------------------------------------------------------------- Number Number ------------------------- Weighted average number of ordinary shares in issue during the year*Weighted average number of shares in issue 123,908,805 108,348,584Weighted average number of shares held by the Employee Share Ownership Plan Trust (133,769) (134,684) ----------- --------- Weighted average number of shares in issue - basic 123,775,036 108,213,900Weighted average effect of share options and contingent long term incentive plan shares 735,681 945,675 ----------- ---------Weighted average number of shares in issue - diluted 124,510,717 109,159,575-------------------------------------------------------------------------------- Pence Pence--------------------------------------------------------------------------------Earnings per share*Basic - after goodwill amortisation, exceptional items and profit on sale of operations 5.28 2.19Goodwill amortisation, exceptional items and profit on sale of operations 4.37 6.16Tax attributable to exceptional items and profit on sale of operations (0.31) (0.68) ----------- ---------- Adjusted - before goodwill amortisation, exceptionalitems and profit on sale of operations 9.34 7.67--------------------------------------------------------------------------------Diluted earnings per share after goodwill amortisation, exceptional items andprofit on sale of operations amount to 5.25p (2004 2.17p).Diluted earnings per share before goodwill amortisation, exceptional items andprofit on sale of operations amount to 9.28p (2004 7.60p).*Comparative figures have been restated following a placing and open offer on 20May 2005 (note 8). 7 AcquisitionsWellington Holdings plc was acquired during the year through the acquisition ofits entire share capital for a total cash consideration of £44,312,000 togetherwith shares issued valued at £1,420,000. The acquisition was completed on 20 May2005.The Group's other acquisitions were the business and assets of L&K Conveyors andservice branches of Rob Harvey.The combined cash flow impact of these acquisitions and provisional fair valueof the assets acquired is Provisional fair value £000 Intangible fixed assets 22Tangible fixed assets 4,703Stock, debtors less creditors (645)Cash at bank and in hand 294 ----------Total net assets acquired 4,374Goodwill arising 41,649 ---------- Consideration 46,023Deferred consideration and accrued costs (136)Cash at bank and in hand of operations acquired (294)Shares issued (1,420)Deferred consideration in respect of previous acquisitions 26 ----------Cash outflow in respect of the acquisition of subsidiary undertakings 44,199 -------------------------------------------------------------------------------- 8 Reconciliation of movements in shareholders' funds 2005 2004 £000 £000-------------------------------------------------------------------------------- 1 September 2004 60,739 58,428 Profit for the year 6,531 2,367Dividends (8,174) (6,324)Share capital issued* 57,760 4,684UITF17 share award accrual 254 206Currency translation differences on foreign currency net investments 1,715 1,378 ---------- ----------Net increase in shareholders' funds 58,086 2,311 ---------- ----------31 August 2005 118,825 60,739-------------------------------------------------------------------------------- *Share capital issued represents a placing and open offer of 46,611,102 ordinaryshares and an issue of 1,192,933 ordinary shares to Wellington Holdings plcshareholders as part of the Wellington acquisition. 9 Contingent assets and liabilities The Group has disposed of certain businesses in prior years, which includedobligations under certain property leases and grants. Should the purchasers ofthe businesses default on these commitments, the future obligation could revertto the Group.In the normal course of business the Group has given guarantees and counterindemnities in respect of commercial transactions and has entered into forwardcontracts for the sale and purchase of foreign currencies by reference to itsforecast requirements.Proceedings have continued against the Welsh Development Agency ("WDA"),claiming substantial damages in relation to the provision by the WDA ofdefective manufacturing facilities. The proceedings are now the subject oflitigation.The Group is involved as defendant in a number of potential and actuallitigation cases in connection with its business, primarily in North America.The directors believe that the likelihood of a material liability arising fromthese cases is remote.In early October 2004, our conveyor belt operations in Charlotte and Atlantareceived notification from the Anti-Trust Division of the US Department ofJustice of their intention to enquire into possible anti-trust violations byFenner. Every co-operation is being given in order to clarify and expedite theprocess. Fenner PLCGroup Profit and Loss AccountFirst Half/ Second Half Splitfor the year ended 31 August 2005 First half Second half (unaudited) (unaudited) Total year ----------------------- --------------------- ------------------- 2005 2004 2005 2004 2005 2004 £000 £000 £000 £000 £000 £000-----------------------------------------------------------------------------------------------------------------------Turnover 141,339 120,836 171,673 139,759 313,012 260,595 ------------------------------------------------------------------------------Operating profit before goodwill amortisation and exceptional items 6,571 5,453 14,684 10,648 21,255 16,101Goodwill amortisation (691) (550) (1,213) (599) (1,904) (1,149)Exceptional items (556) (1,756) (2,946) (4,458) (3,502) (6,214) ------------------------------------------------------------------------------Operating profit 5,324 3,147 10,525 5,591 15,849 8,738 Share of operating loss in associated undertaking (5) 269 (15) 220 (20) 489Profit on sale of associated undertaking - - - 695 - 695 ------------------------------------------------------------------------------Profit on ordinary activities before interest 5,319 3,416 10,510 6,506 15,829 9,922Net interest payable (1,695) (1,778) (2,066) (1,680) (3,761) (3,458)Share of net interest payable inassociated undertaking (22) (34) (21) (35) (43) (69) -------------------------------------------------------------------------------Profit on ordinary activities before taxation 3,602 1,604 8,423 4,791 12,025 6,395Taxation on profit on ordinary activities (1,332) (819) (3,182) (2,233) (4,514) (3,052) -------------------------------------------------------------------------------Profit on ordinary activities after taxation 2,270 785 5,241 2,558 7,511 3,343 Minority equity interests (384) (378) (596) (598) (980) (976) -------------------------------------------------------------------------------Profit for the period 1,886 407 4,645 1,960 6,531 2,367 ------------------------------------------------------------------------------- Earnings per share*Adjusted - before goodwill amortisation, exceptional items and profit on sale of operations 2.72p 2.22p 6.62p 5.45p 9.34p 7.67p Basic - after goodwill amortisation, exceptional items and profit on sale of operations 1.69p 0.38p 3.59p 1.81p 5.28p 2.19p ------------------------------------------------------------------------------*Comparative and first half figures have been restated following a placing and open offer on 20 May 2005 (note 8). 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