19th Apr 2005 07:01
Fenner PLC19 April 2005 19 April 2005 Fenner PLC 2005 Interim Results Fenner PLC, the global engineer specialising in reinforced polymer technology,today announces its interim results for the six months ended 28 February 2005. Fenner is the world leader in the global conveyor belting market and itsproducts include light and heavyweight conveyor belting for the mining and powergeneration markets, and precision motion control products for the computer,copier and mechanical equipment markets. Group Highlights: • Improved operating performance and financial results in rising markets • Operating profit before goodwill amortisation and exceptional items up 21% to £6.6m (2004: £5.5m) on turnover up 17% to £141.3m (2004: £120.8m) • Profit before tax more than doubled to £3.6m (2004: £1.6m) • Heavyweight conveyor belting operations performed strongly, led by a recovery in demand from the coal sector in North America • Specialist polymer operations traded well across all businesses • Recent investment programmes in South Africa, Australia, China and India have all produced excellent results and justified confidence in these operations • Demand and order books remain strong Colin Cooke, Chairman, commented: "Heavyweight conveyor belt operations have benefited from an increasingrealisation in the energy sector of the value of coal as a strategic resourcefor the generation of primary power supplies. "Our substantial investments in recent years in growing capacity to serve theemerging, fast growing markets of the Far East are now showing high returns. Ourinvestments in the Specialist Hose operations are likewise developing anddemonstrating excellent prospects for the future. "Second half volumes are expected to remain high with strong order books and weremain confident of a satisfactory year end outturn." THERE WILL BE AN ANALYSTS' BRIEFING AT 9.30 TODAY AT THE OFFICES OF WEBERSHANDWICK SQUARE MILE, FOX COURT, 14 GRAY'S INN ROAD, LONDON WC1 8WS For Further Information:Fenner PLCMark Abrahams, Chief Executive 19 April 2005: 020 7067 0700Richard Perry, Finance Director Thereafter: 01482 626501Weber Shandwick Square MileNick Oborne / Stephanie Badjonat 020 7067 0700 Chairman's Statement Operating profit increased 69% during the period as a result of increased salesand reduced exceptional costs. Heavyweight conveyor belt operations havebenefited from an increasing realisation in the energy sector of the value ofcoal as a strategic resource for the generation of primary power supplies. Our substantial investments in recent years in growing capacity to serve theemerging, fast growing markets of the Far East are now showing high returns. Ourinvestments in the Specialist Hose operations are likewise developing anddemonstrating excellent prospects for the future. Our seasonal cash outflow is in line with our plans and we have secured a new,five year, £60m Revolving Credit Facility with three leading UK banks. Second half volumes are expected to remain high with strong order books and weremain confident of a satisfactory year end outturn. Turnover and Profits Turnover for the first six months of the year increased 17% to £141.3m (2004£120.8m) driven by strong demand for our heavyweight belting products from aburgeoning energy sector. Operating profit before goodwill amortisation andexceptional items increased 21% to £6.6m (2004 £5.5m). Exceptional items reduced during the period to £0.6m (2004 £1.8m) andprincipally related to investment write-downs and legal costs. Profit before taxmore than doubled to £3.6m (2004 £1.6m). Earnings per share before goodwillamortisation and exceptional items rose 22% to 2.77p per share (2004 2.27p pershare). Cash Resources and Investment The seasonal first half increase in net debt associated with dividend paymentsand increased sales volumes amounted to £12.7m after benefiting from £3.7m oftranslation credit in respect of US$ weakness on our US Private Placement debt.Our organic investment programme is continuing and the extension to ourShanghai, China facility is due for completion by the end of the current year. In anticipation of a heavy capital expenditure programme, potential bolt onacquisitions and the repayment of our US$50m Private Placement Note in March2006, we have secured a new, fiveyear, £60m Revolving Credit Facility with three leading UK banks. This alsogives us flexibility for the company's future debt financing options. Dividends The Board recommends a maintained interim dividend at 1.975p per share. Operations The Group's heavyweight conveyor belting operations have performed strongly inthe opening six months of the year, led by a recovery in demand from the coalsector in North America. Order intake levels have remained high throughout theperiod as demand returned to levels not experienced in recent years. A growingglobal awareness of the strategic value of coal as a primary source of powergeneration to many countries has accelerated demand for our products. Price increases driven by underlying feed stock price pressures and globalcapacity constraints have necessitated constant price reviews in our NorthAmerican operations in order to maintain profitability. In Europe our UK belting operation has strengthened its export base in responseto reducing demand in the home market, however, the weakness of the US$ hasreduced the profitability of its North American sales. Developments in EasternEurope and the former Soviet Union are encouraging. Sales in continental Europeare satisfactory albeit that margins are such that improvements in productivityand capacity are needed to achieve acceptable levels of return. The recent investment programmes in South Africa, Australia, China and Indiahave all produced outstanding results during the period and fully justify ourconfidence in these operations. Improvements in turnover arising from thecommissioning of further capacity have resulted in higher levels of activity,significantly increased profits and strong returns on the investment capital. The Precision Polymers operations in North America have seen a steady increasein activity in line with the improvement in the US industrial sector. TheEuropean operations are growing strongly. Despite the weakness of the US$reducing gross margins, our specialist hose business is performing well.Environmental regulations have raised demand levels for these products withinour growing customer base in this area of specialist expertise. Outlook Our outlook remains positive, with volumes strong in most of our major markets.The margin pressure in Conveyor Belting arising from rapidly increasing rawmaterial costs has hitherto been met with selling price increases in order tomaintain profitability. The Precision Polymers business continues both to improve profitability andmarket position. As we enter the second half of the year, we remain optimistic that the benefitsof increased volumes, together with recovering margins, will maintain theforward momentum of the Group. Colin CookeChairman19 April 2005 Fenner PLCGroup Profit and Loss Accountfor the half year ended 28 February 2005 (unaudited) Year Half year Half year ended ended ended31.08.04 28.02.05 29.02.04 £000 Note £000 £000 260,595 Turnover 2 141,339 120,836 Operating profit before goodwill amortisation 16,101 and exceptional items 2 6,571 5,453 (1,149) Goodwill amortisation (691) (550) (6,214) Exceptional items 3 (556) (1,756)--------- --------- --------- 8,738 Operating profit 5,324 3,147 489 Share of operating loss in associated undertaking (5) 269 695 Profit on sale of associated undertaking - ---------- --------- --------- 9,922 Profit on ordinary activities before interest 5,319 3,416 (3,458) Net interest payable (1,695) (1,778) Share of net interest payable in associated (69) undertaking (22) (34)--------- --------- --------- 6,395 Profit on ordinary activities before taxation 3,602 1,604 (3,052) Tax on profit on ordinary activities 4 (1,332) (819)--------- --------- --------- 3,343 Profit on ordinary activities after taxation 2,270 785 (976) Minority equity interests (384) (378)--------- --------- --------- 2,367 Profit for the period 1,886 407 (6,324) Interim dividend 5 (2,151) (2,148)--------- --------- --------- (3,957) Transfer from reserves (265) (1,741)--------- --------- --------- Earnings per share Adjusted - before goodwill amortisation and 7.83p exceptional items 6 2.77p 2.27p Basic - after goodwill amortisation and 2.23p exceptional items 6 1.74p 0.39p Diluted - after goodwill amortisation and 2.21p exceptional items 6 1.72p 0.39p All of the Group's activities are continuing operations. Fenner PLCGroup Balance Sheetat 28 February 2005 (unaudited) 31.08.04 28.02.05 29.02.04 £000 Note £000 £000 Fixed assets 20,676 Intangible assets - Goodwill 19,885 19,149 5 - Other 3 6 57,513 Tangible assets 56,042 55,125 344 Investments - Associated undertaking 299 3,648 262 - Other 262 262-------- -------- -------- 78,800 76,491 78,190 Current assets 43,391 Stocks 49,173 42,041 55,456 Debtors 62,607 54,150 32,229 Cash at bank and in hand 19,846 24,425-------- -------- -------- 131,076 131,626 120,616 (82,718) Creditors - Amounts falling due within one year (80,415) (66,255)-------- -------- -------- 48,358 Net current assets 51,211 54,361-------- -------- -------- 127,158 Total assets less current liabilities 127,702 132,551 Creditors - Amounts falling due after more (55,037) than one year (53,766) (57,076) (7,670) Provisions for liabilities and charges (7,969) (7,823)-------- -------- -------- 64,451 Net assets 65,967 67,652-------- -------- -------- Capital and reserves 27,150 Called up share capital 27,190 27,150 4,238 Share premium account 4,401 4,248 3,991 Revaluation reserve 4,056 4,108 16,758 Other reserve 17,073 16,909 8,602 Profit and loss account 9,254 12,005-------- -------- -------- 60,739 Shareholders' funds - Equity interest 7 61,974 64,420 3,712 Minority equity interests 3,993 3,232-------- -------- 64,451 Total funds employed 65,967 67,652 Fenner PLCGroup Cash Flow Statementfor the half year ended 28 February 2005 (unaudited) Year Half year Half year ended ended ended 31.08.04 28.02.05 29.02.04 £000 £000 £000 £000 £000 £000 Net cash outflow from operating 21,899 activities before exceptional items (2,000) 1,543 (7,708) Net cash outflow on exceptional items (779) (2,766) ------- ------- ------- Net cash outflow from operating 14,191 activities (2,779) (1,223) Dividends received from associated 77 undertaking - - Returns on investments and servicing of finance 1,142 Interest received 450 535 (4,874) Interest paid (2,173) (2,508) Interest element of finance lease (2) rental payments (1) (1) Dividends paid to minority (511) shareholders (308) (297) ------- ------- ------- Net cash outflow from returns on (4,245) investments and servicing of finance (2,032) (2,271) (2,591) Taxation (1,948) (816) Capital expenditure and financial investment (7,999) Purchase of tangible fixed assets (3,045) (3,313) (744) Purchase of investments and secured loans - (744) 43 Sale of tangible fixed assets 25 26 ------- ------- ------- Net cash outflow on capital expenditure (8,700) and financial investment (3,020) (4,031) Acquisitions and disposals (2,796) Purchase of subsidiary undertakings (254) (2,628) 11 Sale of subsidiary undertaking - 16 Net proceeds on disposal of associated undertaking and purchase of related 1,279 subsidiary - - ------- ------- ------- Net cash outflow on acquisitions and (1,506) disposals (254) (2,612) (6,015) Equity dividends paid (6,324) (6,015) ------- ------- ------- (8,789) Net cash outflow before financing (16,357) (16,968) Financing 4,684 Issue of ordinary share capital - 4,694 68 Loan repayment from associated undertaking 34 35 (11) Capital element of finance lease repayments (6) (6) (3,968) Repayment of bank and other borrowings (197) (141) 916 New bank and other borrowings 2,187 487 ------- ------- ------- 1,689 Net cash inflow from financing 2,018 5,069 ------- ------- ------- (7,100) Decrease in cash (14,339) (11,899) Fenner PLCStatement of Total Recognised Gains and Lossesfor the half year ended 28 February 2005 (unaudited) Year Half year Half year ended ended ended31.08.04 28.02.05 29.02.04 £000 £000 2,367 Profit for the period 1,886 407 Currency translation differences on foreign 1,378 currency net investments 1,125 2,789 ------- ------- ------- Total recognised gains and losses relating to the 3,745 period 3,011 3,196 Reconciliation of Operating Profit to Net Cash Outflow from Operating Activitiesfor the half year ended 28 February 2005 (unaudited) 8,738 Operating profit 5,324 3,147 Non cash items 7,097 Depreciation and amortisation 4,328 3,807 Others including the effect of foreign exchange 1,040 rate changes 444 396 Working capital movements (119) Stocks (6,314) 525 (1,898) Debtors (8,134) (2,198) (667) Creditors 1,573 (6,900) ------- ------- ------- 14,191 Net cash outflow from operating activities (2,779) (1,223) Reconciliation of Net Cash Flow to Movement in Net Debtfor the half year ended 28 February 2005 (unaudited) (7,100) Decrease in cash (14,339) (11,899) Cash inflow from increase in loans and finance 3,063 leases (1,984) (340) ------- ------- ------- (4,037) Increase in net debt resulting from cash flows (16,323) (12,239) - Loans and finance leases acquired with subsidiaries (31) - 9,117 Effect of foreign exchange rate changes 3,678 11,964 ------- ------- ------- 5,080 Increase in net debt (12,676) (275) (44,496) Opening net debt (39,416) (44,496) ------- ------- ------- (39,416) Closing net debt (52,092) (44,771) ------- ------- ------- 64.9% Gearing (closing net debt / Shareholders' funds) 84.1% 69.5% Fenner PLCNotes 1 Basis of preparation The interim financial information, which was approved by the Board on 19 April2005, is unaudited and has been prepared on the basis of the accounting policiesset out in the 2004 Annual Report.The Group profit and loss account for the year ended 31 August 2004 and theGroup balance sheet as at that date are an abridged version of the statutoryaccounts for that period which, together with an unqualified audit report, havebeen filed with the Registrar of Companies. 2 Segmental information by geographical origin Operating profit before goodwill amortisation Turnover and exceptional items Half year Half year Year Half year Half year Year ended ended ended ended ended ended 28.02.05 29.02.04 31.08.04 28.02.05 29.02.04 31.08.04 £000 £000 £000 £000 £000 £000 Europe 42,032 39,440 80,298 (443) 827 2,145North America 64,209 53,789 119,413 2,876 1,246 5,471Africa 14,357 12,298 26,594 1,949 1,883 4,402Rest of world 23,139 18,069 39,237 2,189 1,497 4,083Inter-segment sales (2,398) (2,760) (4,947) - - - ------- ------- ------- ------- ------- ------- 141,339 120,836 260,595 6,571 5,453 16,101 3 Exceptional items The exceptional charge for the current period amounting to £556,000 (31 August2004 £6,214,000; 29 February 2004 £1,756,000) principally comprises an assetimpairment relating to the Group's investment in United Polymers Limited andprofessional costs relating to proceedings against the Welsh Development Agency(WDA) for damages in relation to the provision by the WDA of defectivemanufacturing facilities. The related tax credit amounted to £125,000 (31 August2004 £735,000; 29 February 2004 £358,000). 4 Taxation on profit on ordinary activities Year Half year Half year ended ended ended31.08.04 28.02.05 29.02.04 £000 £000 £000 The tax charge, based on the profit for the period comprises 256 UK taxation 10 116 2,796 Overseas taxation 1,322 703 ------- ------- ------- 3,052 1,332 819 5 Interim dividend The interim dividend of 1.975p per share (2004 1.975p) will be paid on 5September 2005 to shareholders on the register on 5 August 2005, except to theholders of shares issued after 28 February 2005 and before 5 August 2005 whichrequire shareholder approval. 6 Earnings per share In view of the significance of the goodwill amortisation and the exceptionalcosts in the current and prior periods, the directors consider it appropriate todisclose earnings per share calculated both before and after these items. Year Half year Half year ended ended ended 31.08.04 28.02.05 29.02.04 £000 £000 £000 Earnings 2,367 Profit for the period 1,886 407 6,668 Goodwill amortisation and exceptional items 1,247 2,306 (735) Tax attributable to the exceptional items (125) (358)----------- ----------- ----------- Earnings for the period before goodwill 8,300 amortisation and exceptional items 3,008 2,355 Number Number Number Weighted average number of ordinary shares in issue during the period106,197,546 Weighted average number of shares in issue 108,667,227 103,741,359 Weighted average number of shares held by (132,010) the Employee Share Ownership Plan Trust (131,859) (132,165)----------- ----------- ----------- Weighted average number of shares in issue - 106,065,536 basic 108,535,368 103,609,194 Weighted average effect of share options and 930,783 contingent long term incentive plan shares 963,151 919,687----------- ----------- ----------- Weighted average number of shares in issue - 106,996,319 diluted 109,498,519 104,528,881 Pence Pence Pence Earnings per share Basic - after goodwill amortisation and 2.23 exceptional items 1.74 0.39 6.29 Goodwill amortisation and exceptional items 1.15 2.23 (0.69) Tax attributable to exceptional items (0.12) (0.35)----------- ----------- ----------- Adjusted - before goodwill amortisation and 7.83 exceptional items 2.77 2.27 Diluted earnings per share after goodwill amortisation and exceptional items inthe half year ended 28 February 2005 and 29 February 2004 were 1.72p and 0.39prespectively. 7 Reconciliation of movements in shareholders' funds Year Half year Half year ended ended ended31.08.04 28.02.05 29.02.04 £000 £000 £000 58,428 Opening shareholders' funds 60,739 58,428 2,367 Profit for the period 1,886 407 (6,324) Dividends (2,151) (2,148) 4,684 Share capital issued - 4,694 206 UITF17 share award accrual 375 250 Currency translation differences on foreign 1,378 currency net investments 1,125 2,789 ------- ------- ------- 2,311 Net increase in shareholders' funds 1,235 5,992 ------- ------- ------- 60,739 Closing shareholders' funds 61,974 64,420 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Fenner PLC