30th Apr 2008 07:01
Fenner PLC30 April 2008 30 April 2008 Fenner PLC 2008 Interim Results Fenner PLC, the global engineer specialising in reinforced polymer technology, today announces its interim results for the six months ended 29 February 2008. Fenner is a world leader in the field of reinforced polymer engineering. Its products include lightweight and heavyweight conveyor belting for the mining and power generation markets; precision motion control products for the office automation and mechanical equipment markets; sealing products for the mining, hydraulics and energy industries. Highlights • Strong performance from both operating divisions • Good growth in revenue and profits - profit before taxation, amortisation of intangible assets acquired and exceptional items up 14% to £16.1m on revenue up 8% to £201.1m - pre-tax profit was £13.9m (2007: £15.9m) after exceptional costs of £1.7m (2007: £2.1m exceptional profit) and a £1.3m increase in finance costs reflecting investment programmes • Major organic and acquisitive investment programmes are positioning the Group well for continued growth in the future • Conveyor Belting is enjoying robust demand for its products driven by strong energy markets. Good performances in Australia, North America and Europe. Operating profit* was up 28% to £12.9m on revenues up 10.5% to £136.3m • Advanced Engineered Products performed well in the office automation and oil and gas sectors and the mining sector in China. Operating profit* grew to £9.7m (2007: £9.3m) on revenues growing to £64.8m (2007: £62.1m). Newly acquired businesses are bringing significant new opportunities • Additional funds secured to support the group's aggressive growth strategy - £36.5m (gross) placing in March and increased revolving committed credit facility • The Group expects to continue the momentum established over recent years * before amortisation of intangible assets acquired and exceptional items Commenting on outlook, Colin Cooke, Chairman, said: "The transformational period of the Group will continue throughout the second half of the year and beyond as we continue our investment programmes and consolidate recently acquired businesses. The indications in this dynamic environment are most encouraging for further growth to be achieved, with our businesses well placed in a number of strong markets to capitalise on the opportunities available to us. "The healthy order books in our core businesses have been sustained in theinitial months of the second half, which underpin the confidence in ourcapability to enhance our earnings for 2008. We expect to maintain the momentumthat has been established over recent years." - ends - For Further Information: Fenner PLCMark Abrahams, Chief Executive 30 April 2008: 020 7067 0700Richard Perry, Finance Director Thereafter: 01482 626501 Weber Shandwick FinancialNick Oborne / Stephanie Badjonat / Hannah Marwood 020 7067 0700 INTERIM MANAGEMENT REPORT It is encouraging to report on the progress that has been achieved during thefirst six months of the year. Robust demand for our value adding product rangeand service offering has resulted in strong performances from both our operatingdivisions. Operating profit before amortisation of intangible assets acquiredand exceptional items has advanced significantly when compared to the sameperiod in 2007. The Group's strategic growth phase continued as our capital expenditureprogrammes accelerated with significant investment during the period. Inaddition, extensive business development activity has culminated in thesuccessful completion of acquisitions in the Advanced Engineered Products andConveyor Belting divisions. REVENUE AND PROFITSRevenue for the period increased by 8% to £201.1m (2007 £185.5m) with solidperformances in both divisions. The effect on half year revenue from businessesacquired in the period was small at £2.1m given the proximity of completiondates to the period end. Operating profit before amortisation of intangibleassets acquired and exceptional items increased by 19% to £19.2m (2007 £16.2m).Robust growth was facilitated by operating efficiencies and economies of scaleon higher throughput with 3% growth derived from acquisition activities. Exceptional items of £1.7m (2007 profit of £2.1m) have been charged, principallyrelating to costs associated with the expansion of the conveyor belting businessin North America and acquisition integration costs. The exceptional profitarising in 2007 was predominantly caused by the recognition of a £2.5m profit onthe sale of the Group's interest in KSB Pumps in South Africa. Operating profitwas £17.0m (2007 £18.0m), representing an underlying increase of £3.0m offset bya £4.0m movement in amortisation of intangible assets acquired and exceptionalitems. Net finance costs were £3.1m (2007 £2.1m) which reflect the organic andacquisitive investment programmes. The resultant profit before taxation,amortisation of intangible assets acquired and exceptional items was £16.1m(2007 £14.1m). Profit before taxation was £13.9m (2007 £15.9m). Earnings per share before amortisation of intangible assets acquired andexceptional items was 7.0p per share (2007 6.2p per share), representing anincrease of 13% over the equivalent period in 2007. Basic earnings per shareamounted to 6.1p per share (2007 7.0p per share). ACQUISITIONS AND INVESTMENTOur strategic growth plan has advanced rapidly in recent months with asignificant level of acquisition activity and continuing major organicinvestments. Six acquisitions have been completed prior to, and after, the period end. In November 2007, substantially all the operating assets and liabilities ofB-LOC in the US were acquired for an initial consideration of £4.4m with anadjustment for deferred contingent consideration of up to £0.8m. Its productsextend and complement our existing range of high value added, proprietary drivesolutions. In December 2007, substantially all the operating assets and liabilities ofSpliceline in Australia were acquired to expand our service coverage in theNorthern Territory. The initial consideration was £0.7m with £0.2m deferred to alater period. In February 2008, the acquisition of Prodesco, Inc in the US was completed foran initial consideration of £24.2m, excluding costs, with a subsequent workingcapital adjustment and contingent deferred consideration of up to £9.0m (basedon exchange rates at the period end) over a five year period. This acquisitionconsists of two business segments. The first develops and manufactures a rangeof highly specialised technical fabrics which are used in variousperformance-critical and proprietary applications by industrial, aerospace andchemical equipment OEMs. This business enhances our core expertise intextile engineering while exemplifying the Advanced Engineered ProductsDivision's primary focus on performance-critical, polymeric components. Thesecond business segment, Secant Medical, is a leader in the development andproduction of textile structures for the growing medical device market. Typically these products are significant components in devices which are used totreat cardiovascular and orthopaedic conditions. This natural extension to ourportfolio gives controlled exposure to a segment of the medical market which hasattractive growth and resilience characteristics. After the period end, substantially all the operating assets and liabilities ofWinfield Industries, Inc in the US were acquired in March 2008 for £6.9m,excluding costs. Winfield Industries is a leading supplier ofperformance-critical rollers for digital imaging applications and is a naturalfit with our Fenner Precision business. Also in March 2008, Northern Belting Specialists Pty Ltd in Australia wasacquired for £2.3m. This bolt-on acquisition specialises in belt splicing,rubber lining, mechanical and technical servicing and belting sales andrepresents a further strategic addition to enhance our geographical coverage inSouth Australia. In April 2008, substantially all the operating assets and liabilities of KingEnergy Services, Inc in the US were acquired for £2.8m. This represents afurther development of our conveyor belting growth initiative and enables us tooffer a full service capability in the south west mining region. Our organic capital investment programmes have accelerated since the year end.The integration of our seals business in Houston onto a single site has beencompleted ahead of schedule with the synergies enhancing profits earlier thanpreviously envisaged. In the Conveyor Belting Division, our major projects areprogressing to plan and, upon commissioning, will position our businesses aroundthe world to offer an even greater selection of safe conveyor solutions to meetour customers' requirements. CASH RESOURCESA cash spend of £62.0m on our combined acquisition activities and organicinvestment programmes, added to the seasonal movement, increased half year netborrowings. The total outflow, before the effects of exchange rates, was £69.1m(2007 £24.8m). As anticipated, net borrowings closed at £109.1m (2007 £56.4m),remaining comfortably within the scope of planned banking facilities. To support the Group's aggressive growth strategy, a mix of additional sourcesof funds has been secured in recent months at favourable terms. Within ourcommitted facilities, our revolving credit with three UK leading banks has beenincreased to £100.0m from £75.0m on the same terms as previously agreed in June2007. After the period end, in March 2008, £36.5m before costs was raised by theplacing of 15.7m new ordinary shares with institutional investors at 233p pershare. DIVIDENDSAn interim dividend of 2.2p (2007 2.075p) is declared and will be paid on 8September 2008 to shareholders on the register on 1 August 2008. OPERATIONSIn our Conveyor Belting Division, revenue increased to £136.3m (2007 £123.4m)with strong energy markets driving robust demand for our products and services.Operating profit before amortisation of intangible assets acquired andexceptional items was £12.9m (2007 £10.1m). An increase in margin was achievedthrough productivity improvements and plant efficiencies which overcame theeffects of operating in an environment of increasing input costs. Our growing Australian business has performed exceptionally well, particularlyin the service sector where our customer responsiveness levels have improvedfurther following a rigorous investment in our network throughout the region.Our recently announced investment in Kwinana, south of Perth, is underway to build the first new conveyor belting plant in Australia in over 60years, with a scheduled commission date in 2009. In North America, demand levels have been encouraging, particularly in theindustrial sector, where to date limited signs of an economic slowdown have beenevident. Our restructuring plans have progressed well and have mitigated theeffects of raw material price increases, spurred by the global fundamentals ofrising oil prices and demand from emerging economies. The investment in newstate of the art plant is scheduled for a phased commissioning later in theyear. This exciting prospect broadens the scope of our product offering toservice better our customers' future needs across evolving global markets. The European businesses have continued to grow, building on the solidfoundations laid in the previous year. The focus on plant improvement andthroughput will continue over the coming months to improve margins across adiverse product range and customer base. It has been encouraging to see theperseverance to cultivate and penetrate new markets rewarded by significantlyhigher volumes. The Advanced Engineered Products Division has made satisfactory progress withrevenue increasing to £64.8m (2007 £62.1m). Acquisitions contributed £2.0m inthe current period while £2.9m was included in the previous period for KSB Pumpswhich was subsequently divested. Operating profit before amortisation ofintangible assets acquired and exceptional items was £9.7m (2007 £9.3m). The Fenner Drives business produced a solid performance, against a background ofUS economic uncertainty, assisted by a good contribution from the successfullyintegrated B-LOC acquisition. The Fenner Precision business has experiencedstrong demand from the office automation sector, which in part has offset softerdemand from the computer peripherals sector. Against the backdrop of a phasedintroduction of new emission legislation, our specialist Hose business produceda steady performance. The Fenner Advanced Sealing Technologies operations have performed well withcontinuing strength in the oil and gas sector assisting our Process business inthe US. Growth in our Chinese operation was driven by demand from the coalmining sector while a strengthening in our global coverage has improved ourFluid Power business, particularly in Europe and the Middle-East. PRINCIPAL RISKS AND UNCERTAINTIESThe principal risks and uncertainties affecting the Group remain those set outin the 2007 Annual Report. Those which are most likely to impact the performanceof the Group in the remaining months of the financial year are set out below. Due to the global nature of the Group, a large proportion of its revenue isderived from overseas, of which a significant amount is generated in the US. Asa consequence, the Group could be affected by movements in exchange rates andchanges in global and country specific economic or business conditions,particularly in the US. A variety of raw materials are used in the manufacturing processes within ourbusinesses. Significant increases or volatility in the price of these rawmaterials, together with supply constraints, could adversely impact the Group'sperformance. OUTLOOKThe transformational period of the Group will continue throughout the secondhalf of the year and beyond as we continue our investment programmes andconsolidate recently acquired businesses. The indications in this dynamicenvironment are most encouraging for further growth to be achieved, with ourbusinesses well placed in a number of strong markets to capitalise on theopportunities available to us. The healthy order books in our core businesses have been sustained in theinitial months of the second half, which underpin the confidence in ourcapability to enhance our earnings for 2008. We expect to maintain the momentumthat has been established over recent years. FORWARD-LOOKING STATEMENTSCertain statements in this report are forward-looking. Although the Groupbelieves that the expectations reflected in these forward-looking statements arereasonable, we can give no assurance that these expectations will prove to havebeen correct. As these statements include risks and uncertainties, actualresults may differ materially from those expressed or implied by theseforward-looking statements. Consolidated income statementfor the half year ended 29 February 2008 (unaudited) Half year ended Half year ended Year ended 29 February 28 February 31 August 2008 2007 2007 Notes £m £m £m------------------------------------------------------------------------------------------------------Revenue 3 201.1 185.5 380.8Cost of sales (141.2) (130.8) (268.4)------------------------------------------------------------------------------------------------------Gross profit 59.9 54.7 112.4Distribution costs (20.2) (17.7) (36.9)Administrative expenses (22.7) (19.0) (37.3)------------------------------------------------------------------------------------------------------Operating profit before amortisation of intangible assets acquired and exceptional items 3 19.2 16.2 39.0Amortisation of intangible assets acquired (0.5) (0.3) (0.6)Exceptional items 4 (1.7) 2.1 (0.2)------------------------------------------------------------------------------------------------------Operating profit 3 17.0 18.0 38.2Finance income 0.8 0.5 1.4Finance costs (3.9) (2.6) (6.0)------------------------------------------------------------------------------------------------------Profit before taxation 13.9 15.9 33.6Taxation 5 (4.2) (4.8) (9.7)------------------------------------------------------------------------------------------------------Profit for the period 9.7 11.1 23.9------------------------------------------------------------------------------------------------------Attributable to:Equity holders of the parent 9.6 11.1 23.7Minority interests 0.1 - 0.2------------------------------------------------------------------------------------------------------ 9.7 11.1 23.9------------------------------------------------------------------------------------------------------Earnings per shareAdjusted - before amortisation of intangible assets acquired and exceptional items 7 7.0p 6.2p 15.1pBasic 7 6.1p 7.0p 15.0pDiluted 7 6.0p 7.0p 14.9p------------------------------------------------------------------------------------------------------The result for the period derives from continuing operations. Consolidated balance sheetat 29 February 2008 (unaudited) 29 February 28 February 31 August 2008 2007 2007 £m £m £m------------------------------------------------------------------------------------------------------Non-current assetsProperty, plant and equipment 128.9 77.9 90.2Intangible assets 99.3 68.1 66.5Other investments 0.6 0.6 0.6Deferred tax assets 14.1 15.6 12.5------------------------------------------------------------------------------------------------------ 242.9 162.2 169.8------------------------------------------------------------------------------------------------------Current assetsInventories 63.7 57.3 54.5Trade and other receivables 75.6 69.2 61.5Current tax assets 2.0 1.0 0.7Cash and cash equivalents 32.7 19.7 66.1Derivative financial instruments - - 0.2------------------------------------------------------------------------------------------------------ 174.0 147.2 183.0------------------------------------------------------------------------------------------------------Total assets 416.9 309.4 352.8------------------------------------------------------------------------------------------------------Current liabilitiesBorrowings (12.1) (9.0) (10.2)Trade and other payables (86.9) (68.0) (75.1)Current tax liabilities (3.4) (3.6) (5.4)Derivative financial instruments (3.1) (0.7) (0.7)------------------------------------------------------------------------------------------------------ (105.5) (81.3) (91.4)------------------------------------------------------------------------------------------------------Non-current liabilitiesBorrowings (129.7) (67.1) (92.2)Retirement benefit obligations (14.9) (27.5) (14.1)Provisions (14.6) (5.6) (6.9)Deferred tax liabilities (6.3) (5.1) (5.5)------------------------------------------------------------------------------------------------------ (165.5) (105.3) (118.7)------------------------------------------------------------------------------------------------------Total liabilities (271.0) (186.6) (210.1)------------------------------------------------------------------------------------------------------Net assets 145.9 122.8 142.7------------------------------------------------------------------------------------------------------EquityShare capital 39.7 39.6 39.6Share premium 51.9 51.6 51.7Retained earnings 52.9 33.4 54.0Hedging reserve (2.0) 0.3 0.4Exchange reserve 1.4 (3.9) (4.9)Other reserve 1.1 1.1 1.1------------------------------------------------------------------------------------------------------Shareholders' equity 145.0 122.1 141.9Minority interests 0.9 0.7 0.8------------------------------------------------------------------------------------------------------Total equity 145.9 122.8 142.7------------------------------------------------------------------------------------------------------ Consolidated cash flow statementfor the half year ended 29 February 2008 (unaudited) Half year ended Half year ended Year ended 29 February 28 February 31 August 2008 2007 2007 Notes £m £m £m------------------------------------------------------------------------------------------------------Profit before taxation 13.9 15.9 33.6Adjustments for:Depreciation of property, plant and equipment and amortisation of intangible assets 5.2 4.2 8.6Impairment loss on property, plant and equipment 0.8 - -Movement in retirement benefit obligations (0.4) (1.4) (2.7)Movement in provisions (0.1) (0.9) 0.2Finance income (0.8) (0.5) (1.4)Finance costs 3.9 2.6 6.0Profit on disposal of joint venture - (2.5) (2.5)Other non-cash movements 0.4 0.5 0.7------------------------------------------------------------------------------------------------------Operating cash flow before movement in working capital 22.9 17.9 42.5Movement in working capital (10.8) (6.3) 10.8------------------------------------------------------------------------------------------------------Net cash from operations 12.1 11.6 53.3Interest received 0.8 0.7 1.6Interest paid (3.5) (3.4) (5.9)Taxation paid (7.2) (7.0) (10.2)------------------------------------------------------------------------------------------------------Net cash from operating activities 2.2 1.9 38.8------------------------------------------------------------------------------------------------------Investing activities:Purchase of property, plant and equipment 8 (32.0) (13.8) (31.5)Disposal of property, plant and equipment 0.5 - 0.2Purchase of intangible assets - (0.3) (0.5)Acquisition of businesses 9 (30.0) (8.8) (8.8)Disposal of joint venture - 5.2 5.2------------------------------------------------------------------------------------------------------Net cash used in investing activities (61.5) (17.7) (35.4)------------------------------------------------------------------------------------------------------Financing activities:Equity dividends paid 6 (9.9) (9.5) (9.5)Dividends paid to minority shareholders - - (0.1)Issue of ordinary share capital 0.1 0.5 0.7Repayment of finance leases - (0.1) (0.3)Repayment of borrowings (2.8) (3.6) (34.1)New borrowings 35.3 4.9 66.3------------------------------------------------------------------------------------------------------Net cash from/(used in) financing activities 22.7 (7.8) 23.0------------------------------------------------------------------------------------------------------Net (decrease)/increase in cash and cash equivalents (36.6) (23.6) 26.4Cash and cash equivalents at start of period 66.0 41.0 41.0Exchange movements 2.0 1.4 (1.4)------------------------------------------------------------------------------------------------------Cash and cash equivalents at end of period 31.4 18.8 66.0------------------------------------------------------------------------------------------------------Cash and cash equivalents comprises:Cash and cash equivalents 32.7 19.7 66.1Bank overdrafts (1.3) (0.9) (0.1)------------------------------------------------------------------------------------------------------ 31.4 18.8 66.0------------------------------------------------------------------------------------------------------ Consolidated statement of recognised income and expensefor the half year ended 29 February 2008 (unaudited) Half year ended Half year ended Year ended 29 February 28 February 31 August 2008 2007 2007 £m £m £m------------------------------------------------------------------------------------------------------Profit for the period 9.7 11.1 23.9Items recognised directly in equity:Currency translation differences 6.3 (1.8) (2.8)Hedge of net investments in foreign currencies (0.9) 0.4 0.5Hedge of interest rate risk (2.1) (0.1) (0.1)Actuarial (losses)/gains on defined benefit pension schemes (1.2) - 12.0Taxation on items taken directly to equity 0.9 - (4.3)------------------------------------------------------------------------------------------------------Net income/(expense) recognised directly in equity 3.0 (1.5) 5.3------------------------------------------------------------------------------------------------------Total recognised income and expense for the period 12.7 9.6 29.2------------------------------------------------------------------------------------------------------Attributable to:Equity holders of the parent 12.6 9.6 29.0Minority interests 0.1 - 0.2------------------------------------------------------------------------------------------------------Total recognised income and expense for the period 12.7 9.6 29.2------------------------------------------------------------------------------------------------------ Notes to the interim financial statements 1. Basis of preparationThese condensed interim financial statements for the half year ended 29 February2008 have been prepared in accordance with the Disclosure and Transparency Rules('DTR') of the Financial Services Authority ('FSA') and with IAS 34 'InterimFinancial Reporting' as adopted by the European Union. They should be read inconjunction with the Group's financial statements for the year ended 31 August2007. The comparative financial information for the year ended 31 August 2007 does notconstitute statutory accounts within the meaning of Section 240 of the CompaniesAct 1985. It has been extracted from the Group's financial statements for 2007which have been filed with the Registrar of Companies. They contained anunqualified audit report and did not contain a statement under Section 237 (2)or (3) of the Companies Act 1985. 2. Accounting policiesThe accounting policies adopted are consistent with those applied in thepreparation of the Group's financial statements for the year ended 31 August2007, except for the following standards which have been adopted for the firsttime for the year ending 31 August 2008: • IFRS 7 'Financial Instruments - Disclosures'• Amendment to IAS 1 'Presentation of Financial Statements - Capital Disclosures'• IFRIC 10 'Interim Financial Reporting and Impairment'• IFRIC 11 'IFRS 2 - Group and Treasury Share Transactions' None of these standards or interpretations have had a significant impact on thecondensed interim financial statements. 3. Segment information Half year ended Half year ended Year ended 29 February 28 February 31 August 2008 2007 2007 £m £m £m------------------------------------------------------------------------------------------------------RevenueConveyor Belting 136.3 123.4 255.8Advanced Engineered Products 64.8 62.1 125.0------------------------------------------------------------------------------------------------------ 201.1 185.5 380.8------------------------------------------------------------------------------------------------------Operating profit before amortisation of intangible assets acquired and exceptional itemsConveyor Belting 12.9 10.1 24.2Advanced Engineered Products 9.7 9.3 20.0Unallocated (3.4) (3.2) (5.2)------------------------------------------------------------------------------------------------------ 19.2 16.2 39.0------------------------------------------------------------------------------------------------------Operating profitConveyor Belting 11.5 10.0 22.3Advanced Engineered Products 8.9 11.2 21.1Unallocated (3.4) (3.2) (5.2)------------------------------------------------------------------------------------------------------ 17.0 18.0 38.2------------------------------------------------------------------------------------------------------ 4. Exceptional itemsExceptional items comprise £1.4m (2007: £0.1m) of restructuring costs and animpairment loss on assets associated with the expansion of the conveyor beltingbusinesses in North America and £0.3m (2007: £0.3m) of integration costsfollowing the acquisitions of EGC and B-LOC. The 2007 comparative also includeda £2.5m profit on disposal of joint venture. 5. Taxation Half year ended Half year ended Year ended 29 February 28 February 31 August 2008 2007 2007 £m £m £m------------------------------------------------------------------------------------------------------UK taxation 0.1 (0.1) 0.6Overseas taxation 4.1 4.9 9.1------------------------------------------------------------------------------------------------------ 4.2 4.8 9.7------------------------------------------------------------------------------------------------------The tax charge is calculated based on the estimated effective tax rate for thefull year. 6. Dividends Half year ended Half year ended Year ended 29 February 28 February 31 August 2008 2007 2007 £m £m £m------------------------------------------------------------------------------------------------------Dividends paid or approved in the periodInterim dividend for the year ended 31 August 2007 of 2.075p (2006: 1.975p) per share 3.3 3.1 3.1Final dividend for the year ended 31 August 2007 of 4.15p (2006: 4.025p) per share 6.6 6.4 6.4------------------------------------------------------------------------------------------------------ 9.9 9.5 9.5------------------------------------------------------------------------------------------------------Dividends neither paid nor approved in the periodInterim dividend for the year ended 31 August 2008 of 2.2p (2007: 2.075p) per share 3.8 3.3 3.3------------------------------------------------------------------------------------------------------The interim dividend for the year ending 31 August 2008 is due for payment on 8 September 2008 and so has not been recognised as a liability at 29 February 2008. It will be paid to shareholders on the register on 1 August 2008. 7. Earnings per share Half year ended Half year ended Year ended 29 February 28 February 31 August 2008 2007 2007 £m £m £m------------------------------------------------------------------------------------------------------EarningsProfit for the period attributable to equity holders of the parent 9.6 11.1 23.7Amortisation of intangible assets acquired and exceptional items 2.2 (1.8) 0.8Taxation attributable to amortisation of intangible assets acquired and exceptional items (0.7) 0.4 (0.6) Profit for the period before amortisation of intangible assets acquired and exceptional items 11.1 9.7 23.9------------------------------------------------------------------------------------------------------ Number Number Number------------------------------------------------------------------------------------------------------Average number of sharesWeighted average number of shares in issue 158,551,798 157,655,351 158,073,110Weighted average number of shares held by the Employee Share Ownership Plan Trust (128,603) (131,859) (131,859)------------------------------------------------------------------------------------------------------Weighted average number of shares in issue - basic 158,423,195 157,523,492 157,941,251Effect of share options and contingent long term incentive plans 1,317,247 812,820 766,733------------------------------------------------------------------------------------------------------Weighted average number of shares in issue - diluted 159,740,442 158,336,312 158,707,984------------------------------------------------------------------------------------------------------ Pence Pence Pence------------------------------------------------------------------------------------------------------Earnings per shareAdjusted - before amortisation of intangible assets acquired and exceptional items 7.0 6.2 15.1Basic 6.1 7.0 15.0Diluted 6.0 7.0 14.9------------------------------------------------------------------------------------------------------ 8. Capital expenditureCapital expenditure during the period of £32.0m principally relates to the majorexpansion projects in the conveyor belting businesses in North America andAustralia and the integration of the seals businesses in Houston to a singlesite. 9. AcquisitionsOn 9 November 2007, the Group acquired substantially all of the operating assetsand liabilities of B-LOC for an initial consideration of £4.4m. On 14 December 2007, the Group acquired substantially all of the operatingassets and liabilities of Spliceline for an initial consideration of £0.7m. On 5 February 2008, the Group acquired the entire share capital of Prodesco, Inc foran initial consideration of £24.2m. From the respective dates of acquisition, these businesses contributed £2.1m toGroup revenue and £0.2m to Group operating profit, after deducting amortisationof intangible assets acquired and exceptional items of £0.3m. If the acquisitions had occurred on 1 September 2007, it is estimated that Grouprevenue would have been £206.8m and Group operating profit would have been£18.2m, after deducting amortisation of intangible assets acquired andexceptional items of £2.8m. These amounts have been calculated by adjusting theresults of the acquired businesses to reflect the effect of the Group'saccounting policies as if they had been in effect from 1 September 2007. Details of the aggregate assets and liabilities acquired are given below. Accounting Book policy Other Provisional value alignment items fair value £m £m £m £m------------------------------------------------------------------------------------------------------Intangible assets 1.6 (1.6) - -Property, plant and equipment 3.1 (0.1) - 3.0Inventories 2.4 (0.2) - 2.2Cash and cash equivalents 0.1 - - 0.1Trade and other receivables 2.5 - - 2.5Trade and other payables (1.1) (0.1) - (1.2)Deferred taxation - - 0.1 0.1------------------------------------------------------------------------------------------------------Total net assets acquired 8.6 (2.0) 0.1 6.7Intangible assets acquired 23.8Goodwill on acquisition 7.4------------------------------------------------------------------------------------------------------Total consideration 37.9Contingent deferred consideration held as provisions (7.8)------------------------------------------------------------------------------------------------------Cash consideration paid 30.1Cash and cash equivalents acquired (0.1)------------------------------------------------------------------------------------------------------Cash paid per cash flow statement 30.0------------------------------------------------------------------------------------------------------ Cash paid per cash flow statement includes acquisition expenses of £0.8m. The fair value adjustments for accounting policy alignment reflect theprovisional restatement of assets and liabilities in accordance with the Group'saccounting policies. Goodwill arising on acquisition principally represents the speed to market,workforce and anticipated synergies gained through the acquisitions. 10. Reconciliation of net cash flow to movement in net debt Half year ended Half year ended Year ended 29 February 28 February 31 August 2008 2007 2007 £m £m £m------------------------------------------------------------------------------------------------------Net (decrease)/increase in cash and cash equivalents (36.6) (23.6) 26.4Increase in borrowings and finance leases resulting from cash flows (32.5) (1.2) (31.9)------------------------------------------------------------------------------------------------------Movement in net debt resulting from cash flows (69.1) (24.8) (5.5)New finance leases - - (0.2)Exchange movements (3.7) 1.5 2.5------------------------------------------------------------------------------------------------------Movement in net debt in the period (72.8) (23.3) (3.2)Net debt at start of period (36.3) (33.1) (33.1)------------------------------------------------------------------------------------------------------Net debt at end of period (109.1) (56.4) (36.3)------------------------------------------------------------------------------------------------------Net debt is defined as cash and cash equivalents and current and non-current borrowings. 11. Reconciliation of movement in shareholders' equity Half year ended Half year ended Year ended 29 February 28 February 31 August 2008 2007 2007 £m £m £m------------------------------------------------------------------------------------------------------Total recognised income and expense for the period 12.6 9.6 29.0Equity dividends paid (9.9) (9.5) (9.5)Shares issued in the period 0.1 0.5 0.7Share-based payments 0.3 0.2 0.4------------------------------------------------------------------------------------------------------Movement in shareholders' equity in the period 3.1 0.8 20.6Shareholders' equity at start of period 141.9 121.3 121.3------------------------------------------------------------------------------------------------------Shareholders' equity at end of period 145.0 122.1 141.9------------------------------------------------------------------------------------------------------ 12. ContingenciesIn the normal course of business the Group has given guarantees and counterindemnities in respect of commercial transactions. 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 October 2004, the conveyor belting operations in Charlotte and Atlanta, USAreceived notification from the Anti Trust Division of the USDepartment of Justice of their intention to enquire into possible anti trustviolations by Fenner. Every co-operation has been given to date and will begiven as and when required in order to help expedite the process. 13. Related party transactionsOther than the remuneration of executive and non-executive directors, there wereno related party transactions during the period. 14. Post balance sheet events Share placingOn 14 March 2008, the Group announced the placing of 15,657,910 new ordinaryshares of 25p each in the capital of Fenner PLC with institutional investors at 233p per share. This represented approximately 9.9% of the issued share capital of Fenner PLC and raised £36.5m before costs. AcquisitionsOn 3 March 2008, the Group acquired substantially all of the operating assetsand liabilities of Winfield Industries, Inc for a consideration of£6.9m. On 6 March 2008, the Group acquired the entire share capital of Northern BeltingSpecialists Pty Ltd for a consideration of £2.3m. On 1 April 2008, the Group acquired substantially all of the operating assetsand liabilities of King Energy Services, Inc for a consideration of £2.8m. Thisamount includes £0.5m satisfied by the issue of 217,000 ordinary shares ofFenner PLC. Details of the aggregate assets and liabilities acquired after the balance sheetdate are given below. Accounting Book policy Provisional value alignment fair value £m £m £m--------------------------------------------------------------------------------Property, plant and equipment 0.5 0.1 0.6Inventories 1.3 - 1.3Cash and cash equivalents 0.1 - 0.1Trade and other receivables 2.2 - 2.2Trade and other payables (0.8) - (0.8)Current taxation (0.1) - (0.1)--------------------------------------------------------------------------------Total net assets acquired 3.2 0.1 3.3Intangible assets acquired and goodwill on acquisition 8.7--------------------------------------------------------------------------------Total consideration 12.0Share capital issued (0.5)Cash and cash equivalents acquired (0.1)--------------------------------------------------------------------------------Cash paid 11.4--------------------------------------------------------------------------------The fair value adjustments for accounting policy alignment reflect theprovisional restatement of assets and liabilities in accordance with the Group'saccounting policies. The identification and valuation of intangible assets is currently beingundertaken. Responsibility Statement We confirm that to the best of our knowledge: - the condensed interim financial statements contained in this document havebeen prepared in accordance with IAS 34 'Interim FinancialReporting' as adopted by the European Union; - the interim management report contained in this document includes a fairreview of the information required by the FSA's directive DTR4.2.7R (indication of important events during the first six months anddescription of principal risks and uncertainties for the remaining sixmonths of the year); and - this document includes a fair review of the information required by DTR 4.2.8R(disclosure of related party transactions and changestherein). The directors of Fenner PLC and their respective responsibilities are listed inthe Annual Report for 2007. There have been no changes in theperiod. By order of the Board Colin Cooke Richard PerryChairman Group Finance Director30 April 2008 30 April 2008 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Fenner PLC