Dull business but cracking chart, great dividend and ad hoc takeover rumours. I'm happy to settle for that kind of dull!

Pre-Close Trading Statement

StockMarketWire.com
Fenner - a world leader in reinforced polymer technology - posts underlying operating profits of £28.7m for the six months to the end of February, down from £36.6m last time.

Revenues fell to £347.6m from £359.8m and underlying pre-tax profits dropped to £21.8m from £29.6m.

The group posts a pre-tax loss of £5.1m against a profit of £17.6m in 2014.

The interim dividend is maintained at 4.0p per share.

Chief executive Nicholas Hobson said: "The Group's results for the period reflect a good performance by the AEP division and a reduced result from the ECS division which faced challenging market conditions.

"AEP's industrial, medical and other non-oil speciality polymer businesses, which account for some 70 per cent of AEP's revenue, are expected to continue to perform well. The financial results for the second half of the year will also benefit from the acquisition of Charter Medical.

"The remainder of AEP is seeing an impact from lower levels of activity in the oil & gas industry as a result of sharply reduced oil and gas prices. Order intake started to decline in February; the timing and extent of the decline are within the range of our planning assumptions.

"ECS expects to see a continuation of the difficult trading conditions across all of its regions.

"In response to the trading conditions being faced, cash overheads across the Group have been reduced. The Group will continue to closely manage all aspects of its costs and cash flow.

"Taking into account the management actions we are taking in response to the trading conditions, the board's expectations for the outcome for the year remain substantially unchanged overall."

StockMarketWire.com
Fenner has warned that full year earnings, after recognising a lower tax rate, will be slightly below previous management expectations.

It says leading indicators in the mining and energy industries are not yet showing any signs of recovery and the group anticipates the recent challenging market conditions will continue.

It adds: "Nevertheless, we remain encouraged by the focussed way in which the ECS and oil and gas businesses are responding to cost management initiatives.

"We expect the strong performance by the industrial, medical and other non-oil businesses within AEP to continue for the remainder of the year and we anticipate that, for AEP as a whole, the outcome for the year will be in line with previous management expectations.

"However the recent developments in ECS's businesses will result in full year Group earnings, after recognising a lower tax rate, being slightly below previous management expectations.

"Cash exceptional costs in the current financial year arising from our programme to restructure and refocus our business are expected to remain in line with previous guidance at below £10m."

Jefferies International reiterates buy on Fenner, target cut from 235p to 220p.

Time to dust off the slide rule here?

220 would be nice.

I have a very small quantity I bought at 195 and it hasn't been my best trade.

Yes, I have been tempted, but looking at the 10 year chart and bearing in mind that summer trading is usually very thin, I think there might be a bit more downside. However, on my watchlist.

StockMarketWire.com
Fenner expects group revenue and underlying profit for the year ended 31 August to be in line with forecasts at the time of the trading update on 22 July.

Net debt at 31 August was approximately £140 million, principally reflecting a better than anticipated outcome in respect of working capital.

The group expects to release its results for the full year on 11 November 2015.

Investec Sell 170.50 155.00 140.00 Reiterates

Liberum Capital Hold 170.50 - 200.00 Reiterates

finnCap Hold 170.50 175.00 175.00 Reiterates

Big volume day today which may suggest the worst is over.

RWC European Focus Fund (1), RWC Specialist UK Focus Fund (2) From above 3% to above 4%

Annual revenues fall 9% at Fenner

StockMarketWire.com

Fenner, a leader in reinforced polymer technology, has announced that Group revenue decreased by 9% to £666.7m in the year to August 31 2015 (2014: £729.4m).

Underlying operating profit decreased by 29% to £56.4m (2014: £79.5m).

The company says that throughout the year, there was stringent management of the cost base and several cost restructuring initiatives were completed.

Exceptional items amounted to a charge of £34.4m (2014: £19.7m). This comprised impairment costs relating to goodwill and intangible assets acquired of £24.5m and restructuring costs of £9.9m.

Overall this led to a loss before tax of £5.3m, compared to a profit of £29.2m in the previous year. Nicholas Hobson, chief executive officer, commented: "In the financial year to 31 August 2015, the Group has faced difficult trading conditions in some of its key markets. We have responded by rigorous control of costs and the close management of cash and working capital, whilst still maintaining our ability to resume growth when market conditions allow.

"Trading in the majority of the Group remains in line with management expectations. However, in the light of the recent further deterioration in the US coal industry, the Board envisages that the Group is likely to achieve an outcome for the current financial year which is moderately below its previous expectations."

Investec comment:
"Fenner has faced deteriorating markets for the last two years and the momentum is still downwards. The FY15 results were close enough to much-reduced expectations, but the outlook still requires a ‘moderate’ downward adjustment to guidance. We expect that FY16 consensus will be reduced by c.10% and we still see risk to the dividend (maintained for now and yielding almost 8%). On the expectation of lower estimates and given a PE-based valuation (currently under review), we reiterate our Sell recommendation.
Trading. Cost control in both operations and selective investment in AEP were the main themes of FY15, with market conditions providing very little cheer. Revenue declined by 9% (14% in ECS) and operating profits were down by 29%, in spite of management’s best efforts. The result for the year was close enough to our expectations, although these have been reduced 15 times in the last two years. However, conditions continue to deteriorate in the US coal industry and Fenner is guiding lower for FY16 as a result. Its ‘moderate’ change is unquantified, but we expect c.10%, and restructuring initiatives are to be announced soon.
Outlook. Fenner has taken a further £24.5m impairment charge (the same as in the prior year), which will have been based on expected future cash flows. In spite of the anticipated lower capex outflows (following completion of projects in AEP), we do not believe that earnings or cash flow will fully justify the current level of dividend distribution and we therefore maintain lower dividend estimates, notwithstanding the decision to pay 12.00p in respect of FY15.
Stance. Until we see end-market stability, it will be difficult to be confident in estimates for Fenner, and therefore to believe a valuation of the shares based on earnings. Clearly, we have not yet reached that point, so we maintain a Sell recommendation, with our detailed estimates and target price placed under review."

Dividend yield of 8.5% with two thirds of it announced in today's RNS so secure

Yes, but the sp is still likely to decline between now and the divi date and when it goes ex-divi it will presumably adjust downwards to compensate. Lots of companies are lowering their forecasts this week and FENR is no exception. Sadly I can't see any upside at the moment.

StockMarketWire.com
Fenner is restructuring its conveyor belt business in North America and axing more than 20% of jobs in its ECS Americas' operation.

Fenner says the the outlook for the majority of the group remains in line with previous expectations.

Fenner says that in response to the slowdown in the coal industry, ECS Americas has, over recent years, been increasing its focus on industrial markets whilst continuously reducing costs; in the financial year ended 31 August 2015, the annualised cost base of the business (excluding raw material savings) was reduced by GBP9m (10 per cent), with headcount being reduced by 11%.

The restructuring announced today represents a significant step-change in the refocusing of the business with specific new product development, improved customer service and enhanced manufacturing efficiencies.

The principal elements of the programme are:

- Added focus on industrial belt markets with improvements in customer service levels and manufacturing efficiency, coupled with industry-specific new product development

- A change of focus within the coal sector towards those customers who are able to withstand the challenges presented in their markets

- The closure of the majority of the belt manufacturing facility at Port Clinton, Ohio (one of the two such facilities operated by ECS in North America)

- Significant additional savings in support functions, overheads and administration

- Specific measures to address underperforming non-belt manufacturing activities

In addition, ECS is undertaking a downsizing of its South American service business to reflect changing conditions in the copper mining industry.

It is envisaged that these measures will result in a reduction of over 20% of ECS Americas' headcount which, at 31 December 2015, stood at just over 800. The majority of the retrenchments are expected to be completed by the end of January.

Good div coming up but am afraid when sp drops it will take a long time to recover if at all.

I think it will recover Bb, but might take a couple of years. When the mining sector starts to pick up, might be worth buying a few more.

Ex-divi thurs 28th Jan (8p).

8p. I guess it's all in the price - we shall see