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

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

StockMarketWire.com
Fenner confirms that its trading performance in the first half of the financial year has remained in line with the expectations included in the AGM trading update issued on 13 January, notwithstanding that end markets continue to be challenging, most notably oil & gas where the North American rig count has reduced further.

Net debt at 29 February was approximately GBP156m (28 February 2015: GBP177m at constant exchange rates).

The group expects to release its Half Yearly Report on 27 April 2016.

StockMarketWire.com
Fenner expects to achieve an overall outcome for the financial year ending 31 August in line with previous forecasts, save for the small currency related increase in earnings due to the depreciation of sterling.

It says trading results for the third quarter have reflected further improvements in line with its plans.

This performance is against the backdrop of its principal markets having shown no recovery and, in some cases, having deteriorated further. In response to these conditions, the group has succeeded in achieving further benefits from operational efficiencies and market share gains.

An update says: "AEP's medical businesses have continued to perform well and the Secant relocation programme is now entering the testing and certification phase. Although the industrial businesses are seeing some fragility in their wider markets, new product initiatives are offsetting these effects.

"Whilst the recent small increase in the US rig count, combined with market share gains, is expected to benefit our oil/gas businesses, given lead times, the effect of this is most likely to be felt in the new financial year.

"In the Northern Hemisphere, ECS's industrial businesses have remained stable whilst the US coal industry continues to be challenging. The refocussing of our North American business remains on track.

"In Australia, ECS's operational improvements have mitigated on-going pricing pressures from customers in the mining industry.

"Cash flow during the period has reflected normal seasonality and has remained within the range of the Group's expectations. However, due to the recent significant deterioration in the value of sterling against the US dollar, the Group's net debt at the year-end is likely to be above previous expectations, entirely due to currency translation.

"The depreciation of sterling will also benefit the translation of the Group's overseas earnings albeit that, given the timing, the impact in the current financial year will be marginal. In any event, the underlying net debt to EBITDA ratio, as measured by the Group's lenders using constant currencies, will not be significantly impacted."

Peel Hunt today reaffirms its buy investment rating on Fenner PLC (LON:FENR) and raised its price target to 190p (from 180p).

StockMarketWire.com
Fenner's revenues fell to £572.5m in the year to the end of August from £666.7m and underlying operating profits of £37.1m were down from £56.4m.

The group posts a pre-tax loss of £30.3m - up from £5.3m - but says it has continued to make solid progress in challenging markets and there was an improved performance in the second half by both AEP and ECS as management actions took effect.

It says the current year is anticipated to be modestly ahead of previous expectations in addition to currency benefit.

Chief executive Mark Abrahams said: "The Group's results were ahead of our expectations at the time of the Annual General Meeting in January 2016, assisted by currency. Management actions have started to outweigh market pressures.

"The Group has made important progress in repositioning those businesses which have been most affected by market conditions. We achieved another strong performance in terms of generating cash and controlling costs.

"Taken as a whole, the Group has commenced the new financial year with a substantially reduced cost base and with several of the leading indicators for the Group's businesses showing a more positive trend.

"As a consequence, we now anticipate that the outcome for the current year will be modestly ahead of our previous expectations. In addition, the Group is experiencing a tailwind from the translation of overseas earnings into sterling, with the year-on-year impact on underlying operating profit from currency movements estimated to be £4m based on exchange rates prevailing during the early part of the new financial year."

StockMarketWire.com
Fenner's trading in the first quarter has been satisfactory and reflects the progress it has been making in all its businesses, an update ahead of its annual general meeting today says.

Looking ahead it says: "Whilst market conditions remain similar to those reflected in our November statement, we are performing well and gaining traction from market share gains and from our refocusing of the businesses. As a consequence, the board envisages that the group's results for the current financial year will be comfortably above previous expectations."

Peel Hunt not today:
"AEP is seeing an improving trend in order intake and customer enquiries in Oil & Gas, reflecting its strengthening market position and a further rise in the US rig count. The Medical businesses are performing well and in line with expectations. ECS – some increase in order intake in North America, from very low levels.
Outlook – whilst market conditions remain similar to November, the group is enjoying market share gains. As a consequence, the Board envisages that the Group's results for the current financial year will be comfortably above previous expectations.
Forecasts: We expect to increase our August 2017 PBT by c10% to £34m (12.8p). The group is clearly now on an upward trajectory and we anticipate more material upgrades for FY2018E as the key end markets continue to recover, enhanced by further market share gains. On our indicative forecasts, the shares are trading on an August 2017 PER of 18.5x, falling to 15x August 2018 & 1.3% yield. We are increasing our target price to 300p and upgrade our recommendation to Buy."

Peel Hunt today reaffirms its buy investment rating on Fenner PLC (LON:FENR) and raised its price target to 330p (from 300p)

Fenner PLC announces that its Advanced Sealing Technologies group of businesses has completed the final part of its restructuring to reposition its CDI European operations, it having completed the disposal of its Norwegian business on Monday, 13 February 2017. This sale enables CDI to centralise the European business back into its principal operation in Houston, Texas which is where CDI's main customer base is located. CDI has retained its operation in Singapore, which is also a key market for its products.

The restructuring will enable CDI to continue to concentrate on building market share, strengthening its market position and building on its customer service capabilities while also enhancing its product innovation and new product offering in what is a competitive environment. CDI will be able to operate on a leaner more efficient and cost effective basis as a result of this restructuring.

CDI designs and manufactures custom seals for upstream oil and gas applications and is the Group's largest oil & gas related business.

The gross assets disposed with this transaction equate to less than 1% of Advanced Sealing Technologies' gross assets.

Peel Hunt today reaffirms its buy investment rating on Fenner PLC (LON:FENR) and raised its price target to 360p (from 330p).

StockMarketWire.com
Fenner's underlying pre-tax profits more than doubled to £16,5m in the six months to the end of February - up from £8.1m last time.

Revenues rose to £307.4m from £276.8m and the group made a pre-tax profit of £13.8m against a loss of £23.1m a year ago.

The group said revenue was assisted by market share gains and exchange rates and underlying operating profits rose by 60% £24.0m - 27% up at constant currencies.

Chief executive Mark Abrahams said: "It is pleasing that the restructuring of the group has created a platform from which we are now growing and making steady market share gains. We look forward to maintaining this momentum."

Citigroup today reaffirms its buy investment rating on Fenner PLC (LON:FENR) and raised its price target to 380p (from 348p).

JP Morgan Cazenove today reaffirms its neutral investment rating on Fenner PLC (LON:FENR) and raised its price target to 275p (from 255p).

Peel Hunt today (24/04/17) reaffirms its buy investment rating on Fenner PLC (LON:FENR) and raised its price target to 380p (from 360p).

finnCap today (25/04/17) reaffirms its buy investment rating on Fenner PLC (LON:FENR) and raised its price target to 385p (from 335p).