Fenner boosted by recovery in mining sector

The Hessle, East Yorkshire-based company reported an expected 23 per cent fall in pre-tax profits to £87m for the year to November 13 following difficult trading conditions during the group’s first half.

The group expects its key Engineered Conveyor Solutions unit to benefit from the mining industry’s cautious return to more normal maintenance and replacement practices.

Shares in the company rose 10.5 per cent, a rise of 42.7p to 450p, making the stock one of the top gainers on the London Stock Exchange.

Fenner’s chief executive Nicholas Hobson said: “Our performance throughout the year reflects the strength and resilience of the businesses we have built, with advanced engineered products achieving record annual revenues and profit.

“The first half of the financial year saw a robust response to difficult trading conditions in certain key markets.

“Our financial performance recovered strongly in the second half of the year as conditions showed some signs of improvement.”

The Advanced Engineered Products division makes goods ranging from high-pressure seals to silicone catheters.

Mr Hobson said that Fenner is well positioned as it enters its 2014 financial year, with the benefit of the investments made over recent years, a strong financial position and a mixed but generally improving global economic environment.

“Overall, we expect that the current financial year will see a return to growth,” said Mr Hobson.

Analyst Ben Bourne, at Liberum Capital, said: “By year end, the Engineered Conveyor Solutions division’s trading conditions in the United States had shown some signs of recovery. In Australia, conditions are stabilising as foreign exchange is helping demand and offsetting the translational impact and customers are now looking to maximise efficiency.

“The statement re-iterates an expectation of a return to growth in the current year.

“This assumes the benefit of investments made in both divisions, a strong financial position and a mixed but generally improving global economic environment.”

Mr Bourne raised his price target on the stock to 515p from 410p.

Fenner said revenue fell seven per cent to £549.8m in the year to August 31.

The company said weak trade and soft manufacturing activity in China during 2013 created an uncertainty over commodity demand.

However, acquisitions by the company mitigated the effect of slower business.

The company said demand in its Engineered Conveyor Solutions unit, which generates 70 per cent of total revenue, was hit by a slowdown in mining activity in its largest markets such as the US and Australia.

Fenner raised its final dividend to 7.5p per share from 7p a year earlier.

Analyst David Buxton, at FinnCap, said: “The outlook statement is generally more upbeat than the market would be expecting in the wake of comments by Weir, for example.

“The shares have priced in a lacklustre performance and, as they now trade on a 2015 P/E of 11.5 times, there is some scope for a period of decent perform- ance.”

Analyst Andy Douglas at Jefferies said: “The outlook statement accompanying these results is robust, in our view.

“Underlying markets remain challenging in Engineered Conveyor Solutions albeit with some improving trends, but there is a growing optimism towards the outlook for the Advanced Engineered Products division.

“Management continues to expect year-on-year growth in 2014. Acquisitions remain a key part of the strategy and there will continue to be investment across the group in 2014.”

Fenner’s Advanced Engineered Products division has bought three businesses recently: American Industrial Plastics, Norwegian Seals and Man- dals.

LSE member since 1937

The Fenner Group was founded in 1861 by Joseph Henry Fenner in Hull.

Its early products included leather and encompassed belting, lacing and fire hoses.

The flat leather belting for use in power transmission was gaining momentum in the UK at this time, having become common in the US.

By the 1890s the company was exporting its products widely across Europe and into India and the Far East.

The wartime loss of its principal markets forced the company to focus on the domestic opportunities.

In 1937, Fenner became a public company with share capital of £250,000, and has been quoted on the London Stock Exchange ever since.