Fenner engineers big rise in profits to lift economic gloom

Both the group’s conveyor and advanced engineered products divisions have seen volume and margin improvements in the three months to the end of February.

The firm, based in Hessle, near Hull, said it has seen a significant increase in operating profits compared with the same period last year when it was still suffering from the impact of the economic downturn.

Fenner’s newly appointed chief executive, Nick Hobson, said: “First-half trading has been characterised by both volume and margin improvements across our principal business units, with increasing benefits from our capital investment programmes and improved trading conditions as we ended our second quarter.”

Fenner’s shares closed up three per cent last night, a rise of 11p to 352p.

Analyst David Buxton, at FinnCap, said: “Trading continues to strengthen, and we see some upside to our expectations, with a strong increase in activity and improved margins in both the conveyor belting and advanced engineered products divisions.

“The shares look decent value, especially after recent underperformance, and we retain our ‘buy’ rating,” he added.

The group said the positive operating cash-flow performance has resulted in net borrowings finishing in line with the group’s expectations at an estimated £119m, down from £169.2m the previous year.

Fenner has said it expects to make further gains in market share and improve margins this year.

The group has bounced back strongly from the recession.

Margins at its advanced engineered products division, which makes products ranging from drive belts to hydraulic seals, have been sustained, and activity levels are ahead of those it saw before the downturn.

Its conveyor-belting arm, which was largely unaffected by the recession, is benefiting from increased efficiency and more work going through its factories, helped by recent capital investment and strong order books.

Fenner has been encouraged by early progress from its recent expansion into Australia.

In November, it bought Australian conveyor-belt companies Belle Banne and Leading Edge Conveyor Solutions, for £40.12m.

Yesterday, Mr Hobson said the Australian expansion has proceeded successfully since the acquisition was announced.

“The early indications of a rewarding partnership are encouraging,” he added.

Fenner’s chief executive, Mark Abrahams, stepped down to non-executive chairman earlier this month, replacing Colin Cooke, who has retired after 17 years.

Fenner’s new chief executive Nick Hobson was previously managing director of the group’s advanced engineered products arm.

Mr Cooke, who is 70, said Mr Hobson has the “knowledge, experience and skills to take the group to further success”.

Mr Hobson has been with the group for more than 20 years.

Mr Abrahams started with Fenner in 1990 as finance director, stepping up to chief executive four years later. He said the group consulted major shareholders and the investor body, the Association of British Insurers, on the boardroom changes.

“Fenner has created a very distinctive culture, ” said Mr Abrahams. “We have got huge momentum that has been built up, and it’s desperately important.

“Regrettably, there comes a time when people have to retire. Therefore, the issue for us as a board was what’s the best way to maintain that momentum and culture and things that make Fenner distinctive.

“We all agreed that this was the right way to take things forward and make sure that it’s safely transitioned into safe hands.”

Fenner grew underlying pre-tax profits by 49 per cent, to £46.3m, in the year to the end of August, lifting sales by 11 per cent, to £552.5m.

The group expects to report its interim results on April 27.

Medical division boosts group

Fenner has big ambitions for its medical arm, which specialises in products for minimally-invasive surgery.

Developed by Nick Hobson, the group’s recently appointed chief executive, it supplies medical device makers such as Smith & Nephew.

Fenner entered the medical market with the purchase of Secant Medical as part of its acquisition of Prodesco in 2008.

This supplies medical device makers with textiles and polymers, primarily in the cardio-vascular and orthopaedic sectors.

It also recently bought privately-owned MRI Medical, which makes silicone devices such as catheters for global medical manufacturers, for about £5.4m.