Fenner gets back into the acquisition market

The conveyor belting company, based in Hessle near Hull, was forced to halt acquisitions when the recession hit, but said it now has five deals in its sights.

The group also said growth is gathering pace, reporting a 35 per cent leap in first half underlying pre-tax profits.

"It's about momentum now – growth is back," said chief executive Mark Abrahams. "We are growing quite strongly and we're on the front foot.

"We said we would not have any rescue rights issue – this is about keeping the group moving forward."

Yesterday's placing of 17.3m new shares with institutional investors – equivalent to 9.9 per cent of Fenner's share capital – dragged the group's shares down seven per cent, to close at 210p.

Analysts said the share placing would likely dilute any earnings upgrades, but welcomed the profits surge to 16.3m in the six months to the end of February, from 12.1m a year earlier.

Revenues were down four per cent to 246.3m, which the company said was due to a strong first quarter a year ago.

Fenner, whose products span industries ranging from mining to forestry, said three of the acquisitions are more advanced in terms of due diligence. It plans to extend its reach in medical and conveyor belt servicing.

Fenner's medical business is focused on supplying medical device makers with textiles and polymers, primarily in the cardiovascular and orthopaedic sectors. Its products are used in minimally invasive surgery.

Mr Abrahams said he aims to acquire companies which can broaden Fenner's skills and technology, giving the group greater access to medical companies.

In conveyor belt servicing Mr Abrahams said Fenner will bolster its geographic reach with bolt-ons.

The shares were placed at 210p each, a seven per cent discount to Tuesday's 225.8p closing price and raising gross proceeds of 36.3m.

"It's a way of giving us the ability to make these acquisitions and continue to make acquisitions without the balance sheet being a constraint to us," said Mr Abrahams.

"The recession got in the way for the past 12 months. These results are us proving that we can survive and are resilient."

Fenner's global presence spans North America, Europe, South Africa, China, India and Australia.

Exposure to the growing economies of India and China, plus its significant presence in Australia, helped its conveyor belting arm deliver a 40 per cent increase in profits.

While its advanced engineered products arm saw profits dip six per cent, the business improved "significantly" as the period progressed.

"We are fairly strong and fairly robust and fairly optimistic and moving forward in just about all of our businesses," said Mr Abrahams. "Many of our businesses are taking on new people. I feel as positive about the business as I have in a long time."

He said the group, which employs about 4,000 staff globally, is taking on an extra 40 to 50 a month. Fenner said it will increase its dividend by nine per cent to 2.4p per share.

The group ended February with net debt of 169.2m, and Mr Abrahams said cash generation of 24.4m, coupled with the share issue, means the group has "lots and lots" of headroom on its debt facilities.

He added the placing will bring net debt below two times EBITDA (underlying earnings), a key ratio of balance sheet strength.

That compares to a banking covenant stipulating Fenner's net debt must remain below 3.5 times underlying earnings.