Recovery in the US market gives lift to Fenner

ENGINEERING group Fenner cheered the market yesterday with the news that revenues and profits are "well ahead" of last year.

The conveyor belt maker, based in Hessle near Hull, said third-quarter results have been helped by a recovery in US industrial markets.

Fenner said that trading across the whole group has continued to show the strong growth seen during the second quarter.

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The company, which makes belts for the mining industry, said trading in its advanced engineered products business had exceeded expectations, helped by the restocking of supply chains.

The seals business has also benefited from good levels of demand from the oil and gas sector and improved order intake in the general hydraulic sector.

Chief executive Mark Abrahams said: "Despite the continuing wider economic uncertainty, our other businesses in the division, focused on niche areas of expertise, have made solid progress and we are seeing new opportunities in both established and new territories."

He added that the acquisition of MRI Manufacturing and Research earlier this month, for an undisclosed sum, will strengthen its presence in the medical device market.

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Fenner is keen to expand its medical business to tap into the rapidly-growing minimally invasive surgery market.

The group raised 36.3m through the placing of 17,302,233 new ordinary shares earlier this year to fund acquisitions, and Mr Abrahams said the MRI deal used a "reasonable proportion" of this.

Fenner entered the medical market with the purchase of Secant Medical as part of Prodesco in 2008. This supplies medical device makers with textiles and polymers, primarily in the cardio-vascular and orthopaedic sectors.

"The two businesses fit very well together," said Mr Abrahams. The group has said future acquisitions will be in medical and conveyor belting.

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

The group said the conveyor belting division, which was largely unaffected by the economic downturn, has continued to perform well.

The company, which generates 75 per cent of its revenues from outside the UK and Continental Europe, said it is geographically well-diversified.

"Order flows continue to be encouraging and with trading comfortably meeting our expectations, we are confident in both the short and longer term outlook for the business," said Mr Abrahams

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Following the update Fenner's shares rose 4.4 per cent last night, a rise of 9.5p to 225.3p.

Analyst Michael O'Brien at Collins Stewart said: "There is significant operational gearing opportunity in the advanced engineered products division, and this is now starting to come to the fore, due to a combination of both market-share growth and restocking division wide."

Mr O'Brien raised his price target on the stock to 237p from 231p and maintained a 'buy' rating on the stock.

Fenner was forced to halt acquisitions when the recession hit a few years ago, but it now has five deals in its sights.

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It said three of the five acquisitions are more advanced in terms of due diligence.

The group said that operating cash flow continues to be strong and it has benefited from healthy trading and the completion of major internal capital projects last year.

Aim to grow medical division

Fenner's latest acquisition MRI, which stands for Manufacturing Research Incorporated, has annual revenues of around $10m (6.6m) and is "growing profitability".

Founded by Robert Kelliher in 1986, it makes silicone devices such as catheters for global medical manufacturers, from concept all the way to sterile products.

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"People getting older and ill health amongst the aged actively links to the growth of this business, " said Fenner chief executive Mark Abrahams. "It's our aim to grow the medical division to be a substantial part of the group."

MRI designs and makes devices for urology, cardiology, haemodialysis, anaesthesiology, radiology, paediatrics and oncology.

MRI's products have few competitors and it has approval from the US Food and Drug Administration.

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