Shares increase as Fenner sees the bright side with profitability on rise

The group, headquartered in Hessle, near Hull, told shareholders at its annual meeting yesterday it expects to make further gains in market share and improve margins.

Shares in the group lifted 32p to close at 386.7p.

"The business has seen a sharp increase in first quarter profitability compared to the slower trading period of the prior year," said Fenner, reporting on the four months' trading since the start of September.

"In the second quarter, we expect further progress through this seasonally quieter period, benefiting from ongoing margin recovery and further gains in market share.

"Our order books give good visibility and we have increased confidence in our outlook."

The group has bounced back strongly from the recession, the pace of its advanced engineered products (AEP) division slackened as customers chose to work through stock inventories instead of placing new orders.

Fenner said margins at AEP, which makes products ranging from drive belts to hydraulic seals, have been sustained in recent months, 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 added it is 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.

"Strong cost benefits driven by operational efficiencies and its capital investment programme should drive further margin expansion," said Numis Securities analyst Scott Cagehin. "We are upgrading our forecasts by eight per cent and see potential for upgrade momentum during the year." For 2011, the broker expects pre-tax profits of 66.3m and earnings per share of 23.5p.