It Keeps Things Moving

11/02/2010 12:14 pm EST


John Snowden

Contributor, The IRS Report

The conveyor specialist’s own belt is fully tightened, swelling its bottom line, writes John Snowden in The IRS Report.

Fenner (London: FENR) [is an] industrial conveyer belt maker whose belts are usually associated with the mining industry. As a leader in reinforced polymer technology, the company is one of the world's leading producers of heavyweight belting using PVC fabric and steel-reinforced rubber.

Manufactured and designed products include detachable V-belts, thermoplastic belts, precision-timing belts, flat belts, image-transfer rollers, high-temperature hoses, technical fabrics and textile structures, keyless bushings, and belt/chain tensioners.

Fenner Advanced Sealing Technologies is synonymous with high-quality, high-performance sealing solutions, and consequently enjoys an enviable reputation within the world's fluid power and energy industries.

By concentrating on product innovation and service, the company has become a world leader in many niches. As a result, Fenner has had a pretty good recession so far.

Having seen improved momentum during the second quarter of the current trading year, the company came to the market in April with a placing of 17.3 million new ordinary shares at 210 pence per share, to raise a little over £36 million. In July, the company acquired MRI Manufacturing and Research, a privately owned corporation based in Tucson, Ariz..

[MRI] develops and makes silicone-based devices for medical-device companies. Financial details were not released, but Fenner did acquire gross assets of $2.6 million. The acquisition will also help Fenner expand its expertise in elastomer engineering and increase its presence in the medical industry.

At the interim stage, the company had returned to growth and turned in a strong financial performance, with underlying profit before tax increasing by 35% to £16.3 million against £12.1 million for the comparable period in 2009. Earnings per share increased 28% to 6.4 pence, and net cash generated from operating activities improved by £23 million to £24.4 million.

The group has benefited from cost-reduction activities over the last year, and the board felt confident enough to increase the interim dividend by 9% to 2.4 pence per share. The company, whose [fiscal year ends] August 31st, is due to report year-end figures during the first half of November.

After the third-quarter figures, chief executive Mark Abrahams anticipated full-year figures at the top end of expectations, as operating profit for the third quarter of the [fiscal] year was well ahead of the comparable period last year. This would suggest that the 4.4 pence final dividend paid last year could be increased, in which case the rerating of the shares is likely to continue.

A couple of the directors bought shares in the April placing, but the company is also well supported by the 11 brokerage firms which follow [the stock]. In fact, all of them have posted Buy ratings, which must be positive for the approaching results.

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