LONDON (Alliance News) - Fenner PLC Wednesday said it swung to a pretax loss in the first half of its financial year as its business supplying conveyors to the mining and power generation markets continued to struggle, although the company maintained its dividend as it focused on cutting costs and carefully managing its cashflow.
Fenner has two businesses, one that provides advanced polymer materials for engineering projects in fields as diverse as oil and gas, medical, construction, transportation, automation and general industry, and the engineered conveyor business that is currently struggling due to a contraction in the mining industry that's being caused by falling prices for commodities like iron ore.
It reported a pretax loss of GBP5.1 million for the six months to February 28, compared with a profit of GBP17.6 million a year earlier, as revenue declined to GBP347.6 million from GBP359.8 million, and it booked GBP5.0 million in restructuring costs and a GBP2.2 million increase in goodwill impairments.
Panmure Gordon had Tuesday called on the company to cut its dividend to a "sustainable" level, saying it was taking risks with its balance sheet by maintaining the payout when its trading conditions were continuing to deteriorate.
However, Fenner ignored that advice Wednesday, maintaining its interim dividend at 4.0 pence, as net cash from operating activities increased to GBP20.8 million from GBP7.5 million a year earlier. It said its emphasis on cost control and cashflow had led to a GBP9 million annualised decline in overheads as well as improved management of working capital.
"In response to the trading conditions being faced, cash overheads across the group have been reduced. The group will continue to closely manage all aspects of its costs and cash flow," Chief Executive Nicholas Hobson said in a statement. "Taking into account the management actions we are taking in response to the trading conditions, the board's expectations for the outcome for the year remain substantially unchanged overall".
Still, its net debt at the end of the half stood at GBP159.2 million, up from GBP134.7 million a year earlier, meaning its net debt to earnings before interest, tax, depreciation and amortisation rose to 1.7 times, from 1.1 times.
Revenue in the conveyor unit fell to GBP211.9 million, from GBP233.4 million a year earlier, partly offset by an increase in revenue in the polymers unit to GBP135.8 million from GBP126.4 million. Underlying operating profit and margins also rose in the polymers unit.
The polymer unit's industrial, medical and other non-oil speciality polymer businesses, which account for about 70% of the division's revenue, are expected to continue to perform well, helped in the second half of this year by the company's acquisition of Charter Medical, CEO Hobson said.
"The remainder of AEP is seeing an impact from lower levels of activity in the oil & gas industry as a result of sharply reduced oil and gas prices. Order intake started to decline in February; the timing and extent of the decline are within the range of our planning assumptions," he added.
Still, Fenner shares were up 2.8% at 208.00 pence early Wednesday.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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