11 Jan 2018 07:00
11 January 2018 This announcement contains inside information
Fenner PLC
AGM Trading Update
In advance of its Annual General Meeting which is being held later today, Fenner PLC is providing an update on trading for the period from 1 September 2017 to 10 January 2018 and on the outlook for the remainder of its current financial year ending 31 August 2018 ("FY18").
The Group has had a robust start to its financial year as it has continued to transition from recovery to sustainable growth. All businesses are performing well, with generally increasing order intakes and further benefits from on-going efficiency enhancements.
AEP
Within Advanced Sealing Technologies ("AST"), the oil & gas businesses are performing significantly ahead of the same period last year, with notable gains in market shares and generally improved market conditions. AST is making increased investment in product development to maintain and enhance its strong market positions as the technical specifications for sealing solutions, particularly in hydraulic fracturing, become more demanding. Hallite continues to make good progress.
Solesis Medical is achieving results which reflect the continuing growth anticipated and which are significantly ahead of the same period last year; a particular feature of its performance continues to be the contribution of products from the development pipeline which are entering the commercialisation phase.
Precision Polymers is generating revenue growth in excess of market indicators, confirming further increases in its market penetration, with both the US and UK businesses in line with expectations. Revolution Drives, which was acquired in August 2017, continues to perform well.
ECS
In the Northern Hemisphere, ECS is seeing increasing order intake across its North American business; its performance is also benefitting from further operating efficiencies. The newly launched Patriot X range of industrial belts is being well received. Within the European business, there are some early signs that project work may be returning, although this is likely to benefit the second half of the year.
In the Southern Hemisphere, ECS Australia has seen notable increases in its order book over the past two months as mines' purchasing of conveyor belt reverts towards levels commensurate with current levels of mineral extraction and the business gains additional market share. ECS's service businesses continue to perform well. In South Africa, the supply agreement signed in July 2017 has been approved by the regulatory authorities and completion is expected next month. In China, the restructuring of the mining industry continues, with longer term contract arrangements between ECS and its major customers providing some prospect of a recovery in order intake.
Financial
The Group's net borrowings remain in line with previous expectations, with some modest investment in working capital in line with the pick-up in order intake across the Group. Given its balance sheet strength, the Group is planning to utilise this to advance selected organic investment opportunities.
The higher value of sterling in the year to date against foreign currencies would, if it remains broadly unchanged for the remainder of Fenner's financial year, reduce underlying operating profit by about £3 million compared with the result reported for FY17; this is in line with previous guidance and arises purely on the translation of profits generated in overseas currencies into sterling.
Under US tax reforms enacted in December 2017, Fenner expects that its underlying tax rate from FY19 onwards will reduce by around 5 percentage points from previous guidance, with a corresponding uplift in earnings per share. The FY18 underlying tax rate is now expected to reduce to around 28% as the Group begins to benefit from the lower US rate; an exceptional non-cash write down of US deferred tax assets of approximately US$6 million is also anticipated in the first half of the year as a consequence of the lower rate.
Outlook
The Board envisages that, due to the recent increases in order intake in ECS, the consistent strength of AEP and the general strengthening of trading across the Group, Fenner will achieve an operating outcome for the current financial year which is above its previous expectations.
Looking beyond the current year, the Group's strengthening market positions, an increasing expectation of the returns from its on-going investment in product development, the reduced US tax rate and the depth of expertise across the Group's management team make the Board increasingly confident about the future progress of the Group.
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For further information please contact:
Fenner PLC
Mark Abrahams, Chief Executive Officer 01482 626500John Pratt, Group Finance Director
Weber Shandwick Financial
Nick Oborne 020 7067 0700
Notes to editors
Fenner PLC is a world leader in reinforced polymer technology, providing local engineered solutions for performance-critical applications. The Group operates through two divisions:
Advanced Engineered Products. AEP is a group of related growth businesses that use advanced polymeric materials and technical expertise to provide high value-added solutions to global business customers; its principal product areas are sealing systems; belts, hoses and elastomeric solutions; and medical.
Engineered Conveyor Solutions. ECS is an established leader in the supply of industry-leading heavyweight conveyor belting and related services to mining and industrial markets. ECS is a global business with particular strengths in Australia, Europe and North America.
Forward-looking statements
Certain statements contained in this trading update may constitute forward-looking statements. Such forward-looking statements involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of Fenner, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such statements. Such risks, uncertainties and other factors include, among others, exchange rates, the commodity markets, general economic conditions and the business environment.