Fenner PLC Regulatory News (FENR)

14 January 2015

Fenner PLC

("Fenner" or "the Group")

AGM Trading Update

Overview

Trading in the period since 11th November 2014 has been characterised by a good performance by the AEP Division and an increasingly challenging environment in the ECS Division. In response to these conditions and the anticipated impact of the fall in oil prices on demand for oil and gas products within AEP, we have further increased our focus on margin control across the Group. Whilst seeking to ensure that the Group preserves its flexibility to respond to any recovery in its markets, cost reduction programmes have been implemented or accelerated and selected capital projects have been deferred across the Group.

AEP

Trading in the AEP division overall has been in line with expectations during the period, continuing the trend of improving performance reported in the second half of last year. The recent, precipitous fall in oil prices is expected to affect demand levels in those AEP businesses directly involved in the oil and gas industry from early in calendar year 2015. The non-oil, speciality polymer businesses in AEP, which represent approximately two-thirds of divisional turnover, are expected to continue to perform in line with expectations. Notwithstanding satisfactory current activity levels in the oil and gas related businesses, cost bases are being reduced in advance of the expected reduction in demand levels arising from oil prices, which are now widely expected to remain at or around current levels. These pre-emptive cost reductions are being carefully targeted to ensure that we retain our ability to continue to develop the business effectively.

ECS

Against a continuing backdrop of global mineral oversupply and correspondingly low commodity prices, any recovery in our ECS markets continues to be deferred. Demand levels in the Americas are stable, albeit at low levels, anticipated growth in EMEA has not been achieved and margins continue to decline in Australia as a result of customer-driven price pressures. In response to these circumstances, additional cost reductions are now being implemented in all territories to further protect trading margins. With only minimal near-term capital investment required in our ECS facilities, which have been well-invested through the programmes of the past decade, cash conversion is expected to be strong.

Outlook

Our balance sheet is strong, with borrowings remaining in line with expectations. We will complete the major project to consolidate our medical manufacturing facilities in the USA, which is vital to allow continuing strategic growth. Other capital programmes for 2015 are being curtailed to include only essential or near-term payback projects. In addition, future major projects have been deferred pending improved market conditions, which is currently expected to result in significantly lower capital expenditure in 2016 than previously indicated.

In addition to ongoing programmes to aggressively manage variable costs, these new management actions will reduce the run rate of cash overhead expenditure across the group by an incremental £9m on an annualised basis.

Recognising the anticipated effect of lower oil prices and the challenging trading conditions in ECS, offset by cost reductions across the Group, we now anticipate 2015 full year earnings to be slightly below our previous range of expectations. In addition, an exceptional charge will arise from implementation of the cost savings initiated during this year. Our actions leave the group well positioned to take advantage of recovery when it occurs.

Analyst and Investor conference call

A conference call for analysts and investors will be held at 8:30 a.m. (UK time) today to discuss this statement. Participants can join the call on + 44 (0)20 3059 8125. A recording of this conference call will be available for 7 days on + 44 (0)121 260 4861 using the access code 0090801 followed by #.

Forward-looking statements

Certain statements contained in this statement 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.

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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:

Engineered Conveyor Solutions: the ECS division, trading under the Fenner Dunlop, Fenner and Dunlop brand names, is a recognised leader in the global conveying market. The division offers a unique, comprehensive suite of products and services, which serve the conveying needs of mining, power generation and bulk handling markets.

Advanced Engineered Products: the AEP division uses advanced polymeric materials and technical expertise to provide high value-added solutions to customers' most challenging engineering problems. Customers are spread across a variety of end-user segments, including oil & gas and medical which account for some 40 per cent of divisional revenue, together with construction, transportation, automation and general industrial. AEP's trading names are recognised globally and include CDI Energy Products, EGC Critical Components, Hallite, AIP Precision Machining, Fenner Precision, Fenner Drives, James Dawson, Mandals, Secant Medical and Xeridiem.