Strong demand from the mining and energy sectors boosted Fenner’s pre-tax profits by 57 per cent in the first half, and the industrial conveyor belt maker is “confident” of its prospects in the coming six months.
Nicholas Hobson, chief executive, said that the growth the company was enjoying was in part a reward for having continued to invest during the 2008-09 recession.
“We kept our nerve and didn’t lose faith in the underlying strength of our business, and over the subsequent three years, we have seen the benefits coming through in terms of our market share and our margins”, he said.
Fenner continued to invest heavily in the first half to support growth, with capital expenditure running at 1.5 times depreciation. Mr Hobson said he expected the figure to come down slightly in the second half, but that it would rise again over the next two years.
In the six months to February 29, revenues rose to £412m, up 24 per cent on the same period a year earlier, helped by robust activity in the coal mining sector in the Americas, and growing demand in Australia for Fenner’s steel cord products.
Pre-tax profits rose faster still, jumping from £26.6m to £41.7m, thanks mainly to favourable comparators in the first half of 2011, when rising input prices squeezed margins.
Scott Cagehin, an analyst at Numis, said that the results were “very positive”.
“They were underpinned by strong mining production, and the development of their service business has helped their margins. In addition to that, the operational efficiencies they have made over the past few years are starting to bear fruit,” he said, adding that he was increasing his full-year earnings forecasts by 3 per cent as a consequence.
Mr Hobson said that he expected Fenner’s strong run to continue, since the company’s fortunes are tied more to the overall level of minerals extraction than to commodity price fluctuations.
“As long as we continue to see industrialisation and economic growth in South East Asia, there will be strong demand for raw materials, and therefore our products,” he said.
Fenner declared an interim dividend of 3.5p per share, up 32 per cent from the payout last year, and payable from diluted earnings per share of 14.7p.
Mr Hobson said that the dividend increase was a reflection of Fenner’s confidence in its prospects and that the board intended to maintain a progressive dividend policy in future.
Shares in the company closed down 0.9 per cent at 442.6p.