Fenner raises £36m to fund acquisitions

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Fenner, the Yorkshire-based industrial conveyor belt maker, has raised £36m in a share placing to help fund a number of planned bolt-on acquisitions.

The company saw its shares fall 15.8p to 210p as it launched the dilutive placing of 17m new shares to institutional investors, representing just under 10 per cent of its share capital.

The fundraising follows a strong run in Fenner’s share price over the past year, which has multiplied by as much seven times from a low of 32¾p in March 2009. Its market capitalisation had recovered to stand at about £400m before the announcement.

Mark Abrahams, chief executive, conceded general jitters in the markets might not have helped sentiment or maximised revenues from the placing.

“It’s just one of those things. It may have been better if we had done it the day before yesterday, but such is life,” he said.

The placing coincided with the release of Fenner’s interim results, which were buoyed by a recovery in demand among its customer base.

Strong global demand for thermal coal underpinned a 40 per cent jump in operating profits to £16m at Fenner’s main conveyer belt division. Its fast-growing advanced engineering products business, which includes the supply of medical materials used in the insertion of cardiovascular stents and other keyhole surgery applications, also saw sales and profits rise in the second quarter.

Pre-tax profits, hit last time by exceptional restructuring charges, jumped from £600,000 to £12.1m in the six months to February 28 on revenue that slipped from £258m to £246m. Fenner raised its interim dividend from 2.2p to 2.4p, payable from earnings per share of 4.8p (0.2p). Net debt edged up from £165m to £169m over the half year.

● FT Comment

Equity placings designed to take advantage of growth opportunities need not in principle depress share prices, in spite of their dilutive affect on earnings per share. Indeed, brokers maintained adjusted earnings forecasts at about 15p on Wednesday in spite of the dilution, leaving Fenner trading on a forward p/e of 14 times. Nervous markets and knee-jerk reactions by traders who have grown suspicious of distressed placings and emergency rights issues took some of the shine off Fenner’s recovery story, however. Its shares run some medium-term risk of hitting a plateau – but Wednesday’s markdown was a tad overdone.

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