Fenner PLC FENR Final Results

  Fenner PLC (FENR) - Final Results

RNS Number : 4953Q
Fenner PLC
07 November 2012




7 November 2012

                                  Fenner PLC

                                      

                           2012 Preliminary Results



Fenner PLC, a world leader  in reinforced polymer technology, today  announces 
preliminary results for the year ended 31 August 2012.



Highlights



·Record financial performance

- Revenue up 16% to £830.6m

- Underlying operating profit^1 up 30% to £118.8m; operating profit up 30%
to £107.6m

- Underlying profit  before taxation^2  up 30% to  £103.9m; profit  before 
taxation up 27% to £88.6m

- Underlying earnings  per share^2  up 28%  to 36.1p;  basic earnings  per 
share up 23% to 30.3p

- Strong free cash flow of £63.0m (2011: £53.7m)

- ROCE increased to 24% (2011: 20%)



· Dividend per share increased by 31% to 10.5p per share, in  recognition 
of increased quality of earnings and confidence in the future



· Engineered  Conveyor Solutions  ("ECS") underlying  operating  profit^1 
increased by 38% to £84.4m on revenues up 16% to £593.4m



Positive trading conditions for  most of the year  driven by record levels  of 
coal and iron ore extraction;  some slowing of order  intake from the US  coal 
sector towards the end of the year but coal stockpiles have been reducing  for 
several months



· Advanced Engineered Products ("AEP") underlying operating profit^1  and 
revenues both increased by 14% to £43.6m and £237.2m respectively



Growth underpinned by strong demand from the oil and gas sector and investment
to broaden geographic coverage; some small pockets of destocking



·Strategic initiatives to  create a strong,  growing and resilient  Group 
progressed well, supported by organic and acquisitive investment



· Confident in further opportunities for long-term value creation



^1Underlying operating  profit is  before  amortisation of  intangible  assets 
acquired



^2 Underlying profit  before taxation  and underlying earnings  per share  are 
before amortisation of intangible assets acquired and notional interest



Mark Abrahams, Chairman, commented:



"The year just ended was one  of excellent growth, delivering record  results. 
Reflecting this performance, the improved quality of the Group's earnings  and 
our confidence in the future growth of the business, the Board is recommending
a 31% increase in the dividend for the year.



As we have highlighted, in the latter part of the year, ECS saw slower  demand 
from the US coal sector offset by stronger demand elsewhere. Order rates  from 
the US coal sector bottomed in May and have improved steadily since. While  we 
do not expect to benefit  fully from the positive  impact of this trend  until 
the second half, the divisional order book is satisfactory overall.  Commodity 
prices have recently reduced which, while not directly weakening activity  for 
ECS, may lead to some short-term pressure on margins.



The AEP operations  are trading  satisfactorily, albeit with  some pockets  of 
moderate destocking. Recent  acquisitions are expected  to support  continuing 
growth.



We remain  mindful of  the  current global  economic uncertainty.  Given  both 
anticipated end market  trends and the  very strong first  half last year,  we 
expect our performance to be more heavily  weighted to the second half of  the 
current year.



As a result of our  investment programme over recent  years, Fenner is a  much 
stronger and more resilient business serving a more diverse customer base. The
fundamentals of our core  markets underpin healthy,  long-term growth, and  we 
continue to  be  encouraged by  the  number of  identified  opportunities  for 
sustained value creation."



                                    -ends-





A video interview with  Nicholas Hobson, Chief  Executive Officer and  Richard 
Perry, Group Finance Director and a  copy of the analyst presentation will  be 
available from 12.00 noon on the Group's website www.fenner.com.





For further information please contact:



Fenner PLC
Richard Perry, Group Finance Director        today: 020 7067 0700

Nicholas Hobson, Chief Executive Officer thereafter: 01482 626501
Weber Shandwick Financial
Nick Oborne / Stephanie Badjonat                    020 7067 0700





Financial Highlights



                                           

                                       2012   2011
                                                      

Revenue                              £830.6m £718.3m + 16%
                                                      

Underlying operating profit 1       £118.8m  £91.4m + 30%
                                                      

Operating profit                     £107.6m  £82.5m + 30%
                                                      

Underlying profit before taxation 2 £103.9m  £80.2m + 30%
                                                      

Profit before taxation                £88.6m  £69.6m + 27%
                                                      

Underlying earnings per share 2,3     36.1p   28.1p + 28%
                                                      

Basic earnings per share               30.3p   24.6p + 23%
                                                      

Dividend per share                     10.5p    8.0p + 31%





Divisional Performance



                                                                      

                                           Advanced                   

                       Engineered Conveyor Engineered  Unallocated      

                            Solutions       Products    Corporate     Total

                                                                     
                            2012      2011  2012  2011  2012  2011  2012  2011

                              £m        £m    £m    £m    £m    £m    £m    £m
                                                                     

Revenue                    593.4     510.7 237.2 207.6     -     - 830.6 718.3

                                                                      
Underlying operating
profit 1                   84.4      61.1  43.6  38.2 (9.2) (7.9) 118.8  91.4
                                                                     

Operating margin           14.2%     12.0% 18.4% 18.4%           14.3% 12.7%





1 Underlying operating profit is before amortisation of intangible assets
acquired

2 Underlying profit before taxation and underlying earnings per share are
before amortisation of intangible assets acquired andnotional interest

3 Underlying earnings per share is based on the basic weighted average
number of shares in issue





Forward-looking statements

Certain  statements  contained  in  the  report,  in  particular  the  Outlook 
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. Such risks, uncertainties and  other 
factors include,  among  others,  growth in  the  commodity  markets,  general 
economic conditions and the business environment.











Chairman's Statement





In my first full year as Chairman of  Fenner, I am delighted to report on  the 
progress made in  the year. Both  divisions of the  Group have performed  well 
which has resulted in a record financial performance.



Financial highlights

Revenue increased by 16%  to £830.6m with  predominantly strong demand  levels 
from the energy  and mineral extraction  sectors. Underlying operating  profit 
reached a record level for the  Group, advancing by 30% to £118.8m.  Operating 
profit also increased by 30% to £107.6m.



Underlying earnings per share increased by 28% to 36.1p and basic earnings per
share increased by 23% to 30.3p.



Free cash flow generated amounted to £63.0m.  From this, we were able to  fund 
£34.3m for acquisitions and return £18.0m to shareholders in dividends  whilst 
still reducing debt. Our closing net debt was £97.7m (2011: £101.8m).



In recognition  of the  increased  quality of  the  Group's earnings  and  our 
confidence in the future, the Board  is recommending an increase in the  final 
dividend to 7.0p per share which gives a total dividend for the year of  10.5p 
per share (2011: 8.0p), representing a 31% increase.



Overview

We have remained focused on our long-term strategy and shorter-term goals  and 
have achieved significant progress in both areas.



In the Engineered Conveyor Solutions  ("ECS") division, we experienced  strong 
trading conditions for much of the year although construction markets remained
weak. Our southern hemisphere  and European operations performed  consistently 
well throughout the year. In the latter months, we experienced some slowing of
order intake from  the coal  sector in  our US operation  as a  result of  the 
re-alignment of customer output with consumption following the extremely  mild 
winter and  uneconomical pricing  of natural  gas albeit  coal stockpiles  are 
slowly returning  to more  normal levels  with a  recovery in  US natural  gas 
prices and increasing US coal export activity.



Our strategic initiatives have progressed well. Following recent  investments, 
global manufacturing  capabilities  were  leveraged to  meet  customer  demand 
patterns. In  December 2011,  the acquisition  of Allison  Custom  Fabrication 
further strengthened  our  position  as the  leading  provider  of  engineered 
conveyor solutions in North American markets.



In the Advanced Engineered Products  ("AEP") division, growth was  underpinned 
by strong demand from  the oil and  gas sector and  investment to broaden  our 
geographical coverage. The latter  includes initiatives to develop  identified 
growth markets, both  organically and  acquisitively. In  September 2011,  the 
acquisition of Transeals enabled greater  access to the Australian mining  and 
oil and gas aftermarket.



In September  2012,  after  the  year end,  three  bolt-on  acquisitions  were 
completed. American Industrial Plastics complements our existing  capabilities 
and  provides  specialist  expertise  in  precision  machining  of   polymers. 
Norwegian Seals expands  our presence  in oil and  gas to  the subsea  sector. 
Mandals, which produces lay-flat hoses, provides high value added solutions to
customers' needs in fluid handling markets.



In October  2012,  we  exchanged  contracts  to  acquire  Australian  Conveyor 
Engineering ("ACE") and  expect to  complete this  transaction at  the end  of 
November 2012. ACE, which specialises in high capacity conveyor systems to the
mining sector,  furthers Fenner  Dunlop's strategy  of being  the supplier  of 
choice for engineered conveyor solutions in Australia.



People

During the year, we welcomed Vanda  Murray to the Board as Senior  Independent 
Director.  Her  strengths  lie  in   sales  and  marketing,  particularly   in 
organisations with a  wide geographical reach,  which complements the  Board's 
skills set.



At the forthcoming  Annual General  Meeting in January  2013, David  Buttfield 
will leave  the Board  after  10 years.  This  includes extending  his  tenure 
following the untimely and sad death of  David Campbell in 2010. On behalf  of 
the Board, I would like to thank David for his valuable contribution.



I believe that our  employees are critical to  our continued success. I  would 
like to take this opportunity to express my thanks to all our employees around
the world for their commitment and dedication.



Governance

The growth,  strength and  resilience of  Fenner is  built on  the bedrock  of 
strong governance and high business standards. These principles remain part of
our fundamental core values.



During the year, the Board reviewed our policy on diversity which resulted  in 
a Board  Diversity  Statement  being  implemented.  The  Nomination  Committee 
considers diversity  in  all forms  when  making appointments  with  the  best 
candidate being selected  based on  merit regardless of  gender, ethnicity  or 
religious beliefs. This philosophy on diversity runs throughout the Group.



The Board  has  made several  site  visits  around the  Group  which  included 
operations within  the USA,  the Netherlands  and the  UK. These  visits  have 
helped to  broaden  the  non-executive directors'  knowledge  of  the  Group's 
business.



Corporate Responsibility

To Fenner, conducting business in an appropriate manner means delivering  high 
standards of health and safety to  provide safe working conditions, a  respect 
for the  environment in  which we  work  and behaving  with integrity.  As  an 
organisation, we believe  that being both  a good neighbour  and employer  and 
having a  positive  influence  in  our  communities  will  contribute  to  the 
sustainability of our business.



The Group Health &  Safety Management System  Framework is embedded  worldwide 
and facilitates a continually improving health and safety culture. Concern for
the Group's impact on the environment  is a fundamental part of our  corporate 
business strategy as we contribute towards  a sustainable future. Our Code  of 
Business Conduct sets out the behavioural standards expected of all employees.
The cornerstones of the Code are fairness, honesty and integrity.



Outlook

The year just ended  was one of excellent  growth, delivering record  results. 
Reflecting this performance, the improved quality of the Group's earnings  and 
our confidence in the future growth of the business, the Board is recommending
a 31% increase in the dividend for the year.



As we have highlighted, in the latter part of the year, ECS saw slower  demand 
from the US coal sector offset by stronger demand elsewhere. Order rates  from 
the US coal sector bottomed in May and have improved steadily since. While  we 
do not expect to benefit  fully from the positive  impact of this trend  until 
the second half, the divisional order book is satisfactory overall.  Commodity 
prices have recently reduced which, while not directly weakening activity  for 
ECS, may lead to some short-term pressure on margins.



The AEP operations  are trading  satisfactorily, albeit with  some pockets  of 
moderate destocking. Recent  acquisitions are expected  to support  continuing 
growth.



We remain  mindful of  the  current global  economic uncertainty.  Given  both 
anticipated end market  trends and the  very strong first  half last year,  we 
expect our performance to be more heavily  weighted to the second half of  the 
current year.



As a result of our  investment programme over recent  years, Fenner is a  much 
stronger and more resilient business serving a more diverse customer base. The
fundamentals of our core  markets underpin healthy,  long-term growth, and  we 
continue to  be  encouraged by  the  number of  identified  opportunities  for 
sustained value creation.





Mark Abrahams

Chairman











Chief Executive Officer's Review





Strong demand, combined with the benefits of our investments, produced  higher 
margins and record earnings.



Introduction

In another record year it is difficult to pick out specific successes but  the 
growing acceptance of the  Engineered Conveyor Solutions  concept by some  key 
customers and the growth  of Fenner Advanced  Sealing Technologies within  the 
Advanced  Engineered  Products  division,  both  by  organic  investment   and 
acquisition, stand out. The recognition of  the eminence of Secant Medical  in 
the design of medical  textiles was reflected in  its revenue growth and  also 
deserves a mention.



Throughout this report we have introduced the updated vision and strategy  for 
Fenner which was developed by the Executive Committee, with the support of the
Board and the input of senior management across the Group. This builds on  our 
success to date  and demonstrates how  we will drive  long-term value for  our 
customers, employees and shareholders.



Business model

The Fenner business model  is to devolve authority  into the operating  units, 
within an  appropriately controlled  environment.  These operating  units  are 
close to our  customers and are  responsible for delivering  the products  and 
services to them.  The operating  units are  grouped into  two divisions:  the 
Engineered Conveyor  Solutions ("ECS")  division and  the Advanced  Engineered 
Products ("AEP") division. These two divisions enable us to develop  expertise 
within each market segment across  our wide geographic footprint. Our  culture 
of continuous improvement and  investment ensures that  our products meet  and 
exceed the demands of customers.



ECS and AEP both provide premium quality, comprehensive, market focused, whole
life value products  and services. This  has enabled both  divisions to  build 
strong brands  and  excellent  reputations  in  their  chosen  markets.  These 
characteristics are considered to be the key to the success of the Group.



Fenner has  an  experienced  and  stable  management  team,  backed  by  solid 
financial performance and a robust balance sheet. Accordingly, Fenner is  able 
to continue to invest organically and  by acquisition to maintain and  develop 
its strong market positions and strategic partnerships.



Market overview

The economic recovery continues, but  it has weakened. In advanced  economies, 
growth is now too low to make a substantial dent in unemployment and in  major 
emerging market economies, growth rates that had been strong have also slowed.
The IMF growth forecasts for 2013 have been revised from 2.0% down to 1.5% for
advanced economies and from 6.0% to 5.6% for emerging and developing economies
although they note that, "… trade channels are surprisingly strong, with,  for 
example, lower  exports accounting  for  most of  the  decrease in  growth  in 
China." (Source: IMF World Economic Outlook, October 2012).



The demand for ECS goods  and services is primarily  driven by the tonnage  of 
minerals extracted, handled and  consumed. Mineral extraction and  consumption 
tonnages are in turn driven by the internal growth of emerging economies. Coal
is our  most important  market, followed  by iron  ore and  copper ore.  Other 
minerals and aggregates are important in some geographic markets. Energy  coal 
prices fell during the year despite production volumes continuing to  increase 
on a  global basis.  The USA  has seen  reductions in  consumption which  were 
predominantly due to local factors, some  of which, like the price of  natural 
gas, are considered short-term effects. Iron ore and metallurgical coal prices
held up well  until the final  quarter of the  Fenner financial year  allowing 
record export levels to be declared by BHPBilliton and Rio Tinto.



Following our year end there was a market correction in commodity prices which
was driven by uncertainty over  the continued growth in demand.  Nevertheless, 
prices still remain well above those  during the global financial crisis.  The 
medium to long-term projections for coal demand from the International  Energy 
Agency show continued growth.



There is no single driver of demand for the AEP division. However, significant
revenues are derived from oil and  gas, medical, construction and the  general 
industrial markets  of North  America. The  oil and  gas markets  continue  to 
perform well, not  only from steady  demand and security  of supply, but  also 
from the  increasingly sophisticated  extraction methods,  such as  shale  gas 
"fracking", which require  our high performance  products. Despite  regulatory 
changes in the  USA, the  medical market looks  favourable while  construction 
remains weak and the  North American industrial market  has, to date, held  up 
well.





Nicholas Hobson

Chief Executive Officer







Operating Review





Performance

Continued growth was driven by demand from Fenner's major markets: mining  for 
ECS and oil and gas and medical for AEP, but growth was also seen through  our 
distribution channels into general industrial markets. This delivered a second
year of significant  revenue growth for  both divisions. Not  all end  markets 
performed equally  strongly  with  weakness experienced  in  the  construction 
market  in  particular.  Geographically,  the  Asia  Pacific  region  saw  the 
strongest growth  followed  by the  Americas.  Although ECS  showed  a  slight 
increase in new project work,  69% of Group revenue  was derived from the  MRO 
(Maintenance  and  Repair  Organisation)  and  service  aftermarket  with  the 
remaining 31% sourced  from OEMs  (Original Equipment  Manufacturers) and  new 
projects. In general, growth rates eased as the year progressed.



Health and safety

The Group is  absolutely committed  to ensuring  that all  employees can  work 
safely at all times. This overriding  commitment to provide a safe and  secure 
working environment extends to those  employees of other companies working  on 
our behalf  as  well as  to  customers, visitors  and  neighbours who  may  be 
affected by our activities.



The Group has continued to grow in 2012, both organically and by  acquisition. 
That growth brings with it greater responsibilities and enhanced  expectations 
from our  customers,  employees and  neighbours.  Fenner promotes  health  and 
safety as a key element in the culture of each of its operations. The Health &
Safety Management System  Framework ("The Framework")  provides structure  and 
guidance to  all  operations,  irrespective of  size,  to  deliver  continuous 
improvement  within  our  unique  culture  of  autonomy  with  accountability. 
Providing services at customer facilities is  a growing part of our  business. 
Often these customers demand sound  health and safety management systems.  For 
such customers, The Framework,  our health and  safety management systems  and 
the associated training are a significant and unique selling proposition.



The most significant indicator  of health and safety  performance is the  Lost 
Time Incident  Frequency Rate  which shows  a continuing  improving,  downward 
trend because of improvements  in our health and  safety performance. We  also 
monitor the  absolute number  of  lost time  incidents.  The selection  of  an 
absolute measure across  the whole Group,  which does not  reflect changes  in 
employee numbers or hours  worked, demonstrates our  belief that everyone  who 
works for Fenner should return home in the same fit and healthy state in which
they came to work. With significant  commitment from all levels of  management 
and a focus on health and safety through The Framework, it is disappointing to
report a small increase in the number  of lost time incidents compared to  the 
previous year. Delivering continuous  improvement year-on-year is  challenging 
and, as  our  operations respond  to  increasing demand  with  higher  output, 
additional working hours and new staff are required.



Employees

In 2012, our sales growth again  outstripped our employee growth, pointing  to 
the Group  reaping the  benefits  of its  employee development  and  improving 
business practices. The average number of  employees increased by 422 in  2012 
to 4,970, an increase of 9%. This increase largely occurred in the first  half 
of the  year,  with  the  majority  of  the  new  employees  joining  existing 
operations in production and service roles.



All our operations have processes that require high levels of proficiency  and 
technical expertise. Some  of those skills  are not available  in the  general 
workforce in  every region.  Therefore, we  have increased  our commitment  to 
training and  development. Fenner  continues  to benefit  from a  skilled  and 
committed  workforce  in  both  our  acquired  and  existing  operations.   We 
acknowledge the importance of our  employees' contribution to the  performance 
of the Group.



The productivity,  and  in  the  service operation  the  utilisation,  of  our 
employees is a key factor to success. Due to the diversity of our  operations, 
this is best measured  by total sales per  employee. Sales per employee  shows 
that this year productivity increased primarily due to those recruited in 2011
and 2012 becoming fully  trained and productive. Other  factors behind the  5% 
improvement include continued efficiencies from ongoing capital investment and
other improvement initiatives such as six sigma programmes.



Customers and suppliers

From the large  multinational oil, gas  and mining companies  to the  smallest 
medical start-up, across thousands of customers, each Group operation  ensures 
it is meeting  its customers' expectations.  Experienced sales teams  maintain 
close contact with  customers, providing  feedback on  those expectations  and 
ensuring satisfactory  actual performance.  These qualitative  indicators  are 
complemented by quantitative measurements  including customer surveys and  "on 
time in full"  performance. Whilst some  operations are dependent  on a  small 
number of customers, Fenner's  largest customer accounts for  less than 5%  of 
revenue.



Fenner uses a  wide range  of materials, from  thousands of  tonnes of  rubber 
compound to a  few hundred  grammes of  biomaterials, so  our operations  work 
closely with selected suppliers to ensure that our customers benefit from  the 
latest technical  developments in  materials and  processes. The  majority  of 
these relationships are in  the normal course  of business, ensuring  quality, 
continuity of supply and competitive commercial terms. Where appropriate,  and 
usually  relating  to  technical  developments,  relationships  are   formally 
documented. After the  volatility of the  previous year, in  2012 most  Fenner 
operations  saw  stable  material  prices  and  improved  availability.  Close 
cooperation with established suppliers and  active development of new  sources 
has ensured, and continues to ensure, continuity of supply, consistent quality
and technical leadership.



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.  These 
products and services, which  include heavyweight ply,  solid woven and  steel 
cord conveyor  belting backed-up  with  design, installation,  monitoring  and 
maintenance services, is  tailored to suit  each customer's individual  needs. 
Commercial arrangements vary  from a  purely transactional  relationship to  a 
full strategic partnership to reduce both conveyor downtime and total cost  of 
ownership.



The ECS division  experienced positive trading  conditions throughout most  of 
the year  under  review,  driven  by  record  levels  of  coal  and  iron  ore 
extraction. Although construction markets remained weak, growth in revenue  of 
16% was spread across all regions. Order intake from the US coal sector slowed
in April and  May but  has improved  steadily since.  The growth  in sales  of 
steelcord conveyor  belting continued  unabated throughout  the year.  Margins 
benefitted from improved  manufacturing efficiencies and  exploitation of  the 
capabilities of the plant and machinery commissioned in recent years.



In December 2011, Fenner acquired  Allison Custom Fabrication, Inc., based  in 
Western Pennsylvania, which specialises in the design, engineering,  machining 
and  metal  fabrication  of  customised  material  handling  equipment.   This 
acquisition  strengthens   Fenner  Dunlop's   engineered  conveyor   solutions 
capability  to  help  customers  improve  safety  and  reduce  total  cost  of 
ownership, in  both above  and below  ground conveying  applications. We  have 
continued to develop  the ECS offering  in North America  and Australia  where 
product teams  have been  established to  identify and  promote product  lines 
which are  suitable  for branch  based  selling. Conveyor  diagnostic  product 
systems continue to increase in importance, supporting both the ECS model  and 
the sale of premium products. Systems are now established and performing  well 
in the UK, South America, North America, Africa and Australia.



Australia

Year-on-year growth continued in the Australian operations. Coal and iron  ore 
remain the main trading  exports for the country  and the biggest drivers  for 
the trading  performance  of our  Australian  ECS operations.  The  medium  to 
long-term forecasts for  both of these  commodities remains positive.  Revenue 
growth was led  by the service  and ancillary products  which now account  for 
over half the sales in Australia; belting sales also increased. This sales mix
will  provide  protection  against  slower   belting  demand  in  any   future 
environment and, when combined with our regional branch distribution, provides
real competitive advantage.



The new  Kwinana press  project is  on  target for  completion in  2013.  Site 
preparation is now complete and capital equipment has been despatched. The new
steel cord press is to be  sited alongside the existing press, which  operated 
uninterrupted throughout the  civil engineering  phase. The  steel cord  order 
book at the end of the  2012 fiscal year is twice  as high as at the  previous 
year end.



After the year  end, in October  2012, Fenner exchanged  contracts to  acquire 
Australian Conveyor  Engineering  ("ACE").  The  transaction  is  expected  to 
complete at the end of November 2012. ACE specialises in supplying  engineered 
conveyor solutions  for  the  design, manufacture  and  installation  of  high 
capacity conveyor systems for  both surface and  underground mining, with  the 
capability to  take projects  from  the initial  concept to  the  commissioned 
conveyor system. The acquisition is  a significant development for the  Fenner 
Dunlop engineered conveyor solutions offering  in Australia, through which  we 
are growing  by  strengthening  our capabilities  to  effectively  manage  the 
lifetime cost of our customers' conveyors throughout the business cycle.



Americas

Fenner Dunlop Americas  built on  the improvements in  the previous  financial 
year to deliver record results  for the second year  in a row. Revenue  growth 
was supported  by  improved operating  efficiency  arising from  recent  major 
capital investments.



In the second  half, market  sentiment weakened  in the  coal mining  segment, 
resulting in a decline in order rate which has since improved. The record mild
winter temperatures in  the USA resulted  in surplus coal  stockpile at  power 
plants. In addition, the availability of low price natural gas and pressure on
carbon emissions led to  power producers switching from  coal to natural  gas. 
Coal's share of power generation declined from 50% to a historically low  37%. 
Over recent months coal stocks have  fallen and gas prices are rising.  Fenner 
Dunlop  Americas  is  a  supplier  and  partner  to  many  customers  who  are 
financially strong and  who are  amongst the  lowest cost  producers of  coal. 
These customers are  better protected  from volume and  margin pressures  that 
have resulted in the closure of smaller, less efficient mines.



The  bulk   materials  segment   remains   soft,  but   therefore   represents 
opportunities for growth in  the future once  housing construction returns  to 
more normal historic levels. Prices for commodities, including copper and iron
ore, mean  that  they  remain relatively  attractive  prospects  in  Canadian, 
Mexican and  South American  markets.  Steel cord  belting remains  in  strong 
demand and delivery lead times have been, and remain, extended.



Whilst diversification into new territories  and market segments continues  to 
reduce the dependency on the coal  mining industry, US service operations  are 
primarily focused on coal mining, handling and coal fired power generation. We
remain positive about the  market demand for services,  not least because  the 
mining industry is  facing a  skills shortage and  therefore the  recruitment, 
training and retention of skilled technicians is an increasing challenge.  Our 
Chilean operations in Antofagasta and  Santiago primarily provide services  to 
the copper mining industry and have made significant gains in 2012 as well  as 
generating conveyor belting sales throughout South America.



Europe

Based in Drachten in the Netherlands, Dunlop Conveyor Belting serves  European 
markets and exports extensively. Western  European demand declined during  the 
year but export markets  in French Africa, South  America and the Middle  East 
continue to be  strong, with political  instability in some  of these  markets 
providing opportunities  as well  as risks.  Dunlop Conveyor  Belting now  has 
eight service outlets across  Europe and one in  North Africa, which not  only 
generate local service revenue, but also support customers locally,  enhancing 
market share.



Solid Woven

The solid  woven operations  have performed  well this  year, largely  due  to 
increased demand from both coal and  potash producers, and, whilst the  growth 
rate is currently weakening, current demand appears to be sustainable. The  UK 
based solid woven operation grew its  market share in the former Soviet  Union 
and benefited  from  robust demand  from  the Canadian  potash  market  whilst 
maintaining market  share in  Western Europe.  Demand from  the Indian  public 
sector is  growing,  albeit slowly,  which  is supplemented  by  a  developing 
private  sector,  although  the  export  markets  remain  a  significant   and 
attractive market for our  Indian operation. Our  operation in China  exceeded 
expectations in the year  under review; its largest  customer returned to  the 
market following destocking in  the previous year and  our programme to  widen 
the customer base saw  early successes. China remains  cost sensitive and,  in 
the current environment, gaining full commercial recognition for the  benefits 
of our technically superior product is challenging.



Despite labour  unrest and  a  reduction in  mine  output, our  South  African 
operation has grown in the year following market acceptance of our local steel
cord products. Margins suffered from the rapid deterioration of the Rand early
in the year. Uncertainty  over mining mineral rights  and political calls  for 
nationalisation continues  to delay  new projects,  which in  turn limits  our 
opportunities in the short term, but we have begun to diversify away from  our 
dependence on South African coal.



Advanced Engineered Products

Operations within AEP provide  high value added  solutions to customers'  most 
challenging engineering problems using advanced polymeric materials, expertise
in application  design,  effective  manufacturing  design  skills  and  timely 
delivery. Expansion into further mission-critical  applications is a key  part 
of the AEP strategy. The high added  value, niche nature of the product  range 
provides protection against the full effects of economic volatility.



The AEP  division is  divided into  five product  group operations  which  are 
managed on a global basis. These operations are detailed below.



·Fenner Advanced  Sealing  Technologies  comprises:  performance-critical 
hydraulic seals for the global fluid  power industry, trading as Hallite;  CDI 
Energy Products, which  is focused on  sealing solutions for  the oil and  gas 
markets; and  EGC Critical  Components, which  develops and  supplies  bespoke 
products  for  process  applications  including  electronics,  pumps,  valves, 
compressors and aerospace applications;



·Solesis Medical Technologies, focused in North America, comprises Secant
Medical, a leading developer and manufacturer of custom-engineered  biomedical 
textile structures for implantable medical devices, including Prodesco,  which 
provides a wide range of sophisticated industrial fabrics; and Xeridiem, which
develops and manufactures single use disposable devices;



·Fenner  Precision  provides  unique  solutions  to  OEM  system   design 
challenges including engineered rollers and tyres, precision belts and pulleys
and custom moulded engineered polymer products;



·Fenner Drives  designs, manufactures  and sells  an extensive  range  of 
bespoke solutions  for  mechanical  power  transmission  and  motion  transfer 
applications; and



· James Dawson manufactures  silicone and EPDM  speciality hoses for  the 
diesel engine and off-road equipment OEM market.





Fenner Advanced Sealing Technologies

Fenner     Advanced     Sealing     Technologies     ("FAST")     manufactures 
performance-critical seals for mobile hydraulic equipment, mining and oil  and 
gas extraction and exploration equipment. FAST also produces high  reliability 
seals and other performance-critical products  for pump, valve and  compressor 
applications and  continues  to diversify  into  similar applications  in  the 
medical,  semiconductor  processing  and  aerospace  markets.  It  has  global 
operations with production plants in the UK, Germany, USA, China and Singapore
and sales branches  located in  France, Italy, Australia,  Canada and  Brazil, 
with a branch planned for India. In  the year under review, FAST continued  to 
grow strongly through wider geographical coverage and increased market  share. 
The successful  integration  of  Transeals,  the  creation  of  an  integrated 
distribution system  in  Australia and  the  initial benefits  of  aftermarket 
initiatives all contributed to good strategic progress. In 2012, we  increased 
our presence in China  by opening a new  production facility in Suzhou,  which 
continued our investments  in the aftermarket.  Other aftermarket  initiatives 
continue: all of  the sales branches  now have CNC  machines to enable  custom 
seals to be produced quickly, mobile engineers help customers select the right
seals and salesmen directly sell to the oil and gas fields.



After the year end, in September 2012, Norwegian Seals was acquired to  enable 
sales to be developed to the Norwegian continental shelf and North Sea oil and
gas markets. Also in September 2012, American Industrial Plastics in  Florida, 
USA was acquired to broaden our precision machining capabilities for both  CDI 
and EGC. It  also gives  the operation an  increased presence  in the  medical 
equipment component market.



Investment continues in the  new integrated IT system  for the whole of  FAST, 
which will enhance our ability to serve aftermarket customers effectively  and 
will provide a  platform for internet  trading. FAST continues  to expand  its 
global presence,  maintaining its  reputation for  high quality  products  and 
selectively broadening its product range to satisfy new market opportunities.



Solesis Medical Technologies

Fenner continues to invest  for growth in its  existing medical operations  as 
well as  searching for  complementary acquisitions  under the  brand  umbrella 
"Solesis Medical Technologies".



There are two operations  in AEP which focus  on the medical market,  although 
other operations within the Group  supply components to the medical  equipment 
markets.



Both Secant Medical  and Xeridiem serve  the medical device  market using  the 
same business  model; customers  who have  identified an  unmet clinical  need 
contract with either  company to design  a component or  product to meet  that 
need. Both operations  are structured to  make a profit  on those  development 
activities while retaining manufacturing rights should the customer's  product 
be commercialised.  Between them,  the operations  are active  in  cardiology, 
urology, orthopaedics, sports medicine, soft tissue repair,  gastroenterology, 
enteral feeding, gynaecology,  neurology plus general  and bariatric  surgery. 
Both operations are focused on North America.



Secant  Medical,  based  in   Perkasie,  Pennsylvania,  manufactures   textile 
components for  permanently  implanted  medical devices.  Xeridiem,  based  in 
Tucson, Arizona,  manufactures complete,  single use  disposable devices  that 
spend some time inside the human body. Based on the findings of best practices
research,  Frost  &  Sullivan  presented  the  2012  North  American  Enabling 
Technology Award in Medical Implantable Textile Structures Design Approach  to 
Secant Medical,  providing  external recognition  of  our leadership  in  this 
field.



In the year under  review, Xeridiem experienced  rapid commoditisation of  its 
heritage catheter market. Substantial price  pressure was more than offset  by 
the growth delivered  by the Secant  product development pipeline,  delivering 
overall revenue growth of 7%.



Medical device  manufacturers  increasingly  view  their  core  competency  as 
managing health outcomes.  They mitigate  risk by  outsourcing production  and 
reducing internal product  development costs  and prefer  to acquire  products 
that have successfully navigated the regulatory maze and been  commercialised. 
This  strategy  requires  a  population  of  start-up  companies  with   novel 
technologies in order to be successful.  The population of such companies  has 
been reducing due  to the  dearth of early  stage financing  from the  private 
equity community. A number of large medical device manufacturers have  started 
their own venturing divisions to provide  seed capital for new ventures.  This 
has had the unexpected benefit of significantly increasing the quality of  the 
projects being worked on as only the best receive funding.



Populations, especially in the  West, continue to age  and gain weight;  these 
are both predictors of future medical device consumption over the medium term.
For the longer term, additional emphasis will need to be placed on  developing 
countries.



Fenner Precision

"Designed to fit your needs - exactly!" is the promise Fenner Precision  makes 
across its product offering of bespoke belts, stretch bands, tyres and rollers
for office  equipment  and  paper  handling.  In  addition,  Fenner  Precision 
produces composite  mouldings in  a  wide range  of  materials and  sizes  for 
specialist engineering  applications such  as grout  seals for  offshore  wind 
farms. A single sales force focuses on the self service, ATM, digital printing
and specialist engineering  markets throughout  the world.  Products are  then 
delivered by  one of  three factories  in the  USA and  the UK,  supported  by 
presences in Shanghai and Singapore.



Fenner Precision continues to make good  overall progress across a wide  range 
of niche  markets by  growing market  share and  successfully introducing  new 
products.



Fenner Drives

Fenner Drives' range  of added  value, innovative  products is  used to  solve 
problems in power transmission, motion control and package handling industries
worldwide.  Fenner  Drives  brands  such   as  PowerTwist  link  belt,   Eagle 
polyurethane  belting,  B-LOC  and   Trantorque  keyless  bushing  and   T-MAX 
tensioners are  well  known  and  widely  accepted  in  many  of  the  world's 
industrialised economies. The  year has  seen limited market  growth in  North 
America and new competitors  entering the market for  some products which  has 
limited margins  and  growth. However,  opportunities  in South  America  have 
compensated  for  weak  European  markets  and  growth  opportunities  remain, 
particularly in South  America, the  Middle East and  Eastern Europe.  Through 
investment in staff,  equipment and  IT, we  continue to  improve our  product 
development which should deliver growth at  a higher rate than the  underlying 
market.



James Dawson

Despite variations in  both geographical and  market segments, overall  demand 
remained steady for most of 2012, with a general softening towards the end  of 
the year. Stationary power  generation equipment performed strongly,  followed 
by heavy trucks, with off road and construction weaker. James Dawson continued
to focus on streamlining production and improving capability and efficiencies,
including developing  a  new  facility  which  will  see  all  organic  rubber 
manufacturing transferred into a modern and efficient environment over  coming 
months. Our technical  expertise in  reinforced silicone and  EPDM remain  key 
competitive advantages, with new products being developed to address  stricter 
emissions standards and higher operating temperatures for diesel engines.



Acquired in early September 2012, Mandals is a leader in an area of reinforced
polymer technology  which complements  our existing  operations,  particularly 
James Dawson. Based at the southern  tip of Norway, Mandals is a  manufacturer 
of innovative lay-flat and speciality hoses for use in demanding  applications 
in the agricultural,  infrastructure, potable  water and oil  and gas  markets 
around the world.





Nicholas Hobson

Chief Executive Officer







Group Finance Director's Review





Revenue and operating profit

Group revenue  increased by  16% to  £830.6m (2011:  £718.3m). The  effect  of 
acquisitions completed  in  the year  contributed  £12.8m and  the  favourable 
translation effect of exchange rate  movements amounted to £4.5m, the  largest 
component relating to the stronger Australian dollar.



In the ECS division, revenue increased  by 16% to £593.4m (2011: £510.7m)  and 
in the AEP division, revenue increased by 14% to £237.2m (2011: £207.6m).



Underlying operating  profit increased  by 30%  to £118.8m  (2011: £91.4m),  a 
record performance. The effect of  acquisition activity contributed £1.7m  and 
the favourable  translation  effect of  exchange  rate movements  amounted  to 
£0.7m. Divisional profits contributed were £84.4m (2011: £61.1m) from the  ECS 
division and £43.6m (2011: £38.2m) from the AEP division.



Amortisation of intangible assets acquired increased to £11.2m (2011:  £8.9m), 
principally due to acquisition activity.



Group operating profit increased by 30% to £107.6m (2011: £82.5m).



Net finance costs

Finance costs,  net of  finance income,  increased by  £6.1m to  £19.0m.  This 
comprised net interest payable of £14.9m (2011: £11.2m) and notional  interest 
of £4.1m (2011: £1.7m).



The increase in  net interest  payable principally  arose from  the full  year 
effect of  the  additional cost  associated  with the  drawdown  of  long-term 
funding from the private  placement in the last  financial year compared  with 
lower short-term rates earned on amounts deposited.



The majority  of the  Group's borrowing  costs are  at fixed  interest  rates, 
principally  arising  from  the  US  dollar  private  placements  and  related 
cross-currency swaps.



Notional   interest   comprises:   amounts   related   to   defined    benefit 
post-retirement  schemes  and  the   unwinding  of  discount  on   provisions, 
principally arising from  deferred payments on  acquisitions, totalling  £1.9m 
(2011: £1.7m); a charge of £1.7m (2011:  £nil) relating to an increase in  the 
redemption  liability  on  the   purchase  of  non-controlling  interests   in 
acquisitions resulting from an increase  in the projected profits compared  to 
previous estimates; and a charge of £0.5m (2011: £nil) relating to an increase
in the  estimated  financial  obligation under  a  cooperative  joint  venture 
contract in China.



Taxation

The tax rate for the year was  30% (2011: 29%) whilst the underlying rate  was 
29% (2011: 30%).



Although a  large proportion  of Group  profits are  earned in  the USA  where 
marginal tax  rates are  in excess  of 35%,  this was  offset by  lower  rates 
elsewhere in the world, particularly in the UK, the Netherlands and Canada.



Earnings per share and dividends

Underlying earnings per share was 36.1p  (2011: 28.1p) and basic earnings  per 
share was 30.3p (2011: 24.6p).



The interim dividend of 3.5p per share  (2011: 2.65p) was paid on 5  September 
2012. The Board  is recommending  a final dividend  of 7.0p  per share  (2011: 
5.35p) to make a total dividend for the year of 10.5p per share (2011:  8.0p). 
This total dividend represents a distribution of 29% (2011: 28%) of underlying
earnings.



Acquisitions

The Group  completed two  acquisitions  during the  financial year  and  three 
acquisitions after the year end. In addition, after the year end, we exchanged
contracts on a further acquisition.



Acquisitions during the financial year:



In September 2011, the  Group acquired the entire  share capital of  Transeals 
Pty  Limited  ("Transeals"),  a  privately  owned  company  based  in   Perth, 
Australia. Transeals  manufactures and  distributes  seals used  in  hydraulic 
equipment, currently serving the western parts of Australia. This  acquisition 
allows the Hallite operation in Australia,  which is mainly east coast  based, 
to develop its  aftermarket presence  in the buoyant  mining and  oil and  gas 
markets of Western Australia. The cash consideration was £8.1m.



In December 2011, the Group acquired substantially all of the operating assets
of Allison  Custom  Fabrication  ("Allison")  in  Pennsylvania,  USA.  Allison 
specialises in the  design, engineering,  machining and  metal fabrication  of 
customised material handling  equipment, primarily for  the mining markets  of 
Pennsylvania and West  Virginia. This acquisition  further strengthens  Fenner 
Dunlop Americas' position as the engineered conveyor solutions provider in the
Americas. The  initial  cash  consideration was  £15.0m  with  contingent  and 
deferred consideration estimated at £10.4m.



Further disclosures of  acquisitions during  the financial year  are given  in 
note 16.



Acquisitions made after the financial year end:



On 1 September 2012, the Group completed the acquisition of substantially  all 
of the assets and  liabilities of American  Industrial Plastics, Inc  ("AIP"), 
based in Florida, USA. AIP is  a precision machining company with the  ability 
to machine advanced polymers  for application in the  oil and gas and  medical 
markets as well as manufacturing performance precision components for a  range 
of niche applications including aerospace. The initial cash consideration  was 
£16.7m with contingent deferred amounts estimated at £6.3m.



On 3 September 2012, the Group completed the acquisition of 100% of the  share 
capital of  Norwegian  Seals, which  has  operations  in Norway  and  the  UK. 
Norwegian Seals manufactures and  distributes performance-critical seals  into 
the oil and  gas market.  This acquisition will  allow the  FAST operation  to 
exploit the North Sea market and enhance Norwegian Seals' ability to build its
growing industry reputation and presence.  The initial cash consideration  was 
£10.3m,  excluding  working  capital  adjustments,  with  contingent  deferred 
amounts estimated at £5.7m.



On 3 September 2012, the Group completed the acquisition of 100% of the  share 
capital of Mandals, based in Norway  and Sweden. Mandals is a manufacturer  of 
innovative lay-flat and speciality hoses for use in demanding applications and
of circular  looms  for  the manufacture  of  the  woven fabric  used  in  the 
production of  hoses.  The  acquisition builds  on  our  expertise,  providing 
performance-critical applications to the agricultural, infrastructure, potable
water and oil  and gas  markets. The  initial cash  consideration was  £12.5m, 
excluding  working  capital  adjustments,  with  contingent  deferred  amounts 
estimated at £1.3m.



All amounts above are based on exchange rates at the dates of completion.



On 26 October 2012, the Group exchanged contracts to acquire 100% of the share
capital of Australian Conveyor Engineering Pty Ltd ("ACE"), based in New South
Wales.The transaction is expected  to complete at the  end of November  2012. 
ACE specialises in  supplying engineered  conveyor solutions  for the  design, 
manufacture and  installation  of  high capacity  conveyor  systems  for  both 
surface and underground mining, with the capability to take projects from  the 
initial concept to the commissioned conveyor system. The acquisition  furthers 
Fenner Dunlop's  strategy  of being  the  supplier of  choice  for  engineered 
conveyor  solutions  in  Australia,   offering  mining  customers   integrated 
solutions for improving the safety and total cost of materials handling.



Further disclosures of acquisitions after the financial year end are given  in 
note 17.



Cash flow and net debt

The table below summarises the cash flows giving rise to the reduction in  net 
debt.



                                      2012    2011

                                        £m      £m
Net cash from operating activities   103.6    79.8
Net capital expenditure             (28.3)  (14.9)
Net interest paid                   (12.3)  (11.2)
Free cash flow                        63.0    53.7
Acquisitions                        (34.3)  (29.7)
Dividends                           (18.0)  (14.6)
Cash generation                       10.7     9.4
Exchange movements                   (4.7)     0.5
Other movements                      (1.9)   (1.3)
Reduction in net debt                  4.1     8.6
Opening net debt                   (101.8) (110.4)
Closing net debt                    (97.7) (101.8)



Net cash  generated  from  operating  activities  of  £103.6m  (2011:  £79.8m) 
increased significantly due to the higher profit and was after absorbing £8.3m
(2011: £11.2m) of working capital to support the 16% sales growth. Net capital
expenditure increased to £28.3m (2011: £14.9m), largely due to an expansion in
capacity.  This  includes  three   projects  to  increase  the   manufacturing 
capability of our ECS operations in Australia, the Netherlands and China.  Net 
interest paid  was  £12.3m (2011:  £11.2m).  The resultant  free  cash  inflow 
increased to £63.0m (2011: £53.7m).



The net cash outflow  on acquisition and disposal  activity was £34.3m  (2011: 
£29.7m),  of  which  £11.5m  related   to  deferred  amounts  on  prior   year 
acquisitions. Dividends paid increased to £18.0m (2011: £14.6m). The resultant
cash generation of £10.7m (2011: £9.4m) was sufficient to fund our organic and
acquisitive growth initiatives.



After adverse exchange rate  movements of £4.7m  (2011: £0.5m favourable)  and 
other increases in debt  of £1.9m (2011: £1.3m),  closing net debt reduced  by 
£4.1m to £97.7m (2011: £101.8m).



Gross  debt  amounted  to  £206.4m  (2011:  £206.1m)  whilst  cash  and   cash 
equivalents were £108.7m (2011: £104.3m).



Financing

The Group is financed  principally by a mix  of equity, retained earnings,  US 
dollar private  placement  loan  notes  and  committed  bank  facilities.  The 
principal loan  facilities are  raised  centrally whilst  operating  companies 
supplement this funding with local overdraft and working capital facilities.



During the  year the  Group entered  into new  five year  committed  revolving 
credit facilities totalling  £100m. These  comprised an £80m  facility with  a 
club of four major  UK based banks  and a further  bilateral facility of  £20m 
with one of the  banks. These replaced facilities  totalling £145m which  were 
due to expire in the year.



In addition, the Group  has US dollar private  placement loan notes  totalling 
$290.0m. These have the following maturity and interest rate profile:



Principal           Maturity    Fixed rate
US$65.0m            1 Sept 2023 5.42%
US$55.0m            1 Sept 2021 5.27%
US$80.0m            1 Sept 2021 5.12%
US$90.0m            1 June 2017 5.78%
US$290.0m (£182.4m)



The Group's total committed loan facilities  at 31 August 2012, including  the 
US dollar private placements, were £305.7m. Within this, the Group's committed
bank facilities were £122.7m (2011:  £168.0m), of which £100.0m of  facilities 
with UK banks expire in April 2017. At 31 August 2012, £106.2m (2011: £146.6m)
of these facilities were not drawn down whilst uncommitted facilities were  in 
excess of £30m.



The principal financial  covenants relating to  the committed loan  facilities 
are the ratio of net  debt to EBITDA and interest  cover for EBITDA. Net  debt 
must be less  than 3.5  times adjusted EBITDA.  Underlying EBITDA  must be  at 
least 3 times  the net interest  charge. For compliance  with loan  covenants, 
reported EBITDA is adjusted for, inter alia, acquisitions and non-cash  items, 
which improves the reported ratios.



Throughout the year under review, the Group comfortably complied with its loan
covenants.



Net debt to reported EBITDA was  0.7 times (2011: 0.9 times). Reported  EBITDA 
Interest cover was 9.4 times (2011: 9.9 times).



The private placements and new committed bank facilities give the Group access
to a  diversified  range of  committed  loan  facilities, with  a  medium  and 
long-term maturity profile. The Group remains well placed to fund and  support 
its operations with continuing  access to medium  and long-term debt  finance, 
cash resources and, where necessary, shorter-term facilities.



Financial risk management

In the normal course  of business, the Group  is exposed to certain  financial 
risks, principally foreign exchange risk,  interest rate risk, liquidity  risk 
and credit risk. These risks are  managed by the central treasury function  in 
conjunction with  the  operating units,  in  accordance with  risk  management 
policies that are designed to minimise the potential adverse effects of  these 
risks on financial performance. The policies are reviewed and approved by  the 
Board.



The exposures  are managed  through  the use  of borrowings,  derivatives  and 
credit management procedures. The use of derivatives is undertaken only  where 
the underlying interest or currency risk arises from the Group's operations or
sources of finance. No speculative trading in derivatives is permitted.



The Group  has entered  into  cross-currency swaps  linked  to the  US  dollar 
private placement cash  flows. In 2007,  $27.2m was swapped  into €20.0m at  a 
fixed rate  of 5.05%,  maturing in  2017.  In 2011,  $44.7m was  swapped  into 
AUD$45.0m at a  fixed rate  of 8.43%, maturing  in 2023.  These swaps  provide 
hedges against the Group's net investments in the euro and Australian dollars,
at fixed interest rates,  and mirror the private  placement cash flows.  These 
swaps have been accounted for as  hedges in accordance with IAS 39  'Financial 
Instruments:  Recognition  and  Measurement',   with  the  charge  or   credit 
recognised directly in other comprehensive income in equity.



In the normal course of business,  derivatives have been used to hedge  future 
non-functional currency cash flows arising from trading transactions  relating 
to the sale and purchase  of goods and services. The  Group has chosen not  to 
hedge account  for  such  transactions  under  the  requirements  of  IAS  39, 
recognising that cash  flows through  to the  maturity of  the derivative  are 
unaffected. In compliance  with IAS  39, all financial  instruments have  been 
measured at their fair value as at the balance sheet date. A charge or  credit 
to the income  statement has been  recognised for  the loss or  gain on  these 
instruments. In addition, in accordance with IAS 21 'The Effects of Changes in
Foreign Exchange  Rates',  all  foreign  currency  monetary  items  have  been 
retranslated at the closing rate, with changes in value charged or credited to
the income statement.



Return on gross capital employed

The return on gross capital employed has  increased to 24% (2011: 20%) due  to 
the improvement in underlying operating profit  and despite the effect on  the 
capital base  from  reinvesting  capital  expenditure  at  1.4x  (2011:  0.8x) 
depreciation.



The progression in returns  over recent years is  an encouraging indicator  of 
strategic progress. The benefits of  prior year organic expansion  investments 
are an influential  driver in this  progression although, in  the short  term, 
returns in  a  year  can  be distorted  given  the  commissioning  and  market 
penetration timeline compared to the initial capital spend.



Post-retirement benefits

The Group operates  a number  of defined benefit  post-retirement schemes  for 
qualifying employees in operations around the world.



The principal scheme is the  Fenner Pension Scheme which  is based in the  UK. 
The latest formal actuarial valuation of the scheme by a qualified actuary was
carried out as at 31 March 2011.



The total  defined benefit  post-retirement liability,  as calculated  by  the 
schemes' actuaries in accordance with IAS 19 'Employee Benefits' and  recorded 
on the balance sheet at 31 August 2012, increased to £48.2m (2011: £31.7m). Of
this amount, the Fenner  Pension Scheme represents  £35.9m (2011: £24.9m)  and 
the overseas schemes totalled £12.3m (2011: £6.8m). During the year, the  fair 
value of assets of the schemes increased by £11.4m (2011: £11.8m), principally
generated  from  the   schemes'  equity  investments   and  additional   Group 
contributions paid to  reduce the  deficit. The present  value of  obligations 
increased by £27.8m  (2011: reduced by  £2.0m), principally as  a result of  a 
decrease in AA corporate bond yields used to discount obligations.



Accounting policies

The  Group  financial  statements  have  been  prepared  in  accordance   with 
International Financial Reporting Standards as adopted by the European Union.



Going concern

After making enquiries, the directors have  formed a judgement at the time  of 
approving the financial statements that there is a reasonable expectation that
the Company  and Group  have  adequate resources  to continue  in  operational 
existence for the foreseeable future. For this reason, the directors  continue 
to adopt the  going concern basis  in preparing the  financial statements.  In 
forming this view,  the directors have  reviewed the Group's  budget and  cash 
flow forecasts against availability of  financing, including an assessment  of 
sensitivities to changes in market conditions.





Richard Perry

Group Finance Director







Key Performance Indicators





Our key  performance indicators,  which  include financial  and  non-financial 
measures, enable the board to monitor performance. They have been selected  as 
being important  to the  success  of the  Group  in delivering  its  strategic 
objectives.



Underlying operating profit

This is  operating  profit stated  before  amortisation of  intangible  assets 
acquired and notional interest.



Underlying earnings per share

This is a measure of performance and growth. It is calculated by dividing  the 
underlying profit for the year by the basic weighted average number of  shares 
in issue and ranking for dividend.



EBITDA Interest cover

This  measure  provides  an  indication  of  whether  the  Group's  profit  is 
sufficient to cover  its interest  obligations. It is  calculated by  dividing 
operating profit before depreciation,  amortisation and impairment charges  by 
net interest  payable on  bank  overdrafts and  loans,  other loans  and  bank 
deposits. Financial covenants require that underlying EBITDA must be at  least 
3x net interest payable.



Net debt/EBITDA

This is a measure of the Group's  ability to service its debt obligations.  It 
is calculated by dividing net debt (defined as short and long-term  borrowings 
less cash and cash equivalents) by the  profit for the year after adding  back 
net finance costs, taxation, depreciation, amortisation and exceptional items.
Financial covenants require  that net  debt must  be less  than 3.5x  adjusted 
EBITDA. Reported EBITDA is adjusted for, inter alia, acquisitions and non-cash
items.



Return on gross capital employed

This is  a  measure  of  performance  relative  to  amounts  invested.  It  is 
calculated by dividing underlying operating profit by gross capital  employed. 
Gross capital employed is  defined as the average  of the opening and  closing 
non-current  assets   (excluding  deferred   tax  and   derivative   financial 
instruments), inventories, trade  and other  receivables and  trade and  other 
payables.



Capital expenditure/depreciation

This is  a  measure  of investment  in  the  future strength  of  the  Group's 
operational assets and  the ability  to support  growth. It  is calculated  by 
dividing capital expenditure per the  cash flow statement by depreciation  and 
amortisation (excluding intangible assets acquired).



Sales per employee

Total annual third party revenue (at  constant exchange rates) divided by  the 
average number of employees  derived from a simple  total head count (with  no 
distinction between  full time,  part time,  temporary or  casual  employees). 
Where employees  are  employed for  part  of a  year,  the average  number  is 
calculated on a pro-rata basis.



Lost time incidents

The number of incidents connected with work which results in an injured person
being away from work or  unable to do the full  range of their normal  duties, 
not including the day of the incident.



Lost Time Incident Frequency Rate

The number of lost time incidents per 200,000 hours worked.









Consolidated income statement

for the year ended 31 August 2012

                                                                  2012    2011

                                                         Notes      £m      £m
Revenue                                                          830.6   718.3
Cost of sales                                                  (557.9) (493.5)
Gross profit                                                     272.7   224.8
Distribution costs                                              (64.7)  (58.5)
Administrative expenses                                        (100.4)  (83.8)
Operating profit before amortisation of intangible
assets acquired                                                  118.8    91.4
Amortisation of intangible assets acquired                      (11.2)   (8.9)
Operating profit                                                 107.6    82.5
Finance income                                               4     0.7     1.5
Finance costs                                                5  (19.7)  (14.4)
Profit before taxation                                            88.6    69.6
Taxation                                                     6  (26.2)  (20.2)
Profit for the year                                               62.4    49.4
Attributable to:
Owners of the parent                                              58.6    47.2
Non-controlling interests                                          3.8     2.2
                                                                  62.4    49.4
Earnings per share
Basic                                                        8   30.3p   24.6p
Diluted                                                      8   30.2p   24.4p







Consolidated statement of comprehensive income

for the year ended 31 August 2012

                                                                    2012  2011

                                                                      £m    £m
Profit for the year                                                 62.4  49.4
Other comprehensive (expense)/income:
Currency translation differences                                   (3.2) (1.0)
Cash flow hedges                                                   (0.2)   1.5
Net investment hedges                                                3.2 (3.0)
Actuarial (losses)/gains on defined benefit post-retirement
schemes                                                           (21.1)   9.8
Tax on other comprehensive income                                    3.9 (2.1)
Total other comprehensive (expense)/income for the year           (17.4)   5.2
Comprehensive income for the year                                   45.0  54.6
Attributable to:
Owners of the parent                                                41.4  51.5
Non-controlling interests                                            3.6   3.1
                                                                    45.0  54.6







Consolidated balance sheet

at 31 August 2012

                                          2012    2011

                                 Notes      £m      £m
Non-current assets
Property, plant and equipment        9   215.4   207.6
Intangible assets                   10   221.4   202.1
Other investments                            -     0.2
Deferred tax assets                       20.9    23.1
Derivative financial assets                4.5     4.7
                                         462.2   437.7
Current assets
Inventories                              105.6   103.4
Trade and other receivables              120.6   118.0
Current tax assets                         0.5     0.3
Derivative financial assets                0.5     0.1
Cash and cash equivalents           13   108.7   104.3
                                         335.9   326.1
Total assets                             798.1   763.8
Current liabilities
Borrowings                          13  (11.0)  (16.8)
Trade and other payables               (147.4) (149.5)
Current tax liabilities                 (13.6)  (12.2)
Derivative financial liabilities             -   (0.9)
Provisions                          12   (9.4)  (12.4)
                                       (181.4) (191.8)
Non-current liabilities
Borrowings                          13 (195.4) (189.3)
Trade and other payables                 (2.0)   (5.1)
Retirement benefit obligations      11  (48.2)  (31.7)
Provisions                          12  (28.8)  (25.4)
Deferred tax liabilities                 (8.1)  (11.8)
Derivative financial liabilities         (5.2)   (7.2)
                                       (287.7) (270.5)
Total liabilities                      (469.1) (462.3)
Net assets                               329.0   301.5
Equity
Share capital                             48.4    48.2
Share premium                             51.7    51.7
Retained earnings                        107.8    78.2
Exchange reserve                          39.0    42.0
Hedging reserve                          (0.2)   (2.5)
Merger reserve                            65.9    65.9
Shareholders' equity                     312.6   283.5
Non-controlling interests                 16.4    18.0
Total equity                             329.0   301.5



The financial statements were approved by the Board of Directors on 7 November
2012 and signed on its behalf by:



M S Abrahams R J Perry
Chairman     Group Finance Director Registered Number: 329377







Consolidated cash flow statement

for the year ended 31 August 2012

                                                                  2012    2011

                                                          Notes     £m      £m
Profit before taxation                                            88.6    69.6
Adjustments for:
Depreciation of property, plant and equipment and
amortisation of intangible assets                                 31.4    27.3
Impairment of property, plant and equipment                          -     1.0
Impairment of goodwill                                             1.8       -
Impairment of associates                                             -     0.1
Release of deferred consideration on acquisitions                (1.7)       -
Movement in retirement benefit obligations                       (4.2)   (4.9)
Movement in provisions                                           (0.3)   (1.2)
Finance income                                                   (0.7)   (1.5)
Finance costs                                                     19.7    14.4
Other non-cash movements                                           0.8     1.0
Operating cash flow before movement in working capital           135.4   105.8
Movement in inventories                                          (0.5)  (22.1)
Movement in trade and other receivables                          (0.8)  (18.7)
Movement in trade and other payables                             (7.0)    29.6
Net cash from operations                                         127.1    94.6
Taxation paid                                                   (23.5)  (14.8)
Net cash from operating activities                               103.6    79.8
Investing activities:
Purchase of property, plant and equipment                       (26.4)  (14.7)
Disposal of property, plant and equipment                          0.4     0.7
Purchase of intangible assets                                    (2.5)   (0.9)
Disposal of intangible assets                                     0.2       -
Disposal of investments                                              -     0.1
Acquisition of businesses                                    16 (34.3)  (29.9)
Disposal of businesses                                               -     0.1
Interest received                                                  0.5     1.5
Net cash used in investing activities                           (62.1)  (43.1)
Financing activities:
Dividends paid to Company's shareholders                      7 (15.4)  (13.8)
Dividends paid to non-controlling interests                      (2.6)   (0.8)
Interest paid                                                   (12.8)  (12.7)
Repayment of borrowings                                         (17.6) (108.3)
New borrowings                                                    11.1   158.5
Net cash (used in)/from financing activities                    (37.3)    22.9
Net increase in cash and cash equivalents                          4.2    59.6
Cash and cash equivalents at 1 September 2011                    104.3    44.7
Exchange movements                                                 0.2       -
Cash and cash equivalents at 31 August 2012                      108.7   104.3







Consolidated statement of changes in equity

for the year ended 31 August 2012







                         Attributable to owners of the parent
                  Share   Share Retained Exchange Hedging  Merger        Non-controlling  Total

                capital Premium Earnings  reserve Reserve Reserve  Total       interests equity

                     £m      £m      £m       £m      £m      £m     £m              £m     £m

                                                                                      
At 1 September
2010               48.0    51.7     49.4     43.9   (1.8)    64.2  255.4             1.5  256.9
Profit for the
year                  -       -     47.2        -       -       -   47.2             2.2   49.4
Other comprehensive
(expense)/income:
Currency
translation
differences           -       -        -    (1.9)       -       -  (1.9)             0.9  (1.0)
Cash flow
hedges                -       -        -        -     1.5       -    1.5               -    1.5
Net investment
hedges                -       -        -        -   (3.0)       -  (3.0)               -  (3.0)
Actuarial gains
on defined
benefit                                                                               
post-retirement
schemes              -       -      9.8        -       -       -    9.8               -    9.8
Tax on other
comprehensive
income                -       -    (2.9)        -     0.8       -  (2.1)               -  (2.1)
Total other
comprehensive
(expense)/income-             -      6.9    (1.9)   (0.7)       -    4.3             0.9    5.2
Transactions
with owners:
Dividends paid
in the year           -       -   (13.8)        -       -       - (13.8)           (0.8) (14.6)
Shares issued
in the year         0.2       -    (0.1)        -       -     1.7    1.8               -    1.8
Share-based
payments              -       -      0.7        -       -       -    0.7               -    0.7
Acquisition of
businesses            -       -   (12.5)        -       -       - (12.5)            14.2    1.7
Tax on
transactions
with owners           -       -      0.4        -       -       -    0.4               -    0.4
Total
transactions
with owners         0.2       -   (25.3)        -       -     1.7 (23.4)            13.4 (10.0)
At 1 September
2011               48.2    51.7     78.2     42.0   (2.5)    65.9  283.5            18.0  301.5
Profit for the
year                  -       -     58.6        -       -       -   58.6             3.8   62.4
Other comprehensive
(expense)/income:
Currency
translation
differences           -       -        -    (3.0)       -       -  (3.0)           (0.2)  (3.2)
Cash flow
hedges                -       -        -        -   (0.2)       -  (0.2)               -  (0.2)
Net investment
hedges                -       -        -        -     3.2       -    3.2               -    3.2
Actuarial
losses on
defined benefit                                                                       
post-retirement
schemes               -       -   (21.1)        -       -       - (21.1)               - (21.1)
Tax on other
comprehensive
income                -       -      4.6        -   (0.7)       -    3.9               -    3.9
Total other
comprehensive
(expense)/income-             -   (16.5)    (3.0)     2.3       - (17.2)           (0.2) (17.4)
Transactions
with owners:
Dividends paid
in the year           -       -   (15.4)        -       -       - (15.4)           (2.6) (18.0)
Shares issued
in the year         0.2       -    (0.2)        -       -       -      -               -      -
Share-based
payments              -       -      0.9        -       -       -    0.9               -    0.9
Acquisition of
businesses            -       -      1.6        -       -       -    1.6           (1.8)  (0.2)
Tax on
transactions
with owners           -       -      0.6        -       -       -    0.6               -    0.6
Transfer of
non-controlling                                                                       
interests to
borrowings            -       -        -        -       -       -      -           (0.8)  (0.8)
Total
transactions
with owners         0.2       -   (12.5)        -       -       - (12.3)           (5.2) (17.5)
At 31 August
2012               48.4    51.7    107.8     39.0   (0.2)    65.9  312.6            16.4  329.0









Notes





1. Basis of preparation



The preliminary results for the year ended 31 August 2012 were approved by the
Board of Directors  on 7  November 2012. They  are abridged  from the  Group's 
audited financial statements and do  not constitute the statutory accounts  of 
the Company within the meaning of section  434 of the Companies Act 2006.  The 
auditors, PricewaterhouseCoopers  LLP, have  reported on  the Group  financial 
statements for each of the years ending 31 August 2012 and 31 August 2011  and 
given unqualified opinions, which  did not include  a statement under  Section 
498 of the Companies  Act 2006. The Group  financial statements for 2011  have 
been  delivered  to  the  Registrar  of  Companies  and  the  Group  financial 
statements for  2012 will  be filed  with the  Registrar of  Companies in  due 
course.



The Group financial statements  from which these  results have been  extracted 
have been  prepared  in  accordance  with  International  Financial  Reporting 
Standards ("IFRS") as adopted by the European Union and the Companies Act 2006
applicable to  companies reporting  under IFRS.  They are  prepared under  the 
historical cost  convention,  as  modified  by the  revaluation  of  land  and 
buildings and financial assets and financial liabilities (including derivative
instruments) at fair value through profit or loss.





2. Accounting policies



The accounting policies adopted are consistent with those for 2011, except for
the following standards  or interpretations  to existing  standards that  have 
been adopted for the first time during the year:



· IAS 24 (Revised) 'Related Party Disclosures'

· Amendments to  IFRS 1  'First-time Adoption  of International  Financial 
Reporting Standards'

· Amendments to IFRS 7 'Financial Instruments: Disclosures'



None of these standards has had  a significant impact on the Group's  reported 
results or financial position.





3. Segment information



IFRS 8 'Operating Segments'  requires segment information  to be presented  on 
the same basis as that used for internal management reporting.



For the purposes  of managing the  business, the Group  is organised into  two 
reportable segments:  Engineered Conveyor  Solutions and  Advanced  Engineered 
Products.



                             Manufacture of rubber ply, solid woven and steel
                              cord conveyor belting for mining, power
Engineered Conveyor
                              generation and industrial applications with
Solutions                     complementary service operations which design,
                              install,

                              monitor, maintain and operate conveyor systems
                              for mining customers.

                              
                             Manufacture of precision polymer products
                              including:
Advanced Engineered
Products                      - precision drives for computer peripherals,
                              copiers and ATMs;

                              - problem-solving power transmission and motion
                              transfer components;

                              - silicone and complex hoses for heavy duty
                              trucks, buses and off-road vehicles;

                              - seals and sealing solutions for the fluid
                              power and oil and gas industries;

                              - technical textiles for medical and industrial
                              applications and silicone based products for
                              medical applications;

                              - rollers for digital image processing and
                              medical diagnostics; and

                              - fluropolymer components for fluid and gas
                              handling.

                              



Operating segments within these reportable segments have been aggregated where
they have similar economic characteristics with similar

products and  services,  production  processes, methods  of  distribution  and 
customer types.



The Chief Operating Decision Maker ("CODM") for  the purpose of IFRS 8 is  the 
Board of Directors. The financial position of the segments is

reported to the CODM on a monthly basis and this information is used to assess
the performance  of the  Group and  to allocate  resources on  an  appropriate 
basis.



Segment performance is reviewed down to the operating profit level.  Financing 
costs and  taxation are  managed  on a  Group basis  so  these costs  are  not 
allocated to operating segments.



Transfer prices on inter-segment  revenues are on an  arm's length basis in  a 
manner similar to transactions with third parties.



Segment information for the years ended 31  August 2012 and 31 August 2011  is 
as follows:



                   Engineered      Advanced

                    Conveyor      Engineered     Unallocated

                    Solutions      Products       Corporate         Total
                    2012    2011   2012   2011    2012    2011    2012    2011

                      £m      £m     £m     £m      £m      £m      £m      £m
Segment result
Total segment
revenue            593.4   510.7  239.6  210.0       -       -   833.0   720.7
Inter-segment
revenue                -       -  (2.4)  (2.4)       -       -   (2.4)   (2.4)
Revenue from
external
customers          593.4   510.7  237.2  207.6       -       -   830.6   718.3
Operating profit
before
amortisation of
intangible
assets acquired     84.4    61.1   43.6   38.2   (9.2)   (7.9)   118.8    91.4
Amortisation of
intangible
assets acquired    (7.1)   (5.5)  (4.1)  (3.4)       -       -  (11.2)   (8.9)
Operating profit    77.3    55.6   39.5   34.8   (9.2)   (7.9)   107.6    82.5
Net finance
costs                                                           (19.0)  (12.9)
Taxation                                                        (26.2)  (20.2)
Profit for the
year                                                              62.4    49.4
Segment assets
and liabilities
Total assets       536.5   506.8  240.6  232.8    21.0    24.2   798.1   763.8
Total
liabilities      (188.5) (190.9) (46.8) (55.9) (233.8) (215.5) (469.1) (462.3)
Net assets         348.0   315.9  193.8  176.9 (212.8) (191.3)   329.0   301.5





4. Finance income

                         2012 2011

                           £m   £m
Bank interest receivable  0.7  1.5





5. Finance costs

                                                    2012 2011

                                                      £m   £m
Interest payable on bank overdrafts and loans        4.6  7.4
Interest payable on other loans                     11.0  5.3
Interest payable                                    15.6 12.7
Interest on defined benefit post-retirement schemes  0.4  0.4
Interest on the unwinding of discount on provisions  1.5  1.3
Finance charge on redemption liability               1.7    -
Finance charge on other loans                        0.5    -
Notional interest                                    4.1  1.7
Total finance costs                                 19.7 14.4





6. Taxation

                                                    2012  2011

                                                      £m    £m
Current taxation
UK Corporation tax:
- current year                                       0.6   1.7
- adjustments in respect of prior years                -   0.1
                                                     0.6   1.8
Overseas tax:
- current year                                      24.0  17.0
- adjustments in respect of prior years                - (0.1)
                                                    24.0  16.9
                                                    24.6  18.7
Deferred taxation
Origination and reversal of temporary differences:
- UK                                                 1.1   1.7
- overseas
 - current year                                   (0.3) (0.2)
 - adjustments in respect of prior years            0.8     -
                                                     1.6   1.5
Total taxation                                      26.2  20.2





7. Dividends

                                                                     2012 2011

                                                                       £m   £m
Dividends paid or approved in the year
Interim dividend for the year ended 31 August 2011 of 2.65p (2010:
2.40p) per share                                                      5.1  4.6
Final dividend for the year ended 31 August 2011 of 5.35p (2010:
4.80p) per share                                                     10.3  9.2
                                                                     15.4 13.8
Dividends neither paid nor approved in the year
Interim dividend for the year ended 31 August 2012 of 3.5p (2011:
2.65p) per share                                                      6.8  5.1
Final dividend for the year ended 31 August 2012 of 7.0p (2011:
5.35p) per share                                                     13.5 10.3
                                                                     20.3 15.4



The interim dividend for the year ended 31 August 2012 was paid on 5 September
2012. The proposed final dividend for the year ended 31 August 2012 is subject
to approval  by  shareholders  at  the AGM.  Consequently,  neither  has  been 
recognised as liabilities at 31 August  2012. If approved, the final  dividend 
will be paid on  4 March 2013  to shareholders on the  register on 1  February 
2013.





8. Earnings per share

                                                              2012        2011

                                                                £m          £m
Earnings
Profit for the year attributable to owners of the
parent                                                        58.6        47.2
Amortisation of intangible assets acquired                    11.2         8.9
Notional interest                                              4.1         1.7
Taxation attributable to amortisation of intangible
assets acquired and notional interest                        (4.2)       (3.7)
Profit for the year before amortisation of intangible
assets acquired and notional interest                         69.7        54.1
                                                                           

                                                           number      number
Average number of shares
Weighted average number of shares in issue             193,281,396 192,335,105
Weighted average number of shares held by the Employee
Share Ownership Plan Trust                               (114,177)   (114,177)
Weighted average number of shares in issue - basic     193,167,219 192,220,928
Effect of share options and contingent long-term
incentive plans                                          1,128,734   1,525,948
Weighted average number of shares in issue - diluted   194,295,953 193,746,876
                                                                           

                                                            pence       pence
Earnings per share
Underlying - Basic (before amortisation of intangible
assets acquired and notional interest)                        36.1        28.1
Underlying - Diluted (before amortisation of
intangible assets acquired and notional interest)             35.9        27.9
Basic                                                         30.3        24.6
Diluted                                                       30.2        24.4



Underlying earnings  per  share measures  have  been presented  to  provide  a 
clearer understanding of the underlying performance of the Group.





9. Property, plant and equipment



The increase in property, plant and  equipment in the year of £7.8m  comprises 
additions of £27.0m and acquisition  of businesses of £1.8m less  depreciation 
of £19.7m, disposals  of £0.3m, transfers  to intangible assets  of £0.2m  and 
exchange movements of £0.8m.





10. Intangible assets



The increase in intangible assets in the year of £19.3m comprises goodwill and
intangible assets acquired on the  acquisition of businesses of £29.2m,  other 
additions of £2.5m, transfers from property, plant and equipment of £0.2m  and 
exchange movements of £1.1m less amortisation of £11.7m, impairments of  £1.8m 
and disposals of £0.2m. The impairment charge relates to goodwill in  Xeridiem 
and  resulted  from  a  reduction  in   the  projected  cash  flows  in   that 
cash-generating unit.





11. Post-retirement benefits



The Group operates  a number  of defined benefit  post-retirement schemes  for 
qualifying employees in operations around the world. The assets of the schemes
are held in separate trustee-administered funds.  The cost of the schemes  are 
assessed in  accordance with  the advice  of independent  qualified  actuaries 
using the projected unit method.



The principal scheme is the  Fenner Pension Scheme which  is based in the  UK. 
The most recent triennial valuation of  the Fenner Pension Scheme was  carried 
out as at 31 March 2011. The actuarial valuations for all schemes were updated
as at 31 August 2012 by independent qualified actuaries.



Retirement  benefit  obligations  increased  by  £16.5m  in  the  year.   This 
principally comprises  an increase  in  the present  value of  obligations  of 
£27.8m, principally as a result of a decrease in AA corporate bond yields used
to discount obligations, less an increase in  the fair value of assets of  the 
schemes of £11.4m, principally generated from the schemes' equity  investments 
and additional Group contributions paid to reduce the deficit.





12. Provisions

                                             Contingent and

                                                   deferred
                                                              Redemption
                                              consideration
                 Restructuring  Property and                liability on
                                                         on
                        costs environmental   acquisitions acquisitions Total

                            £m            £m             £m           £m    £m
At 1 September
2011                       0.2           4.3           19.3         14.0  37.8
New provisions
charged to
income statement
during the year              -           0.3              -            -   0.3
Provisions
utilised during
the year                 (0.2)         (0.4)              -            - (0.6)
Provisions
released during
the year                     -             -          (1.7)            - (1.7)
Acquisition of
businesses                   -             -            0.8        (1.9) (1.1)
Movement in
redemption
liability in
equity                       -             -              -          0.2   0.2
Notional
interest on the
unwinding of
discount                     -             -            0.5          1.0   1.5
Notional finance
charge on
redemption
liability                    -             -              -          1.7   1.7
Exchange
differences                  -             -            0.3        (0.2)   0.1
At 31 August
2012                         -           4.2           19.2         14.8  38.2



Provisions comprise current provisions of £9.4m (2011: £12.4m) and non-current
provisions of £28.8m (2011: £25.4m).





13. Reconciliation of net cash flow to movement in net debt

                                                                  2012    2011

                                                                    £m      £m
Net increase in cash and cash equivalents                          4.2    59.6
Net decrease/(increase) in borrowings resulting from cash
flows                                                              6.5  (50.2)
Movement in net debt resulting from cash flows                    10.7     9.4
Finance leases on acquisition of businesses                          -   (1.2)
New finance leases                                               (0.6)   (0.1)
Transfer of non-controlling interests from equity                (0.8)       -
Notional finance charge on other loans                           (0.5)       -
Exchange movements                                               (4.7)     0.5
Movement in net debt in the year                                   4.1     8.6
Net debt at 1 September 2011                                   (101.8) (110.4)
Net debt at 31 August 2012                                      (97.7) (101.8)



Net debt  comprises cash  and  cash equivalents  of £108.7m  (2011:  £104.3m), 
current borrowings  of £11.0m  (2011: £16.8m)  and non-current  borrowings  of 
£195.4m (2011: £189.3m).





14. Contingent liabilities



In the normal course  of business the Group  has given guarantees and  counter 
indemnities in respect of commercial transactions.



The Group is involved as defendant in  a small number of potential and  actual 
litigation cases in connection with its business, primarily in North  America. 
The directors believe that the likelihood of a material liability arising from
these cases is remote.





15. Related party transactions



Other than  the  remuneration  of  the  Group's  executive  and  non-executive 
directors and members of the Executive Committee, there were no related  party 
transactions during the year to disclose.





16. Acquisitions



On 1 September 2011, the Group acquired the entire share capital of  Transeals 
Pty  Limited  ("Transeals"),  a  privately  owned  company  based  in   Perth, 
Australia. Transeals  manufactures and  distributes  seals used  in  hydraulic 
equipment, currently serving  the western parts  of Australia. This  strategic 
acquisition allows the Hallite  operation in Australia,  which is mainly  east 
coast based, to develop its aftermarket presence in the buoyant mining and oil
and gas markets of Western Australia. The cash consideration was £8.1m.



On 1 December  2011, the  Group acquired  substantially all  of the  operating 
assets  of  the  business  being  conducted  under  the  name  Allison  Custom 
Fabrication ("Allison") from a group of related privately owned entities based
in  Pennsylvania,  USA.  Allison  specialises  in  the  design,   engineering, 
machining and  metal fabrication  of customised  material handling  equipment, 
primarily for  the mining  markets  of Pennsylvania  and West  Virginia.  This 
acquisition will strengthen the Fenner Dunlop Americas operation's strategy of
being the supplier of choice for engineered conveyor solutions in the Americas
and will enable mining customers  to enjoy integrated solutions for  improving 
the safety  and  total  cost  of ownership  of  materials  handling,  in  both 
underground and above ground applications.The initial cash consideration  was 
£15.0m with contingent and deferred  consideration estimated at £10.4m,  based 
on exchange rates at the date of completion.



From the  date of  acquisition, Allison  contributed £8.3m  to Group  revenue, 
£0.9m to  Group  operating profit  before  amortisation of  intangible  assets 
acquired and a  loss of  £0.2m to  Group operating  profit. From  the date  of 
acquisition, Transeals  contributed £4.5m  to Group  revenue, £0.8m  to  Group 
operating profit before amortisation of  intangible assets acquired and  £0.4m 
to Group operating profit.



If the  acquisition  of  Allison had  occurred  on  1 September  2011,  it  is 
estimated that Group revenue would  have been £833.9m, Group operating  profit 
before amortisation of intangible assets acquired would have been £119.8m  and 
Group operating profit would have  been £108.2m. The acquisition of  Transeals 
occurred on 1 September 2011. These amounts have been calculated by  adjusting 
the results of the  acquired businesses to reflect  the effect of the  Group's 
accounting policies as if they had been in effect from 1 September 2011.



Details of the aggregate  assets and liabilities  acquired, based on  exchange 
rates at the dates of completion, are given below.



                                            Prior year
                      Allison  Transeals   acquisitions                  Total
                  Provisional       Fair       Deferred                   Fair

                   Fair value      Value  Consideration                  value

                           £m         £m             £m                     £m
Property, plant           1.7        0.1              -                    1.8
and equipment
Goodwill                  4.4        3.7              -                    8.1
Intangible
assets acquired:
- customer               14.5        4.0
relationships                                         -                   18.5
- non-compete             2.4
agreement                              -              -                    2.4
- leases                    -                           <

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