Conveyor belt specialist Fenner (FENR), already facing disruption from weak commodity markets, is now without a full-time chief executive officer (CEO) after Nick Hobson was hit by ill health.
Chairman Mark Abrahams, who was CEO from 1994 to 2011, will fill the gap until Hobson returns, though Abrahams himself is scheduled to leave the business in 2017.
Management instability adds a new layer of uncertainty for investors in the Hessle, Yorkshire-based manufacturing outfit.
Weakness in the US coal market and elsewhere in the resources sector is leading to reduced investment by miners and places pressure on how much suppliers like Fenner can charge.
Engineered Conveyer Solutions (ECS), historically Fenner’s flagship division, is set to be restructured in 2016, which analysts at Liberum argue may force a review of the dividend policy.
Operating profit, a measure of ongoing profitability excluding interest and tax, declined to £56.4 million in the 12 months to 31 August 2015, from £79.5 million a year earlier.
In 2016, operating profit is forecast to fall again, to £42 million, before returning to growth in 2017 according to Liberum analyst Ben Bourne’s forecasts.
Fenner’s exposure to cyclical demand from mining companies is offset to an extent by its Advanced Engineered Products (AEP) division, which now delivers the majority of its profits.
A strong balance sheet, with tangible book value at 58p a share at the time of 2015 results, may also provide investors with some comfort though there’s a danger of write-downs to the carrying value of plant and equipment when ECS is restructured.
Fenner still trades some way ahead of its 2009 lows of 33p a share at the height of the financial crisis, though profit in AEP has since more than doubled and tangible book value has increased from 17.5p a share.
Shares in Fenner trade flat at 139p.
