TIDMTRI
RNS Number : 3840W
Trifast PLC
14 November 2017
The information contained within this announcement
is deemed by the Company to constitute inside information
stipulated under the Market Abuse Regulation (EU) No. 596/2014.
Upon the publication of this announcement via the Regulatory
Information Service, this inside information is now considered to
be in the public domain.
TRIFAST PLC
HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHSED 30 SEPTEMBER 2017
"Another six months of strong growth, with increased trading
driving up our underlying PBT"
KEY FINANCIALS
--------------------------------------- -------- -------- -------- ---------
Change
HY2018
Continuing operations (Actual Exchange v
Rate, AER) HY2017 HY2018 HY2017 FY2017
--------------------------------------- -------- -------- -------- ---------
Group revenue +9.0% GBP97.8m GBP89.7m GBP186.5m
Gross profit % -140bps 30.2% 31.6% 31.1%
Underlying operating profit* +8.5% GBP11.1m GBP10.3m GBP21.0m
Operating profit +6.4% GBP9.3m GBP8.8m GBP17.9m
Underlying profit before tax* +9.7% GBP10.9m GBP9.9m GBP20.5m
Profit before tax +7.7% GBP9.1m GBP8.5m GBP17.3m
Underlying diluted earnings per
share* +8.1% 6.78p 6.27p 12.82p
Diluted earnings per share +23.1% 6.56p 5.33p 10.40p
Basic earnings per share +22.2% 6.72p 5.50p 10.72p
Interim/total dividend^ +10.0% 1.10p 1.00p 3.50p
--------------------------------------- -------- -------- -------- ---------
Net debt -GBP6.3m GBP7.9m GBP14.2m GBP6.4m
Return on capital employed (ROCE)* +150bps 20.1% 18.6% 19.9%
--------------------------------------- -------- -------- -------- ---------
* Before separately disclosed items (see notes 2, 6 and 9).
^ Change is in interim dividend only.
OPERATIONAL HIGHLIGHTS
-- Revenue up by 4.8% at Constant Exchange Rate (CER), 9.0% at AER, all organic growth
-- Underlying diluted earnings per share up by 8.1% at AER
-- Confidence for the future and continued profitable growth in
a period of investment, drives an interim dividend increase of
10.0% to 1.10p
-- Ongoing investment for growth in our sales teams and operations around the world
-- Capital investment of GBP1.3m increases our manufacturing
capacity and capability, with more to follow
-- Expanded distribution facilities in Shanghai, with plans in
place for Holland and Northern Ireland
-- New TR Innovation and Technical Centre to be set up in
Gothenburg, Sweden's electric vehicle development area
-- TR Fastenings Espana up and running, with a strong pipeline in place
"HY2018 delivered another six months of strong growth, with
ongoing investment across all of our regions.
Our strong first half results, together with a robust balance
sheet, good access to banking facilities and a proven track record
of profitable investment, means the Group is in a great position to
keep moving forward. The second half has started well and, with a
robust pipeline in place, the Board remain confident of delivering
its expectations for the current financial year.
As an international business with over 70% of our revenue being
generated outside of the UK, and a very well-balanced geographical
and sector spread, the Board remains confident we have the
flexibility and foresight to continue to grow, while facing any
challenges head on as and when they arise."
Malcolm Diamond MBE, Non-Executive Chairman
To listen to the CEO, Mark Belton talking about trading and the
business follow this link:
https://www.brrmedia.co.uk/broadcasts-embed/5a057df02acfc74f9342e193/event
Presentation of Results:
This will be held at 8.45am (UK) today at, The Lounge - 1
Cornhill, London, EC3V 3ND.
Conference dial-in facility: on request, please contact Fiona
Tooley on +44 (0)7785 703523
or email fiona@tooleystreet.com.
Enquiries please contact:
Trifast plc
Malcolm Diamond MBE,
Non-Executive Chairman
Mark Belton, Chief Executive
Officer
Clare Foster, Chief Financial
Officer
Today: Mobile: +44 (0)
7979 518493 (MMD)
Office: +44 (0) 1825
747630
Email: corporate.enquiries@trifast.com
Peel Hunt LLP
Stockbroker & financial
adviser
Justin Jones
Mike Bell
Matthew Brooke-Hitching
Tel: +44 (0)20 7418 8900
TooleyStreet Communications
IR & media relations
Fiona Tooley
Tel : +44 (0)7785 703523
Email : fiona@tooleystreet.com
Editors' note:
LSE Premium Listing: Ticker: TRI
LEI number: 213800WFIVE6RUK3CR22
Group website: www.trifast.com
About us: Trifast, leading international specialists in the
engineering, manufacturing and distribution of high quality
industrial fastenings to major global assembly industries. Key
sectors are automotive, domestic appliances, electronics and
distributors.
The Group employs c.1,200 staff across 28 global locations
across the UK, Europe, Asia and the USA.
For more information, visit
Commercial website: www.trfastenings.com
LinkedIn: www.linkedin.com/company/tr-fastenings
Twitter: www.twitter.com/trfastenings
Facebook: www.facebook.com/trfastenings
Electronic Communications
The Company is not proposing to bulk print and distribute
hard copies of this half-yearly financial report for
the six months ended 30 September 2017 unless specifically
requested by individual shareholders. News updates,
Regulatory News, and Financial statements, can be viewed
and downloaded from the Group's website, www.trifast.com.
Copies can also be requested via corporate.enquiries@trifast.com
or, in writing to, The Company Secretary, Trifast plc,
Trifast House, Bellbrook Park, Uckfield, East Sussex,
TN22 1QW.
Forward-looking statements
This announcement contains certain forward-looking statements.
These reflect the knowledge and information available to the
Company during the preparation and up to the publication of this
document. By their very nature, these statements depend upon
circumstances and relate to events that may occur in the future
thereby involving a degree of uncertainty. Therefore, nothing in
this document should be construed as a profit forecast by the
Company.
TRIFAST PLC
HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHSED 30 SEPTEMBER 2017
"WE ARE FOCUSSED ON LEVERAGING OUR COMBINED STRENGTHS AS AN
INTEGRATED AND INTERACTIVE GROUP"
INTRODUCTION
We continue to develop the depth and scope of our business from
a position of financial strength and stability that derives from
continuing organic growth, supported by effective cash management
and overhead controls.
Global market overview
We imagine that there are very few of us in commerce that have
failed to be influenced by the recent geopolitical uncertainty that
has abounded, and which shows every sign of continuing.
The Trifast Board and management team have concluded, that in
our view, global market demand will remain dynamic, and so we have
increased our focus on our customers and our supply chain,
including our pricing negotiations with key suppliers. This is
coupled with our ongoing forward investment in plant and machinery,
automation and people skills.
TR strategy update
Our commitment to continuous operational improvement over the
past five years has been rewarded with positive KPI performance
against targets on a consistent annual basis, together with
financial reward for our investors and staff.
Building on this success, the Board, led by Mark Belton, has
initiated a major long-term project to provide the Group with
improved real-time management information (including an innovative
customer relationship management (CRM) and global enquiry system),
paralleled with regular senior team training and operational
meetings. This is aimed at significantly developing and integrating
our existing IT infrastructure around the world so as to support
our ongoing growth plans and meet our multinational OEM customers'
evolving demands. One early benefit of this improved approach is
that our six Asian factories are now sharing factory capacity data
to enable work to be shared at times of feast and famine production
issues - previously these were managed on a local basis, thus
restricting revenue and cost recovery opportunities.
Furthermore, this enhanced use of collective resources is
supported by major capital investments in Italy, Singapore and
Taiwan, plus distribution and engineering capacity investment in
the UK, Sweden, Spain and China.
Our search for suitable acquisitions continues to be a major
strategic aim. Since we last reported in June 2017, two larger
international targets were thoroughly investigated over several
months by our newly formed global acquisitions team, but
regrettably, both were finally rejected - more due to future
revenue growth risk than to high valuations. Our team brings
together the skills and experience needed to conduct initial due
diligence without the need to appoint costly external financial
advisers. These advisers will only be appointed in the future
following the successful agreement of non-binding heads of
terms.
Succession and people
It has been a real pleasure to sign an increasing number of long
service award certificates for our burgeoning loyal members of
staff - some of whom have now reached forty-years service, along
with many overseas employees being recognised for service of ten
years and more.
Across the Group, skills and personal development training are
high on the list for resource funding and management focus,
especially as our ever-improving operational efficiencies are
creating the need for heightened individual capabilities as opposed
to the need for always increasing head count to accommodate
business growth.
I am personally proud and delighted to oversee the further
capability development of our business whilst the core Trifast
caring and informal interpersonal culture is jealously guarded by
our management.
Malcolm Diamond MBE, Non-Executive Chairman
13 November 2017
BUSINESS REVIEW
Unless stated otherwise, comparisons with prior year are
calculated at constant currency (CER) and where we refer to
'underlying', this is defined as being before separately disclosed
items (see note 2). CER calculations have been calculated by
translating the HY2018 figures by the average HY2017 exchange
rate.
The above reflects a change in calculation from the HY2017
statement where the average FY2016 rate was used. Given the marked
movement in the rates following the Brexit vote in June 2016,
management consider using the average HY2017 rate presents a more
accurate reflection of our CER growth in HY2018 than an average
FY2017 rate would allow.
The impact of foreign exchange movements has increased our
revenue by an additional 4.2%, GBP3.8m (HY2017: 6.8%, GBP5.3m), our
underlying profit before tax by a further 5.2%, GBP0.5m (HY2017:
12.3%, GBP1.0m) and our underlying diluted EPS by 5.2%, 0.33p
(HY2017: 13.9%, 0.70p).
Our Group performance
HY2018 HY2018 HY2017 Change Change
CER AER at CER at AER
---------------------- --------- --------- --------- -------- --------
Revenue GBP94.0m GBP97.8m GBP89.7m 4.8% 9.0%
---------------------- --------- --------- --------- -------- --------
Gross profit (GP) GBP28.4m GBP29.5m GBP28.4m 0.0% 3.9%
---------------------- --------- --------- --------- -------- --------
GP% 30.2% 30.2% 31.6% -140bps -140bps
---------------------- --------- --------- --------- -------- --------
Underlying EBITDA GBP11.5m GBP12.1m GBP11.2m 2.4% 7.4%
---------------------- --------- --------- --------- -------- --------
Underlying operating
profit (UOP)* GBP10.6m GBP11.1m GBP10.3m 3.4% 8.5%
---------------------- --------- --------- --------- -------- --------
UOP% 11.3% 11.4% 11.4% -10bps 0bps
---------------------- --------- --------- --------- -------- --------
Underlying profit
before tax* GBP10.4m GBP10.9m GBP9.9m 4.5% 9.7%
---------------------- --------- --------- --------- -------- --------
Underlying diluted
EPS* 6.45p 6.78p 6.27p 2.9% 8.1%
---------------------- --------- --------- --------- -------- --------
*The non-underlying measures are included in the Key Financials
table at the start of this report. Reconciliation to equivalent
IFRS measures are in notes 2, 6 & 9.
In HY2018 we have seen another six months of good revenue
growth, up 4.8% to GBP94.0m (AER: up 9.0% to GBP97.8m; HY2017:
GBP89.7m).
This growth has come from our successful ongoing organic growth
strategy. Sales to our top 100 multinational OEMs have grown by
4.4% in the period, reflecting the ever-increasing share of wallet
we are securing with these key customers. Complementing this, we
have also continued to see very strong growth, up 19.0%, across our
master distributor network, predominantly into Europe.
Gross margins have been maintained slightly ahead of our 30.0%
target at 30.2% (AER: 30.2%), although as expected these have
reduced from the HY2017 high of 31.6%. This reduction is the result
of known inflationary purchase pricing pressures which to date have
been most keenly felt in Europe, arising in the main from the
protracted weakness of the EUR against the US$. Despite this
decrease in gross margins, underlying operating margins have
remained steady at 11.3% (AER: 11.4%; HY2017: 11.4%), reflecting
our ongoing focus on strong overhead control, even in a period of
investment driven growth.
Our underlying PBT continues to grow, up by 9.7% at AER to
GBP10.9m (HY2017: GBP9.9m) and 4.5% at CER. This has resulted in a
strong increase in our underlying diluted earnings per share (EPS)
at AER, up 8.1% to 6.78p (HY2017: 6.27p).
Revenue (CER)
Revenues have increased across all our regions and this has been
strongest in Asia, up by 10.7% to GBP28.0m (AER: up 16.8% to
GBP29.6m; HY2017: GBP25.3m). This has largely been driven by
increases in our domestic appliances business in Singapore and
automotive wins for our Chinese, Malaysian and Taiwanese
operations. In PSEP, Malaysia, it is especially encouraging to see
that the increase in intercompany co-operation we put in place
following the downturn in the domestic economy has continued to
bear fruit, with total PSEP revenues increasing strongly in the
period and up by 7.1% against the HY2017.
In the UK, we have seen good growth in what is a mature market,
up 4.1% to GBP35.4m (HY2017: GBP34.0m). Our ability to deliver high
quality products from our extensive range within 48 hours across
the whole of mainland Europe has led to significant increases in
our distributor revenues, which has been coupled with an increase
in contract sales to several of our key multinational OEMs.
In Europe, growth overall has been steady at 2.4% to GBP33.7m
(AER: up 9.8% to GBP36.1m; HY2017: GBP32.9m). Our automotive sector
is experiencing the greatest growth, most specifically in Holland
and Sweden with increases of 10.5% and 8.9% respectively. In Italy,
the importance of automotive is also building, with sales to this
sector increasing by 27.5% in HY2017, albeit off a small base.
Consistent with the second half of FY2017, volume reductions at one
of the Group's largest domestic appliances multinational OEMs, have
partly offset other increases across the region. Trading volumes
with this customer had been abnormally high in both the second half
of FY2016 and HY2017, as we supported a significant global product
recall programme.
In the USA, growth in the period has been good at 3.7% to
GBP3.1m (AER: up 10.0% to GBP3.3m; HY2017: GBP3.0m), although lower
than the double-digit rate anticipated. This reflects a reduction
in our sales to the electronics sector, largely because of the
manufacturing issues some of our key customers are experiencing in
the wake of Hurricane Harvey. However, the start of production on
new automotive wins in the region have helped to offset the
negative impact of this.
Underlying operating profit (CER)
Underlying operating margins have remained steady at 11.3% (AER:
11.4%; HY2017: 11.4%), generating an overall increase in underlying
operating profit of 3.4% to GBP10.6m (AER: up 8.5% to GBP11.1m;
HY2017: GBP10.3m).
Asia has driven a large element of the increase with underlying
operating margins climbing by an impressive 170bps to 14.7% (AER:
up 180bps to 14.8%; HY2017: 13.0%) mainly due to increased sales
levels across a semi-fixed cost base. Offsetting this gain,
regional gross margins fell slightly, by 60bps, largely due to the
ongoing weakness of both GBP and the US$ against the NT$.
In line with the second half of FY2017, our European region has
seen a marked decrease in underlying operating margins against
HY2017, reporting a 540bps fall to 10.9% (AER: fall of 540bps to
10.9%; HY2017: 16.3%). Most of the reduction arises from a decline
in the gross profit margin. This is most specifically in our
Italian operation where, as expected, the impact of increases in
purchase costs at the end of HY2017 have continued into HY2018.
This has been in addition to a planned increase in fixed production
costs in Italy as we invest for future growth. Whilst investment
costs to successfully get our new Spanish greenfield site up and
running, represent most of the overhead led decrease in the
region's underlying operating margin.
In the UK, underlying operating margins have improved strongly
by 190bps to 11.1% (HY2017: 9.2%). Most of this rise comes through
at gross profit level due to increases in revenues as well as
several high margin sales in the period. Foreign exchange gains
made on our EUR distributor sales reflecting a weak GBP, have to
date, been able to offset the negative impact of inflationary
pricing pressures following the Brexit vote. The rest of the
increase reflects a reduction in our overhead spend. This is in
line with our ongoing commitment to control costs wherever
possible, so as to allow us to continue to invest in those areas
where we see the greatest opportunities for growth.
In the USA, underlying operating margins have fallen sharply by
190bps to 3.7% (AER: fall of 200bps to 3.6%; HY2017: 5.6%)
although, as this is our smallest region, the total decrease
equates to less than GBP0.1m. The majority of this reduction
reflects lower gross margins as our electronics sales have
decreased in a large part due to Hurricane Harvey. As in prior
periods, low underlying operating margins are to be expected in
this region given the level of investments for future growth being
made here.
Net financing costs (AER)
These have continued to fall to GBP0.2m (HY2017: GBP0.3m) in
line with the reduction in average net debt.
Taxation (AER)
The HY2018 effective tax rate (ETR) of 11.2% is significantly
lower than our underlying FY2018 ETR of c.23.5%. The main reason
for this difference is due to the finalisation of a fully provided
historic tax position in the UK relating to a combination of EU
loss relief claims (GBP0.6m) for losses made in the run up to the
closure of TR France in 2007 and EU dividend relief claims
(GBP0.6m) to cover dividends paid up to Trifast plc between the
years of 2007 to 2009.
The provision in the accounts at 31 March 2017 was GBP1.2m and
the final settlement agreed on 7 September 2017 was GBP0.3m,
leading to a prior year corporation tax adjustment of GBP0.9m. Due
to the size and the nature of this amount, we have removed the
positive impact of this release from our underlying ETR (see note
9).
Earnings per share (AER)
Our ongoing growth in underlying profit before tax, and foreign
exchange translation tailwinds, has led to a strong increase in our
underlying diluted EPS of 8.1% to 6.78p (HY2017: 6.27p).
Dividend
Confidence for the future and continued profitable growth in a
period of investment, has driven an interim dividend increase of
10.0% to 1.10p (HY2017: 1.00p). The interim dividend will be paid
on 12 April 2018, to shareholders on the Register as at 16 March
2018. The shares will become ex-dividend on 15 March 2018.
Shareholder equity (AER)
As at 30 September 2017, the Group's shareholders' equity
increased to GBP104.0m (FY2017: GBP101.7m). The GBP2.3m uplift
reflects retained earnings of GBP4.8m (HY2017: GBP3.8m), net of a
foreign exchange reserve loss of GBP1.4m and share purchases (net
of share issues) totalling GBP1.1m.
In HY2018, the Group used the Trifast Qualifying Employee
Benefit Trust (EBT) for the first time to purchase 500,000 ordinary
5p shares in the market at 220p. At the 30 September 2017, these
shares were still held by the EBT and will be used to honour future
equity award commitments as required.
Net debt (AER)
Our net debt position at the end of HY2018 has increased by
GBP1.5m to GBP7.9m (FY2017: GBP6.4m). Some GBP1.2m of this increase
is due to the payment out of cash held specifically at 31 March
2017 to settle the national insurance and income tax payments
relating to the Chairman, Malcolm Diamond's exercise of 1,000,000
share options on 17 February 2017.
Capital expenditure of GBP1.3m in the period supports the
Board's ongoing investment in the business, most specifically
within our manufacturing sites with additional capacity projects
underway in Italy, Singapore and Taiwan. In addition, as previously
mentioned, GBP1.1m has been used to acquire 500,000 5p ordinary
shares on the open market via the Trifast EBT. Although our cash is
held across a number of currencies around the world, our gross debt
continues to be held predominantly in EUR and this has led to a
GBP1.3m net increase in net debt mainly from the relative
strengthening of the EUR in the period.
Outside of these movements, our cash generation has reduced with
a conversion rate of underlying EBITDA to underlying cash of 52.3%
(FY2017: 97.3%; HY2017: 82.6%). Our investment in gross stock in
the period includes an extra GBP2.5m to normalise the very low
position we ended FY2017 on and to bring stock weeks back up to
22.8 weeks (FY2017: 21.8 weeks, HY2017: 24.5 weeks). Without the
impact of this, our conversion rate of underlying EBITDA to
underlying cash would be higher at 73.1%.
As at 30 September the headroom on our banking facility was
GBP16.2m (FY2017: GBP13.1m). The net debt to EBITDA ratio is 0.3x
which is significantly less than our covenant limit of 2.75x. In
addition, we continue to have access to an accordion facility of
GBP20.0m within our Group banking facilities with HSBC. These
provide the potential flexibility to debt finance future
acquisitions and further investments as required.
Ongoing and future investment plans
In Asia, over the course of FY2018, we will be investing GBP1.0m
in the construction of a mezzanine level at our Singapore facility
to expand capacity, initially by 25%, and to increase R&D
capabilities. While in Shanghai, we have just expanded our
warehousing and inspection facilities to support the double-digit
growth we are seeing both in the Chinese domestic market and via
our recent expansion into the Japanese market.
In Europe, our greenfield site in Spain is now up and running.
First orders have been processed, stock is on the shelves and the
pipeline is looking strong. In Italy, the investments we have made
in the heat treatment plant in FY2017 are beginning to pay back,
bringing an end to the production bottlenecks that were limiting
our ability to expand capacity at the plant. Looking ahead, we have
further investment planned to support the ongoing growth in our
European distribution sites including a warehouse expansion in
Holland and a TR Innovation and Technical centre situated in the
heart of Sweden's electric vehicle development area, Lindholmen,
Gothenburg.
In the UK, we are in the process of expanding our warehousing
facilities in Northern Ireland to support the strong ongoing growth
we are seeing at this site. Whilst in the USA, despite the
immediate difficulties following on from Hurricane Harvey, we plan
to carry on investing to build the local team and to support future
growth in this important market.
Complementing all of the above, we are continuing to invest in
both our global and local sales resources and supporting teams. In
addition, investments are also being made to improve our digital
and business management systems to help facilitate the improved
integration of our global business. A major part of this investment
is the commencement of a long-term project to significantly develop
and integrate our existing IT infrastructure platform across the
world. The consistent levels of growth we have enjoyed over recent
years, as well as our future growth plans, necessitate this in
order to future proof the business and ensure we remain both fit
for purpose and able to continue to meet the demands of our
multinational OEM customers.
As ever, the search for the next successful acquisition remains
an important strategic aim for the Group and one that is further
supported by our newly formed global acquisitions team.
Outlook
HY2018 delivered another six months of strong growth, with
ongoing investment across all our regions.
Our strong first half results, together with a robust balance
sheet, good access to banking facilities and a proven track record
of profitable investment, means the Group is in a great position to
keep moving forward. The second half has started well and, with a
robust pipeline in place, the Board remain confident of delivering
its expectations for the current financial year. There are, of
course, some macroeconomic factors we cannot fully mitigate,
including the ongoing volatility in the foreign currency and raw
materials markets, input cost pressures in the UK due to the
protracted weakness of GBP, as well as the wider potential
implications of Brexit on our business and the UK economy.
However, as an international business with over 70% of our
revenue being generated outside of the UK, and a very well-balanced
geographical and sector spread, the Board remains confident we have
the flexibility and foresight to continue to grow, while facing any
challenges head on as and when they arise.
RISKS AND UNCERTAINTIES
The Directors do not consider that the principal risks and
uncertainties of the Group have changed since the publication
in June 2017 of the Group's Annual Report for the year ended 31
March 2017. A copy of this publication can be found on the
website
www.trifast.com.
No system can fully eliminate risk and therefore the
understanding of operational risk is central to the management
process within TR. The Group operates a system of internal control
and risk management to provide assurance that we are managing risk
whilst achieving our business objectives. Risk assessment reviews
are regularly carried out by management, with responsibilities for
monitoring and mitigating personally allocated to a broad spread of
individual managers. The review is analysed and discussed at Audit
Committee meetings chaired by our Senior Independent Non-Executive
Director.
As with all businesses, the Group faces risks, with some not
wholly within its control, which could have a material impact on
the Group, and may affect its performance with actual results
becoming materially different from both forecast and historic
results. There are indications that the macroeconomic climate is
still under pressure, and so, we continue to remain vigilant for
any indications that could adversely impact expected results going
forward. Past and future acquisitions can also carry impairment
risks on goodwill should there be a sustained downturn in trading
within an acquired subsidiary.
The long-term success of the Group depends on the ongoing
review, assessment and control of the key business risks it
faces.
Trifast plc - responsibility statement
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
-- the interim management report includes a fair review of the information required by:
a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
b. DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
Mark Belton, Chief Executive Officer
13 November 2017
Condensed consolidated interim income statement
Unaudited results for the six months ended 30 September 2017
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
Notes GBP000 GBP000 GBP000
-------------------------------------- ------- ------------- ------------- ---------
Continuing operations
Revenue 97,813 89,747 186,512
Cost of sales (68,311) (61,347) (128,495)
-------------------------------------- ------- ------------- ------------- ---------
Gross profit 29,502 28,400 58,017
Other operating income 238 203 395
Distribution expenses (2,043) (1,806) (3,964)
-------------------------------------- ------- ------------- ------------- ---------
Administrative expenses before
separately disclosed items 2 (16,566) (16,535) (33,430)
Acquired intangible amortisation (558) (721) (1,273)
IFRS 2 charge (988) (670) (1,512)
Sale of fixed assets - 194 195
Cost on exercise of executive
share options (245) (287) (567)
-------------------------------------- ------- ------------- ------------- ---------
Total administrative expenses (18,357) (18,019) (36,587)
-------------------------------------- ------- ------------- ------------- ---------
Operating profit 9,340 8,778 17,861
-------------------------------------- ------- ------------- ------------- ---------
Financial income 24 27 60
Financial expenses (246) (340) (581)
-------------------------------------- ------- ------------- ------------- ---------
Net financing costs (222) (313) (521)
-------------------------------------- ------- ------------- ------------- ---------
Profit before tax 9,118 8,465 17,340
Taxation 4 (1,025) (1,995) (4,642)
-------------------------------------- ------- ------------- ------------- ---------
8,093 12,698
-------------------------------------- ------- ------------- ------------- ---------
Profit for the period
(attributable to equity shareholders
of the parent company) 6,470
-------------------------------------- ------- ------------- ------------- ---------
Earnings per share
Basic 6 6.72p 5.50p 10.72p
Diluted 6 6.56p 5.33p 10.40p
-------------------------------------- ------- ------------- ------------- ---------
Condensed consolidated interim statement of comprehensive
income
Unaudited results for the six months ended 30 September 2017
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
-------------------------------------- ------------- ------------- ---------
Profit for the period 8,093 6,470 12,698
Other comprehensive income/(expense):
Exchange differences on translation
of foreign operations (703) 8,231 8,486
Net loss on hedge of net investment
in foreign subsidiary (722) (2,433) (2,155)
-------------------------------------- ------------- ------------- ---------
Other comprehensive income/(expense)
recognised directly in equity,
net of income tax (1,425) 5,798 6,331
-------------------------------------- ------------- ------------- ---------
Total comprehensive income recognised
for the period
(attributable to equity shareholders
of the parent company) 6,668 12,268 19,029
-------------------------------------- ------------- ------------- ---------
Condensed consolidated interim statement of changes in
equity
Unaudited results for the six months ended 30 September 2017
Unaudited results for Treasury
the Share Share shares Translation Retained Total
six months ended 30 September capital premium GBP000 reserve earnings equity
2017 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------- -------- -------- -------- ----------- --------- -------
Balance at 1 April 2017 6,014 21,378 - 14,900 59,406 101,698
Total comprehensive income
for the period:
Profit for the period - - - - 8,093 8,093
Other comprehensive expense:
Foreign currency translation
differences - - - (703) - (703)
Net loss on hedge of
net investment in
foreign subsidiary - - - (722) - (722)
------------------------------------- -------- -------- -------- ----------- --------- -------
Total other comprehensive
expense - - - (1,425) - (1,425)
------------------------------------- -------- -------- -------- ----------- --------- -------
Total comprehensive (expense)/income
for the period - - - (1,425) 8,093 6,668
------------------------------------- -------- -------- -------- ----------- --------- -------
Transactions with owners,
recorded directly
in equity:
Issue of share capital 42 12 - - (40) 14
Treasury shares acquired - - (1,100) - - (1,100)
Share based payment transactions
(including tax) - - - - 950 950
Dividends - - - - (4,231) (4,231)
------------------------------------- -------- -------- -------- ----------- --------- -------
Total transactions with
owners 42 12 (1,100) - (3,321) (4,367)
------------------------------------- -------- -------- -------- ----------- --------- -------
Balance at 30 September
2017 6,056 21,390 (1,100) 13,475 64,178 103,999
------------------------------------- -------- -------- -------- ----------- --------- -------
Unaudited results for Treasury
the Share Share shares Translation Retained Total
six months ended 30 September capital premium GBP000 reserve earnings equity
2016 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------------- --------- -------- -------- ----------- --------- -------
Balance at 1 April 2016 5,837 21,161 - 8,569 48,183 83,750
Total comprehensive income for the period:
Profit for the period - - - - 6,470 6,470
Other comprehensive income/(expense):
Foreign currency translation differences - - - 8,231 - 8,231
Net loss on hedge of net investment
in
foreign subsidiary - - - (2,433) - (2,433)
--------------------------------------------- -------- -------- -------- ----------- --------- -------
Total other comprehensive income - - - 5,798 - 5,798
--------------------------------------------- -------- -------- -------- ----------- --------- -------
Total comprehensive income for the period - - - 5,798 6,470 12,268
--------------------------------------------- -------- -------- -------- ----------- --------- -------
Transactions with owners, recorded directly
in equity:
Issue of share capital 104 42 - - (52) 94
Share based payment transactions (including
tax) - - - - 698 698
Dividends - - - - (3,310) (3,310)
--------------------------------------------- -------- -------- -------- ----------- --------- -------
Total transactions with owners 104 42 - - (2,664) (2,518)
--------------------------------------------- -------- -------- -------- ----------- --------- -------
Balance at 30 September 2016 5,941 21,203 - 14,367 51,989 93,500
--------------------------------------------- -------- -------- -------- ----------- --------- -------
Condensed consolidated interim statement of financial
position
Unaudited results for the six months ended 30 September 2017
30 September 30 September 31 March
2017 2016 2017
Group Notes GBP000 GBP000 GBP000
--------------------------------- ----- ------------ ------------ --------
Non-current assets
Property, plant and equipment 18,421 18,176 19,258
Intangible assets 39,285 40,350 39,682
Deferred tax assets 2,139 2,121 2,359
--------------------------------- ----- ------------ ------------ --------
Total non-current assets 59,845 60,647 61,299
--------------------------------- ----- ------------ ------------ --------
Current assets
Inventories 46,942 43,713 41,926
Trade and other receivables 49,251 46,230 49,360
Assets held for sale 11 1,023 - -
Cash and cash equivalents 7 25,095 22,783 24,645
--------------------------------- ----- ------------ ------------ --------
Total current assets 122,311 112,726 115,931
--------------------------------- ----- ------------ ------------ --------
Total assets 182,156 173,373 177,230
--------------------------------- ----- ------------ ------------ --------
Current liabilities
Bank overdraft 7 - 94 -
Other interest-bearing loans and
borrowings 7 18,453 20,900 14,872
Trade and other payables 35,309 33,421 37,145
Tax payable 2,331 2,089 2,471
Dividends payable 5 3,028 2,376 -
Provisions - 70 76
--------------------------------- ----- ------------ ------------ --------
Total current liabilities 59,121 58,950 54,564
--------------------------------- ----- ------------ ------------ --------
Non-current liabilities
Other interest-bearing loans and
borrowings 7 14,512 16,020 16,221
Provisions 1,086 1,117 1,111
Deferred tax liabilities 3,438 3,786 3,636
--------------------------------- ----- ------------ ------------ --------
Total non-current liabilities 19,036 20,923 20,968
--------------------------------- ----- ------------ ------------ --------
Total liabilities 78,157 79,873 75,532
--------------------------------- ----- ------------ ------------ --------
Net assets 103,999 93,500 101,698
--------------------------------- ----- ------------ ------------ --------
Equity
Share capital 6,056 5,941 6,014
Share premium 21,390 21,203 21,378
Treasury shares 10 (1,100) - -
Reserves 13,475 14,367 14,900
Retained earnings 64,178 51,989 59,406
--------------------------------- ----- ------------ ------------ --------
Total equity 103,999 93,500 101,698
--------------------------------- ----- ------------ ------------ --------
Condensed consolidated interim statement of cash flows
Unaudited results for the six months ended 30 September 2017
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
Group Notes GBP000 GBP000 GBP000
---------------------------------------- ----- ------------- ------------- ---------
Cash flows from operating activities
Profit for the period 8,093 6,470 12,698
Adjustments for:
Depreciation, amortisation & impairment 1,493 1,697 3,123
Unrealised foreign currency loss 26 46 165
Financial income (24) (27) (60)
Financial expense 246 340 581
Loss/(gain) on sale of property,
plant & equipment and investments 2 (206) (184)
Equity settled share based payment
charge 956 670 1,512
Taxation charge 1,025 1,995 4,642
---------------------------------------- ----- ------------- ------------- ---------
Operating cash inflow before changes
in working capital
and provisions 11,817 10,985 22,477
Change in trade and other receivables 129 (127) (3,075)
Change in inventories (5,348) (2,087) (273)
Change in trade and other payables (1,631) 228 3,764
Change in provisions (101) (6) (6)
---------------------------------------- ----- ------------- ------------- ---------
Net cash generated from operations 4,866 8,993 22,887
Tax paid (1,219) (2,830) (5,136)
---------------------------------------- ----- ------------- ------------- ---------
Net cash generated from operating
activities 3,647 6,163 17,751
---------------------------------------- ----- ------------- ------------- ---------
Cash flows from investing activities
Proceeds from sale of property,
plant & equipment 2 206 198
Interest received 26 29 60
Acquisition of subsidiary, net
of cash acquired - (1,471) (1,471)
Acquisition of property, plant
& equipment (1,269) (928) (2,948)
---------------------------------------- ----- ------------- ------------- ---------
Net cash used in investing activities (1,241) (2,164) (4,161)
---------------------------------------- ----- ------------- ------------- ---------
Cash flows from financing activities
Proceeds from the issue of share
capital 14 94 341
Repurchase of treasury shares 10 (1,100) - -
Proceeds from new loan 2,316 2,773 2,236
Repayment of borrowings (1,315) (2,036) (7,030)
Payment of finance lease liabilities 86 (4) (6)
Dividends paid (1,203) (934) (3,310)
Interest paid (247) (340) (581)
---------------------------------------- ----- ------------- ------------- ---------
Net cash used in from financing
activities (1,449) (447) (8,350)
---------------------------------------- ----- ------------- ------------- ---------
Net change in cash and cash equivalents 957 3,552 5,240
Cash and cash equivalents at 1
April 24,645 17,581 17,581
Effect of exchange rate fluctuations
on cash held (507) 1,556 1,824
---------------------------------------- ----- ------------- ------------- ---------
Cash and cash equivalents at end
of period 7 25,095 22,689 24,645
---------------------------------------- ----- ------------- ------------- ---------
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
Unaudited results for the six months ended 30 September 2017
1. Basis of preparation
These condensed consolidated interim financial statements have
been prepared on the basis of accounting policies set out in the
full Annual Report and Accounts for the year ended 31 March
2017.
There are no new standards effective for the first time in the
current financial period with significant impact on the Group's
consolidated results or financial position.
However, two events occurred during the six months to 30
September 2017 that require disclosure of appropriate accounting
policies. These are:
-- Treasury shares
The Group's accounting policy for these repurchased shares
(classified as treasury shares) is to recognise the amount of the
consideration paid, which includes directly attributable costs, as
a deduction from equity. They are presented separately in equity in
the treasury share reserve. When treasury shares are sold or
reissued subsequently, the amount received is recognised as an
increase in equity and the resulting surplus or deficit on the
transaction is presented within share premium.
-- Asset held for sale
Non-current assets, or disposal groups comprising assets and
liabilities, are classified as held-for-sale if it is highly
probable that they will be recovered primarily through sale rather
than through continuing use.
Such assets, or disposal groups, are generally measured at the
lower of their carrying amount and fair value less costs to sell.
Any impairment loss on a disposal group is allocated first to
goodwill, and then to the remaining assets and liabilities on a pro
rata basis, except that no loss is allocated to inventories,
financial assets, deferred tax assets, employee benefit assets,
investment property or biological assets, which continue to be
measured in accordance with the Group's other accounting policies.
Impairment losses on initial classification as held-for-sale or
held-for-distribution and subsequent gains and losses on
remeasurement are recognised in profit or loss.
Once classified as held-for-sale, intangible assets and
property, plant and equipment are no longer amortised or
depreciated, and any equity-accounted investee is no longer equity
accounted.
These condensed consolidated interim financial statements have
been prepared in accordance with the Disclosure and Transparency
Rules (DTR) of the Financial Conduct Authority and International
Financial Reporting Standard (IFRS) IAS 34: Interim Financial
Reporting as adopted by the EU. They do not include all the
information required for full annual financial statements, and
should be read in conjunction with the consolidated financial
statements of the Group as at and for the year ended 31 March 2017.
The annual financial statements of the Group are prepared in
accordance with International Reporting Standards (IFRSs) as
adopted by the EU.
This statement does not comprise full financial statements
within the meaning of Section 495 and 496 of the Companies Act
2006. The statement is unaudited but has been reviewed by KPMG LLP
and their Report is set out on page 18.
The comparative figures for the financial year ended 31 March
2017 are not the Company's statutory accounts for that financial
year and have been extracted from the full Annual Report and
Accounts for that financial year. Those accounts have been reported
on by the Company's auditor and delivered to the Registrar of
Companies. The Report of the Auditors was (i) unqualified, (ii) did
not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their Report, and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
Going concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the accompanying half-yearly financial report from
the Non-Executive Chairman, Chief Executive Officer and Chief
Financial Officer. The financial position of the Company, its cash
flows, liquidity position and borrowing facilities are also
described in the same report. In addition, note 26 to the Company's
previously published financial statements for the year ended 31
March 2017 include the Company's objectives, policies and processes
for managing its capital; its financial risk management objectives;
details of its financial instruments and hedging activities; and
its exposures to credit risk and liquidity risk.
These condensed consolidated interim financial statements have
been prepared on a going concern basis which the Directors consider
to be appropriate.
Estimates
The preparation of financial statements in conformity with IFRSs
requires management to make estimates, judgements and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions take account of the circumstances and facts
at the period end, historical experience of similar situations and
other factors that are believed to be reasonable and relevant, the
results for which form the basis of making the judgements about
carrying values of assets and liabilities that are not readily
available from other sources. Actual results may ultimately differ
from these estimates.
Following a review, in preparing these condensed consolidated
interim financial statements, the significant judgements made by
management in applying the Group's accounting policies and the key
sources of estimation uncertainty were updated from those disclosed
in the consolidated financial statements for the year ended 31
March 2017. The key sources of estimation uncertainty are:
-- Recoverable amount of goodwill
-- Inventory valuation
-- Income taxes
The only change to the key sources of estimation uncertainty has
been the removal of the Fair values for IFRS2 charge as it is
considered unlikely that there will be a material adjustment to
these amounts within the next financial year.
2. Underlying performance (before separately disclosed
items)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------------------- -------------- ------------- ---------
Underlying profit before tax 10,909 9,949 20,497
Separately disclosed items within
administrative expenses:
Acquired intangible amortisation (558) (721) (1,273)
IFRS 2 share based payment charge (988) (670) (1,512)
Sale of fixed assets - 194 195
Cost on exercise of executive share
options (245) (287) (567)
Profit before tax 9,118 8,465 17,340
------------------------------------------- -------------- ------------- ---------
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------------------- -------------- ------------- ---------
Underlying EBITDA 12,066 11,238 22,868
Separately disclosed items within
administrative expenses:
IFRS 2 share based payment charge (988) (670) (1,512)
Sale of fixed assets - 194 195
Cost on exercise of executive share
options (245) (287) (567)
EBITDA 10,833 10,475 20,984
------------------------------------------- -------------- ------------- ---------
Acquired intangible amortisation (558) (721) (1,273)
Depreciation and non-acquired amortisation (935) (976) (1,850)
------------------------------------------- -------------- ------------- ---------
Operating profit 9,340 8,778 17,861
------------------------------------------- -------------- ------------- ---------
Management feel it is appropriate to remove the one-off costs
and certain non-trading items discussed above to better allow the
reader of the accounts to understand the underlying performance of
the Group. Further reconciliations of underlying measures to IFRS
measures can be found in note 9.
3. Geographical operating segments
The Group is comprised of the following main geographical
operating segments:
-- UK
-- Europe includes Norway, Sweden, Germany, Hungary, Ireland,
Italy, Holland, Spain and Poland
-- USA includes USA and Mexico
-- Asia includes Malaysia, China, Singapore, Taiwan, Thailand,
Philippines and India
In presenting information on the basis of geographical operating
segments, segment revenue and segment assets are based on the
geographical location of our entities across the world consolidated
into the four distinct geographical regions, which the Board use to
monitor and assess the Group.
Goodwill and intangible assets acquired on business combinations
are included in the region to which they relate. This is consistent
with the internal management reports that are reviewed by the Chief
Operating Decision Maker.
Segment revenue and results under the primary reporting format
for the six months ended 30 September 2017 and 2016 are disclosed
in the table below:
Central costs,
assets and
UK Europe USA Asia liabilities Total
September 2017 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- -------- -------- -------- -------- -------------- --------
Revenue*
Revenue from external customers 34,037 35,568 3,185 25,023 - 97,813
Inter segment revenue 1,336 496 65 4,567 - 6,464
-------------------------------- -------- -------- -------- -------- -------------- --------
Total revenue 35,373 36,064 3,250 29,590 - 104,277
-------------------------------- -------- -------- -------- -------- -------------- --------
Underlying operating profit 3,914 3,940 116 4,368 (1,207) 11,131
Net financing costs (38) (26) - 24 (182) (222)
-------------------------------- -------- -------- -------- -------- -------------- --------
Underlying segment profit 3,876 3,914 116 4,392 (1,389) 10,909
Separately disclosed items
(see note 2) (1,791)
-------------------------------- -------- -------- -------- -------- -------------- --------
Profit before tax 9,118
-------------------------------- -------- -------- -------- -------- -------------- --------
Specific disclosure items
Depreciation and amortisation 123 832 9 483 46 1,493
Assets and liabilities
Segment assets 38,079 73,803 3,699 57,181 9,394 182,156
Segment liabilities (18,399) (15,843) (364) (11,630) (31,921) (78,157)
-------------------------------- -------- -------- -------- -------- -------------- --------
Central costs,
assets and
UK Europe USA Asia liabilities Total
September 2016 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ -------- -------- -------- -------- -------------- --------
Revenue*
Revenue from external
customers 32,612 32,570 2,917 21,648 - 89,747
Inter segment revenue 1,375 286 39 3,681 - 5,381
------------------------------ -------- -------- -------- -------- -------------- --------
Total revenue 33,987 32,856 2,956 25,329 - 95,128
------------------------------ -------- -------- -------- -------- -------------- --------
Underlying operating
profit 3,131 5,349 166 3,302 (1,686) 10,262
Net financing costs (87) (42) - 1 (185) (313)
------------------------------ -------- -------- -------- -------- -------------- --------
Underlying segment
profit 3,044 5,307 166 3,303 (1,871) 9,949
Separately disclosed
items
(see note 2) (1,484)
------------------------------ -------- -------- -------- -------- -------------- --------
Profit before tax 8,465
------------------------------ -------- -------- -------- -------- -------------- --------
Specific disclosure
items
Depreciation and amortisation 298 874 12 480 33 1,697
Assets and liabilities
Segment assets 40,408 69,868 3,810 55,131 4,156 173,373
Segment liabilities (21,086) (13,949) (410) (11,195) (33,233) (79,873)
------------------------------ -------- -------- -------- -------- -------------- --------
* Revenue is derived from the manufacture and logistical supply
of industrial fasteners and category 'C' components.
4. Taxation
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
-------------------------------------- ------------- ------------- ---------
Current tax on income for the period
UK tax 276 241 520
Foreign tax 1,856 2,122 4,756
Deferred tax expense 24 (175) (454)
Adjustments in respect of prior years (1,131) (193) (180)
-------------------------------------- ------------- ------------- ---------
1,025 1,995 4,642
-------------------------------------- ------------- ------------- ---------
A release of GBP0.9m was recognised in adjustments in respect of
prior years following the settlement of a fully provided open
enquiry with the UK tax authority relating to EU loss relief and EU
dividend relief claims. The provision was for a total of GBP1.2m,
of which GBP0.3m was utilised. This has had a significant impact on
our effective tax rate reducing it to 11.2%. Removing the impact of
the adjustments in respect of prior years would lead to a
normalised effective tax rate of c.23.5% (FY2017: 26.8%). The tax
rate reduction since year end is due to a deferred tax asset not
recognised last year for trapped tax losses in the UK as a result
of the share option exercised in the year; as well as reducing tax
rates in Italy and a change in the mix of overseas profits for
HY2018.
5. Dividend
The dividend payable of GBP3.0m represents the final dividend
for the year ended 31 March 2017 which was approved by Shareholders
at the AGM on 27 July 2017 and paid on 13 October 2017 to Members
on the Register on 15 September 2017.
6. Earnings per share
The calculation of earnings per 5 pence ordinary share is based
on profit for the period after taxation and the weighted average
number of shares in the period of 120,401,805 (HY2017: 117,594,097;
FY2017: 118,493,886).
The calculation of the fully diluted earnings per 5 pence
ordinary share is based on profit for the period after taxation. In
accordance with IAS 33 the weighted average number of shares in the
period has been adjusted to take account of the effects of all
dilutive potential ordinary shares. The number of shares used in
the calculation amount to 123,420,081 (HY2017: 121,352,678; FY2017:
122,143,769).
The underlying diluted earnings per share, which in the
Directors' opinion best reflects the underlying performance of the
Group, is detailed below:
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------------ ------------- ------------- ---------
Profit after tax for the period 8,093 6,470 12,698
Acquired intangible amortisation 558 721 1,273
IFRS 2 share based payment charge 988 670 1,512
Sale of fixed assets - (194) (195)
Cost on exercise of executive share
options 245 287 567
Tax adjustment (1,516) (341) (193)
------------------------------------ ------------- ------------- ---------
Underlying profit after tax 8,368 7,613 15,662
------------------------------------ ------------- ------------- ---------
Basic EPS 6.72p 5.50p 10.72p
Diluted EPS 6.56p 5.33p 10.40p
Underlying diluted EPS 6.78p 6.27p 12.82p
7. Analysis of net debt
At At At
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------ ------------- ------------- ---------
Cash and cash equivalents 25,095 22,783 24,645
Bank overdraft - (94) -
------------------------------ ------------- ------------- ---------
Net cash and cash equivalents 25,095 22,689 24,645
------------------------------ ------------- ------------- ---------
Debt due within one year (18,453) (20,900) (14,872)
Debt due after one year (14,512) (16,020) (16,221)
------------------------------ ------------- ------------- ---------
Gross debt (32,965) (36,920) (31,093)
------------------------------ ------------- ------------- ---------
Net debt (7,870) (14,231) (6,448)
------------------------------ ------------- ------------- ---------
8. Reconciliation of net cash flow to movement in net debt
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------------------ ------------- ------------- ---------
Net increase in cash and cash equivalents 957 3,552 5,240
Net (increase)/decrease in borrowings (1,087) (733) 4,794
------------------------------------------ ------------- ------------- ---------
(130) 2,819 10,034
Exchange rate differences (1,292) (1,055) (487)
------------------------------------------ ------------- ------------- ---------
Movement in net debt (1,422) 1,764 9,547
Opening net debt (6,448) (15,995) (15,995)
------------------------------------------ ------------- ------------- ---------
Closing net debt (7,870) (14,231) (6,448)
------------------------------------------ ------------- ------------- ---------
9. Alternative Performance Measure
The half-yearly financial report includes both IFRS measures and
Alternative Performance Measures (APMs). The latter of which are
considered by management to better allow the readers of the
accounts to understand the underlying performance of the Group. A
number of these APMs are used by management to measure the KPIs of
the business (see the Business Review on pages 4 to 6) and are
therefore aligned to the Group's strategic aims. They are also used
at Board level to monitor financial performance throughout the
year.
The APMs used in the half-yearly financial report (including the
basis of calculation, assumptions, use and relevance) are detailed
in note 2 (underlying profit before tax, EBITDA and underlying
EBITDA) and below.
-- Constant Exchange Rate (CER) figures
These are used predominantly in the Business review and give the
readers a better understanding of the performance of the Group,
regions and entities from a trading perspective. They have been
calculated by translating the HY2018 income statement results (of
subsidiaries whose presentational currency is not sterling) using
HY2017 average exchange rates to provide a comparison which removes
the foreign currency translational impact. The impact of
translational gains and losses made on non-functional currency net
assets held around the Group have not been removed.
-- Underlying diluted EPS
A key measure for the Group as it is one of the measures used to
set the Directors' variable remuneration. The calculation has been
disclosed in note 6.
-- Return on capital employed (ROCE)
Return on capital employed is a key metric used by investors to
understand how efficient the Group is with its capital employed.
The calculation is underlying EBIT divided by average capital
employed (net assets + net debt), multiplied by 100%. Underlying
EBIT has been reconciled to operating profit below. Note 2 explains
why the separately disclosed items have been removed to aid
understanding of the underlying performance of the Group.
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------------------------- ------------- ------------- ---------
Underlying EBIT/Underlying operating
profit 11,131 10,262 21,018
Separately disclosed items within administrative
expenses
IFRS2 share based payment charge (988) (670) (1,512)
Acquired intangible amortisation (558) (721) (1,273)
Profit on sale of fixed assets - 194 195
Cost on exercise of executive share
options (245) (287) (567)
------------------------------------------------- ------------- ------------- ---------
Operating profit 9,340 8,778 17,861
------------------------------------------------- ------------- ------------- ---------
-- Normalised net debt
The adjustment to opening net debt reduces our cash holding at
31 March 2017 to take into account the GBP1.2m of cash specifically
held to settle the NI and income tax payments (paid in April 2017)
relating to Malcolm Diamond's exercise of 1,000,000 share options
on 17 February 2017.
-- Underlying cash conversion as a percentage of underlying
EBITDA
This is another key metric used by investors to understand how
effective the Group were at converting profit into cash. Since the
underlying cash conversion is compared to underlying EBITDA, which
has removed the impact of IFRS2 share based payment charges (see
note 2), the impact of these have also been removed from the
underlying cash conversion. The adjustments made to arrive at
underlying cash conversion from cash generated from operations are
detailed below. To reconcile operating profit to underlying EBITDA,
see note 2.
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
-------------------------------------------- ------------- ------------- ---------
Underlying cash conversion 6,316 9,280 22,249
Cost on exercise of executive share
options (245) (287) (567)
Movement in trade payables due to exercise
of share options (1,205) - 1,205
Cash generated from operations 4,866 8,993 22,887
-------------------------------------------- ------------- ------------- ---------
-- Underlying effective tax rate
This is used in the underlying diluted EPS calculation. It
removes the tax impact of separately disclosed items in the year to
arrive at a tax rate based on the underlying profit before tax.
One off tax adjustments have also been removed from the
calculation as they are unlikely to repeat and therefore do not
reflect recurring trading performance. In HY2018 the one-off
adjustments relate to the release of the tax provision (see note 4)
and the change in deferred tax of acquired intangibles relating to
VIC following a reduction in tax rate in Italy. In FY2017 the
one-off adjustment relates to a deferred tax asset not recognised
for losses in the year due to significant tax deductions available
from the exercise of executive share options.
10. Treasury shares
The treasury shares reserve comprises the cost of the Company's
shares held by the Group. At 30 September 2017 the Group held
500,000 of the Company's shares (30 September 2016: nil; 31 March
2017: nil).
11. Assets held for sale
In the six months to 30 September 2017 management committed to a
plan to sell a factory owned by our Malaysian entity, Power Steel
& Electro-Plating Works (PSEP). Accordingly, this factory is
presented as an asset held for sale on the balance sheet. A buyer
has been identified for the asset and management are expecting the
transaction to be completed before 31 March 2018.
The fair value less costs to sell has been estimated at
Malaysian Ringgit (MYR) 8.9m (GBP1.6m). Final figures will be
calculated for this as the sale of the asset is finalised.
The carrying amount of the factory at 30 September 2017 is MYR
5.8m (GBP1.0m) and since this is lower than the fair value, it has
continued to be held at this amount on the balance sheet.
INDEPENT REVIEW REPORT TO TRIFAST PLC
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2017 which comprises the condensed
consolidated interim income statement, the condensed consolidated
interim statement of comprehensive income, the condensed
consolidated interim statement of changes in equity, the condensed
consolidated interim statement of financial position, the condensed
consolidated interim statement of cash flows and the related
explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2017 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The Directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Mark Sheppard
for and on behalf of KPMG LLP
Chartered Accountants
1 Forest Gate
Brighton Road, Crawley
West Sussex, RH11 9PT
13 November 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DMMMMFFGGNZZ
(END) Dow Jones Newswires
November 14, 2017 02:01 ET (07:01 GMT)
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