TIDMTRI
RNS Number : 1177H
Trifast PLC
13 November 2018
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 2018
"Another six months of solid growth, with significant ongoing
investment across our regions and via Project Atlas"
KEY FINANCIALS
--------------------------------------- ---------- ---------- ---------- ---------- -------- ---------
AER change
CER change v
Underlying measures CER HY2019 v HY2018 AER HY2019 HY2018 HY2018 FY2018
--------------------------------------- ---------- ---------- ---------- ---------- -------- ---------
Group revenue GBP105.4m +7.8% GBP105.0m +7.3% GBP97.8m GBP197.6m
Gross profit % 30.2% - 30.2% - 30.2% 30.5%
Underlying operating profit* GBP12.0m +7.6% GBP11.9m +6.7% GBP11.1m GBP22.7m
Underlying profit before tax* GBP11.7m +6.8% GBP11.6m +5.9% GBP10.9m GBP22.2m
Underlying diluted earnings per share* 7.27p +7.2% 7.20p +6.2% 6.78p 13.78p
Net debt GBP13.5m +GBP5.6m GBP7.9m GBP7.4m
Return on capital employed (ROCE)* 19.5% -60bps 20.1% 20.1%
--------------------------------------- ---------- ---------- ---------- ---------- -------- ---------
Interim/total dividend^ 1.20p +9.1% 1.10p 3.85p
--------------------------------------- ---------- ---------- ---------- ---------- -------- ---------
GAAP measures
Operating profit GBP8.3m -10.9% GBP9.3m GBP19.0m
Profit before tax GBP8.0m -12.2% GBP9.1m GBP18.5m
Diluted earnings per share 4.82p -26.5% 6.56p 12.20p
Basic earnings per share 4.93p -26.6% 6.72p 12.54p
--------------------------------------- ---------- ---------- ---------- ---------- -------- ---------
* Before separately disclosed items (see notes 2, 6 and 9)
^ Change is in interim dividend only
OPERATIONAL HIGHLIGHTS
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The investment driven growth story continues...
* Revenue up by 7.8% at Constant Exchange Rate (CER),
7.3% at Actual Exchange Rate (AER)
* Organic revenue growth of 4.3% at CER, 3.5%
non-organic
* Underlying diluted earnings per share up by 7.2% at
CER, 6.2% at AER
* Gross margins remain above our 30% target
* Capital investment of GBP1.3m increases our
manufacturing capacity and capability, with more to
follow
* Expanded distribution facilities in USA, support
regional revenue growth of 34.8% at CER, 31.1% at AER
* Project Atlas, our multi-year investment in our
systems, policies and procedures is on track, with a
spend of GBP1.5m
* Interim dividend of 1.20p, an increase of 9.1% on the
prior year interim
"Our solid 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
healthy pipeline in place, the Board remains confident of
delivering its expectations for the current financial year.
Despite the macroeconomic backdrop we continue to have
confidence in our model. As an international business serving a
range of end markets and with c.70% of revenues and profits being
generated outside the UK, we recognise the global opportunities
that lie ahead in providing good product, skills and services to
industry. We have these, coupled with the foresight and flexibility
around the Group to keep moving forward and delivering on our
future aspirations."
Malcolm Diamond MBE, Non-Executive Chairman
Presentation of Results:
This will be held at 9am (UK) today at, No1 Cornhill, The Dome
Room - 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
Mike Bell
Tel: +44 (0)20 7418 8900
TooleyStreet Communications
IR & media relations
Fiona Tooley
Tel : +44 (0)7785 703523
Email : fiona@tooleystreet.com
Editors' note:
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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.1,300 staff
across 31 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
2018 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
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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 2018
"Investing to build the Trifast of tomorrow, a truly world class
global industrial player"
Dear Shareholder,
It was way back in 1973 that the founders of our business, Mike
Timms and Mike Roberts, frustrated by the suffocating bureaucracy
of working for a large centralised conglomerate, took the plunge
and established TR Fastenings Ltd in Uckfield, East Sussex.
They laid down the core values and culture of the business from
day one, which I know have endured to the present as, now in
FY2019, we celebrate our 45th Anniversary.
Those core values are to look professional, be professional,
sell value - not cheapest price (as what customers need is reliable
quality and service) and, finally, treat customers, suppliers and
employees with equal care, consideration and respect.
Today, Trifast employs c.1,300 staff in the UK, Europe, Asia and
North America, and manufactures over one third of its sales revenue
within its own eight factories. We offer multinational customers
the unique combination of global distribution logistics coupled
with customised product prototyping and high volume in-house
production.
Careful and considered sales targeting and marketing over the
years has resulted in a growing focus on technically complex,
higher value products, where quality and performance are the key
drivers of purchasing decisions, with the result that, the vast
majority of our sales are customer specific, individually
negotiated, unique deals.
However, FY2019 is not only Trifast's 45th anniversary, it also
marks the start of the investment period for Project Atlas, a
ground-breaking multi-year investment in Group wide international
strategic harmonisation of data systems, operational management
procedures, communications and customer specifications.
Groups like Trifast that have grown consistently both
organically and by regular acquisitions inevitably end up with
disparate data systems, operational variations and cultures, and so
cannot fully leverage their market capabilities, and to an extent,
tend to operate in silos - rather than as a fully integrated
cooperative unit. Project Atlas is designed to enable us to
overcome this challenge and build the Trifast of tomorrow, a truly
world class global industrial player.
This will not only enable TR to operate more efficiently and
effectively, but further enhances competitiveness with our
multinational customer groups who require consistent product
prices, delivery and quality on identical components wherever they
assemble products - whether they have plants in the UK, Europe,
Asia, or America.
The success of this project will provide a distinct global
competitive advantage and we look forward to giving you regular
progress updates throughout the coming years as we hit vital
milestones.
Meanwhile, I wish to put on record my admiration and thanks for
the hard work, dedication and energy so freely given by so many of
our colleagues over the past two years in developing this most
ambitious of transformations of how we do business going
forward.
As we say internally, despite hitting record profit performance
every consecutive year since 2012, "we can't wait to get it
right!".
Thank you again for your past, present, and future support.
Malcolm Diamond MBE, Non-Executive Chairman
12 November 2018
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 HY2019 figures by the average HY2018 exchange
rate.
The impact of foreign exchange movements has decreased our AER
revenue by 0.5%, GBP0.4m (HY2018: increased by 4.2%, GBP3.8m), our
AER underlying profit before tax by 0.9%, GBP0.1m (HY2018:
increased by 5.2%, GBP0.5m) and our AER underlying diluted EPS by
1.0%, 0.07p (HY2018: increased by 5.2%, 0.33p).
Our Group performance
Underlying measures HY2019 CER Change HY2019 Change HY2018
at CER AER at AER
Revenue GBP105.4m +7.8% GBP105.0m +7.3% GBP97.8m
----------- -------- ---------- -------- ---------
GP% 30.2% - 30.2% - 30.2%
----------- -------- ---------- -------- ---------
Underlying EBITDA* GBP13.0m +8.0% GBP12.9m +7.3% GBP12.1m
----------- -------- ---------- -------- ---------
Underlying EBITDA%* 12.4% +10bps 12.3% - 12.3%
----------- -------- ---------- -------- ---------
Underlying operating
profit (UOP)* GBP12.0m +7.6% GBP11.9m +6.7% GBP11.1m
----------- -------- ---------- -------- ---------
UOP%* 11.4% - 11.3% -10bps 11.4%
----------- -------- ---------- -------- ---------
Underlying profit before
tax* GBP11.7m +6.8% GBP11.6m +5.9% GBP10.9m
----------- -------- ---------- -------- ---------
Underlying diluted
EPS* 7.27p +7.2% 7.20p +6.2% 6.78p
----------- -------- ---------- -------- ---------
Return on capital employed
ROCE* 19.5% -60bps 20.1%
---------------------------- ----------- -------- ---------- -------- ---------
GAAP measures
----------- -------- ---------- -------- ---------
Operating profit GBP8.3m -10.9% GBP9.3m
----------- -------- ---------- -------- ---------
Operating profit % 7.9% -160bps 9.5%
----------- -------- ---------- -------- ---------
Profit before tax GBP8.0m -12.2% GBP9.1m
----------- -------- ---------- -------- ---------
Diluted EPS 4.82p -26.5% 6.56p
----------- -------- ---------- -------- ---------
*Before separately disclosed items (see notes 2, 6 and 9)
In HY2019 we have seen another six months of strong revenue
growth, up 7.8% to GBP105.4m (AER: up 7.3% to GBP105.0m; HY2018:
GBP97.8m). This is split between an organic increase of 4.3% and,
following on from our successful acquisition of PTS in April 2018,
non-organic growth of 3.5%.
Organic growth, ahead of global industrial production
benchmarks, continues to be driven out of our successful core
growth strategy focusing on sales to our multinational OEMs. The
global automotive sector is providing significant long-term
opportunities for organic growth, with a double digit increase on
the prior half year, through market share gains and site
penetration as a result of strong collaboration across the TR Group
to cross-sell local capacity to our Tier 1 and multinational OEM
customers. Growth in the general industrial sector has also been
strong and with the acquisition of PTS further strengthening the
distributor sales segment, a balanced sector portfolio has been
maintained. By non-organically increasing our distributor sales by
>20%, our overall reliance on the automotive sector has remained
level with FY2018 at 33% (HY2018: 32%).
Gross margins have been successfully maintained 20bps ahead of
our 30.0% target at 30.2% (AER: 30.2%) and are in line with HY2018
(30.2%). Underlying operating margins have also remained steady at
11.4% (AER: 11.3%; HY2018: 11.4%), as we continue to invest
operational gearing gains to support future growth.
Our underlying PBT is up 6.8% at CER to GBP11.7m (AER: 5.9%, to
GBP11.6m, HY2018: GBP10.9m). This has resulted in a strong increase
in our underlying diluted earnings per share (EPS) at CER, up 7.2%
to 7.27p and at AER, up 6.2% to 7.20p (HY2018: 6.78p).
Revenue (CER)
We have seen strong revenue growth across all our regions,
ranging from 4.3% to 34.8% (HY2018: 2.4% to 10.7%).
Europe has been a region of very strong growth for us, reporting
a revenue increase of 7.3% to GBP38.7m (AER: up 6.6% to GBP38.4m,
HY2018: GBP36.1m). This has arisen across a number of sectors, with
double digit growth in the automotive sector in Holland; in the
electronics sector in Hungary and in the general industrial sector
in Germany. In Italy, ongoing volume reductions at one of the
Group's largest domestic appliances customer have offset some of
these gains. However, notwithstanding this, we continue to see
Europe as a key area of investment driven growth.
In Asia, growth has been solid, up 4.3% on the prior period to
GBP30.9m (AER: up 3.9% to GBP30.8m, HY2018: GBP29.6m). This has
largely been driven out of the domestic appliances business in
Singapore as well as an increase in distributor sales from our
Taiwanese factories. In China, ongoing automotive wins have offset
a decline in electronics sales, following the local factory closure
of one of our multinational OEMs operating in the region.
Production volumes are now shifting to India, and as a pan-regional
business, we are already starting to see some of this business
coming successfully back on line through our operations there.
In the UK, revenue has increased by 10.8% to GBP39.2m (HY2018:
GBP35.4m). The majority of this increase, 9.5%, represents
non-organic growth following our latest acquisition PTS. Strong
organic growth in our distributor and other sales has been tempered
by reductions in automotive volumes in the UK due to diesel-led
transitory changes to product cycles and model builds. This has led
to a modest organic growth rate of 1.3% in the period. The
temporary impact of these challenges is expected to continue into
the second half of the year, whilst platforms at a number of our
key customers go through production changeover.
In the USA, growth has been excellent up 34.8% to GBP4.4m (AER:
up 31.1% to GBP4.3m; HY2018: GBP3.3m). This is largely being driven
out of our ongoing penetration into the Group's existing automotive
multinational OEM customers.
Underlying operating profit (CER)
Underlying operating margins have remained steady at 11.4% (AER:
11.3%; HY2018: 11.4%) reflecting our continuing focus on strong
overhead control, even in a period of investment driven growth, and
leading to an overall increase in underlying operating profit of
7.6% to GBP12.0m (AER: up 6.7% to GBP11.9m; HY2018: GBP11.1m). This
is split between an organic UOP of GBP11.5m and, following on from
the acquisition of PTS, non-organic UOP of GBP0.5m.
In Europe, we have seen a strong increase in UOP margins of
80bps up to 11.7% (HY2018: 10.9%). This is the result of increased
sales improving margin by c.100bps, in addition to a 120bps
increase in the region's gross margin due to favourable product mix
changes in Sweden and Hungary. In Italy, lower volumes in the
period at one of our most important domestic appliances customers,
and planned increases in fixed production costs as we invest for
future growth, have continued to temporarily depress gross margins.
However in HY2019, the negative impact of this has been offset by
transactional FX gains arising from the improved strength of the
EUR against the US$.
Outside of the above, for us Europe remains a key area for
investment driven growth. This has led to additional overheads in
the region reducing the UOP% by c.140bps against the prior period.
Key investments have been made in our Dutch operations where we
have expanded the warehousing to support ongoing double digit
growth; in Sweden where we have opened our TR Technical and
Innovation Centre in Gothenburg; in Hungary where we have been
investing in cross-functional headcount to support the 80% trading
increase the site has experienced over the last five years; and in
Spain where our newest greenfield site, TR Espana, is very
successfully continuing to develop and build the local market for
us.
In Asia, gross margins have remained broadly in line with the
prior period, with the UOP margin increase of 120bps to 16.0%
(HY2018: 14.8%) mainly being driven off reductions in net overhead
costs. This is largely the result of a GBP0.5m foreign exchange
balance sheet translation gain, predominantly due to the ongoing
strength of the US$ against our key Asian currencies.
In the UK, UOP margins have remained broadly level at 10.9%
(HY2018: 11.1%). The increase in UOP % as a result of PTS, our
latest acquisition coming on board, has been largely offset by an
expected c.150bps reduction in gross margins since the year end in
our existing UK business. This is the result of purchase price
inflationary pressures feeding through from the protracted weakness
of sterling since the referendum vote. The deferral of these
increased costs to FY2019 has been hard won via a combination of
negotiations with our suppliers and customers, as well as
commercial stock holding decisions that we have made. Regional UOP
is split between an organic UOP of GBP3.8m and a non-organic UOP of
GBP0.5m.
In our smallest region, the USA, UOP% has increased by 130bps to
4.9% (HY2018: 3.6%), largely reflecting the significant increase in
trading in the period. This has been partially offset by a gross
margin reduction of 90bps due to a shift in focus towards
automotive. Whilst an additional GBP0.2m investment in overheads,
mostly as a result of the move to new premises in April 2018, has
further temporarily reduced UOP% ahead of a continued increase in
sales volumes. As in prior periods, low underlying operating
margins are to be expected in this region for the medium term given
the level of investments for future growth being made here.
Net financing costs (AER)
These have increased to GBP0.3m (HY2018: GBP0.2m) in line with
the increase in facilities used to acquire PTS in April 2018.
Taxation (AER)
The HY2019 underlying effective tax rate (ETR) of 23.5% is in
line with our normalised ETR of c.23.5%, based on the geographical
split of the Group's profits. The HY2019 underlying ETR and
unadjusted ETR of 26.1% are both significantly higher than the
HY2018 unadjusted ETR of 11.2%. The main reason for this difference
is that in the prior period, we finalised a GBP1.2m fully provided
historic tax position in the UK via the payment of a GBP0.3m
settlement.
Subject to future tax changes and excluding prior year
adjustments, our normalised underlying ETR is expected to remain in
the range of c.23-25% going forward.
Earnings per share (AER)
Our ongoing growth in underlying profit before tax, has led to a
strong increase in our underlying diluted EPS of 6.2% to 7.20p
(HY2018: 6.78p). Diluted EPS has reduced to 4.82p from 6.56p in the
prior period due to the costs incurred in the period relating to
Project Atlas and the finalisation of the fully provided tax
position in HY2018 (see taxation section).
Dividend
Given our confidence for the future and continued profitable
growth in a period of investment, the Board has declared an interim
dividend increase of 9.1% to 1.20p (HY2018: 1.10p). This will be
paid on 11 April 2019, to shareholders on the Register as at 15
March 2019. The shares will become ex-dividend on 14 March
2019.
Shareholder equity (AER)
As at 30 September 2018, the Group's shareholders' equity
increased to GBP114.0m (FY2018: GBP110.3m). The GBP3.7m uplift
reflects retained earnings of GBP2.0m (HY2018: GBP4.8m), a foreign
exchange reserve gain of GBP1.3m and a reduction in our own shares
held reserve of GBP0.4m.
At the 30 September 2018, the number of shares still held by the
EBT to honour future equity award commitments as required is
1,317,378 shares (HY2018: 500,000 shares, FY2018: 1,500,000
shares).
Over this increased asset base, our strong trading performance
and ongoing investment has led to an underlying ROCE of 19.5%
(HY2018: 20.1%).
Net debt (AER)
Our net debt position at the end of HY2019 has increased by
GBP6.1m to GBP13.5m (FY2018: GBP7.4m). Some GBP8.2m of this
increase is due to the initial consideration paid to acquire PTS in
April 2018.
Capital expenditure of GBP1.3m (HY2018: GBP1.3m) in the period
supports the Board's ongoing plans to invest in the business, most
specifically within our manufacturing sites with additional
capacity projects underway in Italy and Singapore.
Outside of these movements, our cash generation has improved on
the prior period with a conversion rate of underlying EBITDA to
underlying cash of 67.4% (FY2018: 68.1%; HY2018: 52.3%). Our half
year cash conversion is historically lower than our full year
position, due to the higher stock levels we hold at this stage of
the trading cycle.
Our overall investment in gross stock has increased by GBP7.0m
since year end, including a GBP2.5m investment due to the
acquisition of PTS in April 2018. Outside of this and normal
working capital investments for growth, stock weeks across the
Group have increased by 0.9 weeks (GBP2.2m), largely in Italy where
reductions in volumes have led to temporarily higher stock holdings
(up GBP1.1m) and in the USA, to support the very rapid growth in
trading in the period (up GBP0.6m).
Banking facilities
As at 30 September the headroom on our banking facilities was
GBP15.2m (FY2018: GBP24.0m). The net debt to EBITDA ratio is 0.54x
which is significantly less than our covenant limit of 2.75x. In
addition, we continue to have access to an accordion facility of
GBP9.0m within our Group banking facilities with HSBC. This
provides a degree of potential flexibility to debt finance future
acquisitions and further investments as required.
Following on from the successful acquisition of PTS, and given
both our significant investment plans under Project Atlas, combined
with our ongoing appetite to acquire, we have already started
discussions with a number of banks in order to secure access to
additional funds and thereby maintain an appropriate degree of
funding flexibility. This process will be ongoing over the second
half of the financial year.
Ongoing and future investment plans
Trading
In Asia, over the course of FY2018, we invested S$1.2m
(c.GBP0.7m) in the construction of a mezzanine level at our
Singapore facility to expand capacity, initially by 25%, and to
increase R&D capabilities. Over the course of FY2019, we will
be completing this project through the acquisition of additional
forging, packing and inspection equipment to bring that additional
capacity fully on line.
In Europe, our successful green-field site in Spain continues to
grow, with revenues of GBP0.5m already achieved in HY2019 and a
strong pipeline in place. In Italy, additional investments have
been made into plant and machinery to expand our European
manufacturing capacity and capabilities. A warehouse expansion in
Holland is successfully up and running to support ongoing double
digit growth. Whilst the TR Innovation and Technical centre
situated in the heart of Sweden's electric vehicle development
area, Lindholmen, Gothenburg is helping us to access the additional
opportunities that the roll out of electric vehicle technologies is
providing.
In the USA, the move to a new location in April 2018 has
significantly increased the local warehouse capacity to better
support both existing customers and future proof for further
growth.
Complementing all of the above, we are continuing to invest in
both our global and local sales resources and cross functional
supporting teams. Specific investments have already been made into
our sales, quality, IT, and contracts teams and additional plans
are being pulled together to further develop and build our sourcing
and supply side resources.
We successfully added PTS to our portfolio six months ago and it
is pleasing to report that this operation has settled well into the
Trifast Group and is generating good returns. Not only does PTS
widen our customer base, it extends our presence in the stainless
steel fastener arena (holding one of the widest product ranges of
any supplier in Europe), boosting our core OEM customer offering
and supporting ongoing distributor sales growth. PTS remains on
target to be earnings enhancing in the year ending March 2019.
As ever, the search for the next successful acquisition remains
an important strategic aim for the Group.
Project Atlas
Project Atlas is a significant GBP15.0m planned investment into
the integration and development of the Group's IT infrastructure
and underlying rules, processes and policies. This project is
considered an essential part of our ongoing growth plans, both
organic and acquisitive, and will allow us to continue to meet the
evolving needs of our multinational OEM customers.
As planned, over the last six months our international Atlas
cross functional worksteams have been working together to design
the business rules that will form the foundation of the Trifast of
tomorrow. A significant portion of the budgeted spend has been
assigned to the comprehensive review and redesign of these rules
and our underlying processes, which in turn will drive improvements
in our operating and commercial effectiveness and help to underpin
our return on investment.
As a consequence of the work undertaken to date on this project,
we have incurred direct year one costs of GBP1.5m in HY2019,
largely relating to project team and consultancy costs. We have
excluded these costs from our underlying results, (see note 2), to
reflect the unusual scale and one-off nature of this project. We
anticipate continuing to do so, either as operating or capital
expenses (in accordance with International Accounting Standards),
in order to provide shareholders with a better understanding of our
underlying trading performance during this period of
investment.
Outlook
HY2019 delivered another six months of strong growth, with
ongoing investment across all our regions.
Our solid 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
healthy pipeline in place, the Board remains confident of
delivering its expectations for the current financial year.
Globally automotive continues to represent a strong organic
growth opportunity for Trifast as we continue to increase our
market share and site penetration with our multinational Tier 1 and
OEM customers. This is being supported by close collaboration
across the Group's international businesses through cross-selling
of local capability and flexible utilisation of our manufacturing
facilities to enhance competitiveness.
Over 90% of our automotive supply remains outside of the
combustion engine, mainly in the seating, console, dashboard and
lighting systems. This means that the increase in electric vehicle
production is acting as a further significant growth opportunity
for us, providing additional access points as many more new
platforms come on line, battery technology develops and the demand
for charging stations accelerates. Albeit in the short term, we do
expect reductions in automotive volumes in the UK due to diesel-led
transitory changes to product cycles and model builds to continue
into the second half of the year.
The more muted performance in domestic appliances and
electronics in HY2019 reflected customer specific factors, notably
in Italy and China, but the strong local growth in these sectors in
other regions provides confidence that these markets also continue
to have attractive long term potential for Trifast.
As anticipated within the UK business, we have seen the impact
on our gross margins of input cost inflation in the period as a
result of the weak pound. However, notwithstanding the wider
potential long-term implications of Brexit on the UK economy, we
believe that the shorter term operational and financial impact of
any Brexit scenario will be manageable. We have had a
cross-functional Brexit team in place for the last two years and
are on track to carry out our contingency plans to help mitigate
the risks attached to a potential no-deal Brexit scenario.
We continue to have confidence in our model. As an international
business serving a range of end markets and with c.70% of revenues
and profits being generated outside the UK, we recognise the global
opportunities that lie ahead in providing good product, skills and
services to industry. We have these, coupled with the foresight and
flexibility around the Group to keep moving forward and delivering
on our future aspirations.
RISKS AND UNCERTAINTIES
The Directors do not consider that the principal risks and
uncertainties of the Group have changed since the publication
in June 2018 of the Group's Annual Report for the year ended 31
March 2018. 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
Clare Foster, Chief Financial Officer
12 November 2018
Condensed consolidated interim income statement
Unaudited results for the six months ended 30 September 2018
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
Notes GBP000 GBP000 GBP000
--------------------------------------------- ------- ------------- ------------- ---------
Continuing operations
Revenue 104,981 97,813 197,632
Cost of sales (73,327) (68,311) (137,386)
--------------------------------------------- ------- ------------- ------------- ---------
Gross profit 31,654 29,502 60,246
Other operating income 266 238 467
Distribution expenses (2,223) (2,043) (4,068)
--------------------------------------------- ------- ------------- ------------- ---------
Administrative expenses before separately
disclosed items 2 (17,822) (16,566) (33,932)
IFRS 2 share based payment charge (1,152) (988) (2,194)
Acquired intangible amortisation (734) (558) (1,363)
Net acquisition costs (177) - (110)
Project Atlas (1,490) - (375)
Sale of fixed assets - - 556
Cost on exercise of executive share options - (245) (244)
--------------------------------------------- ------- ------------- ------------- ---------
Total administrative expenses (21,375) (18,357) (37,662)
--------------------------------------------- ------- ------------- ------------- ---------
Operating profit 8,322 9,340 18,983
--------------------------------------------- ------- ------------- ------------- ---------
Financial income 36 24 60
Financial expenses (356) (246) (540)
--------------------------------------------- ------- ------------- ------------- ---------
Net financing costs (320) (222) (480)
--------------------------------------------- ------- ------------- ------------- ---------
Profit before tax 8,002 9,118 18,503
Taxation 4 (2,087) (1,025) (3,417)
--------------------------------------------- ------- ------------- ------------- ---------
5,915 8,093 15,086
--------------------------------------------- ------- ------------- ------------- ---------
Profit for the period
(attributable to equity shareholders of
the parent company)
--------------------------------------------- ------- ------------- ------------- ---------
Earnings per share
Basic 6 4.93p 6.72p 12.54p
Diluted 6 4.82p 6.56p 12.20p
--------------------------------------------- ------- ------------- ------------- ---------
Condensed consolidated interim statement of comprehensive
income
Unaudited results for the six months ended 30 September 2018
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
---------------------------------------------------------- ------------- ------------- ---------
Profit for the period 5,915 8,093 15,086
Other comprehensive income/(expense):
Exchange differences on translation of foreign operations 1,571 (703) (846)
Net loss on hedge of net investment in foreign subsidiary (295) (722) (680)
---------------------------------------------------------- ------------- ------------- ---------
Other comprehensive income/(expense) recognised directly
in equity,
net of income tax 1,276 (1,425) (1,526)
---------------------------------------------------------- ------------- ------------- ---------
Total comprehensive income recognised for the period
(attributable to equity shareholders of the parent
company) 7,191 6,668 13,560
---------------------------------------------------------- ------------- ------------- ---------
Condensed consolidated interim statement of changes in
equity
Unaudited results for the six months ended 30 September 2018
Unaudited results for the Share Share Own shares Translation Retained Total
six months ended 30 September capital premium held reserve earnings equity
2018 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------ -------- -------- ---------- ----------- --------- -------
Balance at 1 April 2018 6,068 21,579 (3,437) 13,374 72,705 110,289
Total comprehensive income for
the period:
Profit for the period - - - - 5,915 5,915
Foreign currency translation
differences - - - 1,571 - 1,571
Net loss on hedge of net investment
in
foreign subsidiary - - - (295) - (295)
------------------------------------ -------- -------- ---------- ----------- --------- -------
Total comprehensive income for
the period - - - 1,276 5,915 7,191
------------------------------------ -------- -------- ---------- ----------- --------- -------
Transactions with owners, recorded
directly
in equity:
Issue of share capital 1 21 - - - 22
Own shares used - - 409 - (409) -
Share based payment transactions
(including tax) - - - - 1,088 1,088
Dividends - - - - (4,625) (4,625)
------------------------------------ -------- -------- ---------- ----------- --------- -------
Total transactions with owners 1 21 409 - (3,946) (3,515)
------------------------------------ -------- -------- ---------- ----------- --------- -------
Balance at 30 September 2018 6,069 21,600 (3,028) 14,650 74,674 113,965
------------------------------------ -------- -------- ---------- ----------- --------- -------
Unaudited results for the Share Share Own shares Translation Retained Total
six months ended 30 September capital premium held reserve earnings equity
2017 GBP000 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
Foreign currency translation
differences - - - (703) - (703)
Net loss on hedge of net investment
in
foreign subsidiary - - - (722) - (722)
------------------------------------- -------- -------- ---------- ----------- --------- -------
Total comprehensive income/(expense)
for the period - - - (1,425) 8,093 6,668
------------------------------------- -------- -------- ---------- ----------- --------- -------
Transactions with owners, recorded
directly
in equity:
Issue of share capital 42 12 - - (40) 14
Own 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
------------------------------------- -------- -------- ---------- ----------- --------- -------
Condensed consolidated interim statement of financial
position
Unaudited results for the six months ended 30 September 2018
30 September 30 September 31 March
2018 2017 2018
Group Notes GBP000 GBP000 GBP000
-------------------------------------------- ----- ------------ ------------ --------
Non-current assets
Property, plant and equipment 20,664 18,421 20,013
Intangible assets 45,104 39,285 38,401
Deferred tax assets 2,311 2,139 2,355
-------------------------------------------- ----- ------------ ------------ --------
Total non-current assets 68,079 59,845 60,769
-------------------------------------------- ----- ------------ ------------ --------
Current assets
Inventories 55,594 46,942 49,199
Trade and other receivables 52,405 49,251 52,466
Assets held for sale 11 - 1,023 -
Cash and cash equivalents 7 26,661 25,095 26,222
-------------------------------------------- ----- ------------ ------------ --------
Total current assets 134,660 122,311 127,887
-------------------------------------------- ----- ------------ ------------ --------
Total assets 202,739 182,156 188,656
-------------------------------------------- ----- ------------ ------------ --------
Current liabilities
Other interest-bearing loans and borrowings 7 30,548 18,453 21,912
Trade and other payables 38,492 35,309 38,697
Tax payable 1,640 2,331 1,811
Dividends payable 5 3,307 3,028 -
Provisions - - 76
-------------------------------------------- ----- ------------ ------------ --------
Total current liabilities 73,987 59,121 62,496
-------------------------------------------- ----- ------------ ------------ --------
Non-current liabilities
Trade and other payables 140 - -
Other interest-bearing loans and borrowings 7 9,645 14,512 11,741
Provisions 991 1,086 845
Deferred tax liabilities 4,011 3,438 3,285
-------------------------------------------- ----- ------------ ------------ --------
Total non-current liabilities 14,787 19,036 15,871
-------------------------------------------- ----- ------------ ------------ --------
Total liabilities 88,774 78,157 78,367
-------------------------------------------- ----- ------------ ------------ --------
Net assets 113,965 103,999 110,289
-------------------------------------------- ----- ------------ ------------ --------
Equity
Share capital 6,069 6,056 6,068
Share premium 21,600 21,390 21,579
Own shares held 10 (3,028) (1,100) (3,437)
Reserves 14,650 13,475 13,374
Retained earnings 74,674 64,178 72,705
-------------------------------------------- ----- ------------ ------------ --------
Total equity 113,965 103,999 110,289
-------------------------------------------- ----- ------------ ------------ --------
Condensed consolidated interim statement of cash flows
Unaudited results for the six months ended 30 September 2018
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
Group Notes GBP000 GBP000 GBP000
--------------------------------------------------- ----- ------------- ------------- ---------
Cash flows from operating activities
Profit for the period 5,915 8,093 15,086
Adjustments for:
Depreciation, amortisation & impairment 1,801 1,493 3,300
Unrealised foreign currency (gain)/loss (43) 26 (66)
Financial income (36) (24) (60)
Financial expense 356 246 540
Loss/(gain) on sale of property, plant &
equipment and investments 18 2 (560)
Acquisition contingent consideration - discount
unwinding 76 - -
Equity settled share based payment charge 1,126 956 2,107
Taxation charge 2,087 1,025 3,417
--------------------------------------------------- ----- ------------- ------------- ---------
Operating cash inflow before changes in working
capital
and provisions 11,300 11,817 23,764
Change in trade and other receivables 1,475 129 (2,536)
Change in inventories (3,649) (5,348) (7,674)
Change in trade and other payables (1,984) (1,631) 1,677
Change in provisions 20 (101) (266)
--------------------------------------------------- ----- ------------- ------------- ---------
Net cash generated from operations 7,162 4,866 14,965
Tax paid (2,213) (1,219) (4,849)
--------------------------------------------------- ----- ------------- ------------- ---------
Net cash generated from operating activities 4,949 3,647 10,116
--------------------------------------------------- ----- ------------- ------------- ---------
Cash flows from investing activities
Proceeds from sale of property, plant & equipment 2 2 1,650
Interest received 38 26 61
Acquisition of subsidiary, net of cash acquired (8,150) - -
Acquisition of property, plant & equipment
and intangibles (1,288) (1,269) (3,566)
--------------------------------------------------- ----- ------------- ------------- ---------
Net cash used in investing activities (9,398) (1,241) (1,855)
--------------------------------------------------- ----- ------------- ------------- ---------
Cash flows from financing activities
Proceeds from the issue of share capital 22 14 214
Purchase of own shares 10 - (1,100) (3,437)
Proceeds from new loan 9,393 2,316 5,542
Repayment of borrowings (3,202) (1,315) (3,773)
Payment of finance lease liabilities 22 86 66
Dividends paid (1,319) (1,203) (4,218)
Interest paid (356) (247) (540)
--------------------------------------------------- ----- ------------- ------------- ---------
Net cash generated from/(used in) financing
activities 4,560 (1,449) (6,146)
--------------------------------------------------- ----- ------------- ------------- ---------
Net change in cash and cash equivalents 111 957 2,115
Cash and cash equivalents at 1 April 26,222 24,645 24,645
Effect of exchange rate fluctuations on cash
held 328 (507) (538)
--------------------------------------------------- ----- ------------- ------------- ---------
Cash and cash equivalents at end of period 7 26,661 25,095 26,222
--------------------------------------------------- ----- ------------- ------------- ---------
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
Unaudited results for the six months ended 30 September 2018
1. Basis of preparation
Except as described below, 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 2018.
The Group has adopted IFRS 15 Revenue from Contracts with
Customers and IFRS 9 Financial Instruments from 1 April 2018.
Whilst these standards do not have a material effect on the Group
financial statements, the accounting policy wording has been
updated and there will be changes in disclosure. The details of the
new significant accounting policies, nature of the change and
disclosure requirements are set out below:
-- IFRS 15 Revenue from Contracts with Customers
Revenue from the sale of goods rendered is recognised net of VAT
in the consolidated income statement when control has been
transferred to the buyer. The timing of the transfer of control, in
accordance with normal practice, will be on dispatch of goods or at
the point of customer acceptance where appropriate.
The impact of the change in accounting policy on the financial
statements has been minimal as the point of control being
transferred to the buyer under the new standard, remains the same
as when risk and rewards were transferred under IAS 18 Revenue.
Disclosures required for interim financial reporting relate to
the disaggregation of revenue. This new requirement has been
reflected in note 13. The remaining disclosure requirements will be
detailed in the Annual Report for the year ended 31 March 2019.
-- IFRS 9 Financial Instruments
Trade and other receivables are classified at amortised cost
less impairment losses. Impairment losses are measured using the
'expected credit loss' model.
The change in accounting policy has seen the 'incurred loss'
model under IAS 39 replaced by the 'expected credit loss' (ECL)
model under IFRS 9. The impact of this change on the financial
statements has been minimal. From a Group perspective, the same
provisioning level is required, although there have been immaterial
changes in provisioning levels by region. The new disclosures
required under IFRS 9 will be detailed in the Annual Report for the
year ended 31 March 2019.
A number of amendments to existing standards are also effective
from 1 April 2018 but they do not have a material effect on the
Group financial statements.
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 2018.
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 at the end of this document.
The comparative figures for the financial year ended 31 March
2018 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 Business review 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 2018
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.
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 include those disclosed in the consolidated
financial statements for the year ended 31 March 2018. There is
also a further addition for the judgement below:
-- Valuation of intangible assets
During the period the Group acquired PTS (see note 12).
Accounting standards require their assets and liabilities to be
recognised in the consolidated financial statements at fair value.
As part of a fair value exercise, judgements are made to value
separately identifiable intangible assets. The key judgements made
by management for these assets were profitability, growth, discount
and tax rates. Management engaged an external valuation specialist
to perform the review and they used the income methodology approach
to calculate the GBP4.8m of intangible assets identified.
There are no other key judgements made, other than those
involving estimations. The key source of estimation uncertainty is
inventory valuation.
2. Underlying performance (before separately disclosed
items)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------------------------- ---------------- -------------- ---------
Underlying profit before tax 11,555 10,909 22,233
Separately disclosed items within administrative
expenses:
IFRS 2 share based payment charge (1,152) (988) (2,194)
Acquired intangible amortisation (734) (558) (1,363)
Net acquisition costs (177) - (110)
Project Atlas (1,490) - (375)
Sale of fixed assets - - 556
Cost on exercise of executive share options - (245) (244)
Profit before tax 8,002 9,118 18,503
------------------------------------------------- ---------------- -------------- ---------
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------------------------- ---------------- -------------- ---------
Underlying EBITDA 12,942 12,066 24,650
Separately disclosed items within administrative
expenses:
IFRS 2 share based payment charge (1,152) (988) (2,194)
Net acquisition costs (177) - (110)
Project Atlas (1,490) - (375)
Sale of fixed assets - - 556
Cost on exercise of executive share options - (245) (244)
EBITDA 10,123 10,833 22,283
------------------------------------------------- ---------------- -------------- ---------
Acquired intangible amortisation (734) (558) (1,363)
Depreciation and non-acquired amortisation (1,067) (935) (1,937)
------------------------------------------------- ---------------- -------------- ---------
Operating profit 8,322 9,340 18,983
------------------------------------------------- ---------------- -------------- ---------
Management feel it is appropriate to remove the event driven
costs and certain non-trading items included 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.
The rationale for the exclusion of Project Atlas costs is
provided within the Business review.
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 2018 and 2017 are disclosed
in the table below:
Central costs,
assets and
UK Europe USA Asia liabilities Total
September 2018 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- -------- -------- -------- -------- -------------- --------
Revenue*
Revenue from external customers 37,628 37,718 4,176 25,459 - 104,981
Inter segment revenue 1,551 719 84 5,296 - 7,650
-------------------------------- -------- -------- -------- -------- -------------- --------
Total revenue 39,179 38,437 4,260 30,755 - 112,631
-------------------------------- -------- -------- -------- -------- -------------- --------
Underlying operating profit 4,272 4,491 204 4,900 (1,992) 11,875
Net financing (costs)/income (45) (22) (5) 30 (278) (320)
-------------------------------- -------- -------- -------- -------- -------------- --------
Underlying profit before tax 4,227 4,469 199 4,930 (2,270) 11,555
Separately disclosed items
(see note 2) (3,553)
-------------------------------- -------- -------- -------- -------- -------------- --------
Profit before tax 8,002
-------------------------------- -------- -------- -------- -------- -------------- --------
Specific disclosure items
Depreciation and amortisation (361) (931) (23) (447) (39) (1,801)
Assets and liabilities
Segment assets 51,131 78,972 5,069 59,445 8,122 202,739
Segment liabilities (18,888) (16,343) (905) (13,418) (39,220) (88,774)
-------------------------------- -------- -------- -------- -------- -------------- --------
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)/income (38) (26) - 24 (182) (222)
-------------------------------- -------- -------- -------- -------- -------------- --------
Underlying profit before tax 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)
-------------------------------- -------- -------- -------- -------- -------------- --------
* 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
2018 2017 2018
GBP000 GBP000 GBP000
-------------------------------------- ------------- ------------- ---------
Current tax on income for the period
UK tax 396 276 597
Foreign tax 1,940 1,856 4,186
Deferred tax expense (269) 24 (328)
Adjustments in respect of prior years 20 (1,131) (1,038)
-------------------------------------- ------------- ------------- ---------
2,087 1,025 3,417
-------------------------------------- ------------- ------------- ---------
The HY2019 underlying effective tax rate (ETR) of 23.5% is in
line with our normalised ETR of c.23.5%, based on the geographical
split of the Group's profits. The HY2019 underlying ETR and
unadjusted ETR of 26.1% are both significantly higher than the
HY2018 unadjusted ETR of 11.2%. The main reason for this difference
is that in the prior period, we finalised a GBP1.2m fully provided
historic tax position in the UK via the payment of a GBP0.3m
settlement. The unadjusted HY2019 ETR is higher than the underlying
HY2019 ETR at 26.1% due to the impact of the lower tax relief, at
17.7% (HY2018: 20.7%), on adjusted items, see note 6.
5. Dividend
The dividend payable of GBP3.3m represents the final dividend
for the year ended 31 March 2018 which was approved by Shareholders
at the AGM on 25 July 2018 and paid on 12 October 2018 to Members
on the Register on 14 September 2018.
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 119,894,777 (HY2017: 120,401,805;
FY2018: 120,313,586).
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 122,761,456 (HY2017: 123,420,081; FY2018:
123,678,854).
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
2018 2017 2018
GBP000 GBP000 GBP000
-------------------------------------------- ------------- ------------- ---------
Profit after tax for the period 5,915 8,093 15,086
IFRS 2 share based payment charge 1,152 988 2,194
Acquired intangible amortisation 734 558 1,363
Sale of fixed assets - - (556)
Cost on exercise of executive share options - 245 244
Net acquisitions costs 177 - 110
Project Atlas 1,490 - 375
Tax charge on adjusted items above (630) (371) (802)
Tax adjustments - (1,145) (967)
Underlying profit after tax 8,838 8,368 17,047
-------------------------------------------- ------------- ------------- ---------
Basic EPS 4.93p 6.72p 12.54p
Diluted EPS 4.82p 6.56p 12.20p
Underlying diluted EPS 7.20p 6.78p 13.78p
7. Analysis of net debt
At At At
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------ ------------- ------------- ---------
Net cash and cash equivalents 26,661 25,095 26,222
------------------------------ ------------- ------------- ---------
Debt due within one year (30,548) (18,453) (21,912)
Debt due after one year (9,645) (14,512) (11,741)
------------------------------ ------------- ------------- ---------
Gross debt (40,193) (32,965) (33,653)
------------------------------ ------------- ------------- ---------
Net debt (13,532) (7,870) (7,431)
------------------------------ ------------- ------------- ---------
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
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------------------ ------------- ------------- ---------
Net increase in cash and cash equivalents 111 957 2,115
Net (increase) in borrowings (6,213) (1,087) (1,835)
------------------------------------------ ------------- ------------- ---------
(6,102) (130) 280
Exchange rate differences 1 (1,292) (1,263)
------------------------------------------ ------------- ------------- ---------
Movement in net debt (6,101) (1,422) (983)
Opening net debt (7,431) (6,448) (6,448)
------------------------------------------ ------------- ------------- ---------
Closing net debt (13,532) (7,870) (7,431)
------------------------------------------ ------------- ------------- ---------
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) 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 HY2019 income statement results (of
subsidiaries whose presentational currency is not sterling) using
HY2018 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.
-- Organic measures
Organic measures are calculated before the impact of
acquisitions. This provides a better 'like-for-like' comparison
against the prior period for the reader. Acquisitions are included
in organic figures from the start of the 13(th) month of being part
of the Group.
-- 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.
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------------------------- ------------- ------------- ---------
Underlying EBIT/Underlying operating profit 11,875 11,131 22,713
Separately disclosed items within administrative
expenses
IFRS2 share based payment charge (1,152) (988) (2,194)
Acquired intangible amortisation (734) (558) (1,363)
Profit on sale of fixed assets - - 556
Net acquisition costs (177) - (110)
Project Atlas (1,490) - (375)
Cost on exercise of executive share options - (245) (244)
------------------------------------------------- ------------- ------------- ---------
Operating profit 8,322 9,340 18,983
------------------------------------------------- ------------- ------------- ---------
-- 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,
acquisition costs and Project Atlas (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
2018 2017 2018
GBP000 GBP000 GBP000
----------------------------------------------------- ------------- ------------- ---------
Underlying cash conversion 8,722 6,316 16,789
Cost on exercise of executive share options - (245) (244)
Movement in trade payables due to exercise of share
options - (1,205) (1,205)
Acquisition costs (274) - -
Project Atlas (1,286) - (375)
Cash generated from operations 7,162 4,866 14,965
----------------------------------------------------- ------------- ------------- ---------
-- 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 HY2019, there were no one
off tax adjustments removed. 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 FY2018 the one-off
adjustment relates to those adjusted at HY2018 and the change in
deferred tax in USA following a reduction in tax rate, see the
Annual Report for further details.
10. Own shares held
The own shares held reserve comprises the cost of the Company's
shares held by the Group. At 30 September 2018 the Group held
1,317,378 of the Company's shares (30 September 2017: 500,000; 31
March 2018: 1,500,000).
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). The carrying amount of the
factory at 30 September 2017 was MYR 5.8m (GBP1.0m) and since this
was lower than the fair value, it was held at that amount on the
balance sheet, presented as an asset held for sale. It was sold in
February 2018 for GBP1.7m and generated a profit of GBP0.6m.
12. Acquisition of Precision Technology Supplies Limited
('PTS')
On 4 April 2018, the Group acquired PTS for an initial
consideration of GBP8.5m, subject to adjustment based on the net
cash in the business at completion. The initial amount was paid on
completion in cash. Contingent consideration of up to GBP2.5m in
cash is based on the achievement of significant earn out targets
and will be deferred for 12 months. The targets require PTS to
achieve a minimum adjusted profit after tax (PAT) for FY2019 to
receive a further GBP0.5m consideration. Then for every GBP1 of
adjusted PAT in excess of the minimum an extra GBP3.77 will be
payable subject to a maximum of GBP2.0m. This contingent
consideration will also serve as a retention against which any
potential warranty and indemnity claims can be offset at the end of
the earn out period. The cash consideration has been met from the
Company's existing bank facilities via a drawdown of part of the
Accordion facility with HSBC.
Based in East Grinstead, UK, PTS was founded in 1988 and employs
27 staff. It is a highly regarded distributor of stainless steel
industrial fastenings and precision turned parts, primarily to the
electronics, medical instruments, petrochemical, defence and
robotics sectors. Its emphasis is on delivering high quality
products and services, currently selling into c.80 countries
directly through its well-established distributor network, as well
as digitally through its newly developed, fully integrated
commercial website which lists over 43,000 products for sale. This
approach has enabled PTS to continue to deliver strong sales growth
over the last three years.
For the year ended 31 March 2017, PTS reported revenue of
GBP5.1m and profit before tax of GBP0.7m. Gross assets at that date
were GBP3.8m. These figures were not audited.
In the six months since acquiring PTS to 30 September 2018, the
subsidiary contributed GBP0.5m to the consolidated profit before
tax for the period and GBP3.3m to Group's revenue.
TR has experienced a growing demand for stainless steel
fastenings from a number of our global OEM customers. Adding the
PTS product portfolio has widened our global stock range to enhance
our customer offering and provide further support to our
distributor sales.
As the acquisition completed so close to 31 March 2018, a full
fair value exercise was still to be completed and therefore, the
amounts disclosed in the Annual Report for the year ended 31 March
2018 were given for information purposes only. A fair value
exercise was completed as part of the completion accounts process
and updated consolidated values are disclosed below. These values
will be further reviewed, updated and disclosed in the Annual
Report for the year ended 31 March 2019.
Provisional Adjustments
fair values to
disclosed^ provisional Provisional
GBP000 fair recognised
values fair value
GBP000 GBP000
----------------------------------------- ------------- ------------- ------------
Property, plant and equipment 253 - 253
------------- ------------- ------------
Intangible assets 4,816 - 4,816
------------- ------------- ------------
Inventories 2,417 (164) 2,253
------------- ------------- ------------
Trade and other receivables 1,324 - 1,324
------------- ------------- ------------
Cash and cash equivalents 632 - 632
------------- ------------- ------------
Trade and other payables (1,218) 137 (1,081)
------------- ------------- ------------
Deferred tax liabilities (861) - (861)
----------------------------------------- ------------- ------------- ------------
Net identifiable assets and liabilities 7,363 (27) 7,336
------------- ------------- ------------
Consideration paid:
------------- ------------- ------------
Initial cash price paid 8,781 8,781
------------- ------------- ------------
Contingent consideration at fair value 598 598
----------------------------------------- ------------- ------------- ------------
Total consideration 9,379 9,379
----------------------------------------- ------------- ------------- ------------
Goodwill on acquisition 2,016 27 2,043
----------------------------------------- ------------- ------------- ------------
^These figures were disclosed in the Annual Report for the year
ended 31 March 2018
The fair value of trade and other receivables is GBP1.3m. The
gross contractual flows to be collected are GBP1.1m. The best
estimate at acquisition date of the contractual flows not to be
collected is GBPnil.
Intangible assets that arose on the acquisition include the
following:
-- GBP3.7m of customer relationships, with an amortisation period deemed to be 15 years
-- GBP1.1m of other intangibles, with an amortisation period deemed to be under 12 years
Goodwill is the excess of the purchase price over the fair value
of the net assets acquired and is not deductible for tax
purposes.
It mostly represents potential synergies, e.g. cross-selling
opportunities between PTS and the Group, and PTS's assembled
workforce.
Effect of acquisition
The Group incurred costs of GBP0.2m up to 30 September 2018
(HY2018: GBPnil, FY2018: GBP0.2m) in relation to the PTS
acquisition, split between acquisition costs (GBP0.1m) and
unwinding of the contingent consideration (GBP0.1m). All costs have
been included in administrative expenses (HY2018: GBPnil, FY2018:
GBP0.1m) in the Group's consolidated statement of comprehensive
income and form part of separately disclosed items, (see note 2).
The remaining GBP0.1m of acquisition costs in FY18 relating to the
arrangement fee to drawdown part of the Accordion facility were
recognised on the balance sheet and are being expensed to the
consolidated statement of comprehensive income over the term of the
facility.
13. Disaggregation of revenue
In line with IFRS 15 Revenue from Contracts with Customers we
have included the disaggregation of external revenue by sector,
breaking this down by our geographical operating segments.
September 2018 UK Europe USA Asia Total
--------------------------------- ---- ------- ---- ----- ------
Electronics 5% 4% 2% 5% 16%
Automotive 9% 14% 2% 8% 33%
Domestic appliances 2% 12% - 6% 20%
Distributors 9% - - 2% 11%
General industrial 7% 4% - 2% 13%
Other 4% 2% - 1% 7%
--------------------------------- ---- ------- ---- ----- ------
Revenue from external customers
(AER) 36% 36% 4% 24% 100%
--------------------------------- ---- ------- ---- ----- ------
September 2017 UK Europe USA Asia Total
Electronics 5% 4% 1% 7% 17%
Automotive 10% 12% 2% 8% 32%
Domestic appliances 2% 13% - 7% 22%
Distributors 7% - - 3% 10%
General industrial 6% 4% - 1% 11%
Other 5% 3% - - 8%
--------------------------------- ---- ------- ---- ----- ------
Revenue from external customers
(AER) 35% 36% 3% 26% 100%
--------------------------------- ---- ------- ---- ----- ------
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 2018 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 2018 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
12 November 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BTBLTMBMBBJP
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