Tricorn (TCN): Call with management

Friday, Apr 19 2013 by

Synergy and strategy

It's not often I speak with the management of the small cap companies I cover on my blog, but last week I was contacted by Tricorn IR and scheduled a call with CEO Mike Wellburn and Finance Director Phil Lee. As readers might guess, I'm still undecided about whether speaking to management adds much value in most cases - they are inherently biased parties - but in this case, given how much has happened at Tricorn since their last annual report - and my self-professed ignorance of what it was exactly that Tricorn did - it seemed like a good opportunity to hear straight from the horses' mouths what was going on.

A quick recap on what I've written and what has happened so far, then: my first post on Tricorn (LON:TCN) was back in January. I was rather in two minds - the company had fairly recently lost a large contract with Rolls-Royce (representing 11% of group revenues), which struck me as particularly bad timing given that the rolling stone of international expansion was picking up pace - the group had long had links with suppliers in China, but was going a step further and setting up a separate company and factory there. I also posted a couple of weeks ago, after the announcement that the group was acquiring some US assets at a discount to net asset value. The size of this acquisition was clearly materially significant for the group, at ~£2m, and explained my queries about the cash pile in the original post. Since that post, we've had one more bit of news - a trading update from the company, and it's notably positive - the Chinese factory is up and running, the US acquisition seems to be moving quickly and management say full year (pre-exceptional) PBT will be roughly the same as last year.

Mike first explained the finer details of what it is they actually do, then, with a few examples for my rather nontechnical mind. Essentially, they sit in the supply chain of OEMs (in which they aim at the larger companies), mostly producing pipes used in engines for the transferal of air/water/fuel. He was keen to stress the elements that make their business less commoditised than one might expect - some proprietary equipment for producing pipes…

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Tricorn Group plc is a holding company. The Company holds interests in companies that develop and manufacture pipe solutions. The Company's principal activities include high precision tube manipulation and systems engineering. The Company operates in two segments: Energy and Transportation. The Energy segment includes manipulated tubular assemblies for use in power generation, oil and gas, and marine sectors. The Transportation segment includes ferrous, non-ferrous and nylon material tubular assemblies for use in on and off-highway applications. The Company also offers rigid, nylon and hybrid tubular products for engines, braking systems, transportation lubrication, fuel sender sub-systems and hydraulic actuation in a range of on and off road applications. The Company offers brazed and welded assemblies, tube hose assemblies and diesel injector lines for medium and heavy duty truck engines. It offers hydraulic tube assemblies and precision tubular products for the agricultural sector. more »

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1 Comment on this Article show/hide all

Cisk 20th Apr '13 1 of 1

I held both Tricorn (LON:TCN) and Avingtrans (LON:AVG) last year, including the time when Tricorn (LON:TCN) lost the Rolls-Royce Holdings (LON:RR.) contract, which was subsequently announced that Avingtrans (LON:AVG) had won. Tricorn (LON:TCN) share price has since recovered, although I sold my holding shortly after the announcement as I was concerned why the contract had been lost (not the best move considering the recovery in its share price, although Avingtrans (LON:AVG) has done well also).

Expecting Value - did you glean any further reasons why the contract was lost?

I still prefer Avingtrans (LON:AVG) due to its broader exposure to the aerospace sector (the reasons why I bought both companies in the first place), and also its earlier foothold into China by virtue of it already having its manufacturing facility there up and running, plus its composite exposure with a recent acquisition from a company in receivership.

However I would consider going back into Tricorn (LON:TCN) if I felt that the growth prospects were good...

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About ExpectingValue


Private investor turned hedge fund analyst, looking predominantly at global small caps. Sector agnostic.


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