REG - Trifast PLC - Half-yearly Financial Report-period to 30.9.17 <Origin Href="QuoteRef">TRFT.L</Origin> - Part 2
14/11/2017 07:06
- Part 2: For the preceding part double click ID:nRSN3840Wa
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 monthsended30 September2017£000 Six monthsended30 September2016£000 Yearended31 March2017£000
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 monthsended30 September2017£000 Six monthsended30 September2016£000 Yearended31 March2017£000
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:
September 2017 UK£000 Europe£000 USA£000 Asia£000 Central costs,assets andliabilities£000 Total£000
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)
September 2016 UK£000 Europe£000 USA£000 Asia£000 Central costs,assets andliabilities£000 Total£000
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 monthsended30 September2017£000 Six monthsended30 September2016£000 Year ended31 March2017£000
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 £0.9m 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 £1.2m, of which £0.3m 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 £3.0m 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 monthsended30 September2017£000 Six monthsended30 September2016£000 Year ended31 March2017£000
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
At30 September2017£000 At30 September2016£000 At31 March2017£000
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 monthsended30 September2017£000 Six monthsended30 September2016£000 Year ended31 March2017£000
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 monthsended30 September2017£000 Six monthsended30 September2016£000 Year ended31 March2017£000
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 £1.2m 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 monthsended30 September2017£000 Six monthsended30 September2016£000 Year ended31 March2017£000
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 (£1.6m). 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 (£1.0m)
and since this is lower than the fair value, it has continued to be held at
this amount on the balance sheet.
INDEPENDENT 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
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