REG - Trifast PLC - HALF-YEARLY FINANCIAL REPORT TO 30 SEPTEMBER 2021
23/11/2021 07:00
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RNS Number : 1903T Trifast PLC 23 November 2021
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR. Upon the publication of this announcement via the Regulatory Information
Service, this inside information is now considered to be in the public domain.
Tuesday, 23 November 2021
Leading international specialist in the design, engineering, manufacture, and
distribution
of high-quality industrial fastenings and Category 'C' components principally
to major global assembly industries
"Our fastenings enable innovation today, to build a better tomorrow"
TRIFAST PLC
HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021
Key financials
Underlying measures CER(4) CER(4) AER(4) AER(4) HY2021(1)
HY2022 change HY2022 change HY2020(1)
Revenue £106.4m 31.4% £103.8m 28.1% £81.0m £103.1m
Gross profit % 26.2% (80)bps 26.3% (70)bps 27.0% 28.8%
Underlying operating profit (UOP)(3) £7.7m 73.7% £7.4m 67.0% £4.5m £10.4m
Underlying operating profit %(3) 7.3% 180bps 7.2% 170bps 5.5% 10.1%
Underlying profit before tax(3) £7.3m 84.2% £7.0m 76.8% £4.0m £9.9m
Underlying diluted earnings per share(3) 4.59p 102.2% 4.42p 94.7% 2.27p 6.07p
Bank facility headroom £50.8m £10.2m £40.6m £39.9m
Adjusted net (debt)/cash(5) £(5.1)m (£8.5)m £3.4m £(15.7)m
Return on capital employed (ROCE)(2,3) 8.8% 330bps 5.5% 11.3%
Interim dividend 0.70p N/A - 1.20p
GAAP measures
Operating profit £5.7m 81.3% £3.2m £8.4m
Operating profit % 5.5% 160bps 3.9% 8.2%
Profit before tax £5.3m 98.7% £2.7m £7.9m
Diluted earnings per share 3.22p 117.6% 1.48p 4.82p
1. Presented after the reclassification of IFRS2 Share-based Payments,
including related social security costs on exercise, into underlying results.
For EPS, the impact has been a reduction of 0.04p from 2.31p. For ROCE, a
reduction of 120bps from 7.8%
2. The calculation for ROCE was changed in FY2021, and therefore restated
above for HY2021, to reflect an add back of gross, rather than net debt. The
impact of this change is a 110bps reduction from 6.6%. HY2020 has also been
restated to add back gross rather than net debt. In addition IFRS16 Leases
only became effective from 1 April 2019, therefore HY2020 ROCE has been
calculated from a six month average, with underlying EBIT pro-rated for a full
year
3. Before separately disclosed items (see notes 2, 6 and 9)
4. "CER" being Constant Exchange Rate, calculated by translating the HY2022
figures by the average HY2021 exchange rate & "AER" being Average Exchange
Rate
5. Adjusted net (debt)/cash is presented excluding the impact of IFRS16 Leases
as this is how the calculation is performed for the purposes of the Group's
banking facilities. Including right-of-use liabilities, net debt would
increase by £(13.4)m to £(18.5)m (HY2021: net cash would decrease by
£(13.9)m to net debt of £(10.5)m)
Operational highlights
· Strong rebound in Q1 and solid Q2 growth drives year-on-year revenue
increase of 31.4% and an increase of 3.2% over the pre-Covid HY2020 period
· Operational gearing underpins underlying operating margin increase of
180bps to 7.3%
· Gross margins at 26.2% are down against HY2021, but have held steady
against HY2 FY2021 (26.1%), as transactional price rises offset increased
inflationary pressures
· Global price increase programme on contract customers is on course to
secure normalised gross margins by Q4
· Light vehicle sector sales outperform the market growing 34.3% (8.5%
- source: LMC Automotive Ltd), through continued market share gains
· Focused inventory investments support sales growth and protects
supply in a challenging market
· Project Atlas - costs and timetable on track, benefits starting to
come through
· Falcon acquired - a first step on our ambitious North America
acquisition journey
"Demand across all sectors is strong and our order pipeline has never been
higher. Increasing opportunities for expansion into key emerging technologies
continue to fuel growth, supplemented by new contract wins across a range of
existing and new multinational OEMs/Tier 1 customers. Our global price
increase programme will pass-through cost inflation and we expect revenues to
increase and gross margins to normalise in Q4 as a result. "
Mark Belton, Chief Executive Officer
"There really has never been a more exciting time for the Group. We believe
that the combination of our reputation for 'Trusted Reliability', our loyal
and established customer base and our balance sheet strength put us in a great
position to make the most of both the organic and acquisition opportunities
that surround us."
Jonathan Shearman, Non-Executive Chair
Enquiries please contact:
Trifast plc
Jonathan Shearman, Non-Executive Chair
Mark Belton, Chief Executive Officer
Clare Foster, Chief Financial Officer
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 (mailto:fiona@tooleystreet.com)
Editors' note
LSE Premium Listing: Ticker: TRI
LEI number: 213800WFIVE6RUK3CR22
About Trifast plc (TR) is a leading international specialist in the design,
engineering, manufacture, and distribution of high-quality industrial
fastenings and Category 'C' components principally to major global assembly
industries.
TR supplies to c.5,000 customers in c.75 countries across a wide range of
industries, including light vehicle, heavy vehicle, health & home, energy,
tech and infrastructure, general industrial and distributors. As a
full-service provider to multinational OEMs and Tier 1 companies spanning
several sectors, TR delivers comprehensive support to its customers from
concept design through to technical engineering consultancy, manufacturing,
supply management and global logistics.
TR employs c.1,300 people across 34 business locations within the UK, Asia,
Europe, and the USA including seven high-volume, high-quality and
cost-effective manufacturing sites and three technical & innovation
centres across the world.
For more information, visit
Investor website: www.trifast.com (http://www.trifast.com/)
Commercial website: www.trfastenings.com (http://www.trfastenings.com/)
LinkedIn: www.linkedin.com/company/tr-fastenings
(http://www.linkedin.com/company/tr-fastenings)
Twitter: www.twitter.com/trfastenings (http://www.twitter.com/trfastenings)
Facebook: www.facebook.com/trfastenings (http://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 2021.
Copies can be requested via
Companysecretariat@trifast.com/corporate.enquiries@trifast.com
(mailto:corporate.enquiries@trifast.com) or, in writing to, The Company
Secretary, Trifast plc, Trifast House, Bellbrook Park, Uckfield, East Sussex,
TN22 1QW. News updates, Regulatory News and Financial statements, can be
viewed and downloaded from the Group's website, www.trifast.com
(http://www.trifast.com) .
Forward-looking statements
This announcement contains certain forward-looking statements. These reflect
the knowledge and information available to the Company during the preparation
and up to the publication of this document. By their very nature, these
statements depend upon circumstances and relate to events that may occur in
the future thereby involving a degree of uncertainty. Therefore, nothing in
this document should be construed as a profit forecast by the Company.
TRIFAST PLC
HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021
BUSINESS REVIEW
Unless stated otherwise, current year 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 HY2022 figures by the
average HY2021 exchange rate.
The impact of foreign exchange movements has decreased our AER revenue by
2.5%, £2.6m (HY2021: decreased by 0.4%, £0.5m), our AER underlying profit
before tax by 4.0%, £0.3m (HY2021: decreased by 0.9%, £nil) and our AER
underlying diluted EPS by
3.7%, 0.17p (HY2021: decreased by 1.1%, 0.07p).
Our Group performance
Underlying measures CER CER AER AER HY2021(1)
HY2022 change HY2022 change HY2020(1)
Revenue £106.4m 31.4% £103.8m 28.1% £81.0m £103.1m
Gross profit % 26.2% (80)bps 26.3% (70)bps 27.0% 28.8%
Underlying operating profit (UOP)(3) £7.7m 73.7% £7.4m 67.0% £4.5m £10.4m
Underlying operating profit %(3) 7.3% 180bps 7.2% 170bps 5.5% 10.1%
Underlying profit before tax(3) £7.3m 84.2% £7.0m 76.8% £4.0m £9.9m
Underlying diluted earnings per share(3) 4.59p 102.2% 4.42p 94.7% 2.27p 6.07p
Return on capital employed (ROCE)(2,3) 8.8% 330bps 5.5% 11.3%
GAAP measures
Operating profit £5.7m 81.3% £3.2m £8.4m
Operating profit % 5.5% 160bps 3.9% 8.2%
Profit before tax £5.3m 98.7% £2.7m £7.9m
Diluted earnings per share 3.22p 117.6% 1.48p 4.82p
1. Presented after the reclassification of IFRS2 Share-based Payments,
including related social security costs on exercise, into underlying results.
For EPS, the impact has been a reduction of 0.04p from 2.31p. For ROCE, a
reduction of 120bps from 7.8%
2. The calculation for ROCE was changed in FY2021, and therefore restated
above for HY2021, to reflect an add back of gross, rather than net debt. The
impact of this change is a 110bps reduction from 6.6%. HY2020 has also been
restated to add back gross rather than net debt. In addition IFRS16 Leases
only became effective from 1 April 2019, therefore HY2020 ROCE has been
calculated from a six month average, with underlying EBIT pro-rated for a full
year
3. Before separately disclosed items (see notes 2, 6 and 9)
The first half of FY2022 has been a story of strong recovery and solid growth,
with revenues ending 31.4% up on HY2021 and also ahead of the HY2020 pre-Covid
comparative period. We have seen high demand across all of our key sectors,
with light vehicle sector growth outpacing global light vehicle production to
record a 34.3% increase (8.5% - source: LMC Automotive Ltd), despite the
well-publicised semi-conductor shortages.
Gross margins have remained in line with the second half of FY2021 at 26.2%
(AER: 26.3%; FY2021 HY2: 26.1%) as the temporary impact of further cost price
inflation has been offset by higher revenues and early price increase activity
in our transactional business. Against HY2021 gross margins are 80bps lower
(AER: 70bps lower at 26.3%; HY2021: 27.0%) largely due to the removal of
government support schemes operating in the first half of the previous year.
UOP margin has increased strongly by 180bps to 7.3% (AER: 170bps to 7.2%;
HY2021: 5.5%), and UOP by 73.7% to £7.7m (HY21: £4.5m) as operational
gearing gains feed through into profits. The positive impact of this has been
partially offset by the normalisation of overheads from a lowered HY2021 base,
including the removal of government support schemes.
Reflecting the strong recovery, our underlying PBT is up 84.2% at CER to
£7.3m (AER: 76.8%, to £7.0m, HY2021: £4.0m). This coupled with a
reduction in our underlying effective tax rate has resulted in a marked
increase in our underlying diluted earnings per share (EPS) at CER, up 102.2%
to 4.59p and at AER, up 94.7% to 4.42p (HY2021: 2.27p).
PBT has increased 98.7% at AER to £5.3m (HY2021: £2.7m). In addition to the
movements explained above, profit has reduced by £0.5m due to the costs
incurred to date in acquiring Falcon Fastening Solutions Inc (Falcon). The
reduction in our effective tax rate has resulted in diluted EPS increasing
117.6% to 3.22p (HY2021: 1.48p).
An investment in inventory of £16.3m, to support growth and secure supply,
has led to a temporarily negative underlying cash conversion rate at AER of
(51.9)% (HY2021: restated for IFRS2 and related NI costs 140.3%). This, in
conjunction with the acquisition of Falcon (USA) on 31 August 2021 for £5.9m,
net of cash acquired, means that we have ended the half-year back in an
adjusted net debt position of £(5.1)m (FY2021: £13.3m adjusted net cash)
with a low adjusted net debt to UEBITDA ratio of 0.27x. We continue to have
undrawn facilities of c.£50m (FY2021: c.£63m), and an available accordion
facility for a further £40m, providing us with the security and flexibility
to continue to invest in our future growth.
Revenue (CER)
We have seen strong growth across all our regions, with revenue increases for
the period ranging from 21.4% to 69.5%.
Europe has seen a 31.4% increase to £41.2m (AER 26.8% to £39.8m; HY2021:
£31.4m), reporting record regional revenues, that are 11.2% ahead of HY2020.
Health & home has seen the highest growth as the strong recovery in demand
we saw at key multinational OEMs in the second half of FY2021 has continued.
In Hungary we have seen increases in the Energy, tech and infrastructure
(ET&I) sector as key customers raise production volumes and in Germany
trading conditions in the general industrial sector have proved particularly
buoyant. Despite semi-conductor shortages hampering OEM production volumes in
the light vehicle sector, we have seen a strong recovery in demand across
Holland, Sweden, Italy and Spain as start of production commences on new
platform builds and previously won market share gains start to positively
impact numbers.
Trading levels in the UK have rebounded even faster, recording 39.9% growth to
£40.3m (HY2021: £28.8m) and ending 4.9% ahead of the HY2020 pre-Covid
period. The largest increases have been due to higher distributor volumes and
increased transactional pricing, with trading levels across our stainless
steel, UK and EU distributor markets increasing by between 40% to 67%. Light
vehicle sales have recovered, but remain below pre-Covid levels due to the
impact of semi-conductor shortages. Whilst health and home and general
industrial revenues are c.40% higher as demand returns to these key sectors.
In Asia, we have seen the smallest revenue increase of 21.4% to £27.2m (AER:
17.3% to £26.3m; HY2021: £22.4m), with trading remaining below pre-Covid
levels by (8.2)%. The key reason for this is the temporary Summer lockdowns in
Malaysia which impacted domestic light vehicle volumes as well as health &
home production levels at one of our key multinational OEMs. Offsetting this,
we have seen robust growth in Taiwan as distributor sales recovered to
pre-Covid levels in key European end markets. In Singapore, strong growth was
secured in the ET&I sector, supplemented by increased intercompany
manufacturing and a new general industrial OEM operating in the cooling market
has underpinned double digit growth in China, despite a strong HY2021 base.
In the USA, we have seen exceptionally high growth of 69.5% to £7.2m (AER:
£2.4m to £6.7m; HY2021: £4.2m) and 19.0% up organically on the pre-Covid
period. Organic growth, most noticeably due to new platform builds in the
light vehicle sector, has driven 53.4% of this, with one month of revenue
following the acquisition of Falcon on 31 August 2021 providing the remaining
16.1%.
Underlying operating profit (CER)
Region HY2022 HY2021 Movement HY2022 HY2021 Movement
UOP UOP UOP margin UOP margin
Europe £2.6m £2.2m £0.4m 6.3% 7.1% (80)bps
UK £4.0m £0.4m £3.6m 10.0% 1.5% 850bps
Asia £3.4m £3.2m £0.2m 12.7% 14.2% (150)bps
USA £(0.2)m £(0.2)m - (3.0)% (4.4)% 140bps
The strong recovery in sales, has had the largest impact on UOP margins
resulting in a net increase of 180bps to 7.3% (HY2021: 5.5%) as positive
operational gearing gains feeds through to underlying profitability.
In Europe, despite a strong sales recovery, we have seen an overall 80bps
reduction in UOP margins to 6.3%, £2.6m (HY2021: 7.1%, £2.2m). The positive
impact of higher sales against a fixed and semi-fixed cost base has been more
than offset by what we expect to be temporary increases in freight and raw
material costs, most specifically in our Italian manufacturing site. With the
normalisation of overheads from a lowered base, including the removal of
government support schemes also hampering margin recovery. Transactional price
benefits have already been instigated in the region, however the bigger
pass-through of inflationary costs will take place in HY2 as changes to
contractual pricing act to normalise gross margins.
In contrast in the UK, UOP margins have significantly improved year-on-year
with an 850bps increase to 10.0%, £4.0m (HY2021: 1.5%, £0.4m). The largest
reason for this is the increase in sales, supplemented by a positive product
mix shift due to the rapid growth in higher margin distributor business.
Transactional price increases have had a larger immediate positive impact in
the region as a result. Freight costs have been higher, however raw material
increases have yet to feed through in any significant way due to opening
inventory levels. The normalisation of overheads from a lower base, including
the removal of government support schemes, has also had a negative impact on
overall UOP margins.
In Asia, UOP margins have decreased by 150bps to 12.7%, £3.4m (HY2021: 14.2%,
£3.2m), although these remain relatively high due to the greater proportion
of manufacturing revenues in the region. The lower increase in sales against
the rest of the Group has reduced the positive operational gearing impact,
whilst increases in raw material prices have been felt more immediately due to
the manufacturing focus. The normalisation of overheads from a lowered base
has had an impact on margins, with the removal of the much more generous
government support schemes being by far the biggest element of this.
In the USA, we have seen a 140bps improvement in UOP margins, albeit that
these remain negative at (3.0)%, £(0.2)m (HY2021: (4.4)%, £(0.2)m). The
exceptional increase in sales has had by far the biggest impact on margins.
However, as widely publicised, this has been partially offset by substantially
higher freight costs, while the product mix shift away from ET&I and
towards light vehicles has reduced overall gross margins. Looking ahead, we
expect to return to profits over the course of HY2, as changes to contractual
pricing passes through inflationary costs and normalises gross margins in the
region.
Operating profit (AER)
Similar to underlying operating profit, the strong recovery in sales and
positive operational gearing gains it brings, has had the biggest impact on
the 160bps increase in operating margins from 3.9% to 5.5%. This has been
partially offset by £0.5m of costs incurred in relation to the acquisition of
Falcon in the period.
At a regional level, the movements at operating profit and margins broadly
follow the movements at UOP level:
Region HY2022 HY2021 Movement HY2022 HY2021 Movement
operating profit operating profit operating margin operating margin
Europe £1.9m £1.7m £0.2m 4.9% 5.4% (50)bps
UK £3.3m £(0.2)m £3.5m 8.1% (0.7)% 880bps
Asia £3.3m £3.2m £0.1m 12.5% 14.1% (160)bps
USA £(0.3)m £(0.2)m £(0.1)m (3.7)% (4.4)% 70bps
Net financing costs (AER)
Net financing costs have reduced to £0.4m (HY2021: £0.5m) due to the
decrease in average net debt in the period.
Taxation (AER)
The HY2022 underlying effective tax rate (UETR) and effective tax rate (ETR)
are significantly lower at 13.7% and 16.4% than the previous half-year
(HY2021: restated for IFRS2 and related NI costs 24.9% and 26.7%, FY2021:
23.9% and 25.6%).
This is as a result of a change in the mix of profits by legal entity, the
substantively enacted UK tax rate change to 25% increasing the net deferred
tax asset, and the movement in adjustments in respect of prior years.
Subject to future tax changes and excluding adjustments in respect of prior
years, our normalised underlying ETR is expected to remain in the range of
22-25% going forward.
Earnings per share (AER)
The increase in underlying profit before tax and the reduction in our UETR,
has significantly increased our underlying diluted EPS by 94.7% to 4.42p
(HY2021: 2.27p). Diluted EPS has increased 117.6% to 3.22p (HY2021: 1.48p).
Dividend
The Company has declared an interim dividend of 0.70p (HY2021: nil) which will be paid on 14 April 2022 to members on the register as at 18 March 2022.
We continue to consider that an appropriate level of dividend cover is in the range of 3.0x to 4.0x. For the medium-term, the Board intends to target a pay-out at the top end of this range to allow for the expected ongoing organic growth, strategic investment and acquisitions.
Return on Capital Employed (AER)
As at 30 September 2021, the Group's shareholders' equity increased to
£133.9m (FY2021: £131.8m). The £2.1m uplift reflects retained earnings of
£2.3m (HY2021: £0.5m), a net movement in shares of £(1.8)m and a foreign
exchange reserve gain of £1.6m.
Over this increased asset base and given the strong growth in profits, our
ROCE has increased 200bps from 31 March 2021 to 8.8% (FY2021: 6.8%).
At 30 September 2021, the number of ordinary shares held by the Employee
Benefit Trust (EBT) to honour future equity award commitments had increased to
1,269,059 shares (FY2021: 329,087 shares).
Adjusted net debt (AER)
As at 30 September 2021, the Group had an adjusted net debt position of
£(5.1)m (FY2021: adjusted net cash of £13.3m). Some £(5.9)m (net of
£0.3m cash acquired) of this decrease relates to the acquisition of Falcon
(USA) on 31 August 2021.
As a result of the £16.3m investment in inventory, to support growth and
protect supply, our conversion rate of underlying EBITDA to underlying cash
has been negative in the period at (51.9)% (HY2021 restated for IFRS2 and
related NI costs: 140.3%). We expect this position to be temporary as
inventory levels stabilise, albeit at higher levels, over the second half of
the year.
Supporting the Board's ongoing strategic investments for growth, capital
expenditure in the period amounted to £2.1m (HY2021: £1.5m) including £0.5m
in relation to Project Atlas.
Including the impact of IFRS16 Leases, the Group's net debt position would
have been £(18.5)m (FY2021: net cash of £0.5m).
Project Atlas
Project Atlas is our £17.5m transformational investment that will underpin
the Group's ongoing organic and acquisitive growth strategy and further
integrate our global business to create the Trifast of tomorrow. The
medium-term benefits case supporting this investment has always been very
compelling with an ROI of >25% expected at the point of full benefits
realisation (HY2 of FY2024). In the meantime, we are very pleased to report
that we are already seeing the positive impact of warehouse efficiencies
following the successful roll-out to our pilot site in October 2020 and two
further site implementations in June 2021.
Because of the work undertaken to date on this project, we have incurred
direct costs of £1.0m in HY2022 (cumulatively £13.3m), largely relating to
project team, consultancy, localised testing and training costs. We have
excluded £0.5m of these costs from our underlying results, (see note 2), to
reflect the unusual scale and one-off nature of this project. In line with
accounting standards, we have also recognised the remaining £0.5m
(cumulatively £6.1m) as fixed assets on the balance sheet at 30 September
2021.
Looking ahead, the rollout phase is set to continue with our biggest trading
subsidiary, TR Fastenings (UK) going live at the beginning of FY2023. The
remaining distribution entities are planned to go live by the end of FY2023,
with the manufacturing entities going live in FY2024.
An accelerated acquisition journey
A truly global fastenings business needs a North America region (the largest
fastenings market in the world), of credible scale and reach. Currently it
forms less than 10% of the Group's revenue and therefore we have significant
appetite to acquire in the region to specifically address that imbalance.
A successful first step on the journey was taken on 31 August 2021 with the
acquisition of Falcon, an established fastenings distributor located in North
Carolina (and Kentucky). TR Falcon provides us with an improved presence in a
key US location (North Carolina is home to 29 of our existing top customers)
and access to two new key multinational OEMs supporting diversification
outside of light vehicles with sales into the ET&I and general industrial
sectors.
We continue to view non-organic growth as an opportunity beyond North America,
allowing us to accelerate our digital evolution, onshore in-house
manufacturing capacity, as well as retaining diversification against the
strong organic light vehicle sales momentum.
To read more on Project Atlas and our accelerated acquisition journey, please
follow this link:
https://www.trifast.com/media/145715/trifast-plc-hy-results-presentation.pdf
(https://www.trifast.com/media/145715/trifast-plc-hy-results-presentation.pdf)
.
Looking ahead from a strong foundation
In HY2022, the Group has seen a strong rebound and solid growth despite the
ongoing impact of the international supply chain challenges. There can be no
doubt that semi-conductor shortages will continue to impact results in the
short-term. However, we expect to continue to outperform the market due to new
platform wins and further penetration into our existing light and heavy
vehicle customer base.
Demand across all sectors is strong and our order pipeline has never been
higher. Increasing opportunities for expansion into key emerging technologies
continue to fuel growth, supplemented by new contract wins across a range of
existing and new multinational OEMs/Tier 1 customers. Our global price
increase programme will pass-through cost inflation and we expect revenues to
increase and gross margins to normalise in Q4 as a result. The investments
that we are continuing to make into our manufacturing capacity and our high
growth geographies will further enhance growth. All of which is expected to
carry on feeding through to the bottom line via operational gearing gains.
Our accelerated acquisition journey reflects a significant appetite both in
North America and beyond, and is firmly supported by a growing pipeline of
targets. Alongside this, Project Atlas is in its final stages having been
successfully designed, built, tested and piloted, with benefits now subject
only to an ongoing roll-out timetable.
There really has never been a more exciting time for the Group. We believe
that the combination of our reputation for 'Trusted Reliability', our loyal
and established customer base and our balance sheet strength put us in a great
position to make the most of both the organic and acquisition opportunities
that surround us.
The Board therefore remains committed to its ongoing investment driven growth
strategy and is optimistic for the future.
RISKS AND UNCERTAINTIES
The Directors do not consider that the principal risks and uncertainties of
the Group have changed since the publication in June 2021 of the Group's
Annual Report for the year ended 31 March 2021. The principal risks and
uncertainties include: COVID-19 and the macroeconomic environment, a major
quality issue and a breach of cyber security. A copy of this publication can
be found on the website www.trifast.com (http://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. These reviews are analysed and discussed at
Audit & Risk 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.
The long-term success of the Group depends on the ongoing review, assessment
and management 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 UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
· the interim management report includes a fair review of the information required by:
a. DTR 4.2.7R of the Disclosure Guidance 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 Guidance 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.
Trifast plc Sustainability Report
The Group today has published its expanded Sustainability report which
reflects the growth of our environmental and social programmes within our
operations and supply chain, as well as the impact of our partnership with
customers to reduce environmental impact and deliver new technologies. Our
work on good environmental and social practices and our robust corporate
governance approach have been an important part of the way we operate, and ESG
issues are embedded into our decision-making, alongside commercial and
practical considerations.
To read more, please follow this link:
https://www.trifast.com/media/145713/trifast-sustainability-report-2021.pdf
(https://www.trifast.com/media/145713/trifast-sustainability-report-2021.pdf)
.
Mark Belton, Chief Executive Officer
Clare Foster, Chief Financial Officer
22 November 2021
Condensed consolidated interim income statement
Unaudited results for the six months ended 30 September 2021
Six months Six months Year
Notes ended ended ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Continuing operations
Revenue 3,11 103,792 81,018 188,161
Cost of sales (76,538) (59,117) (138,247)
Gross profit 27,254 21,901 49,914
Other operating income 246 299 595
Distribution expenses (2,350) (1,955) (3,773)
Administrative expenses before separately disclosed items(1) (17,704) (15,785) (34,754)
Acquired intangible amortisation 2 (725) (718) (1,428)
Project Atlas 2 (512) (497) (1,082)
Acquisition costs 2,13 (495) - -
Equity raise costs 2 - (59) (59)
Loss on assets in disposal group classified as Held for Sale 2 - (35) -
Restructuring costs 2 - - (377)
Loss on disposal of TR Formac (Malaysia) SDN Bhd 2 - - (280)
Total administrative expenses (19,436) (17,094) (37,980)
Operating profit 5,714 3,151 8,756
Financial income 20 18 37
Financial expenses (468) (517) (1,009)
Net financing costs 3 (448) (499) (972)
Profit before tax 3 5,266 2,652 7,784
Taxation 4 (861) (709) (1,994)
Profit for the period 4,405 1,943 5,790
(attributable to equity shareholders of the parent company)
Earnings per share
Basic 6 3.23p 1.48p 4.33p
Diluted 6 3.22p 1.48p 4.31p
1. Presented after the reclassification into underlying results of IFRS2
Share-based Payments, including related social security costs on exercise, see
note 2.
Condensed consolidated interim statement of comprehensive income
Unaudited results for the six months ended 30 September 2021
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Profit for the period 4,405 1,943 5,790
Other comprehensive income:
Exchange differences on translation of foreign operations 1,882 1,562 (4,916)
(Loss)/gain on a hedge of a net investment taken to equity (244) (1,199) 34
Other comprehensive income/(expense) recognised directly in equity, net of 1,638 363 (4,882)
income tax
Total comprehensive income recognised for the period 6,043 2,306 908
(attributable to equity shareholders of the parent company)
Condensed consolidated interim statement of changes in equity
Unaudited results for the six months ended 30 September 2021
Share Share Merger reserve Own shares held Translation Retained Total
£000
capital premium £000 reserve earnings equity
£000 £000 £000 £000 £000
Balance at 1 April 2021 6,802 22,461 16,328 (595) 9,524 77,284 131,804
Total comprehensive income for the period:
Profit for the period - - - - - 4,405 4,405
Other comprehensive income for the year - - - - 1,638 - 1,638
Total comprehensive income for the period - - - - 1,638 4,405 6,043
Transactions with owners, recorded directly
in equity:
Issue of share capital - 11 - - - - 11
Share based payment transactions (net of tax) - - - - - (379) (379)
Movement in own shares held - - - (1,420) - (26) (1,446)
Dividends (note 5) - - - - - (2,156) (2,156)
Total transactions with owners - 11 - (1,420) - (2,561) (3,970)
Balance at 30 September 2021 6,802 22,472 16,328 (2,015) 11,162 79,128 133,877
Share Share Merger reserve Own shares held Translation Retained Total
£000
capital premium £000 reserve earnings equity
£000 £000 £000 £000 £000
Balance at 1 April 2020 6,132 22,340 - (1,934) 14,406 74,716 115,660
Total comprehensive income for the period:
Profit for the period - - - - - 1,943 1,943
Other comprehensive income for the year - - - - 363 - 363
Total comprehensive income for the period - - - - 363 1,943 2,306
Transactions with owners, recorded directly
in equity:
Issue of share capital 664 18 14,807 - - - 15,489
Share based payment transactions (net of tax) - - - - - 59 59
Movement in own shares held - - - 372 - (372) -
Presentation transfer to merger reserve - - 1,521 - - (1,521) -
Dividends - - - - - (1,457) (1,457)
Total transactions with owners 664 18 16,328 372 - (3,291) 14,091
Balance at 30 September 2020 6,796 22,358 16,328 (1,562) 14,769 73,368 132,057
Condensed consolidated interim statement of financial position
Unaudited results for the six months ended 30 September 2021
Notes 30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Non-current assets
Property, plant, and equipment 19,360 20,302 18,743
Right-of-use asset 12,509 12,598 11,958
Intangible assets 42,823 39,392 38,452
Deferred tax assets 2,885 2,114 2,539
Total non-current assets 77,577 74,406 71,692
Current assets
Inventories 73,434 59,005 54,765
Trade and other receivables 56,093 49,277 53,194
Cash and cash equivalents 12 23,819 29,822 30,265
Assets in disposal group classified as Held for Sale - 682 -
Total current assets 153,346 138,786 138,224
Total assets 3 230,923 213,192 209,916
Current liabilities
Trade and other payables 45,258 33,440 41,133
Right-of-use liabilities 7 2,796 2,873 2,726
Tax payable 2,598 2,403 2,645
Dividends payable 5 2,156 - -
Liabilities in disposal group classified as Held for Sale - 204 -
Total current liabilities 52,808 38,920 46,504
Non-current liabilities
Other interest-bearing loans and borrowings 7 28,906 26,548 16,970
Right-of-use liabilities 7 10,563 11,056 10,060
Provisions 1,088 959 1,023
Deferred tax liabilities 3,681 3,652 3,555
Total non-current liabilities 44,238 42,215 31,608
Total liabilities 3 97,046 81,135 78,112
Net assets 133,877 132,057 131,804
Equity
Share capital 6,802 6,796 6,802
Share premium 22,472 22,358 22,461
Merger reserve 16,328 16,328 16,328
Own shares held 10 (2,015) (1,562) (595)
Translation reserve 11,162 14,769 9,524
Retained earnings 79,128 73,368 77,284
Total equity 133,877 132,057 131,804
Condensed consolidated interim statement of cash flows
Unaudited results for the six months ended 30 September 2021
Notes Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Cash flows from operating activities
Profit for the period 4,405 1,943 5,790
Adjustments for:
Depreciation, amortisation, and impairment 1,926 1,919 3,813
Right-of-use asset depreciation 1,457 1,616 3,229
Unrealised foreign currency loss/(gain) 153 74 (17)
Financial income (20) (18) (37)
Financial expense (excluding right-of-use liabilities' financial expense) 329 361 696
Right-of-use liabilities' financial expense 139 156 313
Gain on sale of property, plant & equipment, and investments (12) - (7)
Loss on assets in disposal group classified as Held for Sale - 35 -
Equity settled share-based payment transactions (379) 59 1,052
Loss from sale of TR Formac (Malaysia) SDN Bhd - - 280
Taxation charge 861 709 1,994
Equity raise costs - 59 59
Operating cash inflow before changes in working capital
and provisions
8,859 6,913 17,165
Change in trade and other receivables (1,464) 3,932 (3,080)
Change in inventories (16,306) 339 2,571
Change in trade and other payables 2,809 (1,516) 7,861
Change in provisions - - 64
Cash (used in)/generated from operations (6,102) 9,668 24,581
Tax paid (1,137) (542) (1,283)
Net cash (used in)/generated from operating activities (7,239) 9,126 23,298
Cash flows from investing activities
Proceeds from sale of property, plant & equipment 35 - 8
Interest received 22 18 38
Acquisition of subsidiary, net of cash acquired (5,850) - -
Acquisition of property, plant and equipment, and intangibles (2,145) (1,547) (3,060)
Proceeds from sale of TR Formac (Malaysia) SDN Bhd, net of cash held - - 33
Net cash used in investing activities (7,938) (1,529) (2,981)
Cash flows from financing activities
Net proceeds from the issue of share capital 11 15,430 15,540
Purchase of own shares (1,446) - (59)
Proceeds from new loan 11,479 - -
Repayment of borrowings - (18,627) (26,656)
Repayment of right-of-use liabilities (1,520) (1,782) (3,658)
Dividends paid - (1,457) (1,457)
Interest paid (221) (275) (763)
Net cash generated from/(used in) financing activities 8,303 (6,711) (17,053)
Net change in cash and cash equivalents 8 (6,874) 886 3,264
Cash and cash equivalents at 1 April 30,265 28,727 28,727
Effect of exchange rate fluctuations on cash held 428 320 (1,726)
Cash and cash equivalents at end of period 7,12 23,819 29,933 30,265
NOTES TO THE HALF-YEAR FINANCIAL REPORT
Unaudited results for the six months ended 30 September 2021
1. Basis of preparation
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 UK. 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 2021. The annual financial
statements of the Group are prepared in accordance with International
Reporting Standards (IFRSs) as adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
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 BDO LLP and their Report is set out at the end of
this document.
The comparative figures for the financial year ended 31 March 2021 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.
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 2021.
Going concern
The Group's business activities, together with the factors (including the
impact of COVID-19) likely to affect its future development, performance and
position are set out in the accompanying Business Review. The financial
position of the Group, its cash flows, liquidity position and borrowing
facilities are also described in the same report. In addition, note 27 to
the Group's previously published financial statements for the year ended 31
March 2021 include the Group'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.
Current trading and forecasts show that the Group will continue to be
profitable and generate cash. The banking facilities and covenants that are
in place provide appropriate headroom against forecasts. The Directors do not
consider there to be material uncertainties relating to events or conditions
that may be relevant to the next 12 months from signing of the Half-yearly
financial report, that cast doubt on the going concern status. Thus the
Directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future and hence they
continue to adopt the going concern basis of accounting in preparing the
Half-yearly financial report.
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 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 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 2021. For
the six months to 30 September 2021, the fair value of assets acquired in the
business combination is a new key judgement due to the acquisition of Falcon.
Judgements and estimates are made in assessment of the net assets acquired,
including the identification and valuation of intangible assets and their
useful lives.
Another key judgement made by management relates to Project Atlas costs
meeting the capitalisation criteria under IAS 38 Intangible Assets, allowing
directly attributable costs to be capitalised. No other key judgements have
been made, other than those involving estimations. The key sources of
estimation uncertainty are inventory valuation and recoverability of goodwill.
In the 31 March 2021 consolidated financial statements, in note 14, specific
disclosure was made around sensitivity to changes in key assumptions relating
to impairment testing for the recoverability of goodwill relating to TR VIC
(HY2022: £2.9m; FY2021: £2.9m). The discount rate had been above average
in recent years (FY2020: 10.8%; FY2019: 11.2%; FY2016-18 average: 9.3%) due to
the continued economic struggles in Italy and impact of Covid-19. Whilst it
had reduced in FY2021 (8.4%), if it returns to FY2020/FY2019 levels, it may
lead to an impairment. As at 30 September 2021, there was no indicator of a
material change in discount rate, however, we note that the ongoing
recoverability of the TR VIC goodwill amount continues to be sensitive to any
subsequent increase in this rate.
Government grants
Included in the consolidated income statement is £59k (HY2021: £2.1m) of
government grants obtained.
2. Underlying profit before tax and separately disclosed items
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Underlying profit before tax 6,998 3,961 11,010
Separately disclosed items within administrative expenses:
Acquired intangible amortisation (725) (718) (1,428)
Project Atlas (512) (497) (1,082)
Acquisition costs (495) - -
Loss on assets in disposal group classified as Held for Sale - (35) -
Equity raise costs - (59) (59)
Restructuring costs - - (377)
Loss on disposal of TR Formac (Malaysia) SDN Bhd - - (280)
Profit before tax 5,266 2,652 7,784
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Underlying EBITDA 10,104 7,277 17,596
Separately disclosed items within administrative expenses:
Project Atlas (512) (497) (1,082)
Acquisition costs (495) - -
Loss on assets in disposal group classified as Held for Sale - (35) -
Equity raise costs - (59) (59)
Restructuring costs - - (377)
Loss on disposal of TR Formac (Malaysia) SDN Bhd - - (280)
EBITDA 9,097 6,686 15,798
Acquired intangible amortisation (725) (718) (1,428)
Depreciation (including right-of-use depreciation) and non-acquired (2,658) (2,817) (5,614)
amortisation
Operating profit 5,714 3,151 8,756
IFRS2 Share-based payments
Underlying measures have been presented after the reclassification of IFRS2
Share-based Payments including related NI costs on exercise into underlying
results. As noted in the Group's Annual Report for the year ended 31 March
2021, up until FY2021 we had presented IFRS2 Share-based Payment charges
including related NI costs on exercise as separately disclosed items within
administrative expenses. As the development of these schemes is now broadly
complete, we are presenting these costs from FY2021 within underlying results.
The impact of this on the HY2022 results is a gain of £0.4m (HY2021: loss of
£(0.1)m).
Consistent with prior periods, management feel it is appropriate to remove
separately disclosed items as 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.
Event driven/one-off separately disclosed items
Project Atlas is a multi-year investment into our IT infrastructure and
underlying business processes, budgeted to cost £17.5m. We have excluded
these costs (primarily relating to training and project team costs) from our
underlying results, to reflect the unusual scale and one-off nature of this
project. We anticipate continuing to do so in order to provide shareholders
with a better understanding of our underlying trading performance during this
period of investment. This investment will be recorded as a combination of
capital expenditure and separately disclosed items, dependent on accounting
convention.
Net acquisition costs of £0.5m (HY2021: £nil) were incurred in the year in
relation to the acquisition of Falcon on 31 August 2021.
Recurring items
Acquired intangible amortisation has remained in line with HY2021. Intangible
amortisation relating to acquisitions has been separately disclosed since this
does not relate to the trading performance of the respective entities.
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 2021 and 2020 are disclosed in the table below:
September 2021 UK Central costs, Total
£000 Europe USA Asia assets and £000
£000 £000 £000 liabilities
£000
Revenue*
Revenue from external customers 36,923 38,781 6,613 21,475 - 103,792
Inter segment revenue 3,395 1,003 69 4,780 - 9,247
Total revenue 40,318 39,784 6,682 26,255 - 113,039
Underlying operating profit (see note 9) 4,023 2,463 (221) 3,303 (2,122) 7,446
Net financing costs (47) (61) (31) (17) (292) (448)
Underlying profit before tax 3,976 2,402 (252) 3,286 (2,414) 6,998
Separately disclosed items (see note 2) (1,732)
Profit before tax 5,266
Specific disclosure items
Depreciation and amortisation (1,030) (1,304) (158) (839) (52) (3,383)
Assets and liabilities
Non-current asset additions 471 1,411 - 541 733 3,156
Segment assets 66,329 72,109 18,318 62,238 11,929 230,923
Segment liabilities (25,506) (19,955) (3,742) (15,069) (32,774) (97,046)
September 2020 UK Central costs, Total
£000 Europe USA Asia assets and £000
£000 £000 £000 liabilities
£000
Revenue*
Revenue from external customers 26,948 30,792 4,158 19,120 - 81,018
Inter segment revenue 1,875 577 84 3,262 - 5,798
Total revenue 28,823 31,369 4,242 22,382 - 86,816
Underlying operating profit (see note 9) 422 2,232 (186) 3,181 (1,189) 4,460
Net financing costs (68) (56) (34) (25) (316) (499)
Underlying profit before tax 354 2,176 (220) 3,156 (1,505) 3,961
Separately disclosed items (see note 2) (1,309)
Profit before tax 2,652
Specific disclosure items
Depreciation and amortisation (978) (1,417) (122) (969) (49) (3,535)
Assets and liabilities
Non-current asset additions 249 818 - 177 656 1,900
Segment assets 62,306 71,376 8,607 61,629 9,274 213,192
Segment liabilities (21,715) (16,043) (1,530) (13,552) (28,295) (81,135)
Underlying operating profit has been presented after the reclassification of
IFRS2 Share-based Payments and other related costs into underlying results.
The impact of this on the HY2022 results is an increase of £0.4m (HY2021:
decrease of £0.1m).
* 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
2021 2020 2021
£000 £000 £000
Current tax on income for the period
UK tax - - 44
Foreign tax 1,234 920 2,619
Deferred tax income (194) (328) (754)
Adjustments in respect of prior years (179) 117 85
861 709 1,994
The HY2022 underlying effective tax rate (UETR) of 13.7% (HY2021 restated for
IFRS2 and related NI costs: 24.9%) has reduced due to the substantively
enacted UK tax rate change to 25% increasing the net deferred tax asset as
well as the movement in adjustments in respect of prior years. These factors
will also impact the FY2021 underlying UETR. Beyond this will still expect a
normalised underlying UETR range of c.22-25%, based on the geographical split
of the Group's profits. The effective tax rate has decreased to 16.4%
(HY2021: 26.7%) due to the factors mentioned above. An increase in the UK tax
rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24
May 2021. This will increase the Group's future current tax charge
accordingly.
5. Dividends
The dividend payable of £2.2m represents the final dividend for the year ended 31 March 2021 which was approved by Shareholders at the AGM on 28 July 2021 and paid on 15 October 2021 to members on the Register on 17 September 2021. The Company has declared an interim dividend of 0.70p (HY2021: nil) which will be paid on 14 April 2022 to members on the register as at 18 March 2022.
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 136,184,256 (net of own shares held) (HY2021: 130,928,786, FY2021:
133,821,189).
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 (net of own
shares held). The number of shares used in the calculation amount to
136,836,491 (HY2021: 130,933,814 FY2021: 134,257,324).
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
2021 2020 2021
£000 £000 £000
Profit after tax for the period 4,405 1,943 5,790
Separately disclosed items:
Acquired intangible amortisation 725 718 1,428
Project Atlas 512 497 1,082
Acquisition costs 495 - -
Loss on assets in disposal group classified as Held for Sale - 35 -
Equity raise costs - 59 59
Restructuring cost - - 377
Loss on disposal of TR Formac (Malaysia) SDN Bhd - - 280
Tax charge on adjusted items above (97) (279) (641)
Underlying profit after tax 6,040 2,973 8,375
Basic EPS 3.23p 1.48p 4.33p
Diluted EPS 3.22p 1.48p 4.31p
Underlying diluted EPS 4.42p 2.27p 6.24p
HY2021 underlying earnings per share has been presented after the
reclassification of IFRS2 Share-based Payments and other related costs into
underlying results. The impact has been a reduction of 0.04p from 2.31p.
7. Analysis of net debt
At At At
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Net cash and cash equivalents (see note 12) 23,819 29,933 30,265
Debt due within one year (2,796) (2,873) (2,726)
Debt due after one year (39,469) (37,604) (27,030)
Gross debt (42,265) (40,477) (29,756)
Net (debt)/cash (18,446) (10,544) 509
Right-of-use lease liabilities 13,359 13,929 12,786
Adjusted net (debt)/ cash (5,087) 3,385 13,295
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
2021 2020 2021
£000 £000 £000
Net change in cash and cash equivalents (6,874) 886 3,264
Proceeds from new loan (11,479) - -
Repayment of borrowings - 18,627 26,656
Net (increase)/decrease in right-of-use lease liabilities (457) 1,180 2,089
Net (proceeds)/repayment from borrowings (11,936) 19,807 28,745
Movement in prepaid arrangement fees (89) - (240)
Exchange rate differences (56) (967) (990)
(Increase)/decrease in net debt (18,955) 19,726 30,779
Opening net cash/(debt) 509 (30,270) (30,270)
Closing net (debt)/cash (18,446) (10,544) 509
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.
• Underlying figures
The Group believes that underlying measures provide additional guidance to
statutory measures to help understand the underlying performance of the
business during the financial period. The term 'underlying' is not defined
under Adopted IFRS. It is a measure that is used by management to assess the
underlying performance of the business internally and is not intended to be a
substitute measure for Adopted IFRSs' GAAP measures.
It should be noted that the definitions of underlying items being used in
these financial statements are those used by the Group and may not be
comparable with the term 'underlying' as defined by other companies within the
same sector or elsewhere.
Explanations for the items removed from the underlying figures are provided in
note 2.
• Constant Exchange Rate (CER) figures
These are used 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 HY2022
income statement results (of subsidiaries whose presentational currency is not
sterling) using HY2021 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 is 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 a rolling
12 month underlying EBIT divided by average capital employed (net assets +
gross debt) over this period, 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
2021 2020 2021
£000 £000 £000
Underlying EBIT/Underlying operating profit 7,446 4,460 11,982
Separately disclosed items within administrative expenses:
Acquired intangible amortisation (725) (718) (1,428)
Project Atlas (512) (497) (1,082)
Acquisition costs (495) - -
Loss on assets in disposal group classified as Held for Sale - (35) -
Equity raise costs - (59) (59)
Restructuring cost - - (377)
Loss on disposal of TR Formac (Malaysia) SDN Bhd - - (280)
Operating profit 5,714 3,151 8,756
• Underlying cash conversion as a percentage of underlying EBITDA
This is another key metric used by investors to understand how effective the
Group was at converting profit into cash. Since the underlying cash conversion
is compared to underlying EBITDA, which has removed the impact of separately
disclosed items (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
2021 2020 2021
£000 £000 £000
Underlying cash conversion (5,245) 10,196 26,021
Expensed Project Atlas costs paid (488) (528) (1,082)
Acquisition costs paid (350) - -
Restructuring costs (19) - (358)
Cash (used in)/generated from operations (6,102) 9,668 24,581
• 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.
• Adjusted net cash/(debt) and adjusted net cash/(debt) to Underlying EBITDA
ratio
This removes the impact of IFRS16 from both net cash/(debt) and Underlying
EBITDA to better reflect the banking facility covenant calculations. Other
minor adjustments are made to meet the calculations specified in the facility
agreement. Underlying EBITDA is reconciled to operating profit in note 2.
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Net (debt)/cash (18,446) (10,544) 509
Right-of-use 13,359 13,929 12,786
Adjusted net (debt)/cash (see note 7) (5,087) 3,385 13,295
Underlying EBITDA 10,104 7,277 17,596
IFRS2 share-based payment charge and other related costs (398) 93 1,225
Operating lease rentals (1,666) (1,733) (3,583)
Adjusted EBITDA 8,040 5,637 15,238
10. Own shares held
The own shares held reserve comprises the cost of the Company's shares held by
the Group. At 30 September 2021, the Group held 1,269,059 of the Company's
shares (HY2021: 830,610; FY2021: 329,087).
11. Disaggregation of revenue
In line with IFRS15 Revenue from Contracts with Customers we have included the
disaggregation of external revenue by sector, breaking this down by our
geographical operating segments. In FY2021 we changed our sector categories
and HY2021 has been re-presented for this.
September 2021 UK Europe USA Asia Total
Light vehicle 5% 12% 4% 4% 25%
Health & home 3% 13% - 6% 22%
Distributors 13% - - 6% 19%
Energy, tech & infrastructure 7% 5% 1% 4% 17%
General industrial 6% 6% - 1% 13%
Heavy vehicle 2% 2% - - 4%
Revenue from external customers (AER) 36% 38% 5% 21% 100%
September 2020 UK Europe USA Asia Total
Light vehicle 5% 11% 3% 5% 24%
Health & home 3% 14% - 9% 26%
Distributors 11% - - 5% 16%
Energy, tech & infrastructure 7% 6% 2% 3% 18%
General industrial 5% 5% - 2% 12%
Heavy vehicle 2% 2% - - 4%
Revenue from external customers (AER) 33% 38% 5% 24% 100%
12. Cash and cash equivalents
At At At
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Cash and cash equivalents per the statement of financial position 23,819 29,822 30,265
Cash included within Assets Held for Sale - 111 -
Total cash and cash equivalents 23,819 29,933 30,265
13. Acquisition of Falcon Fasteners Solutions Inc ("Falcon")
On 31 August 2021, Trifast acquired 100% of the voting equity interests of
Falcon for a consideration of $8.3m (£6.0m) on a cash free/debt free basis,
subject to adjustment for net cash and working capital in the business at
completion. The consideration was paid on completion and was met from the
Company's existing bank facilities.
Falcon was originally founded in 1979 as a family-owned distributor of
industrial fastenings and Category 'C' components and now operates from two
locations in North Carolina and Kentucky. Over 90% of production components
supplied by Falcon are customer specials. The business specialises in
designing customised supply chain solutions that support lean principles in
manufacturing to reduce cost and improve efficiency for its clients. Falcon
serves a diverse range of sectors with minimal crossover with TR's existing
North American customer base. Trifast intends to retain all staff at both
Falcon and its existing US operation with the acquired business being
re-branded as TR Falcon.
Trifast will be investing into Falcon to further develop the opportunities in
the North American market and expect the acquisition of Falcon to be earnings
enhancing in the first full year of ownership.
In the year ended 31 December 2020, Falcon reported revenue of $11.5m (£8.9m)
and profit before tax of $1.3m (£1.0m). Gross assets at the same date were
US$5.3m (£3.9m). These figures were not audited.
The fair value of trade and other receivables is £0.7m. The gross contractual
flows to be collected are £0.7m. The best estimate at acquisition date of the
contractual flows not to be collected is £nil.
As the acquisition completed so close to the 30 September 2021, the values
disclosed below are all considered provisional. A full fair value assessment
is being performed as part of the completion accounts process. Updated
consolidated values (if required) will be disclosed in the Group consolidated
financial statements for 31 March 2022.
Effect of Acquisition Provisional
values on
acquisition
£000
Property, plant and equipment 121
Right-of-use assets 890
Intangible assets 2,908
Deferred tax asset 20
Inventory 1,548
Trade and other receivables 712
Cash and cash equivalents 313
Trade and other payables (659)
Provisions (23)
Right-of-use liabilities (867)
Net identifiable assets and liabilities 4,963
Total consideration* 6,163
Goodwill on acquisition 1,200
*Made up of £6.0m consideration and £0.2m net working capital/cash
adjustment
Intangible assets that arose on the acquisition include the following:
· £2.1m of customer related intangibles, with an amortisation period deemed to be 12 years
· £0.5m of marketing related intangibles, with an amortisation period deemed to be 5 years
· £0.3m of contract-based intangibles, with an amortisation period deemed to be 4 years
Goodwill is the excess of the purchase price over the fair value of the net
assets acquired and is deductible for tax purposes. It mostly represents
potential future customer relationships and contracts and Falcon's assembled
workforce.
Effect of acquisition
The Group has incurred £0.5m of costs in relation to the acquisition of
Falcon in the period. These costs have been included as separately disclosed
items in administrative expenses in the Group's consolidated statement of
comprehensive income.
14. Related parties
During the period, a relative of the Chair became employed by TR Fastenings
Ltd following an external recruitment process. The relative is paid on an
arm's length basis, with aggregate payroll costs totalling £10k (HY2021:
£nil).
15. IFRS2 Share-based Payments
During the period, a gain of £0.4m (HY2021: charge of £0.1m) was recognised
in relation to IFRS2 Share-based payments due to the reversal of the
cumulative charge relating to the 2019 Board and Senior Manager LTIP shares as
the non-market performance conditions are unlikely to be met.
INDEPENDENT REVIEW REPORT TO TRIFAST PLC
Introduction
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 2021 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 notes.
We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of
financial statements.
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 Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group will be
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this interim financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, ''Interim Financial Reporting''.
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.
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 Financial
Reporting Council for use in the United Kingdom. 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. 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.
Conclusion
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 2021 is not prepared,
in all material respects, in accordance with UK adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting its responsibilities in respect of half-yearly
financial reporting in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
Anna Draper
BDO LLP
Chartered Accountants
Gatwick
22 November 2021
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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