REG - Trifast PLC - Half-yearly Report- six months ended 30.9.22
22/11/2022 07:00
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RNS Number : 1314H Trifast PLC 22 November 2022
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, 22 November 2022
TRIFAST PLC
(Trifast, Group or Company)
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
"Innovation today for a better tomorrow - growing sustainably, together"
HALF-YEARLY FINANCIAL REPORT
Unaudited results for the six months ended 30 September 2022
"Whilst recognising the challenges in HY1, with the initiatives we are
adopting we continue to see significant scope to build the business and we
remain confident in the fundamentals of our business model over the medium
term"
Mark Belton, Chief Executive Officer
Key financials
Underlying measures CER(2) CER(2) AER(2) AER(2) AER HY2022 AER HY2021
HY2023 change HY2023 change
Revenue £117.8m 13.5% £120.2m 15.8% £103.8m £81.0m
Gross profit % 24.5% (180)bps 24.6% (170)bps 26.3% 27.0%
Underlying operating profit (UOP)(1) £6.0m (20.0)% £6.2m (16.7)% £7.4m £4.5m
Underlying operating profit %(1) 5.1% (210)bps 5.2% (200)bps 7.2% 5.5%
Underlying profit before tax(1) £5.2m (25.5)% £5.5m (22.1)% £7.0m £4.0m
Underlying diluted earnings per share(1) 3.21p (27.4)% 3.33p (24.7)% 4.42p 2.27p
Adjusted net (debt)/cash(3) £(40.4)m £(35.3)m £(5.1)m £3.4m
Return on capital employed (ROCE)(1) 6.7% (210)bps 8.8% 5.5%
Interim dividend 0.75p 7.1% 0.70p -
GAAP measures
Operating profit £3.7m (34.4)% £5.7m £3.2m
Operating profit % 3.1% (240)bps 5.5% 3.9%
Profit before tax £3.0m (43.1)% £5.3m £2.7m
Diluted earnings per share 1.85p (42.5)% 3.22p 1.48p
1. Before separately disclosed items (see notes 2, 6 and 7)
2. "CER" being Constant Exchange Rate, calculated by translating the HY2023
figures by the average HY2022 exchange rate & "AER" being Average Exchange
Rate
3. 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 £(14.8)m to £(55.2)m (HY2022: net debt would increase by
£(13.4)m to £(18.5)m)
Operational highlights
· Revenues increased by 13.5% to £117.8m at CER
· Additional contract wins in the period totalling £12m,
reflecting market share gains and commercial focus on faster growing niches
· Inflationary cost pressures and the lag in passing increases
through to customers has resulted in gross margins decreasing to 24.5% at CER
· Operational improvement programme commenced to drive recovery in
HY2 and beyond
o Margins - necessary price increases and cost efficiencies to return margin
to medium term aspirations
o Inventory - normalise as supply chain uncertainty 'recedes'
o Project Atlas - roll out accelerated to finish before the end of FY2024
· Post period end - new Executive Committee formed including new
key appointments of COO and CFO to increase the agility and pace for decision
making
Presentation of HY2023 results
1 The Group will be holding a presentation to financial analysts today at 9.15am
(UK time). Further details can be obtained by contacting TooleyStreet
Communications - details are shown below. Investor enquiries can also be made
via the Company's stockbroker, Peel Hunt LLP and its corporate access team.
2 The Company will also be presenting the HY2023 results via the Investor Meet
Company platform on Thursday, 24 November 2022 at 11.30am (UK time). CEO Mark
Belton, Interim CFO Andy Cooksey and Chief Operating Officer Dan Jack will
host this 'live' event.
Investors who follow Trifast on the IMC platform will automatically be invited
to join the event. The webcast will be available on the Trifast website
following the event. To register for the session, you may follow this link:
https://www.investormeetcompany.com/trifast-plc/register-investor
(https://www.investormeetcompany.com/trifast-plc/register-investor)
Enquiries please contact:
Trifast plc
Jonathan Shearman, Non-Executive Chair
Mark Belton, Chief Executive Officer
Andy Cooksey, Interim Chief Financial Officer
Office: +44 (0) 1825 747630
Email: corporate.enquiries@trifast.com
(mailto:corporate.enquiries@trifast.com)
Shareholders: companysecretariat@trifast.com
(mailto:companysecretariat@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' notes
About Trifast plc
Trifast (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. We
supply 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 (ET&I), 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. The Group employs c.1,350 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.
"Innovation today for a better tomorrow - growing sustainably, together"
For more information, visit our
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)
Trifast, TR and TR Fastenings are registered trademarks of the Company
LEI number: 213800WFIVE6RUK3CR22
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
Unaudited results for the six months ended 30 September 2022
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 HY2023 figures by the
average HY2022 exchange rate.
The impact of foreign exchange movements has increased our AER revenue by
2.1%, £2.4m (HY2022: decreased by 2.5%, £2.6m), our AER underlying profit
before tax by 4.5%, £0.2m (HY2022: decreased by 4.0%, £0.3m) and our AER
underlying diluted EPS by
3.7%, 0.12p (HY2022: decreased by 3.7%, 0.17p).
Underlying measures CER CER AER AER HY2022 HY2021
HY2023 change HY2023 change
Revenue £117.8m 13.5% £120.2m 15.8% £103.8m £81.0m
Gross profit % 24.5% (180)bps 24.6% (170)bps 26.3% 27.0%
Underlying operating profit (UOP)(1) £6.0m (20.0)% £6.2m (16.7)% £7.4m £4.5m
Underlying operating profit %(1) 5.1% (210)bps 5.2% (200)bps 7.2% 5.5%
Underlying profit before tax(1) £5.2m (25.5)% £5.5m (22.1)% £7.0m £4.0m
Underlying diluted earnings per share(1) 3.21p (27.4)% 3.33p (24.7)% 4.42p 2.27p
Return on capital employed (ROCE)(1) 6.7% (210)bps 8.8% 5.5%
GAAP measures
Operating profit £3.7m (34.4)% £5.7m £3.2m
Operating profit % 3.1% (240)bps 5.5% 3.9%
Profit before tax £3.0m (43.1)% £5.3m £2.7m
Diluted earnings per share (DEPS) 1.85p (42.5)% 3.22p 1.48p
1. Before separately disclosed items (see notes 2, 6 and 7)
Group performance
HY2023 has proved to be one of challenge and opportunity against the global
uncertainties surrounding industrial markets. Whilst our operations in Asia
and North America have both produced a solid performance and are in line with
expectations, we have experienced, as a result of weakened consumer demand, a
slowdown in particular within the Health & home sector in UK and Europe.
Volumes have improved across our other key markets with Light vehicle and
General industrial showing the strongest growth over the same period last
year, followed by the Distributors and Energy, tech & infrastructure
sectors (ET&I).
Revenue overall increased year on year by 13.5% to £117.8m (AER: 15.8% to
£120.2m) with growth in all sectors except Health & home. Organic growth
was 9.9%, with 3.6% arising from the full period impact of our North American
acquisition, TR Falcon (completed in August 2021).
Gross margins in the first half of the year have reduced to 24.5% compared to
26.3% reflecting the continuing inflationary cost pressures, the lag in
passing these inflationary increases through to revenue, the impact of the
Ukraine conflict on the Health & homes volumes in Europe and the Covid-19
lockdowns in Shanghai in the first two months of the year.
Reflecting the pressures on gross margins, the UOP margin has decreased by
210bps to 5.1% (AER: decrease 200bps to 5.2%; HY2022: 7.2%). UOP decreased by
20.0% to £6.0m (HY2022: £7.4m). We have continued to make targeted
investment in overheads to support the growth of the business into new
customers and sectors.
Underlying profit before tax (UPBT) is down 25.5% at CER to £5.2m (AER: down
22.1% to £5.5m, HY2022: £7.0m). Interest has increased year on year by
£0.3m reflecting the higher level of net debt and an increase in interest
rates. This coupled with a rise in our underlying effective tax rate has
resulted in a decrease of 27.4% in our underlying diluted earnings per share
(UDEPS) at CER to 3.21p (HY2022: 4.42p) and at AER, down 24.7% to 3.33p
(HY2022: 4.42p).
Profit before tax has decreased 43.1% at AER to £3.0m (HY2022: £5.3m). In
addition to the movements explained above, profit has been further reduced by
Project Atlas spend of £0.8m, acquired intangible amortisation of £0.9m and
CFO exit costs of £0.5m. The resultant DEPS has decreased by 42.5% to 1.85p
(HY2022: 3.22p).
Inventory has increased by £13.9m (including £4.8m of FX) in the first half
of the year to support growth and secure supply, but has also been impacted by
some customer order deferment arising from microchip shortages coupled with a
decline in demand from our Health & home customer base. This has resulted
in adjusted net debt increasing from £23.8m to £40.4m at the end of
September 2022. We continue to have undrawn facilities of £10.5m (FY2022:
£29.3m), and an available accordion facility for a further £40m, providing
us with the security and flexibility to continue to operate and invest in our
future growth.
Revenue (CER)
Total revenue in HY2023 increased 13.5% to £117.8m (AER 15.8% to £120.2m;
HY2022: £103.8m), however there has been mixed demand by region and sector.
Against this mixed backdrop, the Group continues to win new contracts and has
secured a further £12m of contractual wins in HY2023 across our key sectors
with the largest uplift being in Light vehicles. The majority of these wins
are engineering led through new and existing global customers.
Within Europe we have seen an 8.8% increase in sales to a record regional half
year level of £43.3m (AER 6.1% to £42.2m; HY2022: £39.8m). With the
exception of Health & home, all sectors delivered growth and with
particularly strong performances in the Light vehicles, General industrial and
ET&I sectors. Significant revenue growth was recorded in Germany, Hungary,
Holland, Sweden and Spain, with again record sales being recorded in a number
of these countries. The one noticeable exception is Italy, which has been
negatively impacted in the Heath & home sector by the downturn in customer
sentiment and the indirect impact the Ukraine conflict is having on some of
our customers leading to a reduction in volumes produced in our Italian
manufacturing operation.
In the UK, revenues have increased by 5.5% to £42.5m (HY2022: £40.3m). The
largest increases have been due to higher distributor (Lancaster and PTS)
volumes and increased transactional pricing. Light vehicle sales have shown a
20.8% increase in the period reflecting new customer wins, however the
automotive sector as a whole continues to be impacted by semi-conductor
shortages.
Asia has seen an increase in revenue of 14.1% to £29.9m (AER: 22.8% to
£32.2m; HY2022: £26.3m), this is despite the impact of the Shanghai Covid-19
lockdowns in the first two months of the year, which impacted Chinese revenues
by c.£1.1m. We experienced significant year on year increases in the Light
vehicle, Distributor and Health & home sectors. Taiwan continues to see
strong distributor sales in key European end markets. These gains were partly
offset by declines in the General industrial and ET&I sectors.
USA, with the full year impact of the TR Falcon acquisition, has seen revenue
growth of 80.8% to £12.1m (AER: 103.5% to £13.6m; HY2022: £6.7m). Organic
growth was 23.6%, reflecting increases in Light vehicle, General industrial
and ET&I. TR Falcon now represents 39% of our North American revenue. Chip
shortage and other related supply chain shortages continue to impact the
automotive industry, so pent up demand remains for this sector. In addition,
we are actively progressing a strong pipeline of new opportunities.
Underlying operating profit (CER)
Region HY2023 HY2022 Movement HY2023 HY2022 Movement
UOP UOP UOP margin UOP margin
Europe £0.7m £2.5m £(1.8)m 1.7% 6.2% (450)bps
UK £3.0m £4.0m £(1.0)m 7.1% 10.0% (290)bps
Asia £4.8m £3.3m £1.5m 16.1% 12.6% 350bps
USA £(0.1)m £(0.2)m £0.1m (0.6)% (3.3)% 270bps
Despite the increase in Group sales, underlying operating profit (UOP) has
been impacted by the ongoing inflationary challenges and the lag in recouping
these cost increases resulting in UOP reducing to £6.0m (HY2022: £7.4m) and
an UOP margin of 5.1% (HY2022: 7.2%).
In Europe, despite the 8.8% increase in revenues, we have seen an overall
450bps reduction in UOP margins to 1.7%, and operating profit of £0.7m
(HY2022: 6.2%, £2.5m). Most of the negative movement in the UOP has occurred
in TR VIC, which has been hard hit by reduced volumes arising from a loss of
sales indirectly due to the Ukraine conflict and a significant softening in
the Health & home sector, the main channel of Italian sales. Coupled with
the resulting impact of reduced volumes in plant utilisation, the site has had
to battle major input cost increases, most noticeable in energy, freight and
commodity products. Actions are being taken, both on the sales and cost side
to improve operational efficiencies and increase prices in the second half of
the year.
In the UK, UOP margins have decreased year-on-year by 290bps to 7.1%, £3.0m
(HY2022: 10.0%, £4.0m). The increased volumes and transactional pricing has
improved margins at the distributor companies. However, this has been more
than offset by cost input pressures at TR Fastenings (UK) and the lag in
recouping the cost increases as discussions with customers are taking time to
come to fruition. We expect that the margins will recover in the second half
of the year.
UOP margins in Asia have been particularly strong, increasing by 350bps to
16.1%, £4.8m (HY2022: 12.6%, £3.3m). A key driver of the improvement has
been in Taiwan which has seen exceptionally strong growth on the back of high
distributor sales to key European and USA end markets.
In the USA, UOP margins have improved by 270bps, although these remain
negative at (0.6)%, £(0.1)m (HY2022: (3.3)%, £(0.2)m). TR Falcon has
delivered a solid performance; however, the Houston operation in particular is
having to manage a lag in recovering substantial cost increases particularly
in relation to freight costs. Again, we expect margins to improve in the
second half of the year as the lag in prices reduces and cost inputs soften.
Operating profit (AER)
The operating profit and margin (at AER) have been impacted as per the UOP by
the inflationary cost factors and the lag in recouping the cost increases in
revenues. This results in Group operating profit reducing from £5.7m to
£3.7m and operating margin from 5.5% to 3.1%. Operating profit includes
£2.5m of costs not included in UOP (primarily acquired intangible
amortisation, Project Atlas costs and personnel termination costs).
At a regional level, the movements at operating profit and margins broadly
follow the movements at UOP level:
Region HY2023 HY2022 Movement HY2023 HY2022 Movement
Operating profit Operating profit Operating margin Operating margin
Europe £0.1m £1.9m £(1.8)m 0.2% 4.9% (470)bps
UK £2.8m £3.3m £(0.5)m 6.7% 8.1% (140)bps
Asia £5.2m £3.3m £1.9m 16.0% 12.5% 350bps
USA £(0.2)m £(0.3)m £0.1m (1.8)% (3.7)% 190bps
Net financing costs (AER)
Net financing costs have increased to £0.7m (HY2022: £0.4m) due to the
increase in average net debt during the period and higher interest rates.
Taxation (AER)
The HY2023 underlying effective tax rate (UETR) has increased to 17.7%
compared to 13.7% in HY2022 as last year included a one-off benefit relating
to the UK tax change to 25% and the resulting increase in the deferred tax
asset. The effective tax rate (ETR) at 16.5%, is similar to 16.4% in HY2022 as
the UK tax change benefit in HY2022 is offset by HY2023 favourable movements
in adjustments in respect of previous years.
Subject to future tax changes and excluding adjustments in respect of prior
years, our normalised underlying ETR is expected to be in the range of 22-25%
going forward.
Earnings per share (AER)
The decrease in underlying profit before tax and the increase in our UETR, has
reduced the underlying diluted EPS by 24.7% to 3.33p (HY2022: 4.42p).
Diluted EPS has decreased by 42.5% to 1.85p (HY2022: 3.22p).
Dividend
The Company has declared an interim dividend of 0.75p (HY2022: 0.70p) which will be paid on 13 April 2023 to members on the register as at 17 March 2023.
We continue to consider that an appropriate level of dividend cover is in the range of 3.0x to 4.0x.
Return on Capital Employed (AER)
As at 30 September 2022, the Group's shareholders' equity increased to
£143.3m (FY2022: £139.1m). The £4.2m uplift reflects profit for the
period of £2.5m (HY2022: £4.4m), a dividend payment of £(2.8)m, a net
movement in share based payments of £(0.5)m and a foreign exchange reserve
gain of £5.0m (most notably sterling weakening against SGD, TWD, EUR and
USD).
Over this increased asset base and given the reduction in profits, our ROCE
has decreased (160)bps from 31 March 2022 to 6.7% (FY2022: 8.3%).
At 30 September 2022, the number of ordinary shares held by the Employee
Benefit Trust (EBT) to honour future equity award commitments is 2,194,470,
unchanged from FY2022.
Adjusted net debt (AER)
As at 30 September 2022, the Group had an adjusted net debt position of
£40.4m, which is an increase in net debt of £16.6m since FY2022 (£23.8m).
The increase is fundamentally due to the increase in our inventory of £13.9m,
reflecting a mix of foreign exchange (£4.8m), commodity price increases
(£2.0m) and the need to ensure ongoing continuity of supply to our customers,
but also ensure we have the ability to service the new contract wins in the
latter part of the last financial year and the new contract wins this year,
which will be coming on stream over the course of the coming months. While
supply chain issues remain, we are seeing signs of an easing with a softening
in lead times and freight costs. In line with this, we are working hard to
ensure inventory levels are reduced over the remainder of the financial year
and hence expect our net debt to reduce in line with this inventory reduction.
The proceeds of new loans of £13.9m are drawdowns from the existing RCF
facility, see note 26 in the 31 March 2022 consolidated financial statements.
Supporting the Board's ongoing strategic investments for growth, capital
expenditure in the period amounted to £2.6m (HY2022: £2.1m) including £0.4m
in relation to Project Atlas.
Including the impact of IFRS16 Leases, the Group's net debt position is
£55.2m (FY2022: net debt of £37.5m).
Other key balance sheet movements
Property, plant and equipment increased by £1.7m to £22.0m (FY2022: £20.3m)
due to additions of £2.0m (predominantly the capacity expansion plan in TR
VIC), depreciation charge of £(1.4)m and effects of movement on foreign
exchange of £1.1m.
Intangibles has increased by £1.7m to £44.6m (FY2022: £43.0m) due to
effects of movements in foreign exchange of £2.3m, amortisation charge of
£(1.0)m and additions of £0.6m less disposals of £(0.2)m.
Trade and other receivables has increased by £5.5m to £66.0m (FY2022:
£60.5m) due to effects of movements in foreign exchange of £2.5m, increase
in other debtors (£1.6m) and increased trading levels (£1.4m). This,
combined with the increase in our inventory (see adjusted net debt) has seen
working capital as a % of sales increase to 49.3% (FY2022: 46.5%).
Project Atlas
Project Atlas, a key driver of future growth and cost efficiencies, has
continued to progress over FY2023. The phased roll-out at our highest revenue
trading subsidiary TR Fastenings (UK) is expected to be completed by the end
of this financial year. Significant benefits of Atlas, both expected and
unexpected, are being seen within the business. We anticipate that Project
Atlas will close as a project with the roll-out to the remaining distribution
countries during Q4 of FY2024.
We have incurred direct costs of £1.2m in HY2023 (cumulatively £16.1m),
largely relating to project team, consultancy, localised testing and training
costs. We have excluded £0.8m of these costs from our underlying results, to
reflect the unusual scale and one-off nature of this project. In line with
accounting standards, we have also recognised the remaining £0.4m
(cumulatively £7.6m) as intangible assets on the balance sheet at 30
September 2022.
Acquisitions
A truly global fastenings business needs a North America region (the largest
fastenings market in the world), of credible scale and reach. Currently, with
the USA forming less than 15% of the Group's revenue we have significant
appetite to acquire in the region. In the short term, the current
macro-economic backdrop makes acquisition appraisal more challenging and so we
will continue to take a highly disciplined approach and only progress
opportunities that have a very clear value enhancement case.
A successful first step on the journey was taken with the acquisition of TR
Falcon, an established fastenings distributor located in North Carolina (and
Kentucky). Following our successful integration and the solid performance
delivered by TR Falcon, we remain keen to continue our acquisition journey,
with a focus on our strategic initiatives of rebalancing the regions alongside
establishing supply chain support through more on/near-shoring manufacturing
capabilities to help deliver economic and environmental benefits.
People
The Board would like to acknowledge and thank the teams around the globe who
in challenging times continue to work in partnership with commitment and focus
to deliver the quality of service and supply that our customers expect.
The Group is in the process of undertaking a strategic restructure to deliver
ambitious growth plans which will protect against any potential global
recession. With such ambition comes the absolute need for pace and agility in
our decision making structures.
Today, under a separate announcement released this morning via the regulatory
news service, we have announced Main Board and Senior Management
appointments, including a new post of Chief Operating Officer created within
a more focused Executive Committee.
http://www.rns-pdf.londonstockexchange.com/rns/1314H_1-2022-11-21.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/1314H_1-2022-11-21.pdf)
Outlook
In HY2023, the Group has operated in a challenging environment given the
general macroeconomic background. Significant progress has been made on our
strategic growth initiatives through a mix of customer service, technical
innovation, investment and capturing key commercial opportunities. Continued
contract wins across our key sectors should give the basis for year on year
growth in revenue. We also expect the lag between cost increase and recovery
to improve leading to an overall improvement in both the gross and operating
margins in the second half of the year.
Trading since the end of September 2022 has been in line with management
expectations both in terms of revenue and operating margins.
The unprecedented political and economic times coupled with a looming
recession make the short-term outlook for the Group challenging to predict and
therefore we are increasing our focus on taking steps to mitigate these risks
through a mix of operational efficiencies, price increases, profit
enhancements and working capital (primarily inventory) improvements.
As a group, we continue to see significant scope to build the business and we
remain confident in the fundamentals of our business model over the medium
term.
RISKS AND UNCERTAINTIES
The Directors do not consider that the principal risks and uncertainties of
the Group have changed since the publication in July 2022 of the Group's
Annual Report for the year ended 31 March 2022. The principal risks and
uncertainties include: the macroeconomic environment, supply chain challenges,
a breach of cyber security, stock obsolescence and personnel and resources.
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 the Group. 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.
Mark Belton Jonathan Shearman
Chief Executive Officer Non-Executive Chair
21 November 2022
Condensed consolidated interim income statement
Unaudited results for the six months ended 30 September 2022
Six months Six months Year
Notes ended ended ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Continuing operations
Revenue 3, 9 120,232 103,792 218,618
Cost of sales (90,683) (76,538) (160,189)
Gross profit 29,549 27,254 58,429
Other operating income 154 246 565
Distribution expenses (3,171) (2,350) (5,296)
Administrative expenses before separately disclosed items (20,333) (17,704) (38,952)
Acquired intangible amortisation 2 (892) (725) (1,593)
Project Atlas 2 (771) (512) (1,041)
Settlement for loss of office 2 (538) - -
Aborted acquisition costs 2 (253) - -
Acquisition costs 2 - (495) (508)
Total administrative expenses (22,787) (19,436) (42,094)
Operating profit 3,745 5,714 11,604
Financial income 41 20 31
Financial expenses (790) (468) (1,018)
Net financing costs 3 (749) (448) (987)
Profit before tax 3 2,996 5,266 10,617
Taxation 4 (496) (861) (1,640)
Profit for the period 8,977
(attributable to equity shareholders of the Parent Company) 2,500 4,405
Earnings per share
Basic 6 1.85p 3.23p 6.61p
Diluted 6 1.85p 3.22p 6.56p
Condensed consolidated interim statement of comprehensive income
Unaudited results for the six months ended 30 September 2022
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Profit for the period 2,500 4,405 8,977
Other comprehensive income for the period:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations 7,413 1,882 2,907
Loss on a hedge of a net investment taken to equity (2,429) (244) (147)
Other comprehensive income for the period 4,984 1,638 2,760
Total comprehensive income recognised for the period 7,484 6,043 11,737
(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 2022
Share Share Merger reserve Own Translation Retained Total
£000
capital premium shares held reserve earnings equity
£000 £000 £000 £000 £000 £000
Balance at 1 April 2022 6,804 22,512 16,328 (3,487) 12,284 84,704 139,145
Total comprehensive income for the period:
Profit for the period - - - - - 2,500 2,500
Other comprehensive income for the period - - - - 4,984 - 4,984
Total comprehensive income for the period - - - - 4,984 2,500 7,484
Transactions with owners, recorded directly
in equity:
Issue of share capital 1 17 - - - - 18
Share-based payment transactions
(net of tax) - - - - - (530) (530)
Dividends (note 5) - - - - - (2,812) (2,812)
Total transactions with owners 1 17 - - - (3,342) (3,324)
Balance at 30 September 2022 6,805 22,529 16,328 (3,487) 17,268 83,862 143,305
Share Share Merger reserve Own Translation Retained Total
£000
capital premium shares held reserve earnings equity
£000 £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
Condensed consolidated interim statement of financial position
Unaudited results for the six months ended 30 September 2022
Notes 30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Non-current assets
Property, plant, and equipment 21,983 19,360 20,297
Right-of-use assets 13,890 12,509 12,757
Intangible assets 44,633 42,823 42,981
Deferred tax assets 3,039 2,885 2,787
Total non-current assets 83,545 77,577 78,822
Current assets
Inventories 102,833 73,434 88,933
Trade and other receivables 65,956 56,093 60,520
Cash and cash equivalents 7 29,023 23,819 26,741
Total current assets 197,812 153,346 176,194
Total assets 3 281,357 230,923 255,016
Current liabilities
Trade and other payables 45,352 45,258 45,249
Right-of-use liabilities 7 3,424 2,796 3,028
Tax payable 2,739 2,598 2,455
Dividends payable 5 1,875 2,156 -
Total current liabilities 53,390 52,808 50,732
Non-current liabilities
Other interest-bearing loans and borrowings 7 69,382 28,906 50,507
Right-of-use liabilities 7 11,337 10,563 10,683
Provisions 1,088 1,088 1,088
Deferred tax liabilities 2,855 3,681 2,861
Total non-current liabilities 84,662 44,238 65,139
Total liabilities 3 138,052 97,046 115,871
Net assets 143,305 133,877 139,145
Equity
Share capital 6,805 6,802 6,804
Share premium 22,529 22,472 22,512
Merger reserve 16,328 16,328 16,328
Own shares held 8 (3,487) (2,015) (3,487)
Translation reserve 17,268 11,162 12,284
Retained earnings 83,862 79,128 84,704
Total equity 143,305 133,877 139,145
Condensed consolidated interim statement of cash flows
Unaudited results for the six months ended 30 September 2022
Notes Six months Six months Year
ended ended ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Cash flows from operating activities
Profit for the period 2,500 4,405 8,977
Adjustments for:
Depreciation, amortisation, and impairment 2,420 1,926 4,125
Right-of-use asset amortisation 1,747 1,457 3,131
Unrealised foreign currency (gain)/loss (40) 153 (34)
Financial income (41) (20) (31)
Financial expense (excluding right-of-use liabilities) 602 329 692
Right-of-use liabilities' financial expense 188 139 326
Loss/(gain) on sale of property, plant & equipment, intangibles 127 (12) 6
Equity settled share-based payment transactions (530) (379) 772
Taxation charge 496 861 1,640
Operating cash inflow before changes in working capital and provisions 7,469 8,859 19,604
Change in trade and other receivables (1,793) (1,464) (5,950)
Change in inventories (9,141) (16,306) (31,716)
Change in trade and other payables (1,519) 2,809 2,922
Change in provisions - - -
Cash used in operations (4,984) (6,102) (15,140)
Tax paid (1,795) (1,137) (2,757)
Net cash used in operating activities (6,779) (7,239) (17,897)
Cash flows from investing activities
Proceeds from sale of property, plant & equipment 42 35 36
Interest received 34 22 31
Acquisition of subsidiary, net of cash acquired - (5,850) (5,847)
Acquisition of property, plant and equipment, and intangibles (2,591) (2,145) (5,248)
Net cash used in investing activities (2,515) (7,938) (11,028)
Cash flows from financing activities
Net proceeds from the issue of share capital 18 11 53
Purchase of own shares - (1,446) (3,035)
Proceeds from new loan 13,924 11,479 32,980
Repayment of right-of-use liabilities (1,913) (1,520) (2,977)
Dividends paid (937) - (2,156)
Interest paid (656) (221) (805)
Net cash generated from financing activities 10,436 8,303 24,060
Net change in cash and cash equivalents 1,142 (6,874) (4,865)
Cash and cash equivalents at 1 April 26,741 30,265 30,265
Effect of exchange rate fluctuations on cash held 1,140 428 1,341
Cash and cash equivalents at end of period 7 29,023 23,819 26,741
NOTES TO THE 2023 HALF-YEARLY FINANCIAL REPORT
Unaudited results for the six months ended 30 September 2022
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 UK-adopted International Accounting Standard
("IAS") 34: Interim Financial Reporting. 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 2022. The annual financial statements of
the Group are prepared in accordance with UK‑adopted International
Accounting Standards and with the requirements of the Companies Act 2006 as
applicable to companies reporting under those standards.
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 2022 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 2022.
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 26 to
the Group's previously published financial statements for the year ended 31
March 2022 includes 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 (leverage
and interest cover) 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, which cast doubt on the
going concern status. This is also the case after performing sensitivity
analysis, reverse stress testing scenarios to break point for the covenants
and understanding what this would equate to either increasing net debt or
reducing EBITDA. 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 and judgements
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 2022,
except for fair value of assets acquired in a business combination.
A key judgement made by management relates to Project Atlas costs meeting the
capitalisation criteria under IAS 38 Intangible Assets, also considering the
March 2021 IFRS IC agenda decision update on 'Configuration and customisation
costs in a cloud computing arrangement', 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 2022 consolidated financial statements, in note 13, specific
disclosure was made around sensitivity to changes in key assumptions relating
to impairment testing for the recoverability of goodwill relating to TR VIC
(HY2023: £3.0m; FY2022: £2.9m). This was based on post-tax discount rate
being above average in recent years (FY2020: 10.8%; FY2019: 11.2%; FY2016-2018
average: c.9.3%), noting that if the discount rate returns to FY2019/2020
levels, or above, then it is possible that this might lead to an impairment of
VIC's goodwill. The post-tax discount rate at HY2023 has increased to 10.8%
(FY2022: 8.9%), decreasing headroom. In addition to the discount rates
sensitivity, VIC has faced a challenging period with significant cost
increases and reduced sales volumes, in part due the impact of the Ukraine
conflict. Management are in the process of implementing a number of measures
including price increases, improving the cost base and production
efficiencies. Based on these detailed plans and actions, management believe
there is no need to impair VIC's goodwill on an operational profitability
point of view, However, the successful outcome of these actions will only
become clear over the coming months and this will inform a further impairment
review in the second half of the year.
The methodology for calculating the inventory provision has remained
consistent with year end. Inventories are stated at the lower of cost and net
realisable value with a provision being made for obsolete and slow-moving
items. Initially, management makes a judgement on whether an item of inventory
should be classified as standard or customer specific. This classification
then largely determines when a provision is recognised. Management then
estimates the net realisable value of the stock for each individual
classification. In most circumstances, a provision is made earlier for
customer‑specific stock (compared to standard) because it generally carries
a greater risk of becoming obsolete or slow moving given the fastenings are
designed specifically for an individual customer.
The key sensitivity to the carrying amount of customer-specific inventory
relates to the future demand levels for specific products stocked for
individual customers. In the event that an individual customer's demand for
products specific to them unexpectedly reduced, the Company might be required
to increase the inventory provision. Although one customer taking such action
is unlikely to result in a material adjustment, multiple customers taking such
action over a short timescale could result in a material adjustment. The range
of possible outcomes includes a write off of the carrying amount at 30
September 2022, to a write back of the customer-specific inventory provision
at period end (HY2023: £7.0 m; HY2022: £5.6m; FY2022: £6.1m).
Government grants
Included in the consolidated income statement is £nil (HY2022: £59k) 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
2022 2021 2022
£000 £000 £000
Underlying profit before tax 5,450 6,998 13,759
Separately disclosed items within administrative expenses:
Acquired intangible amortisation (892) (725) (1,593)
Project Atlas (771) (512) (1,041)
Settlement for loss of office (538) - -
Aborted acquisition costs (253) - -
Acquisition costs - (495) (508)
Profit before tax 2,996 5,266 10,617
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Underlying EBITDA 9,474 10,104 20,409
Separately disclosed items within administrative expenses:
Project Atlas (771) (512) (1,041)
Settlement for loss of office (538) - -
Aborted acquisition costs (253) - -
Acquisition costs - (495) (508)
EBITDA 7,912 9,097 18,860
Acquired intangible amortisation (892) (725) (1,593)
Depreciation (including right-of-use depreciation) and non-acquired (3,275) (2,658) (5,663)
amortisation
Operating profit 3,745 5,714 11,604
Consistent with prior periods, management feel it is appropriate to remove
separately disclosed items as included above to allow the reader of the
accounts to understand the underlying trading performance of the Group.
Management use judgement in assessing which items, due to their size or
incidence, should be disclosed as separately disclosed items. This is
consistent with the way financial information is presented to the Board.
Further reconciliations of underlying measures to IFRS measures and the cash
flow impact of separately disclosed items can be found in note 7.
Event driven/one-off separately disclosed items
Project Atlas is a multi-year investment into our IT infrastructure and
underlying business processes. 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.
Settlement for loss of office costs of £0.5m (HY2022: £nil) were recognised
in the year from the CFO leaving the Group with immediate effect on 31 August
2022. The costs include payment in lieu of notice, compensation for loss of
office and loss of contractual benefits. We have excluded these costs from our
underlying results both due to their size and incidence.
Aborted acquisition costs of £0.3m (HY2022: £nil) were incurred in the year
in relation to a potential target which was aborted in July 2022. They are
excluded from underlying results to help provide a better understanding of the
trading performance of the Group.
Net acquisition costs of £nil (HY2022: £0.5m) were incurred in the period.
In HY2022, £0.5m of costs were incurred in relation to the acquisition of TR
Falcon on 31 August 2021. They were excluded from underlying results to help
provide a better understanding of the trading performance of the Group.
Recurring items
Acquired intangible amortisation has increased by £0.2m to £0.9m (HY2022:
£0.7m) mainly due to the acquisition of TR Falcon. This is excluded from
underlying results to provide a more consistent understanding of the trading
performance of those entities when compared to those that have grown
organically in the Group.
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 and are consolidated into the four distinct
geographical regions, which the Operational Executive Board uses to monitor
and assess the Group. Interest is reported on a net basis rather than gross
as this is how it is presented to the Chief Operating Decision Maker. All
material non-current assets are located in the country the relevant Group
entity is incorporated in.
Segment revenue and results under the primary reporting format for the six
months ended 30 September 2022 and 2021 are disclosed in the table below:
September 2022 UK Central costs, Total
£000 Europe USA Asia assets and £000
£000 £000 £000 liabilities
£000
Revenue*
Revenue from external customers 38,984 40,462 13,486 27,300 - 120,232
Inter segment revenue 3,546 1,762 111 4,939 - 10,358
Total revenue 42,530 42,224 13,597 32,239 - 130,590
Underlying operating profit (see note 7) 3,016 610 (42) 5,173 (2,558) 6,199
Net financing costs (108) (150) (108) (9) (374) (749)
Underlying profit before tax 2,908 460 (150) 5,164 (2,932) 5,450
Separately disclosed items (see note 2) (2,454)
Profit before tax 2,996
Specific disclosure items
Depreciation and amortisation (1,063) (1,592) (436) (887) (189) (4,167)
Assets and liabilities
Non-current asset additions 377 2,959 39 1,144 524 5,043
Segment assets 78,518 86,159 28,399 76,389 11,892 281,357
Segment liabilities (26,294) (19,045) (3,643) (15,930) (73,140) (138,052)
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 7) 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)
* 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
2022 2021 2022
£000 £000 £000
Current tax on income for the period
UK tax - - -
Foreign tax 1,013 1,234 2,562
Deferred tax income (362) (194) (630)
Adjustments in respect of prior years (155) (179) (292)
496 861 1,640
The HY2023 underlying effective tax rate (UETR) has increased to 17.7%
compared to 13.7% in HY2022 as last year had a one-off benefit relating to the
UK tax change to 25% and the resulting increase in the deferred tax asset. The
effective tax rate (ETR) at 16.5%, is similar to 16.4% in HY2022 as the UK tax
change benefit in HY2022 is offset by HY2023 favourable movements in
adjustments in respect of previous years. Tax rates have been determined using
a weighted average of tax rated across jurisdictions. 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.
Deferred tax asset has increased by £0.2m to £3.0m (FY2022: £2.8m) due to
an increase in deferred tax relating to provision on inventories and tax
losses, offset by a decrease in deferred tax on IFRS2 Share-based payments.
Deferred tax liabilities at £2.9m has remained in line with the year end
balance (£2.9m).
5. Dividends
The dividend payable of £1.9m represents the final dividend for the year ended 31 March 2022 which was approved by Shareholders at the AGM on 7 September 2022 and paid on 14 October 2022 to members on the Register on 16 September 2022. The Company paid an HY2022 interim dividend of 0.70p (HY2021: nil) on 14 April 2022 totalling £0.9m to Shareholders on the register as at 18 March 2022. The Company has declared an HY2023 interim dividend of 0.75p (HY2022: 0.70p) which will be paid on 13 April 2023 to Shareholders on the Register as at 17 March 2023.
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 134,891,184 (net of own shares held) (HY2022: 136,184,256, FY2022:
135,880,620).
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
134,902,422 (HY2022: 136,836,491 FY2022: 136,864,935).
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
2022 2021 2022
£000 £000 £000
Profit after tax for the period 2,500 4,405 8,977
Separately disclosed items:
Acquired intangible amortisation 892 725 1,593
Project Atlas 771 512 1,041
Settlement for loss of office 538 - -
Aborted acquisition costs 253 - -
Acquisition costs - 495 508
Tax charge on adjusted items above (468) (97) (607)
Tax adjusted items - - (386)
Underlying profit after tax 4,486 6,040 11,126
Basic EPS 1.85p 3.23p 6.61p
Diluted EPS 1.85p 3.22p 6.56p
Underlying diluted EPS 3.33p 4.42p 8.13p
7. 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 trading 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 HY2023
income statement results (of subsidiaries whose presentation currency is not
sterling) using HY2022 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
2022 2021 2022
£000 £000 £000
Underlying EBIT/Underlying operating profit 6,199 7,446 14,746
Separately disclosed items within administrative expenses:
Acquired intangible amortisation (892) (725) (1,593)
Project Atlas (771) (512) (1,041)
Settlement for loss of office (538) - -
Aborted acquisition costs (253) - -
Acquisition costs - (495) (508)
Operating profit 3,745 5,714 11,604
• 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
2022 2021 2022
£000 £000 £000
Underlying cash conversion (4,068) (5,245) (13,630)
Expensed Project Atlas costs paid (853) (488) (983)
Settlement for loss of office (33) - -
Aborted acquisition costs (30) - -
Acquisition costs paid - (350) (508)
Restructuring costs - (19) (19)
Cash used in operations (4,984) (6,102) (15,140)
• 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.
Six months ended Six months ended
30 September 2022 30 September 2021
Profit Tax ETR Profit impact Tax impact ETR
impact impact % £000 £000 %
£000 £000
Profit before tax 2,996 (496) 16.5% 5,266 (861) 16.4%
Separately disclosed items 2,454 (468) 19.1% 1,732 (97) 5.6%
Underlying profit before tax 5,450 (964) 17.7% 6,998 (958) 13.7%
• 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 and IFRS 2 Share-based Payments from underlying EBITDA to better
reflect the banking facility covenant calculations. Other adjustments are made
to meet the calculations specified in the facility agreement. Underlying
EBITDA is reconciled to operating profit in note 2.
At At At
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Net cash and cash equivalents 29,023 23,819 26,741
Debt due within one year (3,424) (2,796) (3,028)
Debt due after one year (80,719) (39,469) (61,190)
Gross debt (84,143) (42,265) (64,218)
Net debt (55,120) (18,446) (37,477)
Right-of-use lease liabilities 14,761 13,359 13,711
Adjusted net debt (40,359) (5,087) (23,766)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Underlying EBITDA 9,474 10,104 20,409
IFRS2 share-based payment charge and other related costs (555) (398) 760
Operating lease rentals (1,996) (1,666) (3,560)
Adjusted underlying EBITDA 6,923 8,040 17,609
• Working capital as a percentage of revenue
This is calculated as current assets excluding cash, less current liabilities
excluding debt like items as a percentage of Group revenue. It is a KPI for
the Group as it remains a key focus to ensure efficient allocation of capital
on the balance sheet to improve quality of earnings and reduce the additional
investment needed to support organic growth.
8. Own shares held
The own shares held reserve comprises the cost of the Company's shares held by
the Group. At 30 September 2022, the Group held 2,194,470 of the Company's
shares (HY2022: 1,269,059; FY2022: 2,194,470).
9. 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.
September 2022 UK Europe USA Asia Total
Light vehicle 5% 11% 4% 5% 25%
Health & home 2% 10% - 7% 19%
Distributors 11% 1% 1% 7% 20%
Energy, tech & infrastructure 6% 5% 3% 3% 17%
General industrial 5% 5% 2% 1% 13%
Heavy vehicle 2% 3% 1% - 6%
Revenue from external customers (AER) 31% 35% 11% 23% 100%
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%
10. Financial instruments
There is no significant difference between the fair values and the carrying
values shown in the balance sheet.
11. IFRS2 Share-based payments
During the period, a gain of £0.6m (HY2022: gain of £0.4m) was recognised in
relation to IFRS2 Share-based payments due to the reversal of the cumulative
charge relating to the 2020 Board, OEB and Senior Manager LTIP shares as the
non-market performance conditions are unlikely to be met.
12. Related parties
Transactions between subsidiaries of the Group, are not disclosed in this note
as they have been eliminated on consolidation. The CFO's contract was
terminated on 30 August 2022 with settlement costs of £0.5m being agreed and
recognised as separately disclosed items in the income statement (see note 2).
For the Executive Directors in the period, remuneration was moved to the
median of those of the FTSE Small Cap Index, as signposted in the consolidated
financial statements for the year ended 31 March 2022 on pages 112 and 113.
For the remaining key management personnel (OEB members), there is no
significant change in the components of the compensation that would materially
affect that disclosed in note 28 of the consolidated financial statements for
the year ended 31 March 2022.
In the period, there were share options granted to key management personnel
totalling 1,910,554 (HY2022: 1,365,467). There were lapses relating to the
Board LTIP share options granted on 23 July 2019 totalling 549,879 (HY2022:
493,333) as the performance conditions had not been met.
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 2022.
Copies can be requested via Companysecretariat@trifast.com, or by writing
to, The Company Secretary, Trifast plc, Trifast House, Bellbrook Park,
Uckfield, East Sussex, TN22 1QW. News updates, Regulatory News and Financial
statements, can also be viewed and downloaded from the Group's website,
www.trifast.com (http://www.trifast.com) .
INDEPENDENT REVIEW REPORT TO TRIFAST PLC
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 2022 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.
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 2022 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.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). 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.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the group to
cease to continue as a going concern.
Responsibilities of 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.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of 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.
BDO LLP
Chartered Accountants
Gatwick
21 November 2022
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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