Trifast PLC Half-Year Financial Report - six months to 30.9.16 (5514O)

Share Name	Share Symbol	Market	Type	Share ISIN	Share Description
Trifast Plc	LSE:TRI	London	Ordinary Share	GB0008883927	ORD 5P

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	81.00	77.20	80.80				500	08:11:07

Industry Sector	Turnover	Profit	EPS - Basic	PE Ratio	Market Cap
Manufacturing Industries,nec	244.39M	-2.87M	-0.0213	-38.03	109.07M

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TIDMTRI

RNS Number : 5514O

Trifast PLC

08 November 2016

The information contained within this announcement

is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014.

Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

Tuesday, 8 November 2016

HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHSED 30 SEPTEMBER 2016

"Yet another record breaking six months, with strong underlying trading growth driving our underlying PBT

up by 8.0% at CER (20.3% at AER)."

 
KEY FINANCIALS 
---------------------------------------  --------  --------  --------  --------- 
                                           Change 
                                           HY2017 
Continuing operations (Actual Exchange          v 
 Rate, AER)                                HY2016    HY2017    HY2016     FY2016 
---------------------------------------  --------  --------  --------  --------- 
Group revenue                              +14.9%  GBP89.7m  GBP78.1m  GBP161.4m 
Gross profit %                            +230bps     31.6%     29.3%      29.7% 
Underlying operating profit*               +18.7%  GBP10.3m   GBP8.6m   GBP16.8m 
Operating profit                           +17.3%   GBP8.8m   GBP7.5m   GBP13.9m 
Underlying profit before tax*              +20.3%   GBP9.9m   GBP8.3m   GBP16.0m 
Profit before tax                          +19.1%   GBP8.5m   GBP7.1m   GBP13.1m 
Underlying diluted earnings per 
 share*                                    +24.2%     6.27p     5.05p      9.99p 
Diluted earnings per share                 +24.8%     5.33p     4.27p      8.50p 
Basic earnings per share                   +24.7%     5.50p     4.41p      8.78p 
Interim/total dividend^                    +25.0%     1.00p     0.80p      2.80p 
---------------------------------------  --------  --------  --------  --------- 
Net debt                                 -GBP2.1m  GBP14.2m  GBP16.3m   GBP16.0m 
Return on capital employed (ROCE)*         -70bps     18.6%     19.3%      18.5% 
---------------------------------------  --------  --------  --------  ---------

* Before separately disclosed items (see note 2).

^ Change is in interim dividend only.

OPERATIONAL HIGHLIGHTS

   --      Total revenue increase of 8.1% at Constant Exchange Rate (CER), 14.9% at AER

-- A growth strategy that continues to deliver - revenue from multinational OEMs grew by 8.9% at CER

   --      FX tailwinds bring additional GBP1.0m to underlying profit before tax 
   --      Underlying diluted earnings per share up by 10.3% at CER, 24.2% at AER 
   --      Growth in profitability drives interim dividend increase

-- GBP0.9m capital investment programme in our manufacturing capabilities, which is expected to increase in the second half

   --      Ongoing investment for growth in our sales teams and operations around the world

-- TR Fastenings Espana - an exciting new TR location near Barcelona giving the Group access to a key growth market

"HY2017 has seen another six months of strong trading, putting us firmly on track with our expectations to achieve another record breaking financial year.

There are, of course, some macroeconomic factors we cannot fully mitigate, including the ongoing volatility in the foreign currency and raw materials markets, as well as the wider potential implications of Brexit on our business and the UK economy. We are already starting to see some purchase price challenges in our UK business from the ongoing weakness in Sterling and we expect these pressures to increase over time if that weakness persists. However, as an international business with over 70% of our revenue being generated outside of the UK, the Board remains confident we have the flexibility and foresight to meet these challenges head on as and when they arise.

Right now, in what is our seventh year of continuous profitable growth, with a strong balance sheet, renewed banking facilities and a dedicated, motivated and professional team of people around the world, the Group is in a great position to keep moving forward."

Malcolm Diamond MBE, Executive Chairman

Presentation of Results:

This will be held at 9.30am (UK) today at, The Wellington Room, Octagon Point, St Paul's, London, EC2V 6AA.

Conference dial-in facility: on request, please contact Fiona Tooley on +44 (0)7785 703523

or email fiona@tooleystreet.com .

 
 Enquiries please contact: 
 
  Trifast plc 
  Malcolm Diamond MBE, Executive 
  Chairman 
  Mark Belton, Chief Executive 
  Officer 
  Clare Foster, Chief Financial 
  Officer 
  Today: Mobile: +44 (0) 
  7979 518493 (MMD) 
  Office: +44 (0) 1825 747630 
  Email: corporate.enquiries@trifast.com 
 
   Peel Hunt LLP 
   Stockbroker & financial 
   adviser 
   Justin Jones 
   Mike Bell 
   Tel: +44 (0)20 7418 8900 
 TooleyStreet Communications 
  IR & media relations 
  Fiona Tooley 
  Tel : +44 (0)7785 703523 
  Email : fiona@tooleystreet.com

Editors' note:

LSE Premium Listing: Ticker: TRI

Group website: www.trifast.com

About us: Trifast, leading international specialists in the engineering, manufacturing and distribution of high quality industrial fastenings to major global assembly industries. Key sectors are automotive, domestic appliances, electronics and distributors. The Group employs c.1,200 staff across 27 global locations across the UK, Europe, Asia and the USA.

For more information, visit

Commercial website: www.trfastenings.com

LinkedIn: www.linkedin.com/company/tr-fastenings

Twitter: www.twitter.com/trfastenings

Facebook: www.facebook.com/trfastenings

 
 
   Electronic Communications 
 The Company is not proposing to bulk print and distribute 
  hard copies of this half-yearly financial report for the 
  six months ended 30 September 2016 unless specifically 
  requested by individual shareholders. News updates, Regulatory 
  News, and Financial statements, can be viewed and downloaded 
  from the Group's website, www.trifast.com. Copies can 
  also be requested via corporate.enquiries@trifast.com 
  or, in writing to, The Company Secretary, Trifast plc, 
  Trifast House, Bellbrook Park, Uckfield, East Sussex, 
  TN22 1QW. 
----------------------------------------------------------------

Forward-looking statements

This announcement contains certain forward looking statements. These reflect the knowledge and information available to the Company during the preparation and up to the publication of this document. By their very nature, these statements depend upon circumstances and relate to events that may occur in the future thereby involving a degree of uncertainty. Therefore, nothing in this document should be construed as a profit forecast by the Company.

TRIFAST PLC

HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHSED 30 SEPTEMBER 2016

"OVER 75% of GROUP EBIT TODAY COMES FROM OUTSIDE THE UK"

INTRODUCTION

In addition to our ongoing focus on continuous operational improvement, we are into a sustained period of investment in both capital and people around the Group, an initiative that was implemented back in mid-2015. This investment is enhancing not only our manufacturing capacity and sales capability but is a clear signal to everyone of the Board's confidence for the future.

Global market overview

Despite negative media predictions of both UK and global economic malaise, the Group has sustained its trading dynamics in virtually every one of its geographic and sector divisions. The one exception is the reduced domestic automotive output in Malaysia which has affected Power Steel & Electro-Plating Works (PSEP). However, that is currently being addressed by promoting its unutilised capacity to the Tier 1 automotive customers in the EU and USA. Meanwhile, our other Asian businesses plus the UK, TR Europe and TR USA are all maintaining organic growth in our key customer sectors of automotive, electronics and domestic appliances.

Our most recent acquisition, Kuhlmann in Germany (October 2015), is performing extremely well and has enlarged its sales force to add more resource to its domestic growth opportunities that have been clearly identified by the team.

TR strategy update

We reported back in June the creation of a new senior role, Sales Director TR Fastenings UK, which completes the UK operational board. Kevin de Stadler, who took up this role, has since completed his review of our UK sales strategy and during the rest of this financial year we will look forward to beginning the roll out of his recommendations.

Over recent years there has been a trend for high volume assembly operations to migrate to new countries to preserve, or even to achieve, competitive advantage. It is this transience that has helped to drive TR's international expansion by following customers to new production sites, our latest step seeing us open a new logistics centre in Barcelona, Spain. Trading from this greenfield site is expected to start early next calendar year and responds positively to customer requests to provide technical and logistics support locally in Spain.

Our perpetual search for acquisitions that align with our growth strategy continues to be a key priority for the management team to further add material value to our organic growth. Since 2011 we have added three earnings enhancing businesses with highly experienced and successful teams - PSEP (Malaysia), VIC (Italy) and Kuhlmann (Germany). This clearly is an indication of the timescales involved to not only identify the best fit, but also to ensure growth and cultural harmony post transaction.

With meaningful manufacturing capacity expansion projects underway in Italy and Singapore, the senior UK management team is reviewing the cost benefits of how we collect, store and access the Group's purchase, logistics and sales data by means of more interactive systems that will vastly improve processing efficiency. This is a long-term project with the benefits expected by year end 2018 and is a key example of how the Group now has the resource to undertake fundamental modernisation of basic, highly labour intensive core administrative processes.

Succession and people

It is over twelve months since Mark Belton moved to CEO with Clare Foster replacing him as CFO. I must applaud how smooth this transition has been, especially in view of the ongoing high performance of the Group this year along with a cluster of new policy initiatives they have introduced whilst maintaining enthusiastic support for our well proven existing core strategies for growth.

In May this year we wished Carlo Perini (MD of VIC) a fond farewell as he retired from the Group and moved to the USA. We welcomed Karol Gregorczyk and Francesco Cricco as new internally appointed VIC board directors reporting to Geoff Budd (Group Commercial Director). VIC continues to perform extremely well, justifying the extra capacity investment that is being dedicated to the plant.

TR Fastenings UK has created an additional management role for major continuous improvement investments which resulted in the appointment of Des Christian to the team in July as Project Manager.

In March 2009, I re-joined Trifast as Executive Chairman alongside Jim Barker as incoming CEO and over seven years I have witnessed the gradual emergence of what is now considered a world class player in our sector. The seamless senior management succession has resulted in a motivated and experienced Executive Board that has clear direction, focus and determination going forward. For this reason, I think it is now appropriate that my role as Executive Chairman switches to Non-Executive Chairman from April 2017, a measured step that will provide continuity in the Boardroom and allow me more time to support my other commitments outside of Trifast.

As always these days, I never fail to be in awe of what our nearly 1,200 colleagues achieve by driving Trifast consistently forward, often in the face of challenging market and economic headwinds. My colleagues and I sincerely thank them all for their skill, energy and enthusiasm and look forward to our combined continued success in the near and mid-term future.

Malcolm Diamond MBE, Executive Chairman

BUSINESS REVIEW

Unless stated otherwise, comparisons with prior year are calculated at constant currency ("CER") and where we refer to 'underlying', this is defined as being before separately disclosed items (see note 2). For consistency with the year end, CER calculations have been calculated by translating the HY2017 figures by the average exchange rate for FY2016.

Given the significant weakening of Sterling since June, more so than ever before, CER is the best way of understanding the positive progress of our underlying business. Over the second quarter of HY2017, we witnessed Sterling weaken against our key global currencies with average exchange rates falling 8.3% against the US Dollar, 10.2% against the Euro, and 10.2% against the Singapore Dollar.

The impact of foreign exchange movements has increased our revenue by an additional 6.8% (GBP5.3m), our underlying profit before tax by a further 12.3% (GBP1.0m) and our underlying diluted EPS by 13.9% (0.70p) in HY2017.

Our Group performance

 
                           HY2017     HY2017     HY2016    Growth    Growth 
                              CER        AER               at CER    at AER 
----------------------  ---------  ---------  ---------  --------  -------- 
 Revenue                 GBP84.4m   GBP89.7m   GBP78.1m      8.1%     14.9% 
----------------------  ---------  ---------  ---------  --------  -------- 
 Gross profit (GP)       GBP26.7m   GBP28.4m   GBP22.9m     16.5%     24.1% 
----------------------  ---------  ---------  ---------  --------  -------- 
 GP%                        31.6%      31.6%      29.3%   +230bps   +230bps 
----------------------  ---------  ---------  ---------  --------  -------- 
 Underlying EBITDA       GBP10.2m   GBP11.2m    GBP9.3m      9.3%     20.9% 
----------------------  ---------  ---------  ---------  --------  -------- 
 Underlying operating 
  profit (UOP)*           GBP9.2m   GBP10.3m    GBP8.6m      6.9%     18.7% 
----------------------  ---------  ---------  ---------  --------  -------- 
 UOP%                       10.9%      11.4%      11.1%    -20bps    +30bps 
----------------------  ---------  ---------  ---------  --------  -------- 
 Underlying profit 
  before tax*             GBP8.9m    GBP9.9m    GBP8.3m      8.0%     20.3% 
----------------------  ---------  ---------  ---------  --------  -------- 
 Underlying diluted 
  EPS*                      5.57p      6.27p      5.05p     10.3%     24.2% 
----------------------  ---------  ---------  ---------  --------  --------

*The non-underlying measures are included in the Key Financials table at the start of this report

In HY2017 we have seen strong, continued revenue growth of 8.1% up by GBP6.3m to GBP84.4m.

Non-organic growth accounts for 3.6% of the 8.1% increase, coming from a second successful six months of trading at our latest acquisition, TR Kuhlmann in Germany. The strong organic growth of 4.5% was largely driven from our multinational OEMs where revenue has increased by 8.1% on HY2016 (8.9% including TR Kuhlmann).

TR Kuhlmann is integrating well, having generated GBP2.8m of revenue and GBP0.6m of underlying operating profit. This was noticeably ahead of their first six months in the Group and their performance continues to exceed our expectations.

Gross margins continue to strengthen, up by 190bps on FY2016, and bringing us to above 30% for the first time in our history. This represents the achievement of a long held ambition for the Group, and is a tangible sign of how far we have come over the last seven years of consistent growth. While gross margins increased, underlying operating margins have slightly decreased compared to HY2016 at 10.9%, reflecting the investments for growth we are making around the Group in both our sales and operational teams.

Our underlying PBT continues to grow, up by 20.3% at AER to GBP9.9m (HY2016: GBP8.3m) and 8.0% at CER, driving a very strong increase in our underlying diluted earnings per share (EPS) at AER, up 24.2% to 6.27p (HY2016: 5.05p).

Revenue (CER)

By far the biggest driver of growth was our European business where revenue has increased by 22.1% to GBP29.2m (HY2016: GBP24.0m). Non-organic growth has driven 11.6% (GBP2.8m) of that increase, coupled with very strong organic growth in our domestic appliances business in Italy, electronics in Hungary and automotive across Holland and Sweden.

In Asia, we saw strong growth across our Singaporean and Chinese businesses being offset by slower sales in Malaysia, specifically in the domestic automotive market as previously highlighted. Overall revenue remains stable for the region with a 0.5% increase to GBP19.9m (HY2016: GBP19.8m).

As expected, in the UK we have seen a return to marginal growth of 1.7% to GBP32.6m after a slight overall fall in FY2016. This represents a good recovery for what remains our biggest region by sales. Our smallest region, the USA, continues to perform very well with double-digit growth of 14.7% increasing revenue to GBP2.7m (HY2016: GBP2.3m).

Underlying operating profit (CER)

Underlying operating margins have remained steady at 10.9% (HY2016: 11.1%), generating an overall increase in profit of 6.9% to GBP9.2m (HY2016: GBP8.6m). Once more it is Europe that has driven a large element of the improvement with underlying operating margins increasing 380bps to 15.9% (HY2016: 12.1%) mainly due to gross margin improvements most specifically in Italy, Sweden and Hungary. In Asia, underlying operating profits have fallen by GBP0.9m to GBP2.9m (HY2016: GBP3.8m). Most of this decrease (GBP0.7m) reflects foreign exchange movements on the retranslation of non-local currency cash and debtor positions. In HY2016 we experienced a one-off GBP0.5m gain on retranslation due to the weakening in the Asian currencies following the sudden fall in the value of the Chinese Yuan in September 2016. In HY2017, this position has reversed to a GBP0.2m loss. Outside of this, lower trading levels in our Malaysian business have also acted to reduce underlying operating margins. Together explaining the majority of the 390bps fall in margin to 12.6% (HY2016: 16.5%).

In the UK, margins reduced slightly by 60bps, reflecting good ongoing control of our cost base as our growth investment projects start to be implemented. The US business has seen the biggest reduction in underlying operating margin with a fall of 510bps to 5.4% (HY2016: 10.5%). This fall has occurred through our ongoing successful penetration into the automotive sector, as we have invested in our US resourcing levels ahead of the curve to support actual and expected revenue growth. We would expect to see margins improve as revenue streams continue to increase.

Net financing costs and banking (AER)

These have continued to fall and at the end of the HY2017 stood at GBP0.3m (HY2016: GBP0.4m) despite a broadly consistent average net debt position against HY2016. This is due to both the decrease in EURIBOR and a reduced reliance on our more expensive Asset Based Lending (ABL) facilities.

Taxation (AER)

The HY2017 effective tax rate (ETR) of 23.6% is lower than our normalised ETR of c.26.5%, based on the geographical split of the Group's profits. The main reasons for this difference are favourable prior year corporation tax adjustments in our Malaysian and Italian businesses. In FY2016, this was lower still at 21.8%, as we saw the recognition of a deferred tax asset in the US relating to brought forward losses.

Earnings per share (AER)

Our strong growth in underlying profit before tax, coupled with foreign exchange tailwinds from a weaker Sterling, has significantly increased underlying diluted EPS by 24.2% to 6.27p (HY2016: 5.05p).

Dividend

To reflect the Board's confidence in the business and its future prospects, we are declaring an interim dividend of 1.00 pence per share, an increase of 25.0%. The interim dividend will be paid on 13 April 2017, to shareholders on the Register as at 17 March 2017. The shares will become ex-dividend on 16 March 2017.

Shareholder equity (AER)

As at 30 September 2016, the Group's shareholders' equity increased considerably to GBP93.5m (FY2016: GBP83.8m). The GBP9.7m increase is made up of retained earnings of GBP3.8m (HY2016: GBP3.3m), share issues totalling GBP0.1m and a net foreign exchange reserve gain of GBP5.8m arising from the weakening in Sterling in the second quarter.

Net debt (AER)

Our net debt position at the end of HY2017 has decreased by GBP1.8m to GBP14.2m (FY2016: GBP16.0m) despite the GBP1.5m (EUR1.7m) deferred consideration payment for TR Kuhlmann. This represents the final payment and timed in with the one year anniversary of the successful joining of our two businesses.

Additional capital expenditure of GBP0.9m in the period reflects our ongoing commitment to investing in the business, most specifically within our manufacturing sites with additional capacity projects both underway and planned in Italy and Singapore. Although our cash is held across a number of currencies around the world, our gross debt is held predominantly in Euros and so we have seen a GBP1.1m net increase in net debt mainly from the weakness in Sterling in the period.

Outside of these investments, our cash generation has remained strong, reporting a conversion rate of underlying EBITDA to cash of 82.6% (FY2016: 88.9%; HY2016: 46.3%). This figure includes a GBP2.1m additional investment in stock to support our ongoing growth, most specifically within our Italian, Taiwanese and UK businesses.

Banking facilities

The Group finalised amended banking facilities with HSBC just after the HY2017 period end on 7 October 2016. In summary, the amendments reduce the Group's reliance on the ABL facilities, decrease the overall cost structure and extend the maturity profile of a proportion of our borrowings to better reflect the Group's core funding and investment requirements.

Taking these changes into account, headroom has increased by c.GBP5.0m, helping to support our strategy of investment driven growth. In addition, an Accordion facility of GBP20.0m has been written in to the agreement, providing the potential flexibility to debt finance future acquisitions and investment.

Outlook

HY2017 has seen another six months of strong trading, putting us firmly on track with our expectations to achieve another record breaking financial year.

For us, Europe remains a key area for organic growth. We have investment projects already underway to increase our manufacturing capacity in Italy and our new greenfield site in Spain (opened in October 2016) is already providing ample opportunities to better access the multinational OEMs head-quartered and operating in this region.

Additional investments are being made across the world, in both our global and local sales resources and supporting teams, as well as to improve our digital and integrated business management systems. Right now, in what is our seventh year of continuous profitable growth, with a strong balance sheet, renewed banking facilities and a dedicated, motivated and professional team of people around the world, the Group is in a great position to keep moving forward.

RISKS AND UNCERTAINTIES

The Directors do not consider that the principal risks and uncertainties of the Group have changed since the publication

in June 2016 of the Group's Annual Report for the year ended 31 March 2016. A copy of this can be found on our website

www.trifast.com.

No system can fully eliminate risk and therefore the understanding of operational risk is central to the management process within TR. The Group operates a system of internal control and risk management in order to provide assurance that we are managing risk whilst achieving our business objectives. Risk assessment reviews are regularly carried out by management, with responsibilities for monitoring and mitigating personally allocated to a broad spread of individual managers. The review is analysed and discussed at Audit Committee meetings chaired by our Senior Independent Non-Executive Director.

As with all businesses, the Group faces risks, with some not wholly within its control, which could have a material impact on the Group, and may affect its performance with actual results becoming materially different from both forecast and historic results. There are indications that the macroeconomic climate is still under pressure, and so, we continue to remain vigilant for any indications that could adversely impact expected results going forward. Past and future acquisitions can also carry impairment risks on goodwill should there be a sustained downturn in trading within an acquired subsidiary.

The long-term success of the Group depends on the ongoing review, assessment and control of the key business risks it faces.

Trifast plc - responsibility statement

We confirm that to the best of our knowledge:

-- the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

   --     the interim management report includes a fair review of the information required by:

a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

Mark Belton, Chief Executive Officer

7 November 2016

Condensed consolidated interim income statement