Tricorn Share Discussion Threads

[rivaldo] 06/11/2012 15:00

Westhouse's (house broker's) reaction to all this is interesting. They've only cut their share price target to 40p from 50p:



And their new forecasts are:

this year : £1.54m PBT, 3.5p EPS
next year : £1.84m PBY, 4,2p EPS

As house broker (and as a reasonably well-respected brokerage I think) they should be as close to the company as anyone and presumably wouldn't want to be embarrased by stupidly optimistic forecasts after the RNS.

[apad] 05/11/2012 10:28

On the basis of what is in the public domain I do GP.
My remaining concern is that the Tricorn factory is very local to the Derby plant, so I am surprised that RR is so ruthless.
apad

[interceptor2] 05/11/2012 10:17

ganthorpe, I have held TCN in the past and just thought I would share a small bit of old research I had on the Aerospace division. Back in 2009 the Aerospace division had higher net margin figures than either Energy or Transport. But they since suffered from higher material costs and a delay in passing these costs on to the customers. But look at how strongly they were moving back into profit when I break down each half year.

2010 H1 = loss £0.169m
2010 H2 = loss £0.114m
2011 H1 = loss £0.045m
2011 H2 = profit £0.070m

So the loss of the RR contract will have a huge impact on TCN profits and maybe on it's reputation?, and of course Energy and Transportation have reported a softening in demand.

I wouldn't normally comment on a thread where I don't hold shares and has seen some poor news, but thought I had better share some old research.

Sorry to see investors lose money here, I know what it feels like. For me I wouldn't consider an investment at this time, there are just too many unknowns imv, I would love to see the share price bounce back for investors, and I wish investors all the best, but now isn't the time to buy imho.

ic2...

[gingerplant] 05/11/2012 10:16

APAD - essentially, then, you're thinking RR have gone elsewhere for cost reasons rather than quality?

[apad] 05/11/2012 10:14

It took quite a bit of digging to discover the accident report reference to the failed pipe being drilled on assembly to incorporate an additional filter. I reckon this puts the responsibility in RR's court and if there was any responsibility by Tricorn there would have been some court action by now.
On this basis I have decided to hold.
I would like to see the executive directors owning more shares.
apad

[charo] 05/11/2012 10:08

pj I do understand having been in the industrial market at the highest level for 25 years and manAged contracts for multinational groups,but again the customer will have taken care to ensure their supply is secure without telling TCN.
The effect on tcn is around 2.9 million in sales with a loss of contribution of at least 900k.Serious but not life threatening provided only a non quality issue.
Other opportunities will present themselves.

[pj 1] 05/11/2012 10:02

charo- Manufacturing of this type takes planning/ logistics. This takes Months if not years to plan effectively. It is not a manufacturing process like Wooley Jumpers where most technical specs are the same. This has been in the pipeline (or not as in this case) for some period of time. It also takes time to win this back, estimate 5 years minimum imo

[charo] 05/11/2012 09:53

In fairness to trc if simply matter of price ,not quality concern,then RR likely to have given no advance notice,customers rarely do especially the larger concerns.

[ganthorpe] 05/11/2012 09:04

Looking at the sector breakdown in the Mar 2012 results shows Aerospace as the weakest sector with only £25000 profit on £5.3M sales. The previous year was a £300K loss on slightly higher sales.
So RR accounted for about 50% of Aero sales and not much in profit.However it may be that TCN had succeeded in squeezing better prices/margins out of RR , and now RR have found a suitable alternative supplier.
Clearly there will be a cost in adjusting Aerospace to losing half the turnover , but the assets involved are not great and TCN has a strong cash position.
I think the share price fall to 20P has been overdone and by early December when the Interims are due we will see an assessment of the situation ,which will confirm this.
I have bought some more but not betting the farm.
GAN

[ganthorpe] 05/11/2012 09:04

Looking at the sector breakdown in the Mar 2012 results shows Aerospace as the weakest sector with only £25000 profit on £5.3M sales. The previous year was a £300K loss on slightly higher sales.
So RR accounted for about 50% of Aero sales and not much in profit.However it may be that TCN had succeeded in squeezing better prices/margins out of RR , and now RR have found a suitable alternative supplier.
Clearly there will be a cost in adjusting Aerospace to losing half the turnover , but the assets involved are not great and TCN has a strong cash position.
I think the share price fall to 20P has been overdone and by early December when the Interims are due we will see an assessment of the situation ,which will confirm this.
I have bought some more but not betting the farm.
GAN

[shauney2] 04/11/2012 12:19

I also think it was a commercial decision by RR.

Re the Singapore facility

"Once fully operational, it will assemble and test about 250 engines a year. In seven or eight years, it is expected to be producing about half of Rolls-Royce's global output.

The decision to choose Singapore as a regional manufacturing hub was made easy by a few factors.

For one, major government support came in the form of tax incentives, as well as training and innovation grants"

[apad] 04/11/2012 11:41

For what it's worth I don't think that quality at Tricorn was responsible for the Trent 900 failure.

The pipe that caused the failure was drilled "on assembly" to fit an additional oil filter. It was drilled off-centre and subsequently failed by fatigue.

The loss of the contract might be due to the opening of the major new RR facility in Singapore.

If I am correct then it is a commercial blow (recoverable, so buy) and not a reputational blow (irrecoverable, so sell at any price).

Any more information?

apad

[rogerrail] 03/11/2012 13:17

You have to bear in mind its not just the 11% loss of revenue and the impact on margins because the proportion of fixed overheads won't reduce by the same amount, but also the lowering of high growth expectations from the aero industry which was factored into the share price No doubt TCN had high hopes its chinese startup would pickup some work from RR Singapore. I have stood on the sidelines for a while with this looking to reinvest profits from AVG , it was only instinct on how I viewed the prospect for both cos that prevented me switching so goes to show sometimes you have go with your gut feel and not be swayed by fancy ratios which look backwards 5 years over a period of significant change..in my opinion the share price has further to fall, but as always dyor.

[apad] 03/11/2012 13:14

Electronica posted this:

Rolls Royce are faced with a #150m bill to rectify the engines for Quantas A380 aircraft that exploded in mid air after metal fatigue failure in an engine fuel pipe. That pipe came from an uncontrolled supplier in the Far East. I'm pretty sure that Rolls Royce will be paying more attention to the quality & traceability in their pipe supply chain in future. Is it coincidental that TCN's business with RR has increased since those disasterous Qantas incidents?

in July having asked, in Jan., whether Tricorn were involved.
He might well be wrong about the Far East supplier.

apad

[shauney2] 03/11/2012 11:03

Its nearly 2 years since the Quantas engine explosion in Singapore.
An extract from the report at the time,

Further examination of the cracked area has identified the axial misalignment of an area of counter-boring within the inner diameter of the stub pipe; the misalignment having produced a localized thinning of the pipe wall on one side. The area of fatigue cracking was associated with the area of pipe wall thinning (Figure 1). Misaligned stub pipe counter-boring is understood to be related to the manufacturing process. This condition could lead to an elevated risk of fatigue crack initiation and growth, oil leakage and potential catastrophic engine failure from a resulting oil fire."

Read more: Qantas A380 Engine Report - Rolls Royce Engine Report - Popular Mechanics

Do RMDG make stub pipes?

If it was a quality issue which compromised safety (nice find ChrisG)RR would have terminated or stopped the supply of pipes as soon as the issue was highlighted.At the very least there would be discussions with RMDG Aerospace.

The Tricorn board are far to experienced not to have made any mention of any issues in the last 2 years.
RR are not renewing the contract.Not a decision made overnight.I doubt they looked up pipe manufacturers on google and chose one.To qualify takes years of research with associated costs.

So who is the new supplier?

[charo] 03/11/2012 07:52

surely the board must have been aware of rr potential prob when made positive trade statement.

[deej4y] 03/11/2012 07:49

I agree RR must have discussed with board if there was any quality issues, and just wouldn't pull the plug out the blue. If that is the case, doesn't look good if they were not able to address the problem(s). Hopefully there will be an explanation in Dec statement

[norbert colon] 03/11/2012 04:43

John148. - assume you mean TCN rather than TRI.

I am one of the unfortunate ones who bought in only a week or so ago. I agree with most of the posters on here but as I have only a very small initial holding (that i was looking to add to!), I am going to sit it out and make any decisions in December.

As we all know in investing you just can't predict the future.

What puzzles me is that RR must have already discussed with the board any quality issues (if they existed), I really can't believe this decision by RR just came out of the blue so rather frustrating for investors if that is the case.

[stegrego] 02/11/2012 22:04

I doubt that price matters that much to RR. They are all about quality.
This stock is currently impossible to value unfortunately.

[john148] 02/11/2012 21:58

My view is this is a temporary blip.In a years time RR will probaby be back, with TRI holding the upper negotiating hand. In meantime, who's to say that TRI is not a good takeover target.

[jbarker5555] 02/11/2012 21:34

Sold today on that news for a smaller than hoped for profit. Agree with PJ and others here. I too come from a manufacturing backround and this type of business has to have a critical mass to cover the fixed costs therefore this size reduction to turnover has to heavily impact on the bottom line IMO. Will be interesting to here what management are saying in 6 to 9 months time when they`ve had time to try to fill the gap in capacity. AIMO :)

[pj 1] 02/11/2012 20:10

Anyone buying here now is mad in my opinion as I come from a Manufacturing background. To loose Roycies is aka to a clothing manufacturer loosing M and S. (Research Coats Viyella).And don't you just hate those who then subsequently tell you they have abandoned ship before said announcement? Why don't they tell you at the time they have sold?????? As always DYOR.

[choppa] 02/11/2012 19:01

11% of revenues is huge for a company of this size imho when fed down to the bottom line.

[saucepan] 02/11/2012 18:48

ChrisG: post #1199 - excellent research. I suspect you may well have put two and two together to make four.

[glasshalfull] 02/11/2012 18:22

Sorry to read today's news & commiserations to holders.

Didn't see it coming & despite the shares looking exceptionally good value at 20p there are too many imponderables at this time IMHO for me to consider an investment at this stage.

As well as sharing a number of the concerns listed by posters over the possibility that this may be a "quality" issue rather than simply a "pricing" issue, my other concerns relate to whether this news would effect the current Chinese expansion plans?...11% hit to revenues and whether the corresponding impact to profitability will be sequential? (we simply won't know until December update)...will this news cause any restructuring or write-down(exceptional costs)?...will this impact on longer term growth, as this news coupled with the softening of automotive may also see the company tread water in terms of growth for a number years and therefore impact the valuation the market would attribute?

Hopefully this is simply a one-off and won't overly impact. If so I'm sure a number of us will be chasing the shares back up from the current price on confirmation.

Kind regards,
GHF