Trifast PLC Half-Yearly Financial Report (1177H)

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
	-3.20	-4.19%	73.20	73.20	77.80	76.00	74.80	76.00	33,793	16:35:18

Industry Sector	Turnover	Profit	EPS - Basic	PE Ratio	Market Cap
Manufacturing Industries,nec	244.39M	-2.87M	-0.0213	-35.21	100.99M

Trifast (LSE:TRI)
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TIDMTRI

RNS Number : 1177H

Trifast PLC

13 November 2018

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.

TRIFAST PLC

HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHSED 30 SEPTEMBER 2018

"Another six months of solid growth, with significant ongoing investment across our regions and via Project Atlas"

 
KEY FINANCIALS 
---------------------------------------  ----------  ----------  ----------  ----------  --------  --------- 
                                                                             AER change 
                                                     CER change                       v 
Underlying measures                      CER HY2019    v HY2018  AER HY2019      HY2018    HY2018     FY2018 
---------------------------------------  ----------  ----------  ----------  ----------  --------  --------- 
Group revenue                             GBP105.4m       +7.8%   GBP105.0m       +7.3%  GBP97.8m  GBP197.6m 
Gross profit %                                30.2%           -       30.2%           -     30.2%      30.5% 
Underlying operating profit*               GBP12.0m       +7.6%    GBP11.9m       +6.7%  GBP11.1m   GBP22.7m 
Underlying profit before tax*              GBP11.7m       +6.8%    GBP11.6m       +5.9%  GBP10.9m   GBP22.2m 
Underlying diluted earnings per share*        7.27p       +7.2%       7.20p       +6.2%     6.78p     13.78p 
Net debt                                                           GBP13.5m    +GBP5.6m   GBP7.9m    GBP7.4m 
Return on capital employed (ROCE)*                                    19.5%      -60bps     20.1%      20.1% 
---------------------------------------  ----------  ----------  ----------  ----------  --------  --------- 
Interim/total dividend^                                               1.20p       +9.1%     1.10p      3.85p 
---------------------------------------  ----------  ----------  ----------  ----------  --------  --------- 
GAAP measures 
Operating profit                                                    GBP8.3m      -10.9%   GBP9.3m   GBP19.0m 
Profit before tax                                                   GBP8.0m      -12.2%   GBP9.1m   GBP18.5m 
Diluted earnings per share                                            4.82p      -26.5%     6.56p     12.20p 
Basic earnings per share                                              4.93p      -26.6%     6.72p     12.54p 
---------------------------------------  ----------  ----------  ----------  ----------  --------  ---------

* Before separately disclosed items (see notes 2, 6 and 9)

^ Change is in interim dividend only

 
 OPERATIONAL HIGHLIGHTS 
------------------------------------------------------------------ 
  The investment driven growth story continues... 
 
        *    Revenue up by 7.8% at Constant Exchange Rate (CER), 
             7.3% at Actual Exchange Rate (AER) 
 
       *    Organic revenue growth of 4.3% at CER, 3.5% 
            non-organic 
 
       *    Underlying diluted earnings per share up by 7.2% at 
            CER, 6.2% at AER 
 *    Gross margins remain above our 30% target 
 
 
        *    Capital investment of GBP1.3m increases our 
             manufacturing capacity and capability, with more to 
             follow 
 
        *    Expanded distribution facilities in USA, support 
             regional revenue growth of 34.8% at CER, 31.1% at AER 
 
        *    Project Atlas, our multi-year investment in our 
             systems, policies and procedures is on track, with a 
             spend of GBP1.5m 
 
        *    Interim dividend of 1.20p, an increase of 9.1% on the 
             prior year interim

"Our solid first half results, together with a robust balance sheet, good access to banking facilities and a proven track record of profitable investment, means the Group is in a great position to keep moving forward. The second half has started well and, with a healthy pipeline in place, the Board remains confident of delivering its expectations for the current financial year.

Despite the macroeconomic backdrop we continue to have confidence in our model. As an international business serving a range of end markets and with c.70% of revenues and profits being generated outside the UK, we recognise the global opportunities that lie ahead in providing good product, skills and services to industry. We have these, coupled with the foresight and flexibility around the Group to keep moving forward and delivering on our future aspirations."

Malcolm Diamond MBE, Non-Executive Chairman

Presentation of Results:

This will be held at 9am (UK) today at, No1 Cornhill, The Dome Room - London, EC3V 3ND.

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, Non-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 
 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 
 LEI number: 213800WFIVE6RUK3CR22 
 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.1,300 staff 
  across 31 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 
  2018 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 2018

"Investing to build the Trifast of tomorrow, a truly world class global industrial player"

Dear Shareholder,

It was way back in 1973 that the founders of our business, Mike Timms and Mike Roberts, frustrated by the suffocating bureaucracy of working for a large centralised conglomerate, took the plunge and established TR Fastenings Ltd in Uckfield, East Sussex.

They laid down the core values and culture of the business from day one, which I know have endured to the present as, now in FY2019, we celebrate our 45th Anniversary.

Those core values are to look professional, be professional, sell value - not cheapest price (as what customers need is reliable quality and service) and, finally, treat customers, suppliers and employees with equal care, consideration and respect.

Today, Trifast employs c.1,300 staff in the UK, Europe, Asia and North America, and manufactures over one third of its sales revenue within its own eight factories. We offer multinational customers the unique combination of global distribution logistics coupled with customised product prototyping and high volume in-house production.

Careful and considered sales targeting and marketing over the years has resulted in a growing focus on technically complex, higher value products, where quality and performance are the key drivers of purchasing decisions, with the result that, the vast majority of our sales are customer specific, individually negotiated, unique deals.

However, FY2019 is not only Trifast's 45th anniversary, it also marks the start of the investment period for Project Atlas, a ground-breaking multi-year investment in Group wide international strategic harmonisation of data systems, operational management procedures, communications and customer specifications.

Groups like Trifast that have grown consistently both organically and by regular acquisitions inevitably end up with disparate data systems, operational variations and cultures, and so cannot fully leverage their market capabilities, and to an extent, tend to operate in silos - rather than as a fully integrated cooperative unit. Project Atlas is designed to enable us to overcome this challenge and build the Trifast of tomorrow, a truly world class global industrial player.

This will not only enable TR to operate more efficiently and effectively, but further enhances competitiveness with our multinational customer groups who require consistent product prices, delivery and quality on identical components wherever they assemble products - whether they have plants in the UK, Europe, Asia, or America.

The success of this project will provide a distinct global competitive advantage and we look forward to giving you regular progress updates throughout the coming years as we hit vital milestones.

Meanwhile, I wish to put on record my admiration and thanks for the hard work, dedication and energy so freely given by so many of our colleagues over the past two years in developing this most ambitious of transformations of how we do business going forward.

As we say internally, despite hitting record profit performance every consecutive year since 2012, "we can't wait to get it right!".

Thank you again for your past, present, and future support.

Malcolm Diamond MBE, Non-Executive Chairman

12 November 2018

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). CER calculations have been calculated by translating the HY2019 figures by the average HY2018 exchange rate.

The impact of foreign exchange movements has decreased our AER revenue by 0.5%, GBP0.4m (HY2018: increased by 4.2%, GBP3.8m), our AER underlying profit before tax by 0.9%, GBP0.1m (HY2018: increased by 5.2%, GBP0.5m) and our AER underlying diluted EPS by 1.0%, 0.07p (HY2018: increased by 5.2%, 0.33p).

Our Group performance

 
 Underlying measures           HY2019 CER    Change      HY2019    Change     HY2018 
                                             at CER         AER    at AER 
 Revenue                        GBP105.4m     +7.8%   GBP105.0m     +7.3%   GBP97.8m 
                              -----------  --------  ----------  --------  --------- 
 GP%                                30.2%         -       30.2%         -      30.2% 
                              -----------  --------  ----------  --------  --------- 
 Underlying EBITDA*              GBP13.0m     +8.0%    GBP12.9m     +7.3%   GBP12.1m 
                              -----------  --------  ----------  --------  --------- 
 Underlying EBITDA%*                12.4%    +10bps       12.3%         -      12.3% 
                              -----------  --------  ----------  --------  --------- 
 Underlying operating 
  profit (UOP)*                  GBP12.0m     +7.6%    GBP11.9m     +6.7%   GBP11.1m 
                              -----------  --------  ----------  --------  --------- 
 UOP%*                              11.4%         -       11.3%    -10bps      11.4% 
                              -----------  --------  ----------  --------  --------- 
 Underlying profit before 
  tax*                           GBP11.7m     +6.8%    GBP11.6m     +5.9%   GBP10.9m 
                              -----------  --------  ----------  --------  --------- 
 Underlying diluted 
  EPS*                              7.27p     +7.2%       7.20p     +6.2%      6.78p 
                              -----------  --------  ----------  --------  --------- 
 Return on capital employed 
  ROCE*                                                   19.5%    -60bps      20.1% 
----------------------------  -----------  --------  ----------  --------  --------- 
 GAAP measures 
                              -----------  --------  ----------  --------  --------- 
 Operating profit                                       GBP8.3m    -10.9%    GBP9.3m 
                              -----------  --------  ----------  --------  --------- 
 Operating profit %                                        7.9%   -160bps       9.5% 
                              -----------  --------  ----------  --------  --------- 
 Profit before tax                                      GBP8.0m    -12.2%    GBP9.1m 
                              -----------  --------  ----------  --------  --------- 
 Diluted EPS                                              4.82p    -26.5%      6.56p 
                              -----------  --------  ----------  --------  ---------

*Before separately disclosed items (see notes 2, 6 and 9)

In HY2019 we have seen another six months of strong revenue growth, up 7.8% to GBP105.4m (AER: up 7.3% to GBP105.0m; HY2018: GBP97.8m). This is split between an organic increase of 4.3% and, following on from our successful acquisition of PTS in April 2018, non-organic growth of 3.5%.

Organic growth, ahead of global industrial production benchmarks, continues to be driven out of our successful core growth strategy focusing on sales to our multinational OEMs. The global automotive sector is providing significant long-term opportunities for organic growth, with a double digit increase on the prior half year, through market share gains and site penetration as a result of strong collaboration across the TR Group to cross-sell local capacity to our Tier 1 and multinational OEM customers. Growth in the general industrial sector has also been strong and with the acquisition of PTS further strengthening the distributor sales segment, a balanced sector portfolio has been maintained. By non-organically increasing our distributor sales by >20%, our overall reliance on the automotive sector has remained level with FY2018 at 33% (HY2018: 32%).

Gross margins have been successfully maintained 20bps ahead of our 30.0% target at 30.2% (AER: 30.2%) and are in line with HY2018 (30.2%). Underlying operating margins have also remained steady at 11.4% (AER: 11.3%; HY2018: 11.4%), as we continue to invest operational gearing gains to support future growth.

Our underlying PBT is up 6.8% at CER to GBP11.7m (AER: 5.9%, to GBP11.6m, HY2018: GBP10.9m). This has resulted in a strong increase in our underlying diluted earnings per share (EPS) at CER, up 7.2% to 7.27p and at AER, up 6.2% to 7.20p (HY2018: 6.78p).

Revenue (CER)

We have seen strong revenue growth across all our regions, ranging from 4.3% to 34.8% (HY2018: 2.4% to 10.7%).

Europe has been a region of very strong growth for us, reporting a revenue increase of 7.3% to GBP38.7m (AER: up 6.6% to GBP38.4m, HY2018: GBP36.1m). This has arisen across a number of sectors, with double digit growth in the automotive sector in Holland; in the electronics sector in Hungary and in the general industrial sector in Germany. In Italy, ongoing volume reductions at one of the Group's largest domestic appliances customer have offset some of these gains. However, notwithstanding this, we continue to see Europe as a key area of investment driven growth.

In Asia, growth has been solid, up 4.3% on the prior period to GBP30.9m (AER: up 3.9% to GBP30.8m, HY2018: GBP29.6m). This has largely been driven out of the domestic appliances business in Singapore as well as an increase in distributor sales from our Taiwanese factories. In China, ongoing automotive wins have offset a decline in electronics sales, following the local factory closure of one of our multinational OEMs operating in the region. Production volumes are now shifting to India, and as a pan-regional business, we are already starting to see some of this business coming successfully back on line through our operations there.

In the UK, revenue has increased by 10.8% to GBP39.2m (HY2018: GBP35.4m). The majority of this increase, 9.5%, represents non-organic growth following our latest acquisition PTS. Strong organic growth in our distributor and other sales has been tempered by reductions in automotive volumes in the UK due to diesel-led transitory changes to product cycles and model builds. This has led to a modest organic growth rate of 1.3% in the period. The temporary impact of these challenges is expected to continue into the second half of the year, whilst platforms at a number of our key customers go through production changeover.

In the USA, growth has been excellent up 34.8% to GBP4.4m (AER: up 31.1% to GBP4.3m; HY2018: GBP3.3m). This is largely being driven out of our ongoing penetration into the Group's existing automotive multinational OEM customers.

Underlying operating profit (CER)

Underlying operating margins have remained steady at 11.4% (AER: 11.3%; HY2018: 11.4%) reflecting our continuing focus on strong overhead control, even in a period of investment driven growth, and leading to an overall increase in underlying operating profit of 7.6% to GBP12.0m (AER: up 6.7% to GBP11.9m; HY2018: GBP11.1m). This is split between an organic UOP of GBP11.5m and, following on from the acquisition of PTS, non-organic UOP of GBP0.5m.

In Europe, we have seen a strong increase in UOP margins of 80bps up to 11.7% (HY2018: 10.9%). This is the result of increased sales improving margin by c.100bps, in addition to a 120bps increase in the region's gross margin due to favourable product mix changes in Sweden and Hungary. In Italy, lower volumes in the period at one of our most important domestic appliances customers, and planned increases in fixed production costs as we invest for future growth, have continued to temporarily depress gross margins. However in HY2019, the negative impact of this has been offset by transactional FX gains arising from the improved strength of the EUR against the US$.

Outside of the above, for us Europe remains a key area for investment driven growth. This has led to additional overheads in the region reducing the UOP% by c.140bps against the prior period. Key investments have been made in our Dutch operations where we have expanded the warehousing to support ongoing double digit growth; in Sweden where we have opened our TR Technical and Innovation Centre in Gothenburg; in Hungary where we have been investing in cross-functional headcount to support the 80% trading increase the site has experienced over the last five years; and in Spain where our newest greenfield site, TR Espana, is very successfully continuing to develop and build the local market for us.

In Asia, gross margins have remained broadly in line with the prior period, with the UOP margin increase of 120bps to 16.0% (HY2018: 14.8%) mainly being driven off reductions in net overhead costs. This is largely the result of a GBP0.5m foreign exchange balance sheet translation gain, predominantly due to the ongoing strength of the US$ against our key Asian currencies.

In the UK, UOP margins have remained broadly level at 10.9% (HY2018: 11.1%). The increase in UOP % as a result of PTS, our latest acquisition coming on board, has been largely offset by an expected c.150bps reduction in gross margins since the year end in our existing UK business. This is the result of purchase price inflationary pressures feeding through from the protracted weakness of sterling since the referendum vote. The deferral of these increased costs to FY2019 has been hard won via a combination of negotiations with our suppliers and customers, as well as commercial stock holding decisions that we have made. Regional UOP is split between an organic UOP of GBP3.8m and a non-organic UOP of GBP0.5m.

In our smallest region, the USA, UOP% has increased by 130bps to 4.9% (HY2018: 3.6%), largely reflecting the significant increase in trading in the period. This has been partially offset by a gross margin reduction of 90bps due to a shift in focus towards automotive. Whilst an additional GBP0.2m investment in overheads, mostly as a result of the move to new premises in April 2018, has further temporarily reduced UOP% ahead of a continued increase in sales volumes. As in prior periods, low underlying operating margins are to be expected in this region for the medium term given the level of investments for future growth being made here.

Net financing costs (AER)

These have increased to GBP0.3m (HY2018: GBP0.2m) in line with the increase in facilities used to acquire PTS in April 2018.

Taxation (AER)

The HY2019 underlying effective tax rate (ETR) of 23.5% is in line with our normalised ETR of c.23.5%, based on the geographical split of the Group's profits. The HY2019 underlying ETR and unadjusted ETR of 26.1% are both significantly higher than the HY2018 unadjusted ETR of 11.2%. The main reason for this difference is that in the prior period, we finalised a GBP1.2m fully provided historic tax position in the UK via the payment of a GBP0.3m settlement.

Subject to future tax changes and excluding prior year adjustments, our normalised underlying ETR is expected to remain in the range of c.23-25% going forward.

Earnings per share (AER)

Our ongoing growth in underlying profit before tax, has led to a strong increase in our underlying diluted EPS of 6.2% to 7.20p (HY2018: 6.78p). Diluted EPS has reduced to 4.82p from 6.56p in the prior period due to the costs incurred in the period relating to Project Atlas and the finalisation of the fully provided tax position in HY2018 (see taxation section).

Dividend

Given our confidence for the future and continued profitable growth in a period of investment, the Board has declared an interim dividend increase of 9.1% to 1.20p (HY2018: 1.10p). This will be paid on 11 April 2019, to shareholders on the Register as at 15 March 2019. The shares will become ex-dividend on 14 March 2019.

Shareholder equity (AER)

As at 30 September 2018, the Group's shareholders' equity increased to GBP114.0m (FY2018: GBP110.3m). The GBP3.7m uplift reflects retained earnings of GBP2.0m (HY2018: GBP4.8m), a foreign exchange reserve gain of GBP1.3m and a reduction in our own shares held reserve of GBP0.4m.

At the 30 September 2018, the number of shares still held by the EBT to honour future equity award commitments as required is 1,317,378 shares (HY2018: 500,000 shares, FY2018: 1,500,000 shares).

Over this increased asset base, our strong trading performance and ongoing investment has led to an underlying ROCE of 19.5% (HY2018: 20.1%).

Net debt (AER)

Our net debt position at the end of HY2019 has increased by GBP6.1m to GBP13.5m (FY2018: GBP7.4m). Some GBP8.2m of this increase is due to the initial consideration paid to acquire PTS in April 2018.

Capital expenditure of GBP1.3m (HY2018: GBP1.3m) in the period supports the Board's ongoing plans to invest in the business, most specifically within our manufacturing sites with additional capacity projects underway in Italy and Singapore.

Outside of these movements, our cash generation has improved on the prior period with a conversion rate of underlying EBITDA to underlying cash of 67.4% (FY2018: 68.1%; HY2018: 52.3%). Our half year cash conversion is historically lower than our full year position, due to the higher stock levels we hold at this stage of the trading cycle.

Our overall investment in gross stock has increased by GBP7.0m since year end, including a GBP2.5m investment due to the acquisition of PTS in April 2018. Outside of this and normal working capital investments for growth, stock weeks across the Group have increased by 0.9 weeks (GBP2.2m), largely in Italy where reductions in volumes have led to temporarily higher stock holdings (up GBP1.1m) and in the USA, to support the very rapid growth in trading in the period (up GBP0.6m).

Banking facilities

As at 30 September the headroom on our banking facilities was GBP15.2m (FY2018: GBP24.0m). The net debt to EBITDA ratio is 0.54x which is significantly less than our covenant limit of 2.75x. In addition, we continue to have access to an accordion facility of GBP9.0m within our Group banking facilities with HSBC. This provides a degree of potential flexibility to debt finance future acquisitions and further investments as required.

Following on from the successful acquisition of PTS, and given both our significant investment plans under Project Atlas, combined with our ongoing appetite to acquire, we have already started discussions with a number of banks in order to secure access to additional funds and thereby maintain an appropriate degree of funding flexibility. This process will be ongoing over the second half of the financial year.

Ongoing and future investment plans

Trading

In Asia, over the course of FY2018, we invested S$1.2m (c.GBP0.7m) in the construction of a mezzanine level at our Singapore facility to expand capacity, initially by 25%, and to increase R&D capabilities. Over the course of FY2019, we will be completing this project through the acquisition of additional forging, packing and inspection equipment to bring that additional capacity fully on line.

In Europe, our successful green-field site in Spain continues to grow, with revenues of GBP0.5m already achieved in HY2019 and a strong pipeline in place. In Italy, additional investments have been made into plant and machinery to expand our European manufacturing capacity and capabilities. A warehouse expansion in Holland is successfully up and running to support ongoing double digit growth. Whilst the TR Innovation and Technical centre situated in the heart of Sweden's electric vehicle development area, Lindholmen, Gothenburg is helping us to access the additional opportunities that the roll out of electric vehicle technologies is providing.

In the USA, the move to a new location in April 2018 has significantly increased the local warehouse capacity to better support both existing customers and future proof for further growth.

Complementing all of the above, we are continuing to invest in both our global and local sales resources and cross functional supporting teams. Specific investments have already been made into our sales, quality, IT, and contracts teams and additional plans are being pulled together to further develop and build our sourcing and supply side resources.

We successfully added PTS to our portfolio six months ago and it is pleasing to report that this operation has settled well into the Trifast Group and is generating good returns. Not only does PTS widen our customer base, it extends our presence in the stainless steel fastener arena (holding one of the widest product ranges of any supplier in Europe), boosting our core OEM customer offering and supporting ongoing distributor sales growth. PTS remains on target to be earnings enhancing in the year ending March 2019.

As ever, the search for the next successful acquisition remains an important strategic aim for the Group.

Project Atlas

Project Atlas is a significant GBP15.0m planned investment into the integration and development of the Group's IT infrastructure and underlying rules, processes and policies. This project is considered an essential part of our ongoing growth plans, both organic and acquisitive, and will allow us to continue to meet the evolving needs of our multinational OEM customers.

As planned, over the last six months our international Atlas cross functional worksteams have been working together to design the business rules that will form the foundation of the Trifast of tomorrow. A significant portion of the budgeted spend has been assigned to the comprehensive review and redesign of these rules and our underlying processes, which in turn will drive improvements in our operating and commercial effectiveness and help to underpin our return on investment.

As a consequence of the work undertaken to date on this project, we have incurred direct year one costs of GBP1.5m in HY2019, largely relating to project team and consultancy costs. We have excluded these costs from our underlying results, (see note 2), to reflect the unusual scale and one-off nature of this project. We anticipate continuing to do so, either as operating or capital expenses (in accordance with International Accounting Standards), in order to provide shareholders with a better understanding of our underlying trading performance during this period of investment.

Outlook

HY2019 delivered another six months of strong growth, with ongoing investment across all our regions.

Our solid first half results, together with a robust balance sheet, good access to banking facilities and a proven track record of profitable investment, means the Group is in a great position to keep moving forward. The second half has started well and, with a healthy pipeline in place, the Board remains confident of delivering its expectations for the current financial year.

Globally automotive continues to represent a strong organic growth opportunity for Trifast as we continue to increase our market share and site penetration with our multinational Tier 1 and OEM customers. This is being supported by close collaboration across the Group's international businesses through cross-selling of local capability and flexible utilisation of our manufacturing facilities to enhance competitiveness.

Over 90% of our automotive supply remains outside of the combustion engine, mainly in the seating, console, dashboard and lighting systems. This means that the increase in electric vehicle production is acting as a further significant growth opportunity for us, providing additional access points as many more new platforms come on line, battery technology develops and the demand for charging stations accelerates. Albeit in the short term, we do expect reductions in automotive volumes in the UK due to diesel-led transitory changes to product cycles and model builds to continue into the second half of the year.

The more muted performance in domestic appliances and electronics in HY2019 reflected customer specific factors, notably in Italy and China, but the strong local growth in these sectors in other regions provides confidence that these markets also continue to have attractive long term potential for Trifast.

As anticipated within the UK business, we have seen the impact on our gross margins of input cost inflation in the period as a result of the weak pound. However, notwithstanding the wider potential long-term implications of Brexit on the UK economy, we believe that the shorter term operational and financial impact of any Brexit scenario will be manageable. We have had a cross-functional Brexit team in place for the last two years and are on track to carry out our contingency plans to help mitigate the risks attached to a potential no-deal Brexit scenario.

We continue to have confidence in our model. As an international business serving a range of end markets and with c.70% of revenues and profits being generated outside the UK, we recognise the global opportunities that lie ahead in providing good product, skills and services to industry. We have these, coupled with the foresight and flexibility around the Group to keep moving forward and delivering on our future aspirations.

RISKS AND UNCERTAINTIES

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

in June 2018 of the Group's Annual Report for the year ended 31 March 2018. A copy of this publication can be found on the 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 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

Clare Foster, Chief Financial Officer

12 November 2018

Condensed consolidated interim income statement