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Trifast PLC Half-Yearly Financial Report

13/11/2018 7:01am

UK Regulatory (RNS & others)


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

Unaudited results for the six months ended 30 September 2018

 
                                                           Six months     Six months       Year 
                                                                ended          ended      ended 
                                                         30 September   30 September   31 March 
                                                                 2018           2017       2018 
                                                 Notes         GBP000         GBP000     GBP000 
---------------------------------------------  -------  -------------  -------------  --------- 
Continuing operations 
Revenue                                                       104,981         97,813    197,632 
Cost of sales                                                (73,327)       (68,311)  (137,386) 
---------------------------------------------  -------  -------------  -------------  --------- 
Gross profit                                                   31,654         29,502     60,246 
Other operating income                                            266            238        467 
Distribution expenses                                         (2,223)        (2,043)    (4,068) 
---------------------------------------------  -------  -------------  -------------  --------- 
 Administrative expenses before separately 
  disclosed items                                    2       (17,822)       (16,566)   (33,932) 
 IFRS 2 share based payment charge                            (1,152)          (988)    (2,194) 
 Acquired intangible amortisation                               (734)          (558)    (1,363) 
 Net acquisition costs                                          (177)              -      (110) 
 Project Atlas                                                (1,490)              -      (375) 
 Sale of fixed assets                                               -              -        556 
 Cost on exercise of executive share options                        -          (245)      (244) 
---------------------------------------------  -------  -------------  -------------  --------- 
Total administrative expenses                                (21,375)       (18,357)   (37,662) 
---------------------------------------------  -------  -------------  -------------  --------- 
Operating profit                                                8,322          9,340     18,983 
---------------------------------------------  -------  -------------  -------------  --------- 
Financial income                                                   36             24         60 
Financial expenses                                              (356)          (246)      (540) 
---------------------------------------------  -------  -------------  -------------  --------- 
Net financing costs                                             (320)          (222)      (480) 
---------------------------------------------  -------  -------------  -------------  --------- 
Profit before tax                                               8,002          9,118     18,503 
Taxation                                             4        (2,087)        (1,025)    (3,417) 
---------------------------------------------  -------  -------------  -------------  --------- 
                                                                5,915          8,093     15,086 
---------------------------------------------  -------  -------------  -------------  --------- 
Profit for the period 
 (attributable to equity shareholders of 
 the parent company) 
---------------------------------------------  -------  -------------  -------------  --------- 
Earnings per share 
Basic                                                6          4.93p          6.72p     12.54p 
Diluted                                              6          4.82p          6.56p     12.20p 
---------------------------------------------  -------  -------------  -------------  --------- 
 

Condensed consolidated interim statement of comprehensive income

Unaudited results for the six months ended 30 September 2018

 
                                                               Six months     Six months       Year 
                                                                    ended          ended      ended 
                                                             30 September   30 September   31 March 
                                                                     2018           2017       2018 
                                                                   GBP000         GBP000     GBP000 
----------------------------------------------------------  -------------  -------------  --------- 
Profit for the period                                               5,915          8,093     15,086 
Other comprehensive income/(expense): 
Exchange differences on translation of foreign operations           1,571          (703)      (846) 
Net loss on hedge of net investment in foreign subsidiary           (295)          (722)      (680) 
----------------------------------------------------------  -------------  -------------  --------- 
Other comprehensive income/(expense) recognised directly 
 in equity, 
 net of income tax                                                  1,276        (1,425)    (1,526) 
----------------------------------------------------------  -------------  -------------  --------- 
Total comprehensive income recognised for the period 
 (attributable to equity shareholders of the parent 
 company)                                                           7,191          6,668     13,560 
----------------------------------------------------------  -------------  -------------  --------- 
 

Condensed consolidated interim statement of changes in equity

Unaudited results for the six months ended 30 September 2018

 
Unaudited results for the                Share     Share  Own shares  Translation   Retained    Total 
 six months ended 30 September         capital   premium        held      reserve   earnings   equity 
 2018                                   GBP000    GBP000      GBP000       GBP000     GBP000   GBP000 
------------------------------------  --------  --------  ----------  -----------  ---------  ------- 
Balance at 1 April 2018                  6,068    21,579     (3,437)       13,374     72,705  110,289 
Total comprehensive income for 
 the period: 
Profit for the period                        -         -           -            -      5,915    5,915 
Foreign currency translation 
 differences                                 -         -           -        1,571          -    1,571 
Net loss on hedge of net investment 
 in 
 foreign subsidiary                          -         -           -        (295)          -   (295) 
------------------------------------  --------  --------  ----------  -----------  ---------  ------- 
Total comprehensive income for 
 the period                                  -         -           -        1,276      5,915    7,191 
------------------------------------  --------  --------  ----------  -----------  ---------  ------- 
Transactions with owners, recorded 
 directly 
 in equity: 
Issue of share capital                       1        21           -            -          -       22 
Own shares used                              -         -         409            -      (409)        - 
Share based payment transactions 
 (including tax)                             -         -           -            -      1,088    1,088 
Dividends                                    -         -           -            -    (4,625)  (4,625) 
------------------------------------  --------  --------  ----------  -----------  ---------  ------- 
Total transactions with owners               1        21         409            -    (3,946)  (3,515) 
------------------------------------  --------  --------  ----------  -----------  ---------  ------- 
Balance at 30 September 2018             6,069    21,600     (3,028)       14,650     74,674  113,965 
------------------------------------  --------  --------  ----------  -----------  ---------  ------- 
 
 
Unaudited results for the                 Share     Share  Own shares  Translation   Retained    Total 
 six months ended 30 September          capital   premium        held      reserve   earnings   equity 
 2017                                    GBP000    GBP000      GBP000       GBP000     GBP000   GBP000 
-------------------------------------  --------  --------  ----------  -----------  ---------  ------- 
Balance at 1 April 2017                   6,014    21,378           -       14,900     59,406  101,698 
Total comprehensive income for 
 the period: 
Profit for the period                         -         -           -            -      8,093    8,093 
Foreign currency translation 
 differences                                  -         -           -        (703)          -    (703) 
Net loss on hedge of net investment 
 in 
 foreign subsidiary                           -         -           -        (722)          -    (722) 
-------------------------------------  --------  --------  ----------  -----------  ---------  ------- 
Total comprehensive income/(expense) 
 for the period                               -         -           -      (1,425)      8,093    6,668 
-------------------------------------  --------  --------  ----------  -----------  ---------  ------- 
Transactions with owners, recorded 
 directly 
 in equity: 
Issue of share capital                       42        12           -            -       (40)       14 
Own shares acquired                           -         -     (1,100)            -          -  (1,100) 
Share based payment transactions 
 (including tax)                              -         -           -            -        950      950 
Dividends                                     -         -           -            -    (4,231)  (4,231) 
-------------------------------------  --------  --------  ----------  -----------  ---------  ------- 
Total transactions with owners               42        12     (1,100)            -    (3,321)  (4,367) 
-------------------------------------  --------  --------  ----------  -----------  ---------  ------- 
Balance at 30 September 2017              6,056    21,390     (1,100)       13,475     64,178  103,999 
-------------------------------------  --------  --------  ----------  -----------  ---------  ------- 
 

Condensed consolidated interim statement of financial position

Unaudited results for the six months ended 30 September 2018

 
                                                     30 September  30 September  31 March 
                                                             2018          2017      2018 
Group                                         Notes        GBP000        GBP000    GBP000 
--------------------------------------------  -----  ------------  ------------  -------- 
Non-current assets 
Property, plant and equipment                              20,664        18,421    20,013 
Intangible assets                                          45,104        39,285    38,401 
Deferred tax assets                                         2,311         2,139     2,355 
--------------------------------------------  -----  ------------  ------------  -------- 
Total non-current assets                                   68,079        59,845    60,769 
--------------------------------------------  -----  ------------  ------------  -------- 
Current assets 
Inventories                                                55,594        46,942    49,199 
Trade and other receivables                                52,405        49,251    52,466 
Assets held for sale                             11             -         1,023         - 
Cash and cash equivalents                         7        26,661        25,095    26,222 
--------------------------------------------  -----  ------------  ------------  -------- 
Total current assets                                      134,660       122,311   127,887 
--------------------------------------------  -----  ------------  ------------  -------- 
Total assets                                              202,739       182,156   188,656 
--------------------------------------------  -----  ------------  ------------  -------- 
Current liabilities 
Other interest-bearing loans and borrowings       7        30,548        18,453    21,912 
Trade and other payables                                   38,492        35,309    38,697 
Tax payable                                                 1,640         2,331     1,811 
Dividends payable                                 5         3,307         3,028         - 
Provisions                                                      -             -        76 
--------------------------------------------  -----  ------------  ------------  -------- 
Total current liabilities                                  73,987        59,121    62,496 
--------------------------------------------  -----  ------------  ------------  -------- 
Non-current liabilities 
Trade and other payables                                      140             -         - 
Other interest-bearing loans and borrowings       7         9,645        14,512    11,741 
Provisions                                                    991         1,086       845 
Deferred tax liabilities                                    4,011         3,438     3,285 
--------------------------------------------  -----  ------------  ------------  -------- 
Total non-current liabilities                              14,787        19,036    15,871 
--------------------------------------------  -----  ------------  ------------  -------- 
Total liabilities                                          88,774        78,157    78,367 
--------------------------------------------  -----  ------------  ------------  -------- 
Net assets                                                113,965       103,999   110,289 
--------------------------------------------  -----  ------------  ------------  -------- 
Equity 
Share capital                                               6,069         6,056     6,068 
Share premium                                              21,600        21,390    21,579 
Own shares held                                  10       (3,028)       (1,100)   (3,437) 
Reserves                                                   14,650        13,475    13,374 
Retained earnings                                          74,674        64,178    72,705 
--------------------------------------------  -----  ------------  ------------  -------- 
Total equity                                              113,965       103,999   110,289 
--------------------------------------------  -----  ------------  ------------  -------- 
 

Condensed consolidated interim statement of cash flows

Unaudited results for the six months ended 30 September 2018

 
                                                               Six months     Six months       Year 
                                                                    ended          ended      ended 
                                                             30 September   30 September   31 March 
                                                                     2018           2017       2018 
Group                                                Notes         GBP000         GBP000     GBP000 
---------------------------------------------------  -----  -------------  -------------  --------- 
Cash flows from operating activities 
Profit for the period                                               5,915          8,093     15,086 
Adjustments for: 
Depreciation, amortisation & impairment                             1,801          1,493      3,300 
Unrealised foreign currency (gain)/loss                              (43)             26       (66) 
Financial income                                                     (36)           (24)       (60) 
Financial expense                                                     356            246        540 
Loss/(gain) on sale of property, plant & 
 equipment and investments                                             18              2      (560) 
   Acquisition contingent consideration - discount 
    unwinding                                                          76              -          - 
Equity settled share based payment charge                           1,126            956      2,107 
Taxation charge                                                     2,087          1,025      3,417 
---------------------------------------------------  -----  -------------  -------------  --------- 
Operating cash inflow before changes in working 
 capital 
 and provisions                                                    11,300         11,817     23,764 
Change in trade and other receivables                               1,475            129    (2,536) 
Change in inventories                                             (3,649)        (5,348)    (7,674) 
Change in trade and other payables                                (1,984)        (1,631)      1,677 
Change in provisions                                                   20          (101)      (266) 
---------------------------------------------------  -----  -------------  -------------  --------- 
Net cash generated from operations                                  7,162          4,866     14,965 
Tax paid                                                          (2,213)        (1,219)    (4,849) 
---------------------------------------------------  -----  -------------  -------------  --------- 
Net cash generated from operating activities                        4,949          3,647     10,116 
---------------------------------------------------  -----  -------------  -------------  --------- 
Cash flows from investing activities 
Proceeds from sale of property, plant & equipment                       2              2      1,650 
Interest received                                                      38             26         61 
Acquisition of subsidiary, net of cash acquired                   (8,150)              -          - 
Acquisition of property, plant & equipment 
 and intangibles                                                  (1,288)        (1,269)    (3,566) 
---------------------------------------------------  -----  -------------  -------------  --------- 
Net cash used in investing activities                             (9,398)        (1,241)    (1,855) 
---------------------------------------------------  -----  -------------  -------------  --------- 
Cash flows from financing activities 
Proceeds from the issue of share capital                               22             14        214 
Purchase of own shares                                  10              -        (1,100)    (3,437) 
Proceeds from new loan                                              9,393          2,316      5,542 
Repayment of borrowings                                           (3,202)        (1,315)    (3,773) 
Payment of finance lease liabilities                                   22             86         66 
Dividends paid                                                    (1,319)        (1,203)    (4,218) 
Interest paid                                                       (356)          (247)      (540) 
---------------------------------------------------  -----  -------------  -------------  --------- 
Net cash generated from/(used in) financing 
 activities                                                         4,560        (1,449)    (6,146) 
---------------------------------------------------  -----  -------------  -------------  --------- 
Net change in cash and cash equivalents                               111            957      2,115 
Cash and cash equivalents at 1 April                               26,222         24,645     24,645 
Effect of exchange rate fluctuations on cash 
 held                                                                 328          (507)      (538) 
---------------------------------------------------  -----  -------------  -------------  --------- 
Cash and cash equivalents at end of period               7         26,661         25,095     26,222 
---------------------------------------------------  -----  -------------  -------------  --------- 
 

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

Unaudited results for the six months ended 30 September 2018

1. Basis of preparation

Except as described below, 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 2018.

The Group has adopted IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments from 1 April 2018. Whilst these standards do not have a material effect on the Group financial statements, the accounting policy wording has been updated and there will be changes in disclosure. The details of the new significant accounting policies, nature of the change and disclosure requirements are set out below:

   --      IFRS 15 Revenue from Contracts with Customers 

Revenue from the sale of goods rendered is recognised net of VAT in the consolidated income statement when control has been transferred to the buyer. The timing of the transfer of control, in accordance with normal practice, will be on dispatch of goods or at the point of customer acceptance where appropriate.

The impact of the change in accounting policy on the financial statements has been minimal as the point of control being transferred to the buyer under the new standard, remains the same as when risk and rewards were transferred under IAS 18 Revenue.

Disclosures required for interim financial reporting relate to the disaggregation of revenue. This new requirement has been reflected in note 13. The remaining disclosure requirements will be detailed in the Annual Report for the year ended 31 March 2019.

   --      IFRS 9 Financial Instruments 

Trade and other receivables are classified at amortised cost less impairment losses. Impairment losses are measured using the 'expected credit loss' model.

The change in accounting policy has seen the 'incurred loss' model under IAS 39 replaced by the 'expected credit loss' (ECL) model under IFRS 9. The impact of this change on the financial statements has been minimal. From a Group perspective, the same provisioning level is required, although there have been immaterial changes in provisioning levels by region. The new disclosures required under IFRS 9 will be detailed in the Annual Report for the year ended 31 March 2019.

A number of amendments to existing standards are also effective from 1 April 2018 but they do not have a material effect on the Group financial statements.

These condensed consolidated interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Conduct Authority and International Financial Reporting Standard (IFRS) IAS 34: Interim Financial Reporting as adopted by the EU. 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 2018. The annual financial statements of the Group are prepared in accordance with International Reporting Standards (IFRSs) as adopted by the EU.

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 KPMG LLP and their Report is set out at the end of this document.

The comparative figures for the financial year ended 31 March 2018 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.

Going concern

The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the accompanying Business review from the Non-Executive Chairman, Chief Executive Officer and Chief Financial Officer. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are also described in the same report. In addition, note 26 to the Company's previously published financial statements for the year ended 31 March 2018 include the Company'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.

These condensed consolidated interim financial statements have been prepared on a going concern basis which the Directors consider to be appropriate.

Estimates

The preparation of financial statements in conformity with IFRSs requires management to make estimates, judgements and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions take account of the circumstances and facts at the period end, historical experience of similar situations and other factors that are believed to be reasonable and relevant, the results for 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 ultimately 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 2018. There is also a further addition for the judgement below:

   --      Valuation of intangible assets 

During the period the Group acquired PTS (see note 12). Accounting standards require their assets and liabilities to be recognised in the consolidated financial statements at fair value. As part of a fair value exercise, judgements are made to value separately identifiable intangible assets. The key judgements made by management for these assets were profitability, growth, discount and tax rates. Management engaged an external valuation specialist to perform the review and they used the income methodology approach to calculate the GBP4.8m of intangible assets identified.

There are no other key judgements made, other than those involving estimations. The key source of estimation uncertainty is inventory valuation.

2. Underlying performance (before separately disclosed items)

 
                                                         Six months      Six months       Year 
                                                              ended           ended      ended 
                                                       30 September    30 September   31 March 
                                                               2018            2017       2018 
                                                             GBP000          GBP000     GBP000 
-------------------------------------------------  ----------------  --------------  --------- 
Underlying profit before tax                                 11,555          10,909     22,233 
Separately disclosed items within administrative 
 expenses: 
IFRS 2 share based payment charge                           (1,152)           (988)    (2,194) 
Acquired intangible amortisation                              (734)           (558)    (1,363) 
  Net acquisition costs                                       (177)               -      (110) 
  Project Atlas                                             (1,490)               -      (375) 
  Sale of fixed assets                                            -               -        556 
Cost on exercise of executive share options                       -           (245)      (244) 
Profit before tax                                             8,002           9,118     18,503 
-------------------------------------------------  ----------------  --------------  --------- 
                                                         Six months      Six months       Year 
                                                              ended           ended      ended 
                                                       30 September    30 September   31 March 
                                                               2018            2017       2018 
                                                             GBP000          GBP000     GBP000 
-------------------------------------------------  ----------------  --------------  --------- 
Underlying EBITDA                                            12,942          12,066     24,650 
Separately disclosed items within administrative 
 expenses: 
IFRS 2 share based payment charge                           (1,152)           (988)    (2,194) 
   Net acquisition costs                                      (177)               -      (110) 
   Project Atlas                                            (1,490)               -      (375) 
   Sale of fixed assets                                           -               -        556 
Cost on exercise of executive share options                       -           (245)      (244) 
EBITDA                                                       10,123          10,833     22,283 
-------------------------------------------------  ----------------  --------------  --------- 
Acquired intangible amortisation                              (734)           (558)    (1,363) 
Depreciation and non-acquired amortisation                  (1,067)           (935)    (1,937) 
-------------------------------------------------  ----------------  --------------  --------- 
Operating profit                                              8,322           9,340     18,983 
-------------------------------------------------  ----------------  --------------  --------- 
 

Management feel it is appropriate to remove the event driven costs and certain non-trading items included above to better allow the reader of the accounts to understand the underlying performance of the Group. Further reconciliations of underlying measures to IFRS measures can be found in note 9.

The rationale for the exclusion of Project Atlas costs is provided within the Business review.

3. Geographical operating segments

The Group is comprised of the following main geographical operating segments:

   --     UK 

-- Europe includes Norway, Sweden, Germany, Hungary, Ireland, Italy, Holland, Spain and Poland

   --     USA                        includes USA and Mexico 

-- Asia includes Malaysia, China, Singapore, Taiwan, Thailand, Philippines and India

In presenting information on the basis of geographical operating segments, segment revenue and segment assets are based on the geographical location of our entities across the world consolidated into the four distinct geographical regions, which the Board use to monitor and assess the Group.

Goodwill and intangible assets acquired on business combinations are included in the region to which they relate. This is consistent with the internal management reports that are reviewed by the Chief Operating Decision Maker.

Segment revenue and results under the primary reporting format for the six months ended 30 September 2018 and 2017 are disclosed in the table below:

 
                                                                          Central costs, 
                                                                              assets and 
                                        UK    Europe       USA      Asia     liabilities     Total 
September 2018                      GBP000    GBP000    GBP000    GBP000          GBP000    GBP000 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
Revenue* 
Revenue from external customers     37,628    37,718     4,176    25,459               -   104,981 
Inter segment revenue                1,551       719        84     5,296               -     7,650 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
Total revenue                       39,179    38,437     4,260    30,755               -   112,631 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
Underlying operating profit          4,272     4,491       204     4,900         (1,992)    11,875 
Net financing (costs)/income          (45)      (22)       (5)        30           (278)     (320) 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
Underlying profit before tax         4,227     4,469       199     4,930         (2,270)    11,555 
Separately disclosed items 
 (see note 2)                                                                              (3,553) 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
Profit before tax                                                                            8,002 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
Specific disclosure items 
Depreciation and amortisation        (361)     (931)      (23)     (447)            (39)   (1,801) 
Assets and liabilities 
Segment assets                      51,131    78,972     5,069    59,445           8,122   202,739 
Segment liabilities               (18,888)  (16,343)     (905)  (13,418)        (39,220)  (88,774) 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
 
 
                                                                          Central costs, 
                                                                              assets and 
                                        UK    Europe       USA      Asia     liabilities     Total 
September 2017                      GBP000    GBP000    GBP000    GBP000          GBP000    GBP000 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
Revenue* 
Revenue from external customers     34,037    35,568     3,185    25,023               -    97,813 
Inter segment revenue                1,336       496        65     4,567               -     6,464 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
Total revenue                       35,373    36,064     3,250    29,590               -   104,277 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
Underlying operating profit          3,914     3,940       116     4,368         (1,207)    11,131 
Net financing (costs)/income          (38)      (26)         -        24           (182)     (222) 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
Underlying profit before tax         3,876     3,914       116     4,392         (1,389)    10,909 
Separately disclosed items 
 (see note 2)                                                                              (1,791) 
Profit before tax                                                                            9,118 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
Specific disclosure items 
Depreciation and amortisation        (123)     (832)       (9)     (483)            (46)   (1,493) 
Assets and liabilities 
Segment assets                      38,079    73,803     3,699    57,181           9,394   182,156 
Segment liabilities               (18,399)  (15,843)     (364)  (11,630)        (31,921)  (78,157) 
--------------------------------  --------  --------  --------  --------  --------------  -------- 
 

* 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 
                                                 2018           2017       2018 
                                               GBP000         GBP000     GBP000 
--------------------------------------  -------------  -------------  --------- 
Current tax on income for the period 
UK tax                                            396            276        597 
Foreign tax                                     1,940          1,856      4,186 
Deferred tax expense                            (269)             24      (328) 
Adjustments in respect of prior years              20        (1,131)    (1,038) 
--------------------------------------  -------------  -------------  --------- 
                                                2,087          1,025      3,417 
--------------------------------------  -------------  -------------  --------- 
 

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. The unadjusted HY2019 ETR is higher than the underlying HY2019 ETR at 26.1% due to the impact of the lower tax relief, at 17.7% (HY2018: 20.7%), on adjusted items, see note 6.

5. Dividend

The dividend payable of GBP3.3m represents the final dividend for the year ended 31 March 2018 which was approved by Shareholders at the AGM on 25 July 2018 and paid on 12 October 2018 to Members on the Register on 14 September 2018.

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 119,894,777 (HY2017: 120,401,805; FY2018: 120,313,586).

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. The number of shares used in the calculation amount to 122,761,456 (HY2017: 123,420,081; FY2018: 123,678,854).

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 
                                                       2018           2017       2018 
                                                     GBP000         GBP000     GBP000 
--------------------------------------------  -------------  -------------  --------- 
Profit after tax for the period                       5,915          8,093     15,086 
IFRS 2 share based payment charge                     1,152            988      2,194 
Acquired intangible amortisation                        734            558      1,363 
   Sale of fixed assets                                   -              -      (556) 
Cost on exercise of executive share options               -            245        244 
   Net acquisitions costs                               177              -        110 
   Project Atlas                                      1,490              -        375 
   Tax charge on adjusted items above                 (630)          (371)      (802) 
   Tax adjustments                                        -        (1,145)      (967) 
Underlying profit after tax                           8,838          8,368     17,047 
--------------------------------------------  -------------  -------------  --------- 
Basic EPS                                             4.93p          6.72p     12.54p 
Diluted EPS                                           4.82p          6.56p     12.20p 
Underlying diluted EPS                                7.20p          6.78p     13.78p 
 

7. Analysis of net debt

 
                                           At             At         At 
                                 30 September   30 September   31 March 
                                         2018           2017       2018 
                                       GBP000         GBP000     GBP000 
------------------------------  -------------  -------------  --------- 
Net cash and cash equivalents          26,661         25,095     26,222 
------------------------------  -------------  -------------  --------- 
Debt due within one year             (30,548)       (18,453)   (21,912) 
Debt due after one year               (9,645)       (14,512)   (11,741) 
------------------------------  -------------  -------------  --------- 
Gross debt                           (40,193)       (32,965)   (33,653) 
------------------------------  -------------  -------------  --------- 
Net debt                             (13,532)        (7,870)    (7,431) 
------------------------------  -------------  -------------  --------- 
 

8. Reconciliation of net cash flow to movement in net debt

 
                                               Six months     Six months       Year 
                                                    ended          ended      ended 
                                             30 September   30 September   31 March 
                                                     2018           2017       2018 
                                                   GBP000         GBP000     GBP000 
------------------------------------------  -------------  -------------  --------- 
Net increase in cash and cash equivalents             111            957      2,115 
Net (increase) in borrowings                      (6,213)        (1,087)    (1,835) 
------------------------------------------  -------------  -------------  --------- 
                                                  (6,102)          (130)        280 
Exchange rate differences                               1        (1,292)    (1,263) 
------------------------------------------  -------------  -------------  --------- 
Movement in net debt                              (6,101)        (1,422)      (983) 
Opening net debt                                  (7,431)        (6,448)    (6,448) 
------------------------------------------  -------------  -------------  --------- 
Closing net debt                                 (13,532)        (7,870)    (7,431) 
------------------------------------------  -------------  -------------  --------- 
 

9. Alternative Performance Measure

The half-yearly financial report includes both IFRS measures and Alternative Performance Measures (APMs), the latter of which are considered by management to better allow the readers of the accounts to understand the underlying performance of the Group. A number of these APMs are used by management to measure the KPIs of the business (see the Business Review) and are therefore aligned to the Group's strategic aims. They are also used at Board level to monitor financial performance throughout the year.

The APMs used in the half-yearly financial report (including the basis of calculation, assumptions, use and relevance) are detailed in note 2 (underlying profit before tax, EBITDA and underlying EBITDA) and below.

-- Constant Exchange Rate (CER) figures

These are used predominantly 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 HY2019 income statement results (of subsidiaries whose presentational currency is not sterling) using HY2018 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.

-- Organic measures

Organic measures are calculated before the impact of acquisitions. This provides a better 'like-for-like' comparison against the prior period for the reader. Acquisitions are included in organic figures from the start of the 13(th) month of being part of the Group.

-- 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 has been 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 underlying EBIT divided by average capital employed (net assets + net debt), 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 
                                                            2018           2017       2018 
                                                          GBP000         GBP000     GBP000 
-------------------------------------------------  -------------  -------------  --------- 
Underlying EBIT/Underlying operating profit               11,875         11,131     22,713 
Separately disclosed items within administrative 
 expenses 
 IFRS2 share based payment charge                        (1,152)          (988)    (2,194) 
 Acquired intangible amortisation                          (734)          (558)    (1,363) 
 Profit on sale of fixed assets                                -              -        556 
 Net acquisition costs                                     (177)              -      (110) 
 Project Atlas                                           (1,490)              -      (375) 
 Cost on exercise of executive share options                   -          (245)      (244) 
-------------------------------------------------  -------------  -------------  --------- 
Operating profit                                           8,322          9,340     18,983 
-------------------------------------------------  -------------  -------------  --------- 
 

-- Underlying cash conversion as a percentage of underlying EBITDA

This is another key metric used by investors to understand how effective the Group were at converting profit into cash. Since the underlying cash conversion is compared to underlying EBITDA, which has removed the impact of IFRS2 share based payment charges, acquisition costs and Project Atlas (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 
                                                                2018           2017       2018 
                                                              GBP000         GBP000     GBP000 
-----------------------------------------------------  -------------  -------------  --------- 
Underlying cash conversion                                     8,722          6,316     16,789 
 Cost on exercise of executive share options                       -          (245)      (244) 
 Movement in trade payables due to exercise of share 
  options                                                          -        (1,205)    (1,205) 
 Acquisition costs                                             (274)              -          - 
 Project Atlas                                               (1,286)              -      (375) 
Cash generated from operations                                 7,162          4,866     14,965 
-----------------------------------------------------  -------------  -------------  --------- 
 

-- 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.

One off tax adjustments have also been removed from the calculation as they are unlikely to repeat and therefore do not reflect recurring trading performance. In HY2019, there were no one off tax adjustments removed. In HY2018 the one-off adjustments relate to the release of the tax provision (see note 4) and the change in deferred tax of acquired intangibles relating to VIC following a reduction in tax rate in Italy. In FY2018 the one-off adjustment relates to those adjusted at HY2018 and the change in deferred tax in USA following a reduction in tax rate, see the Annual Report for further details.

10. Own shares held

The own shares held reserve comprises the cost of the Company's shares held by the Group. At 30 September 2018 the Group held 1,317,378 of the Company's shares (30 September 2017: 500,000; 31 March 2018: 1,500,000).

11. Assets held for sale

In the six months to 30 September 2017 management committed to a plan to sell a factory owned by our Malaysian entity, Power Steel & Electro-Plating Works (PSEP). The carrying amount of the factory at 30 September 2017 was MYR 5.8m (GBP1.0m) and since this was lower than the fair value, it was held at that amount on the balance sheet, presented as an asset held for sale. It was sold in February 2018 for GBP1.7m and generated a profit of GBP0.6m.

12. Acquisition of Precision Technology Supplies Limited ('PTS')

On 4 April 2018, the Group acquired PTS for an initial consideration of GBP8.5m, subject to adjustment based on the net cash in the business at completion. The initial amount was paid on completion in cash. Contingent consideration of up to GBP2.5m in cash is based on the achievement of significant earn out targets and will be deferred for 12 months. The targets require PTS to achieve a minimum adjusted profit after tax (PAT) for FY2019 to receive a further GBP0.5m consideration. Then for every GBP1 of adjusted PAT in excess of the minimum an extra GBP3.77 will be payable subject to a maximum of GBP2.0m. This contingent consideration will also serve as a retention against which any potential warranty and indemnity claims can be offset at the end of the earn out period. The cash consideration has been met from the Company's existing bank facilities via a drawdown of part of the Accordion facility with HSBC.

Based in East Grinstead, UK, PTS was founded in 1988 and employs 27 staff. It is a highly regarded distributor of stainless steel industrial fastenings and precision turned parts, primarily to the electronics, medical instruments, petrochemical, defence and robotics sectors. Its emphasis is on delivering high quality products and services, currently selling into c.80 countries directly through its well-established distributor network, as well as digitally through its newly developed, fully integrated commercial website which lists over 43,000 products for sale. This approach has enabled PTS to continue to deliver strong sales growth over the last three years.

For the year ended 31 March 2017, PTS reported revenue of GBP5.1m and profit before tax of GBP0.7m. Gross assets at that date were GBP3.8m. These figures were not audited.

In the six months since acquiring PTS to 30 September 2018, the subsidiary contributed GBP0.5m to the consolidated profit before tax for the period and GBP3.3m to Group's revenue.

TR has experienced a growing demand for stainless steel fastenings from a number of our global OEM customers. Adding the PTS product portfolio has widened our global stock range to enhance our customer offering and provide further support to our distributor sales.

As the acquisition completed so close to 31 March 2018, a full fair value exercise was still to be completed and therefore, the amounts disclosed in the Annual Report for the year ended 31 March 2018 were given for information purposes only. A fair value exercise was completed as part of the completion accounts process and updated consolidated values are disclosed below. These values will be further reviewed, updated and disclosed in the Annual Report for the year ended 31 March 2019.

 
                                             Provisional    Adjustments 
                                             fair values             to 
                                              disclosed^    provisional   Provisional 
                                                  GBP000           fair    recognised 
                                                                 values    fair value 
                                                                 GBP000        GBP000 
-----------------------------------------  -------------  -------------  ------------ 
 Property, plant and equipment                       253              -           253 
                                           -------------  -------------  ------------ 
 Intangible assets                                 4,816              -         4,816 
                                           -------------  -------------  ------------ 
 Inventories                                       2,417          (164)         2,253 
                                           -------------  -------------  ------------ 
 Trade and other receivables                       1,324              -         1,324 
                                           -------------  -------------  ------------ 
 Cash and cash equivalents                           632              -           632 
                                           -------------  -------------  ------------ 
 Trade and other payables                        (1,218)            137       (1,081) 
                                           -------------  -------------  ------------ 
 Deferred tax liabilities                          (861)              -         (861) 
-----------------------------------------  -------------  -------------  ------------ 
 Net identifiable assets and liabilities           7,363           (27)         7,336 
                                           -------------  -------------  ------------ 
 Consideration paid: 
                                           -------------  -------------  ------------ 
 Initial cash price paid                           8,781                        8,781 
                                           -------------  -------------  ------------ 
 Contingent consideration at fair value              598                          598 
-----------------------------------------  -------------  -------------  ------------ 
 Total consideration                               9,379                        9,379 
-----------------------------------------  -------------  -------------  ------------ 
 Goodwill on acquisition                           2,016             27         2,043 
-----------------------------------------  -------------  -------------  ------------ 
 

^These figures were disclosed in the Annual Report for the year ended 31 March 2018

The fair value of trade and other receivables is GBP1.3m. The gross contractual flows to be collected are GBP1.1m. The best estimate at acquisition date of the contractual flows not to be collected is GBPnil.

Intangible assets that arose on the acquisition include the following:

   --     GBP3.7m of customer relationships, with an amortisation period deemed to be 15 years 
   --     GBP1.1m of other intangibles, with an amortisation period deemed to be under 12 years 

Goodwill is the excess of the purchase price over the fair value of the net assets acquired and is not deductible for tax purposes.

It mostly represents potential synergies, e.g. cross-selling opportunities between PTS and the Group, and PTS's assembled workforce.

Effect of acquisition

The Group incurred costs of GBP0.2m up to 30 September 2018 (HY2018: GBPnil, FY2018: GBP0.2m) in relation to the PTS acquisition, split between acquisition costs (GBP0.1m) and unwinding of the contingent consideration (GBP0.1m). All costs have been included in administrative expenses (HY2018: GBPnil, FY2018: GBP0.1m) in the Group's consolidated statement of comprehensive income and form part of separately disclosed items, (see note 2). The remaining GBP0.1m of acquisition costs in FY18 relating to the arrangement fee to drawdown part of the Accordion facility were recognised on the balance sheet and are being expensed to the consolidated statement of comprehensive income over the term of the facility.

13. Disaggregation of revenue

In line with IFRS 15 Revenue from Contracts with Customers we have included the disaggregation of external revenue by sector, breaking this down by our geographical operating segments.

 
 September 2018                      UK   Europe   USA   Asia   Total 
---------------------------------  ----  -------  ----  -----  ------ 
 Electronics                         5%       4%    2%     5%     16% 
 Automotive                          9%      14%    2%     8%     33% 
 Domestic appliances                 2%      12%     -     6%     20% 
 Distributors                        9%        -     -     2%     11% 
 General industrial                  7%       4%     -     2%     13% 
 Other                               4%       2%     -     1%      7% 
---------------------------------  ----  -------  ----  -----  ------ 
 Revenue from external customers 
  (AER)                             36%      36%    4%    24%    100% 
---------------------------------  ----  -------  ----  -----  ------ 
 
 
 September 2017                      UK   Europe   USA   Asia   Total 
 Electronics                         5%       4%    1%     7%     17% 
 Automotive                         10%      12%    2%     8%     32% 
 Domestic appliances                 2%      13%     -     7%     22% 
 Distributors                        7%        -     -     3%     10% 
 General industrial                  6%       4%     -     1%     11% 
 Other                               5%       3%     -      -      8% 
---------------------------------  ----  -------  ----  -----  ------ 
 Revenue from external customers 
  (AER)                             35%      36%    3%    26%    100% 
---------------------------------  ----  -------  ----  -----  ------ 
 

INDEPENT REVIEW REPORT TO TRIFAST PLC

Conclusion

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 2018 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 explanatory notes.

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 2018 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. 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. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The Directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Mark Sheppard

for and on behalf of KPMG LLP

Chartered Accountants

1 Forest Gate

Brighton Road, Crawley

West Sussex, RH11 9PT

12 November 2018

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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