Half Yearly Financial Report - six months 30.9.13

Having spent the last two financial years improving TR's operational processes to enhance margins, we are now, focused once again on top line growth.  Sales engineers have been recruited and inducted to help drive our 'roll-out' into the many individual assembly sites of the multinationals that have already nominated TR as a 'Preferred Supplier'.  Another major development in the industry is the trend for using fewer and lighter materials in manufacture - we are already a market leader with our extensive range of fixings and fasteners and our investment at the beginning of 2013 into a broad new range of plastic fasteners is proving to be progressively valuable in supporting our organic growth aspirations.  Similarly, a recovery in sales of our TR Branded products to distributors in the UK and Mainland Europe is perhaps signalling a stronger macro-economic recovery.

TR has been at the forefront of the industry since it was founded and today, is regularly supplying around 150 million components daily to its 5,000-strong customer base, each with specific needs in both product and quality.  Advances in technology and design combined with economic and environmental factors mean that a successful fastener company like TR has to be nimble enough to adapt its range and at the same time manage its customers' needs.  Having celebrated 40 years of 'Service innovation' in June 2013, we are witnessing another exciting phase of development for the business.

Our key markets are recovering and the operational teams are out there taking advantage of the many opportunities which come their way; from our solid base, we will see TR continue to exploit and build its position within what is a fragmented market whilst growing organically; also over the medium term, a key objective for delivering further value to all stakeholders will be through selective acquisitions in key territories that enhance future earnings and open up new customers, markets and opportunities.

Group revenue in the first six months of the financial year was up 6.6% compared to the comparable half year 2012 with strong organic performances from TR UK (+11.1%), TR Europe (+9.7%), and TR USA (+13.2%).  Comparable TR Asia's revenue overall was down 1.8% and reflects the loss of two component supply contracts which we highlighted in our last Annual results; however comparing the first half performance against the second half of last year, we have seen a very strong recovery of around 10.1% from TR Asia as it added a number of new business gains; TR UK, TR Europe and TR USA performances have also continued with strong growth over H2 year ended March 2013 of 7.9%, 4.7% and 22.5% respectively.

Group overheads in the Half-year as a percentage of sales stood at 20.2%, slightly ahead of the March 2013 level of 19.4% reflecting the increase in investment in our people and additional sales related activities across the TR network.

Underlying operating Group profit has increased by 22.4% to £4.86 million compared to the same period last year (HY2012: £3.97m).  Gross margins continue to improve and during the first half period were reported at 27.7%, up from HY2012 of 26.0% (FY2013: 26.0%).  Underlying pre-tax profit improved by 26.4% to £4.55 million (HY2012 £3.60m) and the Group's underlying EBITDA increased to £5.43 million (HY2012: £4.60m) and represents 8.3% of Group revenue (HY2012: 7.5%).

The taxation charge of £1.02 million (HY2012 £0.95m) is recognised based on the estimated weighted average annual Group's corporate tax rates.  The estimated average tax rate used for HY2013 before prior year adjustments was 26% (HY2012: 28%).

Given the improvement in the Group's operating profit, the reduction in net assets due to foreign exchange translation and the further reduction in net debt, ROCE in the first half increased to 14.7% (FY2013 12.1%).

Basic earnings per share increased by 34.2% to 3.06 pence (HY2012: 2.28p; FY2013: 4.39p), whilst Adjusted diluted earnings per share increased 27.8% to 2.94 pence (HY2012: 2.30p; FY2013 4.73p).

Net assets were significantly impacted by foreign exchange translation, from Asia in particular, reducing the assets down by £3.50 million on March 2013 to £59.45 million (HY2012 £55.28m).

Strong cash flow continues to be a key objective within the Group.  Cash generated from operations was at £3.36 million (HY2012 £2.49m; FY2013 £7.87m). Stocks increased in line with working capital requirements supporting new automotive contracts and organic business growth; net stock weeks have remained fairly stable at 20.1 weeks versus 20.0 weeks at the March 2013 year end and 20.3 weeks in the comparable 2012 interim period, we expect these levels to reduce as new business starts to flow through the system.  The increase in sales has seen a corresponding rise in debtors however the business remains effective in its cash collection with minimal bad debts during the period under review.

During the first half, depreciation of £0.57 million was partially offset by capital expenditure of £0.31 million.  As covered under the review, having revisited our ASEAN facilities programme we expect to see an increase in capital investment in machinery and plant within the Asian region which will enable us to improve productivity and increase operational efficiencies in the future.

We are very reassured by the creditable organic performances achieved in the first half and the opportunities our teams are creating to secure additional growth for the remainder of the financial year and into 2015 and beyond; these combined with our 'self-help' and 'Continuous improvement' initiatives will continue to deliver positive gains.  We are also very encouraged by the number of new products and licenses recently won which are gaining a foothold and this gives us confidence in our future ability to deliver more.  The Board remains optimistic about trading across the Company's UK, Asian, European, and North American regions; buoyed by the current macro-economic recovery in a number of key global markets, in particular for us in the manufacturing and industrials sectors. The combination of these factors gives us confidence that we will now exceed our previous expectations.

However, we also recognise as a management team that to achieve our aspirations and take TR to the next level for all stakeholders we must look to add both organic and strategic growth through new products, sectors and territories to our existing global offering and underpin the many opportunities apparent within our existing and growing multinational portfolio.

We look forward to keeping you updated with developments as we focus on this strategy.

We are committed to a progressive dividend policy whilst balancing our investment in the business for the future benefit of all stakeholders, customers and colleagues alike.  To underpin our confidence in our future, we are pleased to announce the re-introduction of an interim dividend.  An interim dividend of 0.40 pence per share will be paid on 18 April 2014, to shareholders on the Register as at 22 November 2013.  The shares will become ex-dividend on 20 November 2013.

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 2013 unless specifically requested by individual shareholders.

The Board believes that by utilising electronic communication it delivers savings to the Company in terms of administration, printing and postage, and environmental benefits through reduced consumption of paper and inks, as well as speeding up the provision of information to 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 [email protected] or, in writing to, The Company Secretary, Trifast plc, Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW

Cautionary Statement

The Half-yearly financial report has been prepared for the shareholders of the Company, as a body, and no other persons. Its purpose is to assist shareholders of the Company to assess the strategies adopted by the Company and the potential for those strategies to succeed and for no other purpose.  The Half-yearly financial report contains forward looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries, sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated.  No assurances can be given that the forward looking statements in this Half-yearly financial report will be realised.  The forward looking statements reflect the knowledge and information available at the date of preparation.