TIDMTRI
RNS Number : 2250U
Trifast PLC
28 July 2020
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
('Trifast', the 'Group' 'TR' or 'Company')
"Our fastenings enable innovation today, to build a better
tomorrow"
Preliminary results for the year ended 31 March 2020
London: Tuesday, 28 July 2020: Trifast (LSE Premium listing:
TRI), leading international specialist in the design, engineering,
manufacture and distribution of high-quality industrial and
Category 'C' components to major global assembly industries
announces preliminary results for the year ended 31 March 2020:
" Trifast is a global business serving a broad and balanced
range of sectors and geographies and with no one customer
representing greater than 7% of revenue. We are a full-service
provider to our multinational customers, delivering reliable
product engineering, quality, and supply via flexible global
logistics solutions. Even in uncertain times, this gives us a very
good base from which to keep moving forward and delivering on our
future aspirations."
Our Group performance
* Resilient performance maintains revenues of GBP200m,
despite challenging market conditions
* Ongoing market share wins offset automotive downturn
* Underlying operating profit margins holds up well at
9.0% (FY2019: 11.6%)
* Strong cash conversion at 95.9% of UEBITDA reinforces
the Group's financial position
* Balance sheet further strengthened by GBP16m equity
raise in June 2020, providing confidence to invest in
significant long-term growth opportunities
* Swift and effective action in response to COVID-19
reduces impact on the business
* Project Atlas ended FY2020 on track and on budget,
the impact of COVID-19 will continue to be closely
monitored as circumstances evolve
* Pipeline of opportunities and activity levels remain
encouraging
* M&A opportunities increase in uncertain market
conditions
"As I start my tenure as Chair, it is fitting that I pause,
express gratitude and celebrate the past. I have had the privilege
of working with and learning from Malcolm so I can safely say that
although he will be missed, he retires leaving behind a legacy.
There is no doubt that the last financial year was a challenging
period. However, as is often the case in such circumstances, there
are opportunities a plenty. As the team charged with bringing
leadership, we are grabbing these with both hands. Our ability to
build on the foundations laid by the previous generation using a
people and process centric approach, gives us the capability to
walk forward into 'new normal' with great confidence."
Jonathan Shearman, Non-Executive Chair
(appointed 1 April 2020)
"The Board would like to thank each and every one of our TR
colleagues around the world for their hard work, flexibility and
dedication over the last six months. By pulling together and
supporting each other so well in such extraordinary times we have
been able to keep our business, our customers and ourselves safe
and ready to face the challenges and opportunities that are still
to come."
Mark Belton, CEO
Financial highlights
FY2020 FY2020 Movement at Movement at
CER AER FY2019 CER AER
------------------------- --------- --------- --------- ----------- -----------
Revenue GBP200.5m GBP200.2m GBP209.0m (4.0)% (4.2)%
GP%^ 27.5% 27.5% 30.0% (250)bps (250)bps
Underlying operating
profit ('UOP')^* GBP18.0m GBP18.1m GBP24.2m (25.4)% (25.2)%
UOP %^* 9.0% 9.0% 11.6% (260)bps (260)bps
Underlying profit before
tax ^* GBP17.0m GBP17.1m GBP23.5m (27.7)% (27.5)%
Underlying diluted EPS^* 10.52p 10.54p 14.53p (27.6)% (27.5)%
Adjusted net debt (--) GBP15.2m GBP14.2m GBP1.0m
ROCE^* 12.0% 18.8% (680)bps
------------------------- --------- --------- --------- ----------- -----------
Interim/total dividend 1.20p 4.25p (71.8)%
------------------------- --------- --------- --------- ----------- -----------
GAAP measures
Operating profit (OP)^ GBP4.0m GBP4.1m GBP17.1m (76.7)% (76.1)%
------------------------- --------- --------- --------- ----------- -----------
OP%^ 2.0% 2.0% 8.2% (620)bps (620)bps
Profit before tax^ GBP2.9m GBP3.0m 16.4m (82.2)% (81.5)%
Diluted EPS^ (0.19)p 9.90p (101.9)%
------------------------- --------- --------- --------- ----------- -----------
* Before separately disclosed items (see notes 2)
^ Presented after the adoption of IFRS16 Leases in FY2020. The
ROCE impact has been a reduction of 100bps (before IFRS16: 13.0%)
less significant impacts on the remaining metrics are explained in
a separate table at the end of the business review
-- Adjusted net debt is presented excluding the impact of IFRS16
Leases, as this is how the calculation is performed for the
purposes of the Group's banking facilities. Including right-of-use
lease liabilities, net debt would increase by GBP15.1m to GBP30.3m
at FY2020
Letter to shareholders from Malcolm Diamond MBE, Non-Executive
Chair
(retired 31 March 2020)
Dear shareholder
Clearly, the main COVID-19 focus of the Board in recent months
has been on conserving cash, protecting, and retaining staff with a
combination of furloughing and home working, and sustaining
essential staffing for customers.
I sincerely hope that by the time you read this report COVID-19
will at least be having a much-reduced impact on our daily lives -
let alone business and investments.
Without detracting from the global fight and the focus to
protect all our staff, family and friends against COVID-19, I would
like to take this opportunity to review last year's financial
performance to March 2020, my last letter to you as shareholders
before I retire.
FY2020 was another progressive year for Trifast in terms of
internal efficiency improvements with Project Atlas continuing to
roll-out data cleansing, new operational processes, and specialised
training of front-line sales and administrative staff. The first
system installation trial was originally planned and ready to go
live for spring in Ireland, but unfortunately has had to be pushed
back until the autumn due to COVID-19. This will form the basis of
a widespread roll-out following any bug fixes that, hopefully, will
be minimal.
As we have indicated from the start of this major investment,
the decrease in non-value add activity incurred by our existing
system, plus the reduction in working capital will be immense, and
the emergence of even more sophisticated supply chain and customer
service support will be convincingly market leading.
Prior to the financial crash in 2008, Trifast had enjoyed
consistent years of growth from the mid-nineties within the
telecoms and electronics sector, however, it became clear in 2009
that this sector had lost much of its attraction for us.
The decision was then taken to switch our main strategy towards
supplying the automotive Tier 1 sector that made sub-assemblies for
the ultimate vehicle manufacturers. Tier 1 customers are under
constant pressure to improve efficiencies and costs and so TR
offered them design and assembly advice to aid component
re-engineering in order to reveal cost downs.
Our success grew automotive sector spend to 30% of total revenue
by 2018. UK and European government policy change then impacted
diesel sales massively, followed by strict environmental emissions
constraints and the rapid emergence of Electric Vehicles (EV).
Our marketing and sales teams quickly then began focusing on
manufacturers of EV batteries and charging stations, whilst
continuing to maintain efforts with seat and console suppliers that
had similar demand for electric vehicles as from conventional
internal combustion engine power trains.
Although the automotive sector has seen a demand reduction in
the past 12 months or so, Trifast revenues remained relatively
stable reflecting our improved market penetration during the
period.
Looking towards the USA and Spanish locations, these have
enjoyed good organic growth during this time, which has underpinned
our continued efforts with automotive - despite it falling out of
favour recently with analysts.
As announced in November last year, succession planning for the
plc Board was publicised, including my retirement on 31 March 2020.
Trifast has always preferred promotion from within wherever
feasible, and it is my pleasure, that following the appropriate
process, I am handing over to my colleague Jonathan Shearman. Since
being with TR he has shared his knowledge and financial acumen
superbly. His approach and style strongly match the qualities
required of being Non-Executive Chair, especially at this
challenging period in our Company's history.
The Board remains committed to good corporate governance and
ensuring there is a broad range of skill, diversity, and experience
that it can draw upon and on 31 March, Trifast also announced two
new NEDs.
After 45 years at Trifast, I have been able to retire knowing I
have offered commercial and strategic support and mentorship to the
next generation of TR's leadership teams. I would also like to
acknowledge and thank all my immediate colleagues, staff, and our
long-standing shareholders, for their support, loyalty and
commitment over my 45 years with TR. I could not have wished for
more.
I now pass the baton over to Jonathan to add his personal input
to you as shareholders, customers, suppliers, and our wonderful
staff.
Business review
Unless stated otherwise, amounts and comparisons with prior year
are calculated at constant currency (Constant Exchange Rate 'CER')
and, where we refer to 'underlying' this is defined as being before
separately disclosed items (see note 2).
Our Group performance
FY2020 FY2020 Movement at Movement at
CER AER FY2019 CER AER
------------------------- --------- --------- --------- ----------- -----------
Revenue GBP200.5m GBP200.2m GBP209.0m (4.0)% (4.2)%
Gross profit^ GBP55.1m GBP55.1m GBP62.6m (12.0)% (12.0)%
GP%^ 27.5% 27.5% 30.0% (250)bps (250)bps
Underlying operating
profit ('UOP')^ GBP18.0m GBP18.1m GBP24.2m (25.4)% (25.2)%
UOP %^ 9.0% 9.0% 11.6% (260)bps (260)bps
Operating profit (OP)^ GBP4.0m GBP4.1m GBP17.1m (76.7)% (76.1)%
OP%^ 2.0% 2.0% 8.2% (620)bps (620)bps
Underlying EBITDA^ GBP23.5m GBP23.5m GBP26.4m (11.2)% (11.1)%
Underlying EBITDA %^ 11.7% 11.7% 12.7% (100)bps (100)bps
Underlying profit before
tax ^ GBP17.0m GBP17.1m GBP23.5m (27.7)% (27.5)%
Profit before tax^ GBP2.9m GBP3.0m 16.4m (82.2)% (81.5)%
Underlying diluted EPS^ 10.52p 10.54p 14.53p (27.6)% (27.5)%
Diluted EPS^ (0.19)p 9.90p (101.9)%
ROCE^ 12.0% 18.8% (680)bps
------------------------- --------- --------- --------- ----------- -----------
^ Presented after the adoption of IFRS16 Leases in FY2020. For
ROCE the impact has been a reduction of 100bps (before IFRS16:
13.0%) less significant impacts on the remaining metrics which been
explained in a separate table at the end of the business review
The Group delivered a resilient performance in FY2020, despite
challenging market conditions and the initial impact of COVID-19 in
Q4. Revenues decreased by only 4.0% at CER and 4.2%, to GBP200.2m,
at Actual Exchange Rate ('AER') for FY2020.
We are encouraged and supported by the fact that we have
sustained both business and customers over this difficult period.
However as previously reported, we have seen trading decreases
across all our key sectors, as production volumes have reduced, and
country lockdowns were put in place across the world.
The largest source of market share growth continues to come from
our multinational Tier 1s in the automotive sector, with market
share gains most specifically in the USA, Thailand and Spain
successfully offsetting the impact of both volume reductions and Q4
production line shutdowns.
Gross margins have decreased by 250bps to 27.5% (FY2019: 30.0%)
largely because of product mix shift, reducing sales and,
particularly in Italy, foreign exchange fluctuations. Whilst
underlying operating margins have decreased to 9.0% (2019: 11.6%)
as the impact of revenue reductions against a semi-fixed cost base
has been partially offset by overhead savings.
Reflecting the above, underlying PBT has reduced to GBP17.1m at
AER (FY2019: GBP23.5m) leading to a reduced underlying diluted EPS
of 10.54p (FY2019: 14.53p).
Statutory profit before tax reduced to GBP3.0m at AER (FY2019:
GBP16.4m) due to the factors above and separately disclosed items
(see note 2) including impairment charges in the year of GBP7.8m.
The impairments in VIC and PSEP are due to the COVID-19 impact on
their respective discount rates and short to medium-term cash flows
(see note 7). Despite the negative impact of the macroeconomic
factors which are outside of our direct control, management believe
the outlook for VIC and PSEP continues to be positive. Post-tax,
this resulted in a diluted loss per share in the year of (0.19)p
(FY2019: diluted EPS of 9.90p).
Dividend policy
The interim dividend of 1.20p per share was paid on 9 April 2020
(FY2019: interim 1.20p; final 3.05p).
To allow us to appropriately manage our financial position and
flexibility in such an uncertain time, as we have already announced
in April 2020, we are not proposing a final dividend for FY2020. We
plan to revisit this decision on a regular basis depending on how
the wider macroeconomic environment develops.
As a Board we are keen that dividends play their part in our TSR
as soon as is practical. For the medium term, we still believe that
an appropriate level of dividend cover is in the range of 3x to 4x.
However, as is always the case, the actual dividend each year will
need to take in to account our ongoing strategy for investment
driven growth, any acquisitions, and the working capital
requirements of the business.
Revenue
Due to the challenging market conditions throughout FY2020,
coupled with the impact of COVID-19 in Q4, we have seen revenue
declines across nearly all our regions, ranging from 3.9% to 9.4%.
The one exception to this being in the USA, where we are very
pleased to report that strong double digit growth continued, up by
18.7% to GBP10.7m (AER: 22.7% to GBP11.0m; FY2019: GBP9.0m) largely
due to market share wins in the automotive sector.
Our European operations have seen a 3.9% reduction in revenue to
GBP74.1m (AER: 5.7% to GBP72.7m; FY2019: GBP77.1m). Well-publicised
decreases in automotive volumes have been felt most noticeably in
Holland and Sweden. Reduced volumes in domestic appliances and
regional lockdowns in Q4 have decreased trading levels in Italy.
Production volume declines in the electronics sector have reduced
revenues in our Hungarian operations and weakened general
industrial demand in Germany has hampered trading levels here.
Helping to offset some of those challenges, even in the current
very uncertain environment, our newest greenfield site in Spain has
gone from strength to strength, with a >50% trading increase via
market share wins in the automotive sector.
In Asia, we have seen the steepest decline in revenues of 9.4%
to GBP53.7m (AER: 8.0% to GBP54.5m; FY2019: GBP59.2m), in part as
the impacts of COVID-19 were felt more strongly in Q4, most
specifically in China, where lockdowns were in place as early as
February 2020. It is reassuring to note however, that we are now
seeing recovery coming through earlier at our Chinese sites, with
trading levels towards the end of Q1 of FY2021 already returning to
be in line with the start of FY2020. The lockdown in Malaysia at
the end of Q4 has impacted on both the electronics and domestic
appliances sector sales in the region, especially at one of our
largest domestic appliance OEMs. As reported at the half-year, our
automotive business in Taiwan has continued to be negatively
impacted due to volume reductions in its key European market.
However, these losses have been offset to a large extent, by
>65% increases in trading levels at our Thailand operations and
the beginnings of a return to strength at one of our largest
Malaysian automotive OEMs.
Overall, our UK business has declined by 4.5% to GBP75.5m
(FY2019: GBP79.1m) with well-publicised production volume decreases
in the automotive sector being exacerbated by Q4 production line
shutdowns and reduced distributor sales, most noticeably to the EU.
We are pleased to report that our latest acquisition, PTS, has
continued to show growth of >5% despite the current uncertain
macroeconomic conditions, helped by increased medical sector and
other distributor demand in Q4 driving a strong trading finish to
the year.
Underlying operating margins
Underlying operating margins have reduced by 260bps, to 9.0%
(FY2019: 11.6%) to generate an underlying operating profit of
GBP18.0m (FY2019: GBP24.2m).
In Europe we have seen a 300bps decrease in underlying operating
margin to 7.9% (FY2019: 10.9%). Gross margins have reduced as
product mixes have shifted and start of production delays,
specifically in the automotive and electronics sectors have
continued. Whilst as previously reported, the remainder is largely
related to Italy, where movements in the average EUR: $ exchange
rate have increased $ purchase costs unfavourably against a largely
EUR denominated revenue base.
The reduction in sales over a semi-fixed cost base has further
reduced margins, although we are pleased to report that we have
been able to mitigate the impact of this in part, via careful
overhead cost savings despite the ongoing investments required into
our fast growing Spanish site.
In Asia, underlying operating margins have held up exceptionally
well, with a reduction of only 80bps to 15.1% (FY2019: 15.9%),
although reducing sales against a semi-fixed cost base has had a
negative impact. We have been able to more than offset this through
short-term overhead cost savings. Again, this is despite the
investments we continue to make in our successful Thailand
operations.
In the UK, underlying operating margins have decreased by 190bps
to 9.1% (FY2019: 11.0%). Gross margins have been lower in the
region, reflecting a change in product mix due to a drop in
distributor spend and some temporary increases in stock
provisioning as the result of higher levels on hand. However, it is
reduced sales over a semi-fixed cost base that have driven most of
the reduction.
In our small, nonetheless fastest growing region, the USA,
underlying operating margins have remained low at 2.2% (FY2019:
4.9%). This reflects the very positive impact of double-digit
revenue growth but offset by the ongoing investments for future
growth we are making within the business.
Net financing costs (at AER)
Interest costs have increased to GBP1.0m (FY2019: GBP0.7m). The
main reason for this is the inclusion of GBP0.4m of expense in
relation to right-of-use lease liabilities, following the adoption
of IFRS16.
Taxation (at AER)
The underlying effective tax rate (ETR) is broadly in line at
23.1% (FY2019: underlying effective tax rate: 23.6%).
Subject to future tax changes and excluding prior year
adjustments, our normalised underlying ETR is expected to remain in
the range of c.22-25% going forward.
The main reasons for the difference between our FY2020 ETR of
107.8% and the FY2019 ETR of 25.4% is due to the impairment charges
in the year and reduced deferred tax on share options.
GAAP measures: operating profit by region (AER)*
2020 2019
-------- --------------------- ---------------------
Profit/(loss) Profit/(loss)
GBPm Margin GBPm Margin
-------- ------------- ------ ------------- ------
UK 5.1 6.8% 7.1 9.0%
Europe (2.8) (3.8)% 7.0 9.1%
Asia 7.1 13.0% 9.1 15.4%
USA 0.2 1.8% 0.4 4.7%
Central (5.5) N/A (6.5) N/A
-------- ------------- ------ ------------- ------
Total 4.1 2.0% 17.1 8.2%
-------- ------------- ------ ------------- ------
* After allocating separately disclosed items, including
goodwill impairments
Operating margins have reduced from 8.2% to 2.0% largely due to
the factors above and goodwill impairments in the year of
GBP7.8m.
In the UK and USA reductions are largely due to the factors
above. In Europe and Asia this is also true, however impairment
losses of GBP7.0m (VIC) and GBP0.8m (PSEP) have further impacted
margins in these two regions respectively in FY2020.
Net debt (AER)
Our net debt position at the end of FY2020 has increased by
GBP16.1m to GBP30.3m (FY2019: GBP14.2m). Some GBP15.1m of this
increase is due to the adoption of IFRS16 Leases. Excluding the
impact of this, our pre-IFRS16 adjusted net debt is significantly
lower at GBP15.2m (excluding the impact of prepaid arrangement fees
relating to the refinance in April 2019, adjusted net debt would be
higher at GBP15.8m).
Cash generation has been strong, with an increased conversion
rate of underlying EBITDA to underlying cash of 95.9% (FY2019:
64.9%) as stock levels have stabilised and trade debtors have
reduced due to slower trading at the end of the year. Year-end
stock levels have remained higher than our historic average,
largely due to the high degree of volatility in current demand.
However, our operational teams have been working extremely hard, to
help us secure a GBP4.1m stock reduction to GBP59.2m in HY2
(HY2020: GBP63.3m; FY2019: GBP57.6m).
Project Atlas has driven additional investment of GBP5.7m in the
year, of which GBP3.1m has been capitalised as an intangible asset.
As planned, excluding Project Atlas, capital expenditure has been
lower at only GBP1.4m in the period, including the finalisation of
a factory extension at one of our Taiwanese sites and a much-needed
warehouse extension at our Lancaster distribution site.
In addition, in February 2020, GBP1.7m was also used to acquire
1 million 5p ordinary shares on the open market via the Trifast EBT
to honour future equity award commitments.
Banking facilities
The Group successfully renegotiated its banking facilities in
April 2019 and has access to an GBP80m revolving credit facility
over a four-year term, with an option to extend for up to one year,
and an additional GBP40m accordion facility to support
acquisitions.
The Group's banking facilities include covenants to maintain an
adjusted leverage ratio of below 3.0x and an interest cover ratio
above 4.0x on a rolling 12-month basis. At 31 March 2020, the
Group's covenants are well within these limits with an adjusted
leverage ratio of 0.80x and interest cover of 30x.
To reflect the current uncertain conditions the Board has set a
reduced maximum net debt to underlying EBITDA ratio target of 1.5x
(FY2019: 2.0x). This would only be breached via investment, where a
short-term reversal can be reliably forecast.
Return on Capital Employed (at AER)
As at 31 March 2020, the Group's shareholders' equity had
decreased to GBP115.7m (FY2019: GBP121.1m). This GBP5.4m movement
is made up of a retained loss of GBP7.4m (including goodwill
impairments of GBP7.8m), share movements totalling GBP1.6m
(including the acquisition and utilisation of own shares held of
GBP1.1m) and a foreign exchange reserve gain of GBP0.4m which arose
due to a relative weakening of Sterling in FY2020.
Over this decreased asset base, our underlying ROCE has reduced
to 12.0% (FY2019: 18.8%).
Following an annual impairment review, the goodwill balances
that the Group holds in both TR VIC in Italy and PSEP, in Malaysia
have been impaired by GBP7.0m to GBP3.0m and GBP0.8m to GBPnil,
respectively. These impairments have been recognised in response to
the short and medium-term impacts of COVID-19 and do not reflect a
long-term change in the Group's strategic direction or support of
these underlying businesses.
Full details of the work performed in relation to the above are
included in note 7.
Post-balance sheet event
Equity Placing
In June 2020, the Company undertook a non-pre-emptive equity
placing which raised GBP16m gross proceeds. This ensures that the
Group can continue to support its long-term strategic investments
as well as being able to maximise its growth in the short term as
markets recover.
As a result of this equity Placing, the Group is in an adjusted
net cash position (excluding IFRS16 right-of use lease liabilities)
as at 30 June 2020.
The combination of the new banking facilities and the equity
Placing is an extremely exciting development for the Group.
Providing the flexibility and confidence to allow us to continue to
follow our strategic aims, coupled with an increase in both
security and tenure of funding to support us in a less certain
macro-economic environment.
Outlook
In FY2020 the Group has delivered a resilient performance
despite challenging market conditions and the initial impact of
COVID-19 in Q4.
As detailed below, we have taken swift and significant action in
response to COVID-19 to ensure that we look after both the welfare
of our staff, and that we continue to work closely with our
suppliers and customers so supply chains are protected, production
lines continue to operate, and we cement Trifast's reputation as a
trusted and reliable counterparty. The Group's focus on flexibility
and an integrated global approach has provided resilience and,
combined with the decisive actions taken by the Board, minimised
the impact of COVID-19 and preserved capability.
There can be no doubt that COVID-19 had a significant impact on
trading in the latter part of FY2020 and into the first quarter of
FY2021. However, we are immensely proud to report that all our TR
sites are back open for business and ready and able to return to
full capacity as soon as demand returns to the market. Very
encouragingly, volumes have begun to recover in all key end markets
over the course of Q1 of FY2021, allowing the Group to return to
underlying profitability in the month of June 2020.
We are especially excited by the encouraging activity levels and
pipeline of opportunities that we are seeing, with additional
prospects for growth already secured, and enquiries well underway
across a number of sectors including electric vehicle, 5G, medical
and the general industrial sector.
Looking further ahead, we strongly believe that the combination
of our reputation for Trusted Reliability, our flexible and
established global supplier networks, and our balance sheet
strength will put us in a great position to make the most of both
the organic and M&A opportunities that are likely to arise as
the competitor landscape shifts and demand returns to the
market.
It is, of course likely, that there will be some long-term
changes in the way that our customers, our suppliers, and the
macroeconomic environment operates. We consider that the real
fundamentals of our business model and strategy remain unchanged,
although we are constantly reviewing what this 'new normal' will
look like and how we can best address the challenges and
opportunities it will bring.
FY2020 IFRS16 FY2020 FY2019
Underlying measures (post IFRS16) impact (pre IFRS16) (pre IFRS16)
------------------------------------------- -------------- -------- ------------- -------------
CER
GP% 27.5% 10bps 27.4% 30.0%
Underlying EBITDA GBP23.5m GBP3.5m GBP20.0m GBP26.4m
Underlying EBITDA% 11.7% 170bps 10.0% 12.7%
Underlying operating profit (UOP) GBP18.0m GBP0.4m GBP17.6m GBP24.2m
UOP% 9.0% 20bps 8.8% 11.6%
Underlying profit before tax GBP17.0m - GBP17.0m GBP23.5m
------------------------------------------- -------------- -------- ------------- -------------
AER
Underlying diluted EPS 10.54p - 10.54p 14.53p
Return on capital employed (ROCE) 12.0% (100)bps 13.0% 18.8%
Net debt GBP30.3m GBP15.1m GBP15.2m GBP14.2m
Net debt to underlying EBITDA ratio 1.29x 0.54x 0.75x 0.54x
Underlying cash conversion as a percentage
of underlying EBITDA 95.9% 40bps 95.5% 64.9%
Net financing costs GBP1.0m GBP0.4m GBP0.6m GBP0.7m
------------------------------------------- -------------- -------- ------------- -------------
GAAP Measures (AER)
Operating profit GBP4.1m GBP0.4m GBP3.7m GBP17.1m
Operating profit % 2.0% 20bps 1.8% 8.2%
Profit before tax GBP3.0m - GBP3.0m GBP16.4m
Diluted EPS (0.19)p - (0.19)p 9.90p
------------------------------------------- -------------- -------- ------------- -------------
COVID-19 and the business
Over the course of the last six weeks of FY2020 and the first
quarter of FY2021 we have seen the impact of the COVID-19 pandemic
significantly widen, leading to government mandated temporary site
closures in Singapore, Malaysia, Italy, Spain and India and
customer production line shutdowns predominantly in the automotive
sector. This, in conjunction with a general reduction in
manufacturing volumes across almost all end markets, has reduced
trading levels and forecasts.
However, despite these challenges, we have been working
extremely hard to ensure that we understand the risks we are facing
now and expect to face in the future. We are acting proactively to
manage and mitigate those risks, we are looking after our most
important resource of all - our people. We are continuing to
protect and build the business for both sustainability in the
short-term and success in the long-term.
Our people
"A Group-wide employee survey showed that 96% of respondents
were satisfied with how the Group has handled the COVID-19
pandemic"
Our first priority was always going to be to ensure a safe
working environment for all of our employees around the world.
Because of the nature of our business, in manufacturing and
distribution, it is not possible for everyone to work from home and
so the actions that we have taken include a mixture of responses,
including:
* Facilitating home working (where possible), helped by
our Project Atlas investments
* Implementing staggered shift patterns and increased
spacing between workers at our sites
* Closely monitoring and adhering to all local
government guidelines - including full site lockdown
and restricted staff numbers where appropriate
Trading
"Considerable work has been undertaken with customers and the
supplier base to minimise supply chain risks. We are pleased to
report that we have been able to keep supply routes open for all
our customers, despite the unprecedented logistical challenges
around the world"
Supporting our customers
We are in regular communication with our customers to understand
their ongoing needs, as they initially locked down and then as they
have wound volumes back up. This has involved a mixture of
increased stock ordering to allow us to ride out any potential
supply chain blockages, moving stock around the TR Group to the
place of greatest need, utilising alternative logistics solutions
and re-sourcing product where required. As customers come back on
line, we have been working with them in advance to respond to their
evolving COVID-19 policies and procedures and to fully support the
ramp up of manufacturing volumes.
Working with our suppliers
Our world-class external supplier base is hugely important to
the ongoing success and sustainability of our business and we are
proud to report that despite these uncertain times, we have not
looked to extend credit terms with any of our suppliers. We firmly
believe that the best way to get through this and succeed on the
other side is by working together fairly and for the benefit of all
our stakeholders. We also successfully applied for essential
business lockdown exemptions in Italy, Malaysia and Singapore to
ensure that our manufacturing sites were back open for business as
soon as possible to service our local and global customer base.
Access to cash
"Strong cash conversion, significant facility headroom and a
successful equity raise provide ongoing resilience in uncertain
times"
In April 2019 we signed new four-year banking facilities with
three banks - HSBC, Citi, and NatWest. These provide access to
GBP80m of RCF of which GBP35.7m is undrawn as at 31 March 2020. The
GBP16m equity raise in June 2020 puts the Group in a net cash
position and provides additional confidence to continue to invest
to maximise our long-term growth opportunities, whilst at the same
time ensuring the Group retains a financial position that manages
risk and its strategic flexibility.
Daily stress-testing and scenario planning has been in place
since the beginning of March to ensure that we are able to look
ahead and make the right decisions at the right times. This will
not only allow us to protect and sustain the business but will also
ensure that the actions we are taking are measured and appropriate
in anticipation of trading conditions improving in the longer
term.
Standing behind these scenarios we also have a comprehensive and
evolving list of cash and profit conservation initiatives that we
can and have drawn on, as required, to safeguard the short and
long-term future of the business.
To mitigate the challenges around forecasting accuracy, actions
are approved when there still remains clear banking covenant
contingency in both scenarios and well in advance of any forecast
low points. As a Board we have set a reduced maximum net debt to
underlying EBITDA ratio of 1.5x (FY2019: 2.0x) to better manage the
heightened level of uncertainty and risk in the current
environment.
Trifast - building a better tomorrow
"Despite COVID-19 the next couple of years for Trifast remain a
very exciting time for our business as we look to implement and
invest in a number of significant and positive changes in the way
that we are structured and we operate"
Project Atlas
Project Atlas is a transformational investment for Trifast. For
the first time in our history, we will become a fully integrated
global business, underpinned by best in class global policies,
processes and procedures and a state of the art IT solution, all of
which have been designed to ensure that we are able to operate as
efficiently and commercially effectively as possible. As one of the
very few truly global businesses in a fragmented marketplace, this
will put us ahead of the majority of our competition in our ability
to reliably, proactively and cost-effectively service our global
customers, as well as in our capacity to maintain, manage and
develop our extensive supplier network around the world.
Where are we now?
As at the end of FY2020, we are pleased to report that Project
Atlas was on track and on budget, although the impact of COVID-19
will continue to be closely monitored as circumstances evolve
As planned, in FY2020 our key focus has been on the finalisation
of the analysis work. Followed in the second half of the year by
the design and build phase of the project. As a result of all that
hard work, we are very pleased to report that over the course of
the last 12 months we have successfully built a global IT solution
that is now ready and waiting to be rolled out as soon as the
current circumstances allow.
Given the extensive COVID-19 travel restrictions and the
importance of providing adequate training to allow us to fully
realise expected benefits, we have inevitably been forced to
re-align the project timetable a little, deferring roll-out until
the second half of FY2021. Our revised plan has been specifically
designed to make best use of this deferral period, by focusing on
upfront site by site preparations and additional development and
training activities to increase our internal expertise and
self-sufficiency.
Looking beyond that short deferral period, the next two years
will be all about localisation and roll-out with priority being
given initially to our distribution businesses. This will be an
incredibly exciting time for us as we start to see all our efforts
to date turn into something tangible and transformational around
the TR world. With all of the benefits firmly in sight and a strong
and dedicated TR team behind us, we remain completely confident
that we will be able to bring this project to a successful
conclusion.
"Project Atlas always came with a very strong benefits case,
including an ROI of >25% at the point of full realisation
(expected to be in FY2024)"
Introducing our new Operational Executive Board (OEB)
A global business requires a global strategy and a global
strategy demands a Global Operational Executive Board (OEB). Since
April 2020, for the first time in TR's history, a fully
cross-functional and regionally representative OEB has been in
operation. The OEB is made up from some of our most experienced and
capable senior people from around the world.
This team will devise the strategic direction and goals for our
global business and by working together will take responsibility
for driving these to a successful conclusion for the Trifast Group.
In the current uncertain environment, wider cost optimisation
programmes are also under development by the OEB with a focus on
measured and appropriate actions to allow us to protect and sustain
the business.
Other good news for the future
We are also looking to make targeted investments in our supplier
relationship management and supply chain resilience. This has
already started with the successful recruitment of a Global Supply
Chain Director and will be followed by additional global and
regional recruitment to support that new role. A key focus of this
team will be to work closely and develop with our trusted supplier
base, to ensure that we are able to make the best use of our global
purchasing power and enhanced forecasting capabilities to
rationalise supply and drive input cost efficiencies.
We will also be using this additional resource capacity to
maintain and enhance the geographical breadth and resilience of our
supplier base, to ensure we are able to provide secure, reliable
local and global supply chains to best suit any of our customers'
changing needs in a post COVID-19 world.
On the acquisitions side in August 2020, we will be joined by an
experienced M&A professional. Paul Ranson has worked across all
areas of M&A and will work with us and our external adviser
networks to lead our global acquisition activities. Although
consolidation is constant, our market remains hugely fragmented,
with no one player owning more than 5%. This means acquisitions
will remain a key part of our growth journey for the foreseeable
future. With significant debt financing in place and the recent
equity raise, as well as additional internal resource, we are
confident that the number of opportunities and successful
transactions we see will begin to increase in the medium-term.
Last and not least, we plan to continue to make careful
investments into our three fastest growing geographies - USA; Spain
and Thailand. Over the last five years, we have made it our mission
to identify these areas and ensure that we organically invest to
make the best of the opportunities that exist. It is the
continuation of these investments that will allow us to carry on
taking profitable market share despite the additional challenges
that the current uncertain environment is placing on us.
Consolidated income statement for the year ended 31 March
2020
2020 2019
Note GBP000 GBP000
---------------------------------------------------- ---- --------- ---------
Continuing operations
Revenue 3 200,221 208,952
Cost of sales (145,114) (146,317)
---------------------------------------------------- ---- --------- ---------
Gross profit 55,107 62,635
Other operating income 4 424 464
Distribution expenses (4,627) (4,268)
---------------------------------------------------- ---- --------- ---------
Administrative expenses before separately disclosed
items (32,815) (34,635)
IFRS2 share based payment charge 2 (2,030) (2,454)
Acquired intangible amortisation 2, 7 (1,409) (1,419)
Net acquisition costs 2 - (3)
Project Atlas 2 (2,505) (3,117)
Impairments in goodwill 2, 7 (7,761) -
Costs on exercise of executive share options 2 (307) (107)
---------------------------------------------------- ---- --------- ---------
Total administrative expenses (46,827) (41,735)
Operating profit 5 4,077 17,096
---------------------------------------------------- ---- --------- ---------
Financial income 82 80
Financial expenses (1,117) (755)
---------------------------------------------------- ---- --------- ---------
Net financing costs (1,035) (675)
---------------------------------------------------- ---- --------- ---------
Profit before taxation 3 3,042 16,421
Taxation 6 (3,280) (4,177)
---------------------------------------------------- ---- --------- ---------
(Loss)/profit for the year
(attributable to equity shareholders of the Parent
Company) (238) 12,244
---------------------------------------------------- ---- --------- ---------
(Loss)/earnings per share
Basic 13 (0.19)p 10.14p
Diluted 13 (0.19)p 9.90p
---------------------------------------------------- ---- --------- ---------
Consolidated statement of comprehensive income for the year
ended 31 March 2020
2020 2019
GBP000 GBP000
------------------------------------------------------------- ------- -------
(Loss)/profit for the year (238) 12,244
Other comprehensive income for the year:
Items that may be reclassified subsequently to profit or
loss:
Exchange differences on translation of foreign operations 1,342 148
(Loss)/profit on a hedge of a net investment taken to equity (924) 466
------------------------------------------------------------- ------- -------
Other comprehensive income recognised directly in equity 418 614
------------------------------------------------------------- ------- -------
Total comprehensive income recognised for the year
(attributable to the equity shareholders of the Parent
Company) 180 12,858
------------------------------------------------------------- ------- -------
Consolidated statement of changes in equity for the year ended
31 March 2020
Own
Share Share shares Translation Retained Total
capital premium held reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- -------- -------- ------- ----------- --------- -------
Balance at 31 March 2019 6,095 21,914 (3,019) 13,988 82,115 121,093
--------------------------------- -------- -------- ------- ----------- --------- -------
Effect of change in accounting
policy
(see note 1) - - - - (1,069) (1,069)
--------------------------------- -------- -------- ------- ----------- --------- -------
Balance at 31 March 2019
(restated) 6,095 21,914 (3,019) 13,988 81,046 120,024
--------------------------------- -------- -------- ------- ----------- --------- -------
Total comprehensive income
for the year:
Loss for the year - - - - (238) (238)
Other comprehensive income
for the year - - - 418 - 418
--------------------------------- -------- -------- ------- ----------- --------- -------
Total comprehensive income
recognised for the year - - - 418 (238) 180
--------------------------------- -------- -------- ------- ----------- --------- -------
Issue of share capital 37 426 - - (16) 447
Share based payment transactions
(net of tax) - - - - 1,836 1,836
Movement in own shares held - - 1,085 - (2,778) (1,693)
Dividends - - - - (5,134) (5,134)
--------------------------------- -------- -------- ------- ----------- --------- -------
Total transactions with
owners 37 426 1,085 - (6,092) (4,544)
--------------------------------- -------- -------- ------- ----------- --------- -------
Balance at 31 March 2020 6,132 22,340 (1,934) 14,406 74,716 115,660
--------------------------------- -------- -------- ------- ----------- --------- -------
Consolidated statement of changes in equity for the year ended
31 March 2019
Own
Share Share shares Translation Retained Total
capital premium held reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- -------- -------- ------- ----------- --------- -------
Balance at 31 March 2018 6,068 21,579 (3,437) 13,374 72,705 110,289
Total comprehensive income
for the year:
Profit for the year - - - - 12,244 12,244
Other comprehensive income
for the year - - - 614 - 614
--------------------------------- -------- -------- ------- ----------- --------- -------
Total comprehensive income
recognised for the year - - - 614 12,244 12,858
--------------------------------- -------- -------- ------- ----------- --------- -------
Issue of share capital 27 335 - - (9) 353
Share based payment transactions
(net of tax) - - - - 2,213 2,213
Movement in own shares held - - 418 - (418) -
Dividends - - - - (4,620) (4,620)
--------------------------------- -------- -------- ------- ----------- --------- -------
Total transactions with
owners 27 335 418 - (2,834) (2,054)
--------------------------------- -------- -------- ------- ----------- --------- -------
Balance at 31 March 2019 6,095 21,914 (3,019) 13,988 82,115 121,093
--------------------------------- -------- -------- ------- ----------- --------- -------
Company statement of changes in equity for the year ended 31
March 2020
Own
Share Share shares Merger Retained Total
capital premium held reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- -------- -------- ------- -------- --------- -------
Balance at 31 March 2019
and restated for effect
in change in accounting
policy
(see note 1) 6,095 21,914 (3,019) 1,521 23,680 50,191
Total comprehensive income
for the year:
Profit for the year - - - - 4,166 4,166
--------------------------------- -------- -------- ------- -------- --------- -------
Total comprehensive income
recognised for the year - - - - 4,166 4,166
--------------------------------- -------- -------- ------- -------- --------- -------
Issue of share capital 37 426 - - (16) 447
Share based payment transactions
(net of tax) - - - - 1,848 1,848
Movement in own shares held - - 1,085 - (2,778) (1,693)
Dividends - - - - (5,134) (5,134)
--------------------------------- -------- -------- ------- -------- --------- -------
Total transactions with
owners 37 426 1,085 - (6,080) (4,532)
--------------------------------- -------- -------- ------- -------- --------- -------
Balance at 31 March 2020 6,132 22,340 (1,934) 1,521 21,766 49,825
--------------------------------- -------- -------- ------- -------- --------- -------
Company statement of changes in equity for the year ended 31
March 2019
Own
Share Share shares Merger Retained Total
capital premium held reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- -------- -------- ------- -------- --------- -------
Balance at 31 March 2018 6,068 21,579 (3,437) 1,521 21,853 47,584
Total comprehensive income
for the year:
Profit for the year - - - - 4,577 4,577
--------------------------------- -------- -------- ------- -------- --------- -------
Total comprehensive income
recognised for the year - - - - 4,577 4,577
--------------------------------- -------- -------- ------- -------- --------- -------
Issue of share capital 27 335 - - (9) 353
Share based payment transactions
(net of tax) - - - - 2,297 2,297
Movement in own shares held - - 418 - (418) -
Dividends - - - - (4,620) (4,620)
--------------------------------- -------- -------- ------- -------- --------- -------
Total transactions with
owners 27 335 418 - (2,750) (1,970)
--------------------------------- -------- -------- ------- -------- --------- -------
Balance at 31 March 2019 6,095 21,914 (3,019) 1,521 23,680 50,191
--------------------------------- -------- -------- ------- -------- --------- -------
Statements of financial position at 31 March 2020
Group Company
------------------------------------- ---- ---------------- ----------------
2020 2019 2020 2019
Note GBP000 GBP000 GBP000 GBP000
------------------------------------- ---- ------- ------- ------- -------
Non-current assets
Property, plant, and equipment 20,427 21,081 2,384 2,469
Right-of-use asset 13,788 - 24 -
Intangible assets 7 39,155 44,818 4,088 943
Equity investments - - 42,006 41,440
Deferred tax assets 1,926 2,129 381 683
------------------------------------- ---- ------- ------- ------- -------
Total non-current assets 75,296 68,028 48,883 45,535
------------------------------------- ---- ------- ------- ------- -------
Current assets
Inventories 8 59,187 57,558 - -
Trade and other receivables 9 52,928 53,782 48,911 44,517
Cash and cash equivalents 28,727 25,199 265 899
------------------------------------- ---- ------- ------- ------- -------
Total current assets 140,842 136,539 49,176 45,416
------------------------------------- ---- ------- ------- ------- -------
Total assets 3 216,138 204,567 98,059 90,951
------------------------------------- ---- ------- ------- ------- -------
Current liabilities
Other interest-bearing loans and
borrowings 10 266 32,617 - 29,123
Trade and other payables 11 34,914 37,207 4,587 5,102
Right-of-use liabilities 3,113 - 11 -
Tax payable 1,817 1,982 - -
------------------------------------- ---- ------- ------- ------- -------
Total current liabilities 40,110 71,806 4,598 34,225
------------------------------------- ---- ------- ------- ------- -------
Non-current liabilities
Non-current trade and other payables - 138 - -
Other interest-bearing loans and
borrowings 10 43,622 6,739 43,622 6,407
Right-of-use liabilities 11,996 - 14 -
Provisions 959 959 - -
Deferred tax liabilities 3,791 3,832 - 128
------------------------------------- ---- ------- ------- ------- -------
Total non-current liabilities 60,368 11,668 43,636 6,535
------------------------------------- ---- ------- ------- ------- -------
Total liabilities 3 100,478 83,474 48,234 40,760
------------------------------------- ---- ------- ------- ------- -------
Net assets 115,660 121,093 49,825 50,191
------------------------------------- ---- ------- ------- ------- -------
Equity
Share capital 6,132 6,095 6,132 6,095
Share premium 22,340 21,914 22,340 21,914
Own shares held (1,934) (3,019) (1,934) (3,019)
Reserves 14,406 13,988 1,521 1,521
Retained earnings 74,716 82,115 21,766 23,680
------------------------------------- ---- ------- ------- ------- -------
Total equity 115,660 121,093 49,825 50,191
------------------------------------- ---- ------- ------- ------- -------
The profit after tax for the Company is GBP4.2m (FY2019:
GBP4.6m).
These financial statements were approved by the Board of
Directors on 27 July 2020.
Statements of cash flows for the year ended 31 March 2020
Group Company
--------------------------------------------- ---- ------------------ ------------------
2020 2019 2020 2019
Note GBP000 GBP000 GBP000 GBP000
--------------------------------------------- ---- -------- -------- -------- --------
Cash flows from operating activities
(Loss)/profit for the year (238) 12,244 4,166 4,577
Adjustments for:
Depreciation, amortisation, and impairment 7 11,541 3,672 85 80
Right-of-use asset depreciation 3,118 - 19 -
Unrealised foreign currency loss 89 38 82 -
Financial income (82) (80) (115) (38)
Financial expense (excluding right-of-use
liabilities' financial expense) 752 755 742 614
Right-of-use liabilities' financial expense 365 - - -
(Gain)/loss on sale of property, plant,
and equipment
and investments (3) 12 - -
Dividends received - - (10,072) (10,837)
Equity settled share-based payment charge 1,981 2,414 441 1,131
Taxation charge 6 3,280 4,177 41 -
--------------------------------------------- ---- -------- -------- -------- --------
Operating cash inflow/(outflow) before
changes
in working capital and provisions 20,803 23,232 (4,611) (4,473)
Change in trade and other receivables 2,060 (755) (2,310) (10,475)
Change in inventories (1,217) (6,036) - -
Change in trade and other payables (2,242) (2,645) (538) 2,673
Change in provisions - (12) - -
--------------------------------------------- ---- -------- -------- -------- --------
Cash generated from/(used in) operations 19,404 13,784 (7,459) (12,275)
--------------------------------------------- ---- -------- -------- -------- --------
Tax paid (3,889) (3,877) - -
--------------------------------------------- ---- -------- -------- -------- --------
Net cash from/(used in) operating activities 15,515 9,907 (7,459) (12,275)
--------------------------------------------- ---- -------- -------- -------- --------
Cash flows from investing activities
Proceeds from sale of property, plant,
and equipment 7 31 - -
Interest received 82 84 108 37
Acquisition of subsidiary, net of cash
acquired (503) (8,150) - -
Acquisition of property, plant and equipment
and intangibles (4,594) (4,180) (3,145) (999)
Dividends received - - 10,072 10,837
--------------------------------------------- ---- -------- -------- -------- --------
Net cash (used in)/from investing activities (5,008) (12,215) 7,035 9,875
--------------------------------------------- ---- -------- -------- -------- --------
Cash flows from financing activities
Proceeds from the issue of share capital 447 353 447 353
Purchase of own shares (1,693) - (1,693) -
Proceeds from new loan 45,026 12,136 44,225 12,136
Repayment of borrowings (41,620) (5,953) (37,318) (4,433)
(Payment)/proceeds from finance leases (74) (2) - -
Repayment of right-of-use liabilities (3,487) - (18) -
Dividends paid 12 (5,134) (4,620) (5,134) (4,620)
Interest paid (752) (758) (719) (614)
--------------------------------------------- ---- -------- -------- -------- --------
Net cash (used in)/from financing activities (7,287) 1,156 (210) 2,822
--------------------------------------------- ---- -------- -------- -------- --------
Net change in cash and cash equivalents 3,220 (1,152) (634) 422
Cash and cash equivalents at 1 April 25,199 26,222 899 477
Effect of exchange rate fluctuations on
cash held 308 129 - -
--------------------------------------------- ---- -------- -------- -------- --------
Cash and cash equivalents at 31 March 28,727 25,199 265 899
--------------------------------------------- ---- -------- -------- -------- --------
Notes to the Financial Statements
1. Preparation of the preliminary statement
The preliminary results announcement for the year ended 31 March
2020 has been prepared by the Directors based on the results and
position reflected in the statutory accounts. The statutory
accounts are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union ('Adopted
IFRS').
Adoption of IFRS16
This note explains the impact of the adoption of IFRS16 Leases
on the Group's financial statements and discloses the new
accounting policies that have been applied from 1 April 2019 (date
of initial application).
The Group adopted IFRS16 from 1 April 2019 under the modified
retrospective approach and therefore has not restated comparatives
for the 2019 reporting period. The reclassifications and the
adjustments arising from the new leasing rules are therefore
recognised in the opening balance sheet on 1 April 2019.
Policy applied from 1 April 2019 - The Group as lessee
The Group's leases primarily comprise of right-of-use assets
regarding land & buildings, motor vehicles and equipment.
Short-term leases (<12 months) and leases for which the
underlying asset is of a low value (<GBP4k) are excluded.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, and subsequently at cost less any accumulated
depreciation and impairment losses. The right-of-use asset is
subsequently depreciated using the straight-line method from the
lease commencement date to the end of the lease term. In addition,
the right-of-use asset is periodically reduced by impairment
losses, if any, and adjusted for certain remeasurements of the
lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the lessee's incremental
borrowing rate. Generally, the Group uses its incremental borrowing
rate.
The lease liabilities are subsequently increased by the interest
cost on the lease liability and decreased by lease payments made.
The liability will be remeasured if there is a change in the future
lease payments or if there are changes in the estimated length of
the lease.
The lease period is established as the non-cancellable period
together with the opportunity to extend the lease if the lessee is
reasonably certain to utilise that option, and periods covered by
an opportunity to terminate the lease if the lessee is reasonably
certain not to utilise that option.
Practical expedients applied
In applying IFRS16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- The use of a single discount rate to a portfolio of leases
with reasonably similar characteristics
-- The accounting for operating leases with a remaining lease
term of less than 12 months as at 1 April 2019 as short-term
leases
-- The exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application
-- The use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease
The Group has also elected not to reassess whether a contract is
or contains a lease at the date of initial application. Instead,
for contracts entered into before the transition date the Group
relied on its assessment made applying IAS17 and IFRIC4 Determining
whether an Arrangement contains a Lease.
Adjustments recognised on adoption of IFRS16 - Group
On adoption of IFRS16, the Group recognised lease liabilities in
relation to leases which had previously been classified as
operating leases under the principles of IAS17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 April 2019. The Group also recognised right-of-use
assets for properties, vehicles & equipment which were measured
on a retrospective basis as if the new rules had always been
applied, discounted at the rate on the date of initial application.
This has been summarised below.
1 April 2019
GBP'000
--------------------------------------- ------------
Right-of-use assets 12,909
Deferred tax asset 251
Right-of-use liabilities (current) 2,727
Right-of-use liabilities (non-current) 11,566
Prepayments (117)
Accruals (180)
Retained Earnings (1,069)
When measuring lease liabilities for leases that were classified
as operating leases, the Group discounted lease payments using the
lessee's incremental borrowing rate at 1 April 2019. The weighted
average rate applied is 2.4%.
The right-of-use liabilities recognised at 1 April 2019
reconciles to the operating lease commitment as at 31 March 2019 as
disclosed in the Group's consolidated financial statements as
follows:
1 April 2019
GBP'000
---------------------------------------------------------------- ------------
Operating lease commitment as at 31 March 2019 as disclosed in
the Group's consolidated
financial statements 14,283
Recognition exemption for leases of low-value assets (160)
Recognition exemption for leases with less than 12 months lease
term at transition (250)
Operating leases in scope of IFRS16 13,873
Discounted using the incremental borrowing rate as 1 April 2019 (1,676)
Inception date before transition date but lease commenced after (203)
Difference between minimum lease payments & end of lease 2,105
Extension options reasonably certain to be exercised 194
Right-of-use liabilities recognised at 1 April 2019 14,293
The recognised right-of-use assets relate to the following types
of assets:
1 April 2019
GBP'000
------------------------- ------------
Land & buildings 11,925
Motor vehicles 951
Equipment 33
Total right-of-use asset 12,909
Adjustments recognised on adoption of IFRS16 - Company
On adoption of IFRS16, the Company recognised lease liabilities
of GBP20,000 and right of use assets of GBP20,000 in relation to
leases which had previously been classified as operating leases
under the principles of IAS17 Leases. The leases were measured
using the same principles above for the Group.
2. Underlying profit before tax and separately disclosed
items
2020 2019
GBP000 GBP000
------------------------------------------------- ------- -------
Underlying profit before tax 17,054 23,521
Separately disclosed items within administrative
expenses
IFRS2 share based payment charge (2,030) (2,454)
Acquired intangible amortisation (1,409) (1,419)
Net acquisition costs - (3)
Project Atlas (2,505) (3,117)
Impairment of goodwill (7,761) -
Costs on exercise of executive share options (307) (107)
-------------------------------------------------- ------- -------
Profit before tax 3,042 16,421
-------------------------------------------------- ------- -------
2020 2019
GBP000 GBP000
------------------------------------------------- ------- -------
Underlying EBITDA 23,525 26,449
Separately disclosed items within administrative
expenses
IFRS2 share based payment charge (2,030) (2,454)
Net acquisition costs - (3)
Project Atlas (2,505) (3,117)
Impairment of goodwill (7,761) -
Costs on exercise of executive share options (307) (107)
-------------------------------------------------- ------- -------
EBITDA 10,922 20,768
-------------------------------------------------- ------- -------
Acquired intangible amortisation (1,409) (1,419)
Depreciation and non-acquired amortisation (5,436) (2,253)
-------------------------------------------------- ------- -------
Operating profit 4,077 17,096
-------------------------------------------------- ------- -------
There were GBPnil separately disclosed items in FY2020 (FY2019:
GBPnil) other than the amounts detailed above. FY2020 accounts for
leases under IFRS16 Leases, FY2019 accounts for leases under IAS 17
Leases. The transition to IFRS16 resulted in EBITDA being c.GBP3.5m
higher.
Recurring items
During the period the IFRS2 charge decreased, due to the
non-market performance conditions not being achieved for the Board
FY2018 LTIP and hence the cumulative charge was reversed. GBP0.3m
(FY2019: GBP0.5m) relates to the Board deferred equity bonus
scheme. GBP0.1m (FY2019: GBP0.6m) relates to the new LTIP structure
for the Directors. GBP1.5m (FY2019: GBP1.2m) represents the charge
for the Deferred Bonus Award scheme for senior managers. The
remaining GBP0.2m (FY2019: GBP0.2m) relates to the SAYE scheme.
IFRS2 share based payment charges have continued to be
specifically presented as separately disclosed items within
administrative expenses. We understand that these costs are more
conventionally included within underlying results and we confirm
management's intention to present these as such at the appropriate
time. However, currently the underlying equity award schemes that
form the basis of these charges are under a period of significant
development.
This includes:
-- The cessation of the Board deferred equity schemes that were
in operation from FY2014 to FY2017;
-- The one-off introduction of a three-year Senior Manager
deferred equity bonus award in FY2016;
-- The introduction of the current annual, rolling three-year
Board LTIP share awards in FY2018; and
-- The subsequent introduction of a new annual, rolling
three-year Senior Manager LTIP share award scheme in FY2020.
As a result of the above, the annual IFRS2 charge is expected to
be subject to a significant degree of volatility until we reach a
more stable ongoing position. We consider that this ongoing
volatility, if presented within our underlying results in the short
to medium term, will only detract readers from being able to gain a
clear understanding of the Group's underlying trading position.
Management will continue to periodically assess this decision to
determine when IFRS2 share based payment charges will become part
of the underlying results.
Acquired intangible amortisation has remained in line with prior
year. Intangible amortisation relating to acquisitions have been
separately disclosed since they do not relate to the trading
performance of the respective entities with a charge.
During the year, part of the FY2017 Board deferred equity bonus
shares and the FY2017 Senior Manager Equity Awards were exercised
and the Group incurred GBP0.3m of employer's National Insurance in
relation to these exercises. Last year, the FY2016 Deferred Equity
Bonus awards were exercised resulting in the Company incurring
GBP0.1m of employer's National Insurance.
Event driven/one-off items
Net acquisition costs of GBPnil (FY2019: GBP0.1m) were incurred
in the year. The FY2019 acquisition costs were in relation to the
acquisition of PTS on 4 April 2018. The costs in FY2019 were offset
by a GBP(0.1)m movement in the contingent consideration for
PTS.
Project Atlas is a multi-year investment into our IT
infrastructure and underlying business processes, budgeted to cost
GBP15.0m. As a consequence of the work undertaken to date on this
project, we have incurred direct costs of GBP2.5m in FY2020
(FY2019: GBP3.1m), largely relating to the project team. We have
excluded these costs from our underlying results, to reflect the
unusual scale and one-off nature of this project. We anticipate
continuing to do so in order to provide shareholders with a better
understanding of our underlying trading performance during this
period of investment. This investment will be recorded as a
combination of capital expenditure and separately disclosed items,
dependent on accounting convention.
Impairments in goodwill of GBP7.8m (FY2019: GBPnil) were
incurred in the year relating to VIC (GBP7.0m) and PSEP (GBP0.8m),
see note 7 for further details.
Management feel it is appropriate to remove the one-off costs
and certain non-trading items discussed above to better allow the
reader of the accounts to understand the underlying performance of
the Group.
3. Operating segmental analysis
Segment information is presented in the consolidated financial
statements in respect of the Group's geographical segments. This
reflects the Group's management and internal reporting structure,
and the operating basis on which individual operations are reviewed
by the Chief Operating Decision Maker (the Board). Performance is
measured based on each segment's underlying profit before finance
costs and income tax as included in the internal management reports
that are reviewed by the Chief Operating Decision Maker. This is
used to measure performance as management believes that such
information is the most relevant in evaluating the results of
certain segments relative to other entities that operate within the
industry.
Inter-segment pricing is determined on an arm's length basis.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis.
Goodwill and intangible assets acquired on business combinations
are included in the region to which they relate.
Geographical operating segments
The Group is comprised of the following main geographical
operating segments:
- UK
- Europe includes Norway, Sweden, Hungary, Ireland, Holland, Italy, Germany, Spain and Poland
- USA includes USA and Mexico
- Asia includes Malaysia, China, Singapore, Taiwan, Thailand, India and Philippines
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, and are
consolidated into the four distinct geographical regions, which the
Board use to monitor and assess the Group. Interest is reported on
a net basis rather than gross as this is how it is presented to the
Chief Operating Decision Maker. All material non-current assets are
located in the country the relevant Group entity is incorporated
in.
Common
UK Europe USA Asia costs Total
March 2020 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- -------- -------- ------- -------- -------- ---------
Revenue
Revenue from external customers 71,979 71,217 10,864 46,161 - 200,221
Inter segment revenue 3,521 1,521 177 8,363 - 13,582
-------------------------------- -------- -------- ------- -------- -------- ---------
Total revenue 75,500 72,738 11,041 54,524 - 213,803
-------------------------------- -------- -------- ------- -------- -------- ---------
Underlying operating result 6,819 5,722 281 8,262 (2,995) 18,089
Net financing costs (161) (102) (114) (33) (625) (1,035)
-------------------------------- -------- -------- ------- -------- -------- ---------
Underlying segment result 6,658 5,620 167 8,229 (3,620) 17,054
Separately disclosed items
(see note 2) (14,012)
-------------------------------- -------- -------- ------- -------- -------- ---------
Profit before tax 3,042
-------------------------------- -------- -------- ------- -------- -------- ---------
Specific disclosure items
Depreciation and amortisation 1,841 2,717 235 1,949 103 6,845
Impairments in goodwill 6,966 795 7,761
-------------------------------- -------- -------- ------- -------- -------- ---------
Assets and liabilities
Non-current asset additions 3,021 777 136 1,463 3,167 8,564
Segment assets 65,679 69,836 8,897 64,534 7,192 216,138
Segment liabilities (24,127) (16,150) (1,855) (13,582) (44,764) (100,478)
-------------------------------- -------- -------- ------- -------- -------- ---------
Within separately disclosed items of GBP14.0m are GBP7.8m of
goodwill impairments.
Common
UK Europe USA Asia costs Total
March 2019 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- -------- -------- ------- -------- -------- --------
Revenue
Revenue from external customers 76,030 75,395 8,822 48,705 - 208,952
Inter segment revenue 3,040 1,742 178 10,539 - 15,499
-------------------------------- -------- -------- ------- -------- -------- --------
Total revenue 79,070 77,137 9,000 59,244 - 224,451
-------------------------------- -------- -------- ------- -------- -------- --------
Underlying operating result 8,666 8,423 446 9,445 (2,784) 24,196
Net financing (costs)/income (99) (42) (19) 63 (578) (675)
-------------------------------- -------- -------- ------- -------- -------- --------
Underlying segment result 8,567 8,381 427 9,508 (3,362) 23,521
Separately disclosed items
(see note 2) (7,100)
-------------------------------- -------- -------- ------- -------- -------- --------
Profit before tax 16,421
-------------------------------- -------- -------- ------- -------- -------- --------
Specific disclosure items
Depreciation and amortisation 705 1,891 45 951 80 3,672
-------------------------------- -------- -------- ------- -------- -------- --------
Assets and liabilities
Non-current asset additions 700 754 1,312 218 998 3,982
Segment assets 57,763 75,407 6,505 59,458 5,434 204,567
Segment liabilities (20,027) (14,416) (492) (10,759) (37,780) (83,474)
-------------------------------- -------- -------- ------- -------- -------- --------
There were no material differences in Europe and USA between the
external revenue based on location of the entities and the location
of the customers. Of the UK external revenue GBP14.9m (FY2019:
GBP16.9m) was sold into the European market. Of the Asian external
revenue, GBP4.5m (FY2019: GBP5.1m) was sold into the American
market and GBP4.1m (FY2019: GBP8.6m) sold into the European
market.
Revenue is derived solely from the manufacture and logistical
supply of industrial fasteners and Category 'C' components.
4. Other operating income
2020 2019
GBP000 GBP000
------------------------------------------------ ------- -------
Rental income received from freehold properties 12 12
Other income 412 452
------------------------------------------------ ------- -------
424 464
------------------------------------------------ ------- -------
5. Expenses and auditor's remuneration
Included in profit for the year are the following:
2020 2019
GBP000 GBP000
------------------------------------------- ------- -------
Depreciation and non-acquired amortisation 2,318 2,253
Right-of-use asset depreciation 3,118 -
Amortisation of acquired intangibles 1,409 1,419
Impairments in goodwill 7,761 -
Operating lease expense 1,058 4,051
Net foreign exchange gain (567) (92)
Project Atlas (IT and business processes) 2,505 3,117
(Gain)/loss on disposal of fixed assets (3) 12
-------------------------------------------- ------- -------
Operating lease expense in FY2020 are low value and short-term
leases, in FY2019 it was operating leases under IAS17.
Auditor's remuneration:
2020 2019
GBP000 GBP000
------------------------------------------------------- ------- -------
Audit of these financial statements 146 87
Audit of financial statements of subsidiaries pursuant
to legislation 250 252
Taxation compliance services - 21
Other assurance services - 30
Other services relating to transaction services - -
------------------------------------------------------- ------- -------
Total 396 390
------------------------------------------------------- ------- -------
6. Taxation
2020 2019
Recognised in the income statement GBP000 GBP000
-------------------------------------------------- ------- -------
Current UK tax expense:
Current year 59 496
Adjustments for prior years (50) 103
-------------------------------------------------- ------- -------
9 599
-------------------------------------------------- ------- -------
Current foreign tax expense:
Current year 3,181 3,941
Adjustments for prior years (91) (10)
-------------------------------------------------- ------- -------
3,090 3,931
-------------------------------------------------- ------- -------
Total current tax 3,099 4,530
Deferred tax expense
Origination and reversal of temporary differences 179 (289)
Change in tax rates (7) 27
Adjustments for prior years 9 (91)
-------------------------------------------------- ------- -------
Deferred tax expense/(income) 181 (353)
-------------------------------------------------- ------- -------
Tax in income statement 3,280 4,177
-------------------------------------------------- ------- -------
2020 2019
GBP000 GBP000
--------------------------------------------------------- ------- -------
Current tax recognised directly in equity - IFRS2 share
based tax credit (58) (121)
Deferred tax recognised directly in equity - IFRS2 share
based tax charge 203 322
--------------------------------------------------------- ------- -------
Total tax recognised in equity 145 201
--------------------------------------------------------- ------- -------
Reconciliation of effective tax rate ('ETR') 2020 ETR 2019 ETR
and tax expense GBP000 % GBP000 %
--------------------------------------------- ------- --- ------- ---
(Loss)/profit for the period (238) 12,244
Tax from continuing operations 3,280 4,177
--------------------------------------------- ------- --- ------- ---
Profit before tax 3,042 16,421
--------------------------------------------- ------- --- ------- ---
Tax using the UK corporation tax rate
of 19% (FY2019: 19%) 578 19 3,120 19
Tax suffered on dividends 416 14 474 3
Non-deductible expenses 286 9 189 1
Tax incentives - - (146) (1)
Non-taxable receipts (44) (1) - -
IFRS2 share option charge 501 16 105 1
Deferred tax assets not recognised 76 2 58 -
Impairment losses 1,475 49 - -
Different tax rates on overseas earnings 131 4 348 2
Adjustments in respect of prior years (132) (4) 2 -
Tax rate change (7) - 27 -
--------------------------------------------- ------- --- ------- ---
Total tax in income statement 3,280 108 4,177 25
--------------------------------------------- ------- --- ------- ---
7. Intangible assets - Group
Assets
under course
of construction Goodwill Other Total
GBP000 GBP000 GBP000 GBP000
---------------------------------------- ---------------- -------- ------- -------
Cost
Balance at 1 April 2018 - 43,358 15,456 58,814
Acquisitions - 2,043 4,816 6,859
Additions 943 - 51 994
Effect of movements in foreign exchange - 359 (258) 101
---------------------------------------- ---------------- -------- ------- -------
Balance at 31 March 2019 943 45,760 20,065 66,768
---------------------------------------- ---------------- -------- ------- -------
Balance at 1 April 2019 943 45,760 20,065 66,768
Additions 3,145 - 22 3,167
Effect of movements in foreign exchange - 165 346 511
---------------------------------------- ---------------- -------- ------- -------
Balance at 31 March 2020 4,088 45,925 20,433 70,446
---------------------------------------- ---------------- -------- ------- -------
Amortisation and impairment
Balance at 1 April 2018 - 14,231 6,182 20,413
Amortisation for the year - - 1,469 1,469
Effect of movements in foreign exchange - 164 (96) 68
---------------------------------------- ---------------- -------- ------- -------
Balance at 31 March 2019 - 14,395 7,555 21,950
---------------------------------------- ---------------- -------- ------- -------
Balance at 1 April 2019 - 14,395 7,555 21,950
Amortisation for the year - - 1,447 1,447
Impairment for the year - 7,761 - 7,761
Effect of movements in foreign exchange - (12) 145 133
---------------------------------------- ---------------- -------- ------- -------
Balance at 31 March 2020 - 22,144 9,147 31,291
---------------------------------------- ---------------- -------- ------- -------
Net book value
At 1 April 2018 - 29,127 9,274 38,401
---------------------------------------- ---------------- -------- ------- -------
At 31 March 2019 943 31,365 12,510 44,818
---------------------------------------- ---------------- -------- ------- -------
At 31 March 2020 4,088 23,781 11,286 39,155
---------------------------------------- ---------------- -------- ------- -------
The addition in assets under the course of construction in the
year relates to Project Atlas.
Included within other intangibles are customer relationship
intangible assets of GBP9.0m (FY2019: GBP9.9m), know-how of GBP1.1m
(FY2019: GBP1.3m) and marketing related intangibles of GBP0.9m
(FY2019: GBP1.0m).
The amortisation charge is recognised in administrative expenses
in the income statement. Of the GBP1,447,000 charge in the year,
GBP1,409,000 relates to amortisation on acquired intangibles.
Other intangible assets are made up of
-- Customer relationships acquired as part of the acquisition of
PSEP. The remaining amortisation period left on these assets is 3.8
years
-- Customer relationships, technology know-how and technology
patents acquired as part of the acquisition of VIC. The average
remaining amortisation period on these assets is 7.8 years
-- Customer relationships acquired as part of the acquisition of
Kuhlmann. The average remaining amortisation period on these assets
is 5.5 years
-- Customer relationships and marketing related intangibles
acquired as part of the acquisition of PTS, the average remaining
amortisation period on these assets is 12.3 years
The following cash generating units have carrying amounts of
goodwill
2020 2019
GBP000 GBP000
----------------------------------------------------- ------- -------
Special Fasteners Engineering Co. Ltd (Taiwan) 10,691 10,722
TR Fastenings AB (Sweden) 1,063 1,063
Lancaster Fastener Company Ltd (UK) 1,245 1,245
Serco Ryan Ltd (within TR Fastenings Ltd) (UK) 4,083 4,083
Power Steel and Electro-Plating Works SDN Bhd (PSEP)
(Malaysia) - 793
TR VIC SPA (VIC) (Italy) 3,001 9,802
TR Kuhlmann GmbH (Germany) 1,551 1,510
Precision Technology Supplies Ltd (UK) 2,043 2,043
Other 104 104
----------------------------------------------------- ------- -------
23,781 31,365
----------------------------------------------------- ------- -------
The changes in goodwill for SFE and Kuhlmann relate to foreign
exchange gains or losses as these investments are held in,
Singaporean Dollars and Euros, respectively. The reductions in
goodwill for VIC and PSEP predominantly relate to goodwill
impairments of GBP7.0m and GBP0.8m respectively, the remaining
movements relate to foreign exchange gains or losses as the
investments are held in Euros and Malaysian Ringgits
respectively.
Annual impairment testing
The Group tests goodwill annually for impairment. The
recoverable amount of cash generating units is determined from
value in use calculations.
Value in use was determined by discounting the future cash flows
generated from the continuing use of the unit. In this method, the
free cash flows after funding internal needs of the subject company
are forecast for a finite period of four years based on actual
operating results, budgets and economic market research. Beyond the
finite period, a terminal (residual) value is estimated using an
assumed stable cash flow figure.
The values assigned to the key assumptions represent
management's assessment of future trends in the fastenings market
and are based on both external and internal sources of historical
data. Further information on sources of data used can be found in
each description of the key assumptions below.
The recoverable amount of Special Fasteners Engineering Co. Ltd
(Taiwan), TR VIC SPA (Italy) and Serco Ryan Ltd (within TR
Fastenings Ltd) (UK) have been calculated with reference to the key
assumptions shown below:
SFE VIC Serco
------------------------- ------------ ------------ -----------
2020 2019 2020 2019 2020 2019
------------------------- ----- ----- ----- ----- ---- -----
Long-term revenue growth
rate 2.0% 2.0% 1.6% 2.0% 2.0% 2.0%
Discount rate - post-tax 7.6% 9.9% 10.8% 11.2% 7.3% 8.4%
Discount rate - pre-tax 9.5% 12.4% 14.9% 15.4% 9.0% 10.4%
Terminal EBIT margin 16.2% 16.8% 13.5% 17.2% 8.1% 9.1%
------------------------- ----- ----- ----- ----- ---- -----
Long-term revenue growth rate
Four-year management plans are used for the Group's value in use
calculations. Long-term growth rates into perpetuity have been
determined as the lower of:
-- The nominal GDP rates for the country of operation
-- The long-term compound annual growth rate in EBITDA in years
six to ten estimated by management
Post-tax risk adjusted discount rate
The discount rate applied to the cash flows of each of the
Group's operations is based on the Weighted Average Cost of Capital
('WACC') (using post-tax numbers). The cost of equity element uses
the risk free rate for ten year bonds issued by the government in
the respective market, adjusted for a risk premium to reflect both
the increased risk of investing in equities and the systemic risk
of the specific Group operating company.
In making this adjustment, inputs required are the equity market
risk premium (that is, the increased return required over and above
a risk-free rate by an investor who is investing in the market as a
whole) and the risk adjustment, beta, applied to reflect the risk
of the specific Group operating company relative to the market as a
whole.
In determining the risk adjusted discount rate, management has
applied an adjustment for the systemic risk to each of the Group's
operations determined using an average of the betas of comparable
listed fastener distribution and manufacturing companies and, where
available and appropriate, across a specific territory. Management
has used an equity market risk premium that takes into
consideration studies by independent economists, the average equity
market risk premium over the past five years and the market risk
premiums typically used by investment banks in evaluating
acquisition proposals.
To calculate the pre-tax discount rate we have taken the
post-tax discount rate and divided this by one minus the applicable
tax rate. We consider this an appropriate approximation of the
pre-tax rate as there are no significant timing differences between
the tax cash flows and tax charges. The table above discloses the
discount rate on a post and pre-tax basis. This takes into account
certain components such as the various discount rates reflecting
different risk premiums and tax rates in the respective regions.
Overall, the Board is confident that the discount rate adequately
reflects the circumstances in each location and is in accordance
with IAS36.
Terminal EBIT margin
The margins used in the value in use calculations are based on
historic performance adjusted for any known or expected changes to
occur to existing operations based on management plans. Key
adjustments relate to known efficiency gains from increased volumes
achieved in the business as well as the transactional foreign
exchange impact based on forecast rates.
Impairments in the year
The impairments of GBP7.0m in VIC's goodwill and GBP0.8m in
PSEP's goodwill respectively have arisen due to the impact of
COVID-19 both on short to medium-term cash flows as well as higher
than usual discount rates. These have been separately disclosed in
the consolidated income statement.
For VIC, the discount rate used is 10.8% post-tax (14.9%
pre-tax). This is at similar levels to FY2019 (11.2% post-tax;
15.4% pre-tax) due to the economic struggles in Italy, but higher
than the average post-tax rate in previous years of c.9.3%. The
unit's recoverable amount calculated by management is GBP27.4m.
For PSEP, the discount rate used is 10.6% post-tax (13.9%
pre-tax). This is broadly in line with FY2019 (11.6% post-tax;
15.3% pre-tax), but higher than the average post-tax rate in
previous years of c.10.0%. The unit's recoverable amount calculated
by management is GBP10.4m.
Sensitivity to changes in assumptions
The continued economic struggles in Italy, combined with the
impact of COVID-19, has caused the discount rate for VIC to remain
high (the years before FY2019 it was c.9.3%), thus reducing
headroom. If these uncertainties continue and the discount rate
increases then it is possible that there might be an additional
impairment of VIC's goodwill. Given the impairment in the year,
VIC's recoverable amount is equal to its carrying amount. An
increase in the discount rate of 50bps will cause the units
recoverable amount to be GBP1.3m lower than its carrying amount.
Despite the negative impact of the macroeconomic factors (including
COVID-19) which are outside of our direct control, management
believe the outlook for VIC continues to be positive.
Excluding VIC, management believe that no reasonably possible
change in any key assumptions would cause the carrying value of any
other cash generating unit to exceed its recoverable amount.
8. Inventories - Group
2020 2019
GBP000 GBP000
------------------------------------ ------- -------
Raw materials and consumables 4,982 5,568
Work in progress 2,026 2,233
Finished goods and goods for resale 52,179 49,757
------------------------------------ ------- -------
59,187 57,558
------------------------------------ ------- -------
In FY2020, inventories of GBP129.2m (FY2019: GBP132.4m) were
recognised as an expense during the year and included in cost of
sales. Inventories have been written down by GBP1.6m in the year
(FY2019: GBP1.1m) in line with the Group's stock provisioning
policy. Such write-downs were recognised as an expense during
FY2020. No significant specific stock provisions have been reversed
in the year.
No inventories are pledged as security for liabilities.
The carrying amount of inventories carried at fair value less
costs to sell is GBP1.4m (FY2019: GBP1.2m).
9. Trade and other receivables
Group Company
---------------------------------------- ---------------- ----------------
2020 2019 2020 2019
GBP000 GBP000 GBP000 GBP000
---------------------------------------- ------- ------- ------- -------
Trade receivables 48,484 49,149 - -
Non trade receivables and prepayments 4,444 4,633 21 313
Amounts owed by subsidiary undertakings - - 48,890 44,204
---------------------------------------- ------- ------- ------- -------
52,928 53,782 48,911 44,517
---------------------------------------- ------- ------- ------- -------
The trade receivables position for the Group at 1 April 2018 was
GBP48.0m.
Expected credit losses for the Group were calculated by first
grouping trade receivables by entity and looking at historic credit
loss rates over 5 years. This was then overlaid with considerations
for overdue debt, forward looking information (including COVID-19)
and any customer specific risks.
Expected credit losses for the Company were assessed at year end
and there had not been a significant increase in credit risk
therefore they are provided at 12-month ECL. No material provision
was required in FY2020 or FY2019.
10. Other interest-bearing loans and borrowings
This note provides information about the Group and Company's
existing interest-bearing loans and borrowings as at 31 March
2020.
Current Non-current
--------------------------- ---------------- ---------- ---------------- ----------------
2020 2019 2020 2019
Initial loan value Rate Maturity GBP000 GBP000 GBP000 GBP000
--------------------------- ---------------- ---------- ------- ------- ------- -------
Group
Asset based lending Base + 1.49% 2019 - 2,977 - -
VIC unsecured loan EURIBOR + 1.95% 2020 266 517 - 258
Right of use liabilities Various 2020-2050 3,102 - 11,982 -
Finance lease liabilities Various 2019-2020 - - - 74
Group and Company
Revolving Credit LIBOR/ EURIBOR
Facility + 1.10% 2023 - - 44,262 -
Prepaid arrangement
fees - - (640) -
Right of use liabilities Various 2020-2023 11 - 14 -
Facility A VIC acquisition
loan EURIBOR + 1.50% 2021 - 4,307 - 4,307
Facility B Revolving LIBOR/ EURIBOR
Credit Facility + 1.50% 2019-2021 - 24,816 - -
Property Loan LIBOR + 1.25% 2021 - - - 2,100
--------------------------- ---------------- ---------- ------- ------- ------- -------
Total Group 3,379 32,617 55,618 6,739
--------------------------------------------------------- ------- ------- ------- -------
Total Company 11 29,123 43,636 6,407
--------------------------------------------------------- ------- ------- ------- -------
11. Trade and other payables
Group Company
------------------------------------------- ---------------- ----------------
2020 2019 2020 2019
GBP000 GBP000 GBP000 GBP000
------------------------------------------- ------- ------- ------- -------
Trade payables 20,054 21,496 - -
Amounts payable to subsidiary undertakings - - 3,547 4,162
Deferred consideration - 511 - -
Non-trade payables and accrued expenses 12,665 12,961 855 839
Other taxes and social security 2,195 2,239 185 101
------------------------------------------- ------- ------- ------- -------
34,914 37,207 4,587 5,102
------------------------------------------- ------- ------- ------- -------
12. Dividends
During the year the following dividends were recognised and paid
by the Group:
2020 2019
GBP000 GBP000
--------------------------------------------------------- ------- -------
Final paid 2019 - 3.05p (FY2018: 2.75p) per qualifying
ordinary share 3,687 3,301
Interim paid 2019 - 1.20p (FY2018: 1.10p) per qualifying
ordinary share 1,447 1,319
--------------------------------------------------------- ------- -------
5,134 4,620
--------------------------------------------------------- ------- -------
After the balance sheet date, a final dividend of nil per
qualifying ordinary share (FY2019: 3.05p) was proposed by the
Directors and an interim dividend of 1.20p (FY2019: 1.20p) was paid
in April 2020.
2020 2019
GBP000 GBP000
---------------------------------------------------------- ------- -------
Final proposed 2020 - nilp (FY2019: 3.05p) per qualifying
ordinary share - 3,687
Interim paid 2020 1.20p (FY2019: 1.20p) per qualifying
ordinary share 1,457 1,447
---------------------------------------------------------- ------- -------
1,457 5,134
---------------------------------------------------------- ------- -------
Subject to Shareholder approval at the Annual General Meeting,
which is to be held on 22 September 2020, the Board are not
proposing a final dividend at this time. See the Business Review
for further details.
13. Earnings per share
Basic earnings per share
The calculation of basic loss per share at 31 March 2020 was
based on the loss attributable to ordinary shareholders of
GBP(0.2)m (FY2019: profit of GBP12.2m) and a weighted average
number of ordinary shares outstanding during the year ended 31
March 2020 (excluding own shares held) of 122,171,272 (FY2019:
120,723,637), calculated as follows:
Weighted average number of ordinary shares
2020 2019
------------------------------------------------------- ----------- -----------
Issued ordinary shares at 1 April 121,890,011 121,364,667
Net effect of shares issued/(held) 281,261 (641,030)
------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares at 31 March 122,171,272 120,723,637
------------------------------------------------------- ----------- -----------
Diluted earnings per share
The calculation of diluted loss per share at 31 March 2020 was
based on loss attributable to ordinary shareholders of GBP(0.2)m
(FY2019: profit of GBP12.2m) and a weighted average number of
ordinary shares outstanding during the year ended 31 March 2020
(excluding own shares held) of 122,171,272 (FY2019: 123,734,170),
calculated as follows:
Weighted average number of ordinary shares (diluted)
2020 2019
------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares at 31 March 122,171,272 120,723,637
Effect of share options on issue - 3,010,533
------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares (diluted)
at 31 March 122,171,272 123,734,170
------------------------------------------------------- ----------- -----------
For diluted EPS there are potentially 2,273,827 dilutive share
options, however they are not included in the weighted average
calculation for FY2020 because they are anti-dilutive since there
is a loss after tax. These dilutive share options are considered in
the calculation for underlying diluted EPS below.
The average market value of the Company's shares for the
purposes of calculating the dilutive effect of share options was
based on quoted market prices for the period that the options and
deferred equity awards were outstanding.
Underlying earnings per share
2020 EPS 2019 EPS
--------------------------------- --------------------------- ---------------------------
Earnings Earnings
EPS (total) GBP000 Basic Diluted GBP000 Basic Diluted
--------------------------------- -------- ------- -------- -------- ------- --------
(Loss)/profit after tax
for the financial year (238) (0.19)p (0.19)p 12,244 10.14p 9.90p
Separately disclosed items:
IFRS2 share based payment
charge 2,030 1.66p 1.63p 2,454 2.03p 1.98p
Acquired intangible amortisation 1,409 1.15p 1.13p 1,419 1.18p 1.14p
Net acquisition costs - - - 3 - -
Costs on exercise of executive
share options 307 0.25p 0.24p 107 0.09p 0.09p
Impairments in goodwill 7,761 6.35p 6.24p - - -
Project Atlas 2,505 2.05p 2.01p 3,117 2.58p 2.52p
Tax charge on adjusted
items above (653) (0.53)p (0.52)p (1,370) (1.13p) (1.10p)
--------------------------------- -------- ------- -------- -------- ------- --------
Underlying profit after
tax 13,121 10.74p 10.54p 17,974 14.89p 14.53p
--------------------------------- -------- ------- -------- -------- ------- --------
The 'underlying diluted' earnings per share is detailed in the
above tables. In the Directors' opinion, this best reflects the
underlying performance of the Group and assists in the comparison
with the results of earlier years (see note 2).
14. Subsequent events
There are no material adjusting events subsequent to the balance
sheet date.
On the 19 June 2020 the Company's broker, Peel Hunt,
successfully completed the placing of 12,448,132 new ordinary
shares of five pence each in the share capital of the Company at a
price of 120.5 pence per Placing Share, raising gross proceeds of
approximately GBP15m. The Placing Price represented a discount of
9.7% to the closing price of 133.5 pence per share on 18 June 2020.
The Placing Shares being issued represented approximately 10.1% of
the issued share capital of the Company prior to the Placing.
On 23 June, the broker option was exercised in full, placing a
total of 830,000 new ordinary shares of five pence each in the
share capital of the Company, raising gross proceeds of
approximately GBP1m. The transaction costs incurred relating to the
placings of these shares were GBP0.5m.
As part of the transactions for the placing of the ordinary
shares, Trifast plc acquired Project Lavender Limited, a company
incorporated in Jersey, on 5 June 2020, and after the placing of
the shares the company was liquidated on 24 June 2020.
The placing was undertaken to ensure that the Group can continue
to support its long-term strategic investments as well as being
able to maximise its growth in the short term as markets recover
from COVID-19. For further details, see the Business Review.
There are no other material non-adjusting events subsequent to
the balance sheet date.
15. Preliminary statement
The financial information set out above does not constitute the
Group's statutory Report and Accounts for the years ended 31 March
2020 or 2019 but is derived from the 2020 Report and Accounts. The
Report and Accounts for 2019 have been delivered to the Registrar
of Companies and those for 2020 will be delivered in due course.
The external auditor has reported on the 2020 Report and Accounts;
the report was (i) unqualified, (ii) did not include references to
any matters to which the external auditor drew attention by way of
emphasis without qualifying the reports and (iii) did not contain
statements under section 498(2) or (3) of the Companies Act
2006.
16. Investor communications
The Company is not proposing to bulk print and distribute hard
copies of this Preliminary statement unless specifically requested
by individual shareholders, however it can be downloaded from the
investor website. News updates, Regulatory News, and previous
years' Annual Reports can also be viewed and downloaded from the
Group's website, www.trifast.com.
The Report and Accounts for the year ended 31 March 2020,
together with the Notice of Meeting will be posted to shareholders
where requested and uploaded to the National Storage Mechanism
https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism
and the Group's website, www.trifast.com in due course.
The 2020 Annual Report and Financial Statements will also be
available on request by writing to: The Company Secretary, Trifast
plc, Trifast House, Bellbrook Park, Uckfield, East Sussex TN22 1QW,
Email: corporate.enquiries@trifast.com.
17. Annual General Meeting
The Annual General Meeting will be held on Tuesday 22 September
at 12noon at Trifast House, Bellbrook Park, Uckfield, East Sussex
TN22 1QW. Shareholders must not attend the AGM in person due to the
current situation with COVID-19. Information regarding the AGM will
be uploaded to our website
http://www.trifast.com/investors/shareholder-meetings/ in due
course.
Enquiries please contact:
--------------------------------------------
Trifast plc
Jonathan Shearman, Non-Executive Chair
Mark Belton, Chief Executive Officer
Clare Foster, Chief Financial Officer
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
Trifast plc (TR) is an international specialist in the design, engineering,
manufacture, and distribution of high quality industrial and Category 'C'
component s principally to major global assembly industries. TR employs
c.1300 people across 33 business locations within the UK, Asia, Europe,
and the USA including eight high-volume, high-quality, and cost-effective
manufacturing sites across the world. TR supplies to over 5,000 customers
in >75 countries worldwide. As a full-service provider to multinational
OEMs and Tier 1 companies spanning several sectors, TR delivers comprehensive
support to its customers across every requirement, from concept design through
to technical engineering consultancy, manufacturing, supply management and
global logistics.
For more information, visit
Investor website: www.trifast.com
Commercial website: www.trfastenings.com
LinkedIn : www.linkedin.com/company/tr-fastenings
Twitter: www.twitter.com/trfastenings
Facebook : www.facebook.com/trfastenings
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
FR BIGDRCSDDGGR
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July 28, 2020 02:00 ET (06:00 GMT)
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