Business Review

"Our business objectives remain committed to margin enhancement whilst continuing to focus on maximising growth opportunities through TR's transactional sales, global sales and acquisition strategies"

Introduction

Whilst global recovery continues to be reliant on overall economic and customer confidence getting stronger, the Group has focused on its "self-help" objectives which has produced a solid improvement in both sales and profitability, giving us a stronger platform to continue to build upon our stated strategic objectives. Our business objectives remain, committed to margin enhancement whilst continuing to focus on maximising growth opportunities through both TR's transactional and Global sales strategy and acquisition strategy.

Three years on . . . and a "World of Opportunity"

The end of this financial year was a significant time for us both, as it marked the three-year milestone since our return to Trifast as a working partnership of Chairman and CEO in March 2009.

Looking back provides a stark yet encouraging contrast between the status and financial health of the Company in 2009 compared to 2012, maybe not quite "rags to riches", but more "doomed to dynamic", and we are now focused and working through this current financial year with an even higher degree of confidence in our ability to further accelerate our growth going forward into 2013 and 2014.

Clearly, the 2011 year brought us and many other businesses major challenges from the impact of the Japanese Tsunami and earthquakes, the flooding in Thailand, and the nervousness from the Eurozone sovereign debt, all of which for TR adversely impacted global demand for our components, yet we still exceeded our profit growth target as a Group. We believe that this performance is much more attributable to the resilience, energy and skill of our management and staff around the world than to perhaps over conservative budgeting by the Board.

The global market for fasteners and related components for assembly is so vast that Trifast's revenue is barely measurable in terms of penetration, yet the market is more fragmented than ever before as many major Western corporations have downsized to reduce cost in recent years.

This has revealed opportunities for smaller more flexible players such as Trifast to become "strategic consolidators" where synergy savings provide attractive returns — especially with low cost/high technology manufacturers predominantly to be found in Asia.

As we report on our performance over the year 2011/12, we are mindful that looking ahead your Board clearly sees a "World of Opportunity".

Pictured: TR Distribution Centre, Uckfield

Stakeholder Value

In what is perceived as an increasingly competitive market it is very easy for suppliers to slip into what we term "over compliance", where more added value is provided to customers for less volume or revenue in return. This develops from either fear of losing the customer to a competitor or from the promise by customers of gaining additional business if existing transactions are made more attractive. These concessions invariably come from the sales team where the cost and danger of customer compliance is rarely recognised — mainly because financial training and awareness is not normally provided by management to their sales personnel.

This knowledge gap has now been remedied at TR Fastenings with team and one-to-one commercial training and mentoring, to the extent that now when new enquiries and orders are evaluated at the time of receipt then our internal processes receive more focus and debate than the actual revenue. Logistics contracts (VMI), both new and existing, are scrutinised to effect maximum efficiency with regard to product stock levels, packaging, delivery cycles, administration, customer contact frequency, etc. in order to ensure that our customer receives optimum service and value without eroding what is normally a competitively narrow margin when the contract is up and running. This very professional approach combined with our strategic vendor development programme and new Global sourcing initiatives has created the ability to achieve our margin improvement targets during the year under review.

However, this is not a "one-off" phase that we have gone through, but a permanent culture of "value focus" that is reinvigorated at regular intervals by senior management as a matter of routine. It is no accident that the only bonus schemes within the Group are efficiency based and that there is a total absence of revenue driven commission schemes. We believe that this will enable us to deliver best value on behalf of all our stakeholders.

"The knowledge gap has now been remedied at TR with team and one-to-one commercial training and mentoring"

Did you know?

  • TR has attained Global Supplier Approval with nearly 30 International key customers

Operational "Smoothing"

Our ongoing margin improvement strategy is focused not only upon better transactional volumes and buying levels but also on reducing fixed superfluous overhead costs along with operational "Continuous Improvement" in process efficiencies.

Material savings have been identified and part achieved over the past year by renegotiating onerous property leases in the Midlands and Scotland and also on freight contracts for imports plus a significant reduction in our UK van fleet — even with the growth in sales revenue.

Meanwhile, our UK and mainland European-based procurement and sourcing teams are working with key suppliers on a major initiative to rationalise and standardise incoming product packaging sizes and specifications. This is a longer term project that will provide material benefits to the indirect costs of handling goods inwards, warehouse storage, order picking and subsequent customer deliveries.

The introduction of the UK-based TR Direct business model in June 2011, plus the improved focus on TR Branded product sales to UK-based OEMs, has necessitated an overhaul of our external sales structure, to the extent that we now have a smaller team of more specialised representatives that report directly to the TR Direct and TR Branded product managers rather than, as before, to regional general managers. We are now witnessing improved sales dynamics as a result.

Pictured: First class manufacturing and logistics 24/7 around the Globe

Until early 2011, like many organisations, Group marketing operated separately from Group sales; however, as we strive to maximise "joined up thinking" within a "lean management structure" charged with ambitious growth targets, these two functions are now working in close harmony with a sharpened focus on both internal and external messaging. One tangible benefit has been a major overhaul of the TR website to make it much more sales orientated and "user-friendly".

In the Autumn of 2011, we addressed the need to simplify our strategy in the USA by switching our TR Branded product sales through a US-based commission agency in Massachusetts; consequently we closed our own distribution and sales facility near Boston during March 2012. All stock is now held in our new distribution hub established in Houston from where all sales and marketing is aimed predominantly at the major multinational electronics OEMs headquartered in the USA — many of whom we already supply in Europe and Asia.

We started this new financial year with TR Fastenings Inc. (USA) poised to develop into a meaningful contributor to Group revenue and profits following this strategic realignment.

Partnership working with customers is recognised and awarded

In March 2012, we were delighted to be recognised by Lear Corporation, a Fortune 500 company with 207 locations globally. We were presented with their prestigious "Lear Supplier of the Year" Award in Detroit. This has opened up opportunities to us across the Lear Corporation as we are recognised as a "Preferred Global Supplier".

The winning formula was created by a dedicated TR team, attention to quality, all backed up by technical support and TR manufacturing capability. We have received a number of awards, but this success we strongly believe is capable of being replicated with other multinationals we are currently working with or targeting.

Pictured: PSEP manufacturing

Phase Three: Organic Growth and Niche Acquisitions

Prior to entering this financial year being reported upon, we indicated that organic growth, whilst being reliably predicted, would fail to provide sufficient return to our loyal and patient Shareholders going forward, and with opportunities for consolidation within a fragmented global fastener sector, your Board made an open commitment to seek "value-add niche acquisitions to further strengthen the Group".

As broadly documented at the end of 2011, the acquisition of Power Steel and Electro-Plating Works Sdn. Bhd. ("PSEP") in Malaysia has fulfilled all the key criteria to help broaden TR's manufactured product range, especially within the Automotive assembly sector, whilst clearly demonstrating its strength of earnings. We are happy to confirm that the integration process has been successfully achieved principally thanks to the efforts and commitment of both TR's team and our new colleagues from Power Steel.

It is the Board's conclusion that the PSEP acquisition provides an encouraging foundation start to further expansion of the Group's manufacturing expertise and resources; therefore, it is indicative that our "Phase Three" strategic plan has a life expectancy beyond our initial three-year recovery plan instigated when we returned to the business.

"On behalf of the Main Board and all stakeholders, we would like to welcome all new members of staff across the Globe. All our people are to be congratulated for their hard work and dedication ensuring that we attain our aspirations as an ambitious business"

Our People

On behalf of the Main Board and all stakeholders, we would like to welcome all new members of staff across the Globe. All our people are to be congratulated for their hard work and dedication ensuring that we attain our aspirations as an ambitious business. Your Directors have all received tremendous support and dedication from the staff and their operational management teams; these are the people who are striving to deliver our plans and the improving performance for the benefit of all stakeholders. Once again, we look forward to working with them to deliver our next strategic three-year plan.

Pictured: David Ng, Asia Business Development Manager, HK Tan, General Manager TR Formac Malaysia (background)

Pictured: Jo Devlin, TR Strategic Project Manager

Management Structure

Having completed our three-year return to Trifast, what happens to the Board and indeed the two of us as we reach this juncture?

Today, it is our operational Group and country management that now deliver the ever improving performance of the Trifast business model which now has reduced the day-to-day dependence on the CEO's and Chairman's input at operational level. This satisfying outcome gives substantial strength to the Executive team allowing us to focus on driving the acquisition strategy, as we see Trifast as having the skills, capability and desire to
at least double in size.

This goal coincides with the fact that the global fastener market is highly fragmented with many opportunities for profitable consolidation and although current worldwide economic nervousness exists, it is a fact that our market is still growing.

These three circumstances have convinced us both to set a second three-year plan that targets realistic organic growth that is hugely reinforced with meaningful acquisitions — mainly, we believe, to be high tech/low cost niche manufacturers.

For this reason and for as long as we can add Shareholder value, your Chairman and CEO will continue at Trifast to drive this second three-year plan that aims to grow the business considerably to attain a position of market strength.

"Under promise — over deliver"

From Trifast's flotation in 1994 to the Millennium, the business developed a solid reputation for consistently outperforming market consensus, and with our recovery since 2009, we are hopeful that our "Under promise — over deliver" reputation is being restored.

Returning to the Dividend Stream

Underpinning our confidence in the future of the business, the Board is recommending the reintroduction of a dividend, subject to Shareholder approval at the Annual General Meeting in September, and we look forward to restoring a solid progressive dividend policy over the coming years.

Did you know?

  • TR has six state-of-the-art manufacturing facilities, staffed by highly experienced technical engineers

Current Trading

At the time of writing (18 June 2012), as all of our business teams continue to trade profitably we have been very encouraged by the accuracy of our growth forecasting so far this current financial year. Our enquiry log for major new business opportunities remains busy across all three main continents we serve — and sectors, mainly in Electronics and Automotive. We look forward to updating stakeholders throughout the year on our progress.

18 June 2012

Malcolm-diamond-jim-barker.jpg

Jim Barker
Chief Executive

Malcolm Diamond MBE
Executive Chairman

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