Finance Review

Strong Cash generation at


Significant improvement in ROCE to


(Inc PSEP on a pro-rata basis)



Underlying profit up


"The key driver of growth in the year was the Europe/ USA region which grew by 9.8%. Holland and Hungary saw the largest growth with a number of new automotive contracts secured in Holland and wins from the electronics sector in Hungary"

"Whilst Revenue growth is important to the business, one of our key drivers remains the focus on quality of earnings and margin enhancement"

Did you know?

  • Statutory Profit before Tax increased by 88.7%
  • Basic Earnings per Share increased 78.7%

The traditional TR business has performed well and through a focus on margin and "self-help" applications has returned a creditable result despite natural disasters and external influences affecting the global economies and commercial marketplace. Added to the solid organic performance of TR, the integration of Power Steel and Electro-Plating Works Sdn. Bhd. ("PSEP"), acquired at the end of last year continues to progress on plan; as a combined business we have a number of exciting opportunities ahead.

An Operational Business Review of the year ended March 2012 has been set out in the Joint Chairman's and CEO's Statement.


Overall, Group Revenue year-on-year was 6.1% up on the previous year at £112.51 million; this included a contribution of £3.56 million from our Malaysian acquisition PSEP, completed in December 2011, leaving organic revenue growth at the existing TR operations at a solid 2.7%. This demonstrates a good all-round reported performance, and was achieved against a softening in demand in our Q3 period when we witnessed a mix of customer de-stocking in Europe/USA on the back of ongoing EuroZone concerns, and customer schedule changes in Asia following the Thai floods that occurred in September 2011. However, the last quarter of the financial year (Q4) saw a return to more encouraging volumes and sales, and we completed the year with a strong performance.

The Group's key regions can be analysed as follows:

Continuing operationsFull Year
31 March
Full year
31 March

UK £57.78m £57.13m +1.1%
Asia1 £31.12m £27.45m +13.4%
Europe/USA £23.61m £21.51m +9.8%
Total for the year £112.51m £106.09m +6.1%
  1. Includes PSEP acquisition.

The key driver of growth in the year was the Europe/USA region which grew by 9.8%. Holland and Hungary saw the largest growth with a number of new automotive contracts secured in Holland and wins from the electronics sector in Hungary. As previously discussed, overall growth in the Asian territories was affected by the Thai floods and the Japanese Tsunami and so it was pleasing to see that organically (excluding the acquisition of PSEP) this Region still grew marginally by 0.4%.

Whilst Revenue growth is important to the business, one of our key drivers remains the focus on quality of earnings and margin enhancement.

Adjusted pre-tax profit operating margins

The underlying operating result between the TR represented regions can be analysed as follows:

Continuing operationsFull Year
31 March
Full year
31 March
Underlying operating result

UK £2.74m £2.46m
Asia1 £3.76m £3.20m
Europe/USA £0.62m (£0.05m)
Central costs (£1.49m) (£1.29m)
Total before financing costs £5.63m £4.32m
Net financing costs (£0.63m) (£0.55m)
Total after financing costs £5.00m £3.77m
  1. Includes PSEP acquisition

The Management is very pleased to report a 32.6% increase in profitability to £5.00 million (before separately disclosed items). It is also satisfying to report that the Group's underlying organic pre-tax profit (pre-PSEP) was £4.42 million, a 17.2% increase over the previous financial year — a very creditable performance by the TR businesses.

By territory, the UK contribution increased by 11.4% demonstrating better utilisation of its overheads, whilst Asia grew 17.5% reflecting the positive effect of PSEP; however, the biggest swing was Europe/USA turning a small loss in 2011 into a profit of £0.62 million.

One of our stated goals is to focus on net margin enhancement; therefore, it is pleasing to report that during the year, we have improved net margins from 3.6% to 4.4%. This has been achieved through:

  • Consolidation and better utilisation of the Group's overheads
    • as a percentage of sales, have been reduced from 21.1% to 20.6%, with a target of decreasing by a further 1% by the end of the financial year ending March 2013. The Board together with the Operational management teams around the business continueto review and identify areaswhere efficiencies can continue to be made.
    • average headcount was reduced by 2.6% (prior to acquiring PSEP), which represents the actions in Asia where, as previously highlighted, we undertook to exit our Chinese manufacturing plant in Suzhou within the Free Trade Zone and relocate the operation into one of our Strategic Alliance Partners. This move has served to improve TR's ability to service the domestic market more efficiently.

      The total number of staff within the Group at the year-end stood at 1,029 (March 2011: 880) of which 176 joined the Group with PSEP.
  • Gross Profit margins (GP%)

Gross Profit showed an improvement during the year up from 25.2% at year-end March 2011 to 25.6% at the end of the financial year being reported upon. This improvement was achieved despite higher than normal stock write-offs (due to the closure of SAAB in December 2011 and Customer transfer projects in China coming to the end of their life cycle) and the strengthening of the Asian currencies against both the US$ and Euro. The Board believes that there is additional scope to further improve GP margins and this continues to be a key objective for the future.

  • Acquisition benefits

As Shareholders are aware, to achieve ongoing earnings enhancing growth, investment is required. One of the Board's strategies is to focus on niche market acquisitions which operate at higher margins and this has been shown through the acquisition of PSEP, where pre-tax profit margins are circa 16% of revenue.

Extending the Group's capabilities through £15 million acquisition in Asia

Since 2009, we have successfully restructured the Group's operations across its European, Asian and US businesses. An essential element of the TR Management growth strategy is to identify and selectively acquire profitable, "self-managing bolt-on" businesses that either extend its product range or offer niche opportunities as well as being earnings enhancing for the Group.

In December 2011, we completed the acquisition of PSEP, a Malaysian-based manufacturer of higher value and technically sophisticated cold forged components used within the automotive, motorcycle and compressor industries in the Asian region. PSEP is considered to be one of the most advanced fastener manufacturers in the Asia region with a strong balance sheet and excellent track record. Adding TR's Global Sales & Marketing resources to the excellent PSEP model will increase our capabilities in Asia and we will see further utilisation of their capacity, for example through channelling some of the Group's growing Automotive business enquiries and wins through their business.

The acquisition consideration was £14.94 million, of which £13.49 million was paid on completion with £1.45 million becoming payable in December 2012 subject to claims under warranties not being initiated. PSEP was acquired utilising a mix of Bank resource (Term Loan £7.48 million) and an Equity Placing which amounted to 21,621,622 shares at 37 pence per share, raising approximately £8.00 million, before expenses. These shares were admitted to the Official List of the London Stock Exchange on 14 December 2011.

For the period in review, the results were in line with our expectations, providing revenue in the Q4 period of £3.56 million and profit of £0.58 million.

Separately disclosed items

The following items are shown separately in the Consolidated income statement and need to be taken into consideration when reviewing the underlying performance of the Group:

Acquisition Expenses (£0.39m)
Restructuring credit/costs £0.66m
Intangible amortisation (£0.28m)
IFRS 2 charge (£0.23m)
Total (£0.24m)

The Acquisition expenses relate to the legal and accountancy fees incurred as part of the due diligence process required in the purchase of PSEP. The Restructuring credit of £0.66 million comprises £0.84 million of provision releases in respect of onerous leases, which have been surrendered with potential liabilities up to 2017. The costs in relation to this had previously been provided and separately disclosed. This was offset by £0.18 million costs incurred to close one of our sites in the USA; the majority of which relate to redundancies and an onerous lease.

Interest and interest cover

Net interest costs have increased in the year to £0.63 million (2011: £0.55 million) due largely to the Acquisition Term Loan taken out by TR Asia Investment Holdings Pte. Ltd ("TR Asia") to part fund the PSEP acquisition.

Net interest cover (which is defined as EBITDA to net interest, before one-off separately disclosed items) improved to 10.4 times (2011: 9.5 times) despite the increase in gross debt.

Pictured: Carolyn Emsley, Peter Callender, Lyndsey Case, Mark Belton, Maria Johnson, Mim O'Brien and Jon Gibb


Taxation in the period amounted to £1.60 million, an Effective Tax Rate ("ETR") of 33.6% (2011: 34.9%); however, the ETR was affected by disallowable tax costs in relation to the acquisition of PSEP, the surrender of onerous leases in the UK and the closure costs of one of our sites in the US. Before these one-off tax disallowable costs, the normalised ETR would have been 27%, while the Group's blended tax rate based on geographical tax regimes was 20%.

At the end of the period, all of the current tax charge related to overseas operations.

Balance sheet and funding

At 31 March 2012, total Shareholder equity amounted to £53.49 million (2011: £42.85 million), an increase of 24.8%; this increase reflects the Group's profitability during this period and an injection to part fund the PSEP acquisition of £8.00 million (£7.18 million net of expenses).

Property, plant and equipment in the year increased by £6.21 million to £13.29 million, predominantly due to the fixed assets acquired in December 2011 with PSEP (£4.53 million relates to property and £1.92 million to plant & machinery). Intangible assets also increased by £1.33 million, largely as a result of the PSEP acquisition; £0.82 million in relation to intangible customer relationships acquired and which are to be amortised over 12 years and £0.73 million relating to goodwill. The provisional fair value of net assets acquired with PSEP was £14.21 million.

Whilst stock, debtors and creditors have increased accordingly due to the PSEP acquisition, stock weeks have largely remained constant at 22.1. (2011: 22.0). Debtor days remain strong at 70 (2011: 73). Total bad debts were low at £0.08 million which predominantly related to the exposure to SAAB following it filing for bankruptcy. Total provisions have reduced year-on-year by £1.49 million; £0.53 million was utilised during the year, and £0.96 million was released largely due to the surrender of onerous lease provisions at sites in the UK. Although the surrender of these onerous leases will impact cash flow in the first half of the financial year ending March 2013, in the long term, it will save Group cash flow overall.

During the year, a £7.48 million five-year Term Loan supplied by Development Bank of Singapore ("DBS") to TR Asia Investment Holdings Pte Ltd was taken out to part fund the PSEP acquisition; this attracted a fixed interest rate of 3.14% per annum and contributed to Gross debt at 31 March 2012 increasing to £20.21 million (2011: £14.28 million).

Year-end net debt was £8.41 million (2011: £7.14 million), an increase of £1.27 million. If we were to exclude PSEP's net cash position and the effect of funding the acquisition, the underlying net debt at the end of the period would have been significantly lower at £3.76 million, a reduction of £3.38 million and reflecting the positive cash generation made by the Group during the period. Gearing remains low at 15.7% (2011: 16.7%).

The Group's Banking facilities as at31 March 2012 consisted of:

  • a Term Loan which has £1.00 million outstanding and will be fully repaid by 31 December 2012;
  • an Asset Based Lending ("ABL") facility of £15.80 million, of which £11.80 million is utilised; this has a three-year term which expires in February 2013.

The Directors have made appropriate enquiries and are satisfied that the Company is likely to be able to extend or replace its current facilities, as they come up for renewal.

The Group continues to trade well within its banking covenants.

Group net cash balances at 31 March 2012 were £11.80 million (2011: £7.14 million), of which £8.03 million were held in foreign currencies (2011: £6.26 million). This increase is due to PSEP, where the majority of its cash balances are held in Malaysian Ringgits.

"It is pleasing to report that during the year, we have improved net margins from 3.6% to 4.4%"

Cash flow

Cash generation continues to be a key focus for the TR operations, to provide sufficient cash reserves for reinvestment back into the overall business. Cash flow generated from operating activities before tax was strong at £4.42 million compared to £1.05 million cash used in the previous financial year. This has been achieved mainly by an improving EBITDA performance.

Net proceeds after expenses from the Equity Placing (announced in November 2011) amounting to £7.18 million and the Acquisition Term Loan of £7.48 million were used to fund the acquisition of PSEP and the other associated costs.

Capital expenditure in the year was £0.65 million, more than double the previous financial year (2011: £0.30 million). The investment covered improvements to operational facilities for the benefit of personnel and extended manufacturing capabilities in Asia.

The Group continues to be prudent with cash but remains mindful of its objective to invest to increase Return on Capital Employed ("ROCE"). Last year, we witnessed a significant improvement in ROCE from 2.4% in 2010 to 8.7% in 2011. After taking into account PSEP, on a 12-month pro rata basis, ROCE improved further to 11.3% at 31 March 2012.

Earnings per share
Adjusted diluted Eps


(2011: 3.03p)

Earnings per Share

The adjusted diluted Earnings per Share ("EPS") which in the Directors' opinion best reflects the underlying performance of the Group, has increased significantly by 24.1% to 3.76 pence (2011: 3.03 pence). Basic Earnings per Share has increased by 78.7% to 3.45 pence (2011: 1.93 pence).


The Directors' focus since the Board changes in 2009 has been on capital growth through investing in the business and increasing ROCE, but the restoration of a yield and the Board's desire to return to a progressive dividend policy has remained very important to the Directors who committed to all stakeholders that this would be addressed at the earliest opportunity.

To underpin the confidence the Management has in the future development and success of the business, it is with pleasure that the Board will be recommending a return to a Dividend stream. Subject to Shareholder approval at the Annual General Meeting which is to be held on 20 September 2012, a final dividend of 0.5 pence (net of tax) per Ordinary share will be paid on 18 October 2012 to Shareholders on the Register at the close of business on 29 June 2012. The Ordinary shares becomeex dividend on 27 June 2012.


At Trifast we continue to closely monitor and operate stringent financial controls around the businesses, and I would like to acknowledge the dedicated teamwork, initiatives and support that both Group and the Finance teams around the Globe provide not only to me but to the operational business units and I look forward to working with them over the coming year to deliver further progress and efficiencies.


Whilst uncertainty in the world markets remains, the Directors are encouraged by the progress the enlarged business is making through enhanced capabilities and the opportunities afforded to us to rebuild supply partnerships, and build on and win new business. We are optimistic that with the opportunities that lie ahead, the Group will continue to make good progress both commercially and strategically throughout 2012/13.

18 June 2012

Mark Belton
Group Finance Director