Publication of the 2022 Annual Results

RNS Number : 6812T

Trifast PLC

26 July 2022

 

Publication of the 2022 Annual Results "Innovation today for a better tomorrow - Growing sustainably, together"

LONDON: Tuesday, 26 July 2022: Trifast plc (LSE Premium listing: TRI) ('Trifast', the 'Group' 'TR' or 'Company'), publishes the Group's audited Annual report and Financial statements for the year ended 31 March 2022. The following information contained within this announcement is a summary taken from the Group's audited FY2022 Annual report and Financial statements which can be viewed in full via this link:

http://www.rns-pdf.londonstockexchange.com/rns/6812T_1-2022-7-25.pdf

"The medium term is increasingly exciting and as a Board we remain confident that the fundamentals of our business model and strategy position us well to become a larger, more profitable company. Over the coming financial year we will continue to make steady progress through a mix of customer service, technical innovation, investment and capturing key opportunities being presented"

CEO, Mark Belton

FY2022 Summary

· Strong recovery in HY1 and robust growth in HY2 drives a year-on-year revenue increase of 18.7% (organic 15.9%; acquisition 2.8%, 8.9% organic increase at CER against FY2020)

· Successful phase one price increase negotiation, implemented to mitigate cost inflation, returns gross margins in the month of March 2022 much closer to historic levels

· Underlying operating margins increase to 6.8% (FY2021: 6.4%), as strong sales growth offsets overhead normalisation

· Strong financial position allows further investment in inventory to support sales growth and protect supply, even as lead times remain at historic highs

· Falcon acquired - a first step on our ambitious North American acquisition journey

· Project Atlas, phased roll-out to our largest subsidiary underway, completion expected by end of 2022

FY2022 Financial highlights

Underlying measures:	CER FY2022	CER change	AER FY2022	AER change	FY2021	FY2020
Revenue	£223.3m	18.7%	£218.6m	16.2%	£188.2m	£200.2m
Gross profit %	26.6%	10bps	26.7%	20bps	26.5%	27.5%
Underlying operating profit (UOP)	£15.2m	27.1%	£14.7m	23.1%	£12.0m	£15.8m
Underlying operating profit %	6.8%	40bps	6.7%	30bps	6.4%	7.9%
Underlying profit before tax	£14.2m	29.2%	£13.8m	25.0%	£11.0m	£14.7m
Underlying diluted earnings per share	8.44p	35.3%	8.13p	30.3%	6.24p	8.64p
Adjusted leverage ratio2			1.27x	n/a	n/a	0.80x
Adjusted net (debt)/cash1			£(23.8)m	£(37.1)m	£13.3m	£(15.2)m
Underlying return on capital employed (ROCE)			8.3%	150bps	6.8%	8.8%
Total dividend			2.10p	31.3%	1.60p	1.20p
GAAP measures
Operating profit			£11.6m	32.5%	£8.8m	£4.1m
Operating profit %			5.3%	60bps	4.7%	2.0%
Profit before tax			£10.6m	36.4%	£7.8m	£3.0m
Diluted earnings per share			6.56p	52.2%	4.31p	(0.19)p

1.  Adjusted net (debt)/cash is presented excluding the impact of IFRS 16 Leases

2.  Calculated in line with banking agreement

To read the financial report in full, please go to pages 52-59 of the FY2022 Annual report

To also read more about:

-our key strategic indicators (KSIs) and key performance indicators (KPIs), refer to pages 12-15 of the FY2022 Annual report

-our balance sheet and focus on capital allocation refer to pages 38-41 of the FY2022 Annual report.

Unless stated otherwise, amounts and comparisons with prior year are calculated at constant currency (Constant Exchange Rate (CER)). Comparisons with FY2020 are calculated at FY2020 exchange rates. Where we refer to 'underlying' this is defined as being before separately disclosed items (see note 2 in the Annual report).

Presentation of FY2022 results

1	The Group will be holding a presentation to financial analysts today at 8:45am (UK time). Further details can be obtained by contacting TooleyStreet Communications - details are shown below. Investor enquiries can also be made via the Company's stockbroker, Peel Hunt LLP and its corporate access team.
2	The Company will also be presenting the FY2022 results via the Investor Meet Company platform on Thursday, 28 July 2022 at 11:30am (UK time). This 'live' event will be hosted by CEO Mark Belton, and CFO Clare Foster.  Investors who follow Trifast on the IMC platform will automatically be invited to join the event. The webcast will be available on the Trifast website following the event. To register for the session, you may follow this link: https://www.investormeetcompany.com/trifast-plc/register-investor

Further enquiries please contact:

Trifast plc

Jonathan Shearman, Non-Executive Chair

Mark Belton, Chief Executive Officer

Clare Foster, Chief Financial Officer

Office:  44 (0) 1825 747366

Email: [e-mail] or [e-mail]

Peel Hunt LLP (Stockbroker & financial adviser)

Mike Bell,  Tel: [phone]

TooleyStreet Communications, (IR & media relations)

Fiona Tooley,  Tel: [phone] or Email: [e-mail]

Editors' note

LSE Premium Listing: Ticker: TRI

LEI number: 213800WFIVE6RWK3CR22

Trifast (TR) is a leading international specialist in the design, engineering, manufacture and distribution of high-quality industrial fastenings and Category 'C' components, principally to major global assembly industries.  Weemploy c.1,300 people across 34 business locations within the UK, Asia, Europe, and North America including seven high-volume, high-quality, and cost-effective manufacturing sites across the world.  TR supplies to c.5,000 customers in c.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. · Our purpose: To provide Trusted Reliability at every turn to our customers, suppliers and our people, empowering them to deliver sustainable products and solutions that add value to society and our planet · Our vision: To enable innovation today for a better tomorrow · Our mission: To promote an environment that is safe and fair, which motivates, develops and maximises the contribution and potential of all employees. To be acknowledged commercially as the market leader in industrial fastenings in terms of service, quality, design, engineering support, ESG (environmental, social and governance), together with brand reputation. To continue to grow profitability, improve stakeholder returns through organic and acquisitive growth, and by driving continual efficiencies throughout the organisation To read more about · being a global leader operating in attractive markets, go to pages 16-25 of the FY2022 Annual report · driving growth through our business model - go to pages 10-11 of the FY2022 Annual report · about our culture, go to page 3 of the FY2022 Annual report · Our five-year sustainability strategy framework (2022-2026): go to pages 43 and 50-51 of the FY2022 Annual report http://www.rns-pdf.londonstockexchange.com/rns/6812T_1-2022-7-25.pdf or 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 Note   Trifast, TR and TR Fastenings are registered trademarks of the Company.

Trifast plc

2022 Annual results

Extracts from the Strategic report

The report can be read in full on pages 2-89 of the FY2022 Annual report

"As we approach our 50 year anniversary in 2023, I am pleased to see how our business is transforming, from an international company with individual operations worldwide, to a more global company, working together as one team"

CEO, Mark Belton

Introduction

Over the last few years, we have seen the world change dramatically creating opportunities and challenges along the way.  As a Group we have come together and met those changes head on.  The combination of the Covid-19 pandemic and the Ukraine conflict has affected everyday life around the world in so many different ways.  In business, further obstacles have created a combined macroeconomic backdrop not seen commercially for many decades, manifesting in commodity shortages, to supply chain logistics disruption, plant lockdowns, and significant cost inflation.

Yet despite these challenges, we have had our best trading year ever by revenue, with growth of 18.7%.  This resulted in underlying operating profit increasing by 27.1%.  Gross margins at the end of March moved much closer to our historic levels and all regions delivered profitable growth.  In the summer we also acquired Falcon Fastening Solutions Inc. as part of our strategy to both grow and rebalance our North American region and I am pleased to report that TR Falcon revenue is performing slightly ahead of our original expectations.

We have had to operate smarter, collaborating much more with our customers and suppliers to ensure our Trusted Reliability of supply. I am incredibly proud of how our teams globally have managed it, thanks to the strong relationships that they have developed over many years.

I want to take this opportunity to acknowledge the hard work and commitment of all my colleagues around the world, as none of this could have been possible without their dedication, and their 'can do' spirit.

Overview

At the beginning of the financial year the Covid-19 vaccination programme began to be rolled out and life started to return to some form of new normality.  We adapted our working practices to ensure all our people continued to remain safe and that the Group adhered to local government regulations.  While virtual communications cut down travel costs and in the main made us more productive, we recognised the importance of working together face-to-face and the comradery that this achieves.  The opening up, therefore, of restrictions towards the end of 2021 and into 2022 has been very much welcomed, enabling us to visit and, more importantly, continue to support our people around the business.  We are mindful that potential risks associated with Covid-19 remain in many parts of the world, as the recent lockdowns in Shanghai have evidenced, however this has had limited impact on FY2022 and we will continue to adapt our business to ensure our people remain safe and that we are able to service our customers effectively.

Following change and technological developments in our end markets, we revisited our sector analysis in FY2021 to better reflect how we view these markets and the opportunities within them.  All sectors within the period showed growth, despite the ongoing supply chain disruption and the temporary factory closures across several of our global OEMs.  In particular, we are very pleased to have delivered growth of 7.4% in our light vehicle (LV) sector, which represented an outperformance of c.9% against an automotive market that has been subject to significant short-term challenges.  We are delighted to report that we have successfully added a number of contractual wins to our order book both from existing and new customer relationships across our key sectors. Sales to distributors and energy, tech & infrastructure (ET&I) sectors were driven by strong underlying demand.  We have also continued to see an increased number of opportunities develop in the electric vehicle (EV) market.

Our North America region continues to go from strength to strength, with very strong organic revenue growth further supplemented by acquisition growth from TR Falcon.

The Ukraine conflict has exacerbated wider supply chain disruption, especially in Europe.  The direct impact on the business has been minimal with less than 1% of Group revenue going into Russia and Ukraine, however a number of our global customers operating in Europe do also include Russia as an end market which is impacting volumes at specific locations.  On behalf of all of us at Trifast our thoughts go out to all those affected by this conflict and we hope the situation can be resolved quickly and family and friends reunited.

The macroeconomic environment (supply chain pressures, together with freight, energy and other input cost increases over the period) created challenges, generating pent up demand but also impacting our margins in the first half of the year.  In response to ongoing inflationary pressures, we instigated a co-ordinated price increase programme, with phase one substantially completed by the financial year end.  This helped gross margins return closer to more historic levels, although further inflationary cost increases, such as energy incurred during the latter part of the financial year, held back a full margin recovery due to the lag between cost increase and recovery.  As part of doing business in this environment we are continuing dialogue with our customers to pass on relevant additional costs and the successful outcome of these negotiations will remain key.

Given the various macroeconomic factors affecting the supply chain, we invested significantly in stock during the period and whilst this has impacted cash generation, it has guaranteed continuity of supply in a period of very high lead times.  It is pleasing to report that over this difficult period, we have met our contractual obligations and not let customers down as well as enabling us to capture market share.  During FY2023 we expect stock levels to start to unwind as the macroeconomic environment stabilises.

Engineering-led innovation

'Innovation today for a better tomorrow' has long been our mantra and this has never been so important as in this current dynamically changing marketplace.  As a society we are moving away from being wasteful towards preservation and conservation; not only do we have a resolute team focused on ESG, but we also have teams of highly skilled engineers who collaborate with customers to help support them on their application fastening issues by developing innovative and cost-effective engineered products.  Our agile approach enables customers to develop sustainable products and solutions that will add value to society and the planet.

You can read more in depth on our approach to sustainability in the case studies on pages 32 of the Annual report

Accelerated acquisition journey

Following our successful integration and the solid performance delivered by TR Falcon, we continue our acquisition journey.  With a focus on our strategic initiatives of rebalancing the regions alongside establishing supply chain support through more on/near-shoring manufacturing capabilities to help deliver economic and environmental benefits.

You can read more about our acquisition journey, go to page 34 of the Annual report

Investing in organic growth

Organic investment is core to our strategy for growth and medium-term margin enhancement. This encompasses our people, our systems and targeted locational investments.

You can read more about our organic growth strategy, go to page 28 of the Annual report

Locational investment

As we continue to expand, we need to ensure that our locations remain fit for purpose.  In May 2022 we relocated our high growth Hungary operation to larger, purpose built facilities and around the beginning of FY2024 our UK-based PTS business will also relocate to facilities that are over 40% bigger, enabling it to support future growth and more product ranges for the distributor market.

We recognised early last year that TR VIC, our European manufacturing site, would soon reach its capacity as higher-level demand is set to increase over the next few years.  By the end of this calendar year we will have invested c.€4.0m into TR VIC's infrastructure and its machine capacity increasing production capability by over 30%and providing the foundation to produce more in-house, improve efficiencies and localise manufacturing support for our European OEMs and their ESG requirements.

You can read more about this on pages 28-29 of the Annual report

Project Atlas

Project Atlas, a key driver of future growth and cost efficiencies, has continued to progress over FY2022.  After the successful implementation at three sites in Europe, we decided to bring forward the phased roll-out to our highest revenue trading subsidiary TR Fastenings (UK). This in turn will enable us to free up greater capacity sooner. We knew this was always going to be the most complex and challenging roll-out and despite a successful phase one, we have seen a delay, to the end of calendar year 2022, in the implementation of phases two and three due to capacity constraints balancing supporting and protecting the growth we have seen, against training and educating the same people involved in Atlas. Although early days, we are pleased to report that the benefits of Atlas, both expected and unexpected, are being seen already within the business. Again, I would like to express my thanks to all our people involved in this transformational project. To undergo a change like this is difficult in the best of times, but to do it in the environment we have seen over the last few years is testimony to their resilience and strength of character.

Full details of our progress and plans for Project Atlas are provided on pages 30 and 31 of the Annual report. The financial impact of the work undertaken to date on this project is as follows. We have incurred direct costs of £2.6m in FY2022 (cumulatively £14.9m), largely relating to project team, consultancy and training costs. We have excluded £1.0m of these costs from our underlying results (see note 2 in the Annual report), to reflect the unusual scale and one-off nature of this project. In line with accounting standards, we have also recognised the remaining £1.6m (cumulatively £7.2m) as fixed assets on the balance sheet at 31 March 2022.

You can read more about this project on pages 30-31 of the Annual report

People

We place great importance on the development and training of all our people.  As part of our investment in Atlas we have launched a comprehensive human resources module which includes a global Employee Assistance portal to support staff in all aspects of wellbeing and an Online Learning Management System to complement face-to-face Development training.  During the year we expanded our talent pool in our commercial function to drive our ambitious growth plans.

In March 2022, Scott McDaniel joined us as North America Regional Director.  He has a wealth of operational and business leadership skills and has worked in a variety of industries including large global industrial fastenings companies.  Scott will also sit on the Operational Executive Board (OEB) and is responsible for driving profitable growth in North America, both organically and acquisitively.  As part of our succession planning, Glenda Roberts (who previously held the responsibility for the US), will continue to provide mentorship to the US team and remain Global Projects and Marketing Director.

We have further strengthened our Group compliance team to ensure that we continue to meet the expectations of our stakeholders.  From April 2022, Lyndsey Case became Head of Governance and we welcomed Christopher Morgan, an experienced FTSE 250 practitioner, to the plc team as Group Company Secretary.  To increase our strategic resilience within the business, Maddy Webb, who has been with the business for 21 years, has become Head of Risk, while Neil Stanbury joined us in March 2022 to assume the role of Global Director of Quality.  With our strong growth aspirations, continual improvement initiatives, combined with the importance of environmental, social and governance (ESG), the enhanced team provides a stronger structured framework of governance.

To read more

· on governance, refer to pages 47 and 96-100 of the Annual report

· about the Board and OEB, refer to pages 92-95 of the Annual report

Sustainability

We have developed a clear vision for sustainability for the next five years and have created a focused strategy that will improve both our sustainability and opportunities in a changing market.  During FY2022 we conducted a full review of our global KSIs and operational KPIs, which will be reported into the Trifast plc Board and our Operational Executive Board.  In addition, we have also included a second level of KPIs which we believe will support functional reporting of sustainability data.  These indicators have now been expanded to include a more detailed overview of our sustainability performance, supporting the ongoing commitment to our sustainability strategy.  I am pleased that our work to explore and assess climate-related risks and opportunities has gone well and the Annual report includes disclosures in line with the Task Force on Climate-related Financial Disclosures.

To read in more detail about

· our five-year framework go to page 43 of the Annual report

· our approach and focus on Sustainability, please go to pages 44-51 of the Annual report

Outlook

As a Group, we continue to see significant scope to build the business through a mix of organic market share growth, as well as through strategic acquisitions.  We are pleased with the progress we are making, albeit the operating backdrop continues to require considerable effort to be applied to managing rising inflationary costs and supply chain disruption, as well as the ongoing roll out of Project Atlas.  I remain incredibly proud, as well as amazed as to how the TR teams around the Group cope with all of this on a daily basis.

A rigorous focus on service levels and responsiveness have strengthened the Group's position in its established markets during this challenging period and have created incremental opportunities with key international OEM customers.  While supply lead times are now stabilising across most of our territories, they remain at historically high levels at c.50+ weeks vs. c.25 weeks pre 2020 and so we have continued to invest in inventory to support customer demand. 

To protect margins as inflationary cost increases continue, we do expect price increase negotiations to form an important ongoing part of doing business in the current macroenvironment. The pass-through of these additional costs is a better understood process as we head into FY2023, than it was a year ago, but the successful outcomes of those conversations will remain key. Consistent with many businesses, in the first quarter of FY2023, we have seen a further uplift in certain key input costs, including energy. As a result of this, in the short term we expect to see a period of cost recovery deferral across our non-transactional business and therefore a greater degree of the Group's FY2023 profitability weighted towards the second half of the year.

In the first three months of the new financial year Group trading has been solid with c.10% growth in total revenue (at CER). We are continuing to see an increased number of opportunities in high growth and emerging technologies, with good momentum in new contract wins and our pipeline has never been so strong.

Revenue growth in the first quarter has been achieved despite ongoing challenges in certain markets.  We welcomed the easing of the Shanghai lockdown in June, having seen trading in our Chinese operations significantly affected in the first two months of FY2023.  This is estimated to have impacted revenue by c.£1.5m, although providing there are no further lockdowns in China, we envisage recouping a good proportion of this by the end of FY2023.  Whilst less than 1% of Group revenue is directly derived from Russia, the conflict is having an indirect impact on some of our European health & home customers, coupled with some volume reductions as a result of a downturn in consumer sentiment.  Our light vehicle OEM/Tier 1 customers continue to manage through semi-conductor chip shortages across all regions.

We continue to be proactive in both cost management and pricing actions to mitigate the impact of ongoing, significant, inflationary cost increases.  These actions are proving effective, albeit the lag between cost increase and recovery has continued to be seen in margins in the first quarter.

Given the unprecedented political and economic times the short term outlook for the Group is proving somewhat challenging to predict. However our Q1 performance, together with new contract wins and the growing pipeline, gives us confidence in delivering strong revenue growth in FY2023, despite a cautious view as to how quickly some of our specific market headwinds described above abate. We anticipate inflation in many cost areas will remain elevated over the remainder of the year and we will continue to take proactive steps to mitigate the impact of this on our margins.

The medium term is increasingly exciting and as a Board we remain confident that the fundamentals of our business model and strategy position us well to become a larger, more profitable company. Over the coming financial year we will continue to make steady progress through a mix of customer service, technical innovation, investment and capturing key opportunities being presented.

We look forward to updating you on our journey over the coming months and as always thank you for the interest you have shown in our business.

Key Strategic Indicators

Indicator (AER)		Revenue growth vs GDP%		Underlying operating margin (%)		Underlying ROCE (%)		Group revenue in North America		Atlas Implementation (% of employees)1
Medium-term target		In excess of GDP - FY2022 4%		10-13%		10-15%		>25%		100% of employees
Key metric		FY2022: 13.6% FY2021: (6.0)% FY2020: (4.2)%		FY2022: 6.7% FY2021: 6.4% FY2020: 7.9%		FY2022: 8.3% FY2021: 6.8% FY2020: 8.8%		FY2022: 8.0% FY2021: 5.1% FY2020: 5.4%		FY2022: 12.6% FY2021: 1.6% FY2020: nil
Our progress in FY2022		The Group delivered 13.6% organic revenue growth, 960bps higher than global GDP in FY2022, reflecting a very strong recovery from Covid-19 trading levels		Higher trading levels, offset by a slower recovery in gross margins due to inflationary pressures and a post-pandemic normalisation of our underlying cost base		ROCE increased by 150bps, reflecting higher profitability, offset in part by investment in inventory		Extremely strong revenue growth has increased regional sales by 82.0% (organic: 31.5%; Falcon: 50.5%)		Two further sites implemented in FY2022 and phase one of the three‑phase roll-out to our biggest trading subsidiary, TR Fastenings (UK). Phase two and phase three is now on track to complete by the end of calendar year 2022

1.  Based on initial scoping

Extracts from the Financial review

To read in full, refer to pages 52-59 of the Annual report

"The next couple of years remain a very exciting and challenging time for the business as we build the momentum and the foundation for our medium‑term aspirations"

Clare Foster, CFO

FY2022 was a very positive year for the Group. Robust growth in the second half followed a strong recovery in HY1, to end the year with revenues up 18.7% to £223.3m (AER 16.2% to £218.6m; FY2021: £188.2m).  15.9% of that growth was organic, with the remaining 2.8% reflecting seven months' trading from our latest acquisition, TR Falcon.  Against FY2020, we grew organically by 8.9%, meaning that FY2022 represented a record-breaking trading year for the Group, with organic revenues coming in 2.3% greater (at AER) than our previous highest level of £209.0m, as recorded in FY2019.

This growth reflected persistent high demand in most of our underlying markets, and was achieved despite supply chain shortages across a number of sectors, most markedly in the light vehicle market, coupled with a significant increase in our sales to distributors, as end customers increased in-fill stock purchasing in the face of wider supply chain pressures.

Gross margins have remained in line with FY2021 at 26.6% (AER: 26.7%; FY2021: 26.5%) as the positive impact of higher revenues has been offset by the lag effect in the pass-through of inflationary cost pressures.  UOP increased significantly by 27.1% to £15.2m (AER: up 23.1% to £14.7m, FY2021: £12.0m), with UOP margin up 40bps to 6.8% (AER: up 30bps to 6.7%, FY2021: 6.4%).  Operational gearing gains fed through into profits, although the positive impact of this was partially offset by the normalisation of overheads from a lowered FY2021 base (including the removal of government support schemes) as well as ongoing strategic investments to support our organic growth journey.

Reflecting the strong trading performance, our underlying PBT is up 29.2% at CER to £14.2m (AER: 25.0% to £13.8m; FY2021: £11.0m). This, coupled with a reduction in our underlying effective tax rate, has resulted in a marked increase in our underlying diluted earnings per share (EPS), up 30.3% to 8.13p at AER (FY2021: 6.24p).

Supply chain challenges remain and although lead times are now stabilising across most of the world, these continue to stand at historically high levels.  Considering this challenging backdrop and given our strong financial position, the business took the decision to invest in inventory levels in FY2022 (£31.7m) to support growth and ensure reliability of supply.  This has led to a temporarily negative underlying cash conversion rate at AER of (66.8)% (FY2021: 147.9%), which, in conjunction with the acquisition of Falcon on 31 August 2021 for £5.8m (net of cash), means that we ended the year with an adjusted net debt position of £(23.8)m (FY2021: £13.3m adjusted net cash).  We expect the investment in stock to reduce and drive historically high cash generation rates, as the macroeconomic environment settles.

As a result of these investments, our leverage ratio, calculated in line with the banking agreement, at 31 March 2022 was 1.27x (FY2021: n/a - adjusted net cash).  Whilst this is higher than recent history, it remains within our target range of 1.0x to 2.0x and therefore continues to provide flexibility to invest in future non-organic growth.  Facility headroom as at 31 March 2022 was c.£30m (FY2021: c.£62.6m), as stated before an additional £40m accordion option.

CER continues to be the best way of understanding the positive progress of our underlying business. To aid understanding, the impact of this on our key metrics can be seen in the chart on page 53 of the Annual report.

Revenue

We have seen strong growth across all our regions, with revenue increases ranging from 13.9% to 89.2% (3.5% to 78.1% against pre-Covid-19 FY2020).  The majority of these increases reflect volume, rather than price increases, largely due to transitional delays in the pass-through of inflationary cost pressures outside of our distributor sector business.

Europe has seen a 14.2% increase to £83.9m (AER 9.6% to £80.6m; FY2021: £73.5m) to report record revenues that are 14.3% ahead of FY2020.  We have seen the highest growth from our German business, across a mix of sectors.  Strong growth in the energy, tech & infrastructure (ET&I) sector, and a new global health and home OEM, has led to a marked trading increase at our Hungarian operations.  Our Italian operations drove the greatest revenue increase in the region in HY1, predominantly into the health & home sector, with revenues in the second half of the year going on to stabilise at this high level.  Supply chain shortages, most particularly in the light vehicle sector, have continued to limit growth in Holland.

However, we are pleased to report that despite a similar sector focus on the light vehicle market, solid market share gains in Spain have been able to more than offset these macro challenges, to drive >20% year-on-year growth.

In Asia, we have seen a revenue increase of 13.9% to £56.1m (AER: 12.3% to £55.4m; FY2021: £49.3m), but with trading only 3.5% ahead of FY2020.  One of the main reasons the region was slower to recover was the summer lockdowns and December floods in Malaysia that limited domestic light vehicle volumes and also health & home production levels at one of our key multinational OEMs.  In contrast, we have seen exceptionally strong growth in Taiwan as distributor sales recovered and grew substantially beyond pre-Covid-19 levels in key European end markets.  In Singapore, solid growth in the ET&I sector, supplemented by increased intercompany manufacturing, has more than offset temporary sub-contractor transfer issues at a key health & home customer.

Trading levels in the UK have recovered and grown very strongly, with revenues increasing by 21.7% to £83.9m (FY2021: £68.9m), to end 11.1% ahead of FY2020.  The biggest driver of this has been significantly higher sales volumes to distributors, coupled with a market pricing model that allows for the rapid pass-through of inflationary costs in this sector.  Health & home and general industrial sales have continued to show strong growth across a number of key global OEM customers.  However, light vehicle sales remain below pre-Covid-19 levels, predominantly due to the impact of semi-conductor shortages.

In North America revenue growth has been very high at 89.2% to £18.4m (AER: 82.0% to £17.7m; FY2021: £9.7m), leading to a 71.8% increase against the pre‑Covid-19 FY2020 period.  Organic growth has driven 36.6% of this as new platform builds in the light vehicle sector come online and ET&I sales gain momentum.  TR Falcon has represented 52.6% of growth, with revenues running slightly ahead of expectation since acquisition on 31 August 2021.

Underlying operating profit

Underlying operating margins have increased by 40bps, to 6.8% (FY2021: 6.4%) contributing to a strong uptick in operating profit of 27.1%, to £15.2m at CER (AER: up 23.1% to £14.7m; FY2021: £12.0m).

As a Group we have seen the positive impact of stronger sales driving operating profit increases and margin upgrades.  Further supplemented by a shift in sector mix with a greater proportion of the Group's trading being secured in the higher margin distributor sector.  The normalisation of our overhead base, including the removal of government support schemes and the return of higher bonus, travel and other discretionary spend has offset this in part.  In addition to which, the business has made a number of targeted strategic investments (see pages 28 to 31 of the Annual report) to support our ongoing growth journey.  This includes Project Atlas business as usual costs, now roll-out is underway, further investments into our HR, ESG and acquisition capabilities and targeted recruitment into our commercial and compliance teams.

Outside of North America all of our regions are now showing underlying operating profits, with Asia continuing to bring in the highest returns at 12.9% (FY2021: 13.2%).  In North America we have seen an improvement in year-on-year margins from a negative position of (5.9)% in FY2021, as very strong sales growth has driven operational gearing gains, and following the acquisition of TR Falcon in August 2021. Our European region has seen the largest fall, recording a reduction of 210bps, as sales growth gains are more than offset by gross margin pressures due to the relatively early onset and then transitional delays in the pass-through of inflationary cost pressures.  Cost increases have impacted underlying operating profits across all regions and are expected to continue to do so as ongoing cost inflation and price increase negotiations become an everyday and key part of doing business.

Net debt (AER)

The Group's adjusted net debt has increased by £37.1m to £(23.8)m (FY2021: adjusted net cash of £13.3m), predominantly reflecting £34.7m of net working capital investments to support growth and ensure reliability of supply.

Outside of working capital, £(5.8)m (net of cash acquired) was used to fund the acquisition of Falcon (USA) on 31 August 2021 and supporting the Board's ongoing investments for organic growth, capital expenditure in the period amounted to £5.2m (FY2021: £3.1m), including £1.5m in relation to Project Atlas.  Further details of these strategic investments are provided on pages 34 to 37 and pages 30 to 31 respectively in the Annual report. Including the impact of IFRS 16 Leases, the Group's net debt position was £(37.5)m (FY2021: net cash of £0.5m).  

Adjusted net debt bridge can be seen on page 57 of the Annual report

Taxation (AER)

The underlying effective tax rate (ETR) is lower at 19.1% (FY2021: underlying effective tax rate: 23.9%).  The main reason for the difference is the year-on-year movement in adjustments in respect of prior years.  Subject to future tax changes and excluding prior year adjustments, our normalised underlying ETR is expected to remain in the range of c.20-25% going forward. The main reason for the difference between our FY2022 ETR of 15.4% and the FY2021 ETR of 25.6% is due to a patent box claim in Italy in addition to the adjustments in respect of prior years mentioned above.

Dividend policy

Following such a strong recovery in FY2022 and with an ambitious growth strategy in place, we remain committed to a progressive dividend policy that shares the benefit of ongoing profit growth with our shareholders.  As a result, the Directors are proposing, a final dividend of 1.40p per share.  Subject to shareholder approval at the forthcoming AGM this will be paid on Friday, 14 October 2022 to shareholders on the register as at Friday, 16 September 2022,Together with the interim dividend of 0.70p (paid on 14 April 2022), this brings the total for the year to 2.10p per share, an increase of 31.3% on the prior year (FY2021: 1.60p).  The ex-dividend date is Thursday, 15 September 2022.

Trifast plc

Consolidated income statement

for the year ended 31 March 2022

	Annual report Note	2022 £000	2021 £000
Continuing operations
Revenue	3, 35	218,618	188,161
Cost of sales		(160,189)	(138,247)
Gross profit		58,429	49,914
Other operating income	4	565	595
Distribution expenses		(5,296)	(3,773)
Administrative expenses before separately disclosed items		(38,952)	(34,754)
Acquired intangible amortisation	2, 13	(1,593)	(1,428)
Project Atlas	2	(1,041)	(1,082)
Restructuring costs	2	-	(377)
Loss on disposal of TR Formac (Malaysia) SDN Bhd	2	-	(280)
Acquisition costs	2,36	(508)	-
Equity raise costs	2	-	(59)
Total administrative expenses		(42,094)	(37,980)
Operating profit	5, 6, 7	11,604	8,756
Financial income	8	31	37
Financial expenses	8	(1,018)	(1,009)
Net financing costs		(987)	(972)
Profit before taxation	3	10,617	7,784
Taxation	9	(1,640)	(1,994)
Profit for the year (attributable to equity shareholders of the Parent Company)		8,977	5,790
Earnings per share
Basic	25	6.61p	4.33p
Diluted	25	6.56p	4.31p

Consolidated statement of comprehensive income

for the year ended 31 March 2022

	2022 £000	2021 £000
Profit for the year	8,977	5,790
Other comprehensive income / (loss) for the year:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations	2,907	(4,916)
(Loss) / gain on a hedge of a net investment taken to equity	(147)	34
Other comprehensive income / (loss) recognised directly in equity	2,760	(4,882)
Total comprehensive income recognised for the year
(attributable to the equity shareholders of the Parent Company)	11,737	908

Consolidated statement of changes in equity

for the year ended 31 March 2022

	Share	Share	Merger	Own	Translation	Retained	Total
	capital	premium	reserve	shares held	reserve	earnings	equity
	000	£000	£000	£000	£000	£000	£000
Balance at 31 March 2021	6,802	22,461	16,328	(595)	9,524	77,284	131,804
Total comprehensive income for the year:
Profit for the year	-	-	-	-	-	8,977	8,977
Other comprehensive income for the year	-	-	-	-	2,760	-	2,760
Total comprehensive income recognised for the year	-	-	-	-	2,760	8,977	11,737
Issue of share capital	2	51	-	-	-	-	53
Share-based payment transactions (net of tax)	-	-	-	-	-	742	742
Movement in own shares held	-	-	-	(2,892)	-	(143)	(3,035)
Dividends	-	-	-	-	-	(2,156)	(2,156)
Total transactions with owners	2	51	-	(2,892)	-	(1,557)	(4,396)
Balance at 31 March 2022	6,804	22,512	16,328	(3,487)	12,284	84,704	139,145

Consolidated statement of changes in equity

for the year ended 31 March 2021

	Share	Share	Merger	Own	Translation	Retained	Total
	capital	premium	reserve	shares held	reserve	earnings	equity
	000	£000	£000	£000	£000	£000	£000
Balance at 31 March 2020	6,132	22,340	-	(1,934)	14,406	74,716	115,660
Total comprehensive income for the year:
Profit for the year	-	-	-	-	-	5,790	5,790
Other comprehensive loss for the year	-	-	-	-	(4,882)	-	(4,882)
Total comprehensive income recognised for the year	-	-	-	-	(4,882)	5,790	908
Issue of share capital	670	121	14,807	-	-	-	15,598
Presentation transfer to merger reserve 1	-	-	1,521	-	-	(1,521)	-
Share-based payment transactions (net of tax)	-	-	-	-	-	1,154	1,154
Movement in own shares held	-	-	-	1,339	-	(1,398)	(59)
Dividends	-	-	-	-	-	(1,457)	(1,457)
Total transactions with owners	670	121	16,328	1,339	-	(3,222)	15,236
Balance at 31 March 2021	6,802	22,461	16,328	(595)	9,524	77,284	131,804

1.  Previously, the merger reserve was reported in retained earnings at a consolidated level. Due to the additional merger reserve created from the equity raise, management now consider it appropriate to separately disclose the merger reserve.  Therefore, we have transferred the £1.5m previously reported in retained earnings to the merger reserve

Statements of financial position

at 31 March 2022

		Group		Company
	Annual report Note	2022	2021	2022	2021
		£000	£000	£000	£000
Non-current assets
Property, plant, and equipment	10, 11	20,297	18,743	2,216	2,300
Right-of-use assets	12	12,757	11,958	40	60
Intangible assets	13, 14	42,981	38,452	7,027	5,691
Equity investments	15	-	-	42,298	42,320
Non-current trade and other receivables	19	-	-	66,344	44,318
Deferred tax assets	16, 17	2,787	2,539	724	721
Total non-current assets		78,822	71,692	118,649	95,410
Current assets
Inventories	18	88,933	54,765	-	-
Trade and other receivables	19	60,520	53,194	1,888	2,375
Cash and cash equivalents	26	26,741	30,265	604	2,256
Total current assets		176,194	138,224	2,492	4,631
Total assets	3	255,016	209,916	121,141	100,041
Current liabilities
Trade and other payables	21	45,249	41,133	1,569	5,506
Right-of-use liabilities	12, 20, 26	3,028	2,726	19	19
Tax payable		2,455	2,645	-	-
Total current liabilities		50,732	46,504	1,588	5,525
Non-current liabilities
Other interest-bearing loans and borrowings	20, 26	50,507	16,970	50,507	16,970
Right-of-use liabilities	12, 20, 26	10,683	10,060	23	42
Provisions	23	1,088	1,023	-	-
Deferred tax liabilities	16, 17	2,861	3,555	-	-
Total non-current liabilities		65,139	31,608	50,530	17,012
Total liabilities	3	115,871	78,112	52,118	22,537
Net assets		139,145	131,804	69,023	77,504
Equity
Share capital		6,804	6,802	6,804	6,802
Share premium		22,512	22,461	22,512	22,461
Merger reserve		16,328	16,328	16,328	16,328
Own shares held		(3,487)	(595)	(3,487)	(595)
Reserves		12,284	9,524	-	-
Retained earnings		84,704	77,284	26,866	32,508
Total equity		139,145	131,804	69,023	77,504

Statements of cash flows

for the year ended 31 March 2022

		Group		Company
	Annual report Note	2022	2021	2022	2021
		£000	£000	£000	£000
Cash flows from operating activities
Profit/(loss) for the year		8,977	5,790	(4,106)	12,472
Adjustments for:
Depreciation, amortisation, and impairment	10, 11, 13, 14	4,125	3,813	84	84
Right-of-use asset depreciation	12	3,131	3,229	19	19
Unrealised foreign currency gain		(34)	(17)	(45)	(23)
Financial income	8	(31)	(37)	(155)	(83)
Financial expense (excluding right-of-use liabilities)	8	692	696	683	708
Right-of-use liabilities' financial expense	8,12	326	313	-	-
Loss / (gain) on sale of property, plant, and equipment, intangibles, and investments		6	(7)	145	-
Dividends received		-	-	(3,358)	(16,628)
Equity settled share-based payment charge		772	1,052	325	133
Loss from sale of TR Formac (Malaysia) SDN Bhd		-	280	-	108
Taxation charge	9	1,640	1,994	(13)	(268)
Costs incurred on issue of share capital		-	59	-	59
Operating cash inflow/(outflow) before changes in working capital and provisions		19,604	17,165	(6,421)	(3,419)
Change in trade and other receivables		(5,950)	(3,080)	916	2,239
Change in inventories		(31,716)	2,571	-	-
Change in trade and other payables		2,922	7,861	299	1,034
Change in provisions		-	64	-	-
Cash (used in)/generated from operations		(15,140)	24,581	(5,206)	(146)
Tax paid		(2,757)	(1,283)	-	-
Net cash (used in)/generated from operating activities		(17,897)	23,298	(5,206)	(146)
Cash flows from investing activities
Proceeds from sale of property, plant, and equipment		36	8	-	-
Interest received		31	38	196	82
Acquisition of subsidiary, net of cash acquired		(5,847)	-	-	-
Acquisition of property, plant and equipment and intangibles	10, 11, 13, 14	(5,248)	(3,060)	(1,481)	(1,603)
Lending to subsidiary undertakings		-	-	(21,638)	-
Proceeds from sale of TR Formac (Malaysia) SDN Bhd, net of cash held		-	33	-	-
Dividends received		-	-	3,358	16,628
Net cash (used in)/from investing activities		(11,028)	(2,981)	(19,565)	15,107
Cash flows from financing activities
Proceeds from the issue of share capital	24	53	15,540	53	15,540
Purchase of own shares	24	(3,035)	(59)	(3,035)	(59)
Proceeds from new loan		32,980	-	32,980	-
Repayment of borrowings		-	(26,656)	-	(26,390)
Repayment of loans from subsidiaries		-	-	(4,248)	-
Repayment of right-of-use liabilities	12	(2,977)	(3,658)	(19)	(18)
Dividends paid	24	(2,156)	(1,457)	(2,156)	(1,457)
Interest paid		(805)	(763)	(456)	(586)
Net cash from/(used in) financing activities		24,060	(17,053)	23,119	(12,970)
Net change in cash and cash equivalents		(4,865)	3,264	(1,652)	1,991
Cash and cash equivalents at 1 April		30,265	28,727	2,256	265
Effect of exchange rate fluctuations on cash held		1,341	(1,726)	-	-
Cash and cash equivalents at 31 March		26,741	30,265	604	2,256

Trifast plc

Notes to the announcement

Detailed notes to the financial statements can be found in the Annual report on pages 148-197

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

· North America: 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 Operational Executive Board uses 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.

March 2022	UK  000	Europe  000	North America £000	Asia £000	Common amounts £000	Total £000
Revenue
Revenue from external customers	77,056	78,482	17,535	45,545	-	218,618
Inter-segment revenue	6,805	2,089	191	9,805	-	18,890
Total revenue	83,861	80,571	17,726	55,350	-	237,508
Underlying operating result	8,122	3,858	(72)	7,123	(4,285)	14,746
Net financing costs	(125)	(169)	(107)	(58)	(528)	(987)
Underlying segment result	7,997	3,689	(179)	7,065	(4,813)	13,759
Separately disclosed items						(3,142)
Profit before tax						10,617
Specific disclosure items
Depreciation and amortisation	(2,184)	(2,731)	(554)	(1,685)	(102)	(7,256)
Government support income	-	-	-	76	8	84
Assets and liabilities
Non-current asset additions	1,962	3,269	1,381	54	1,481	8,147
Segment assets	74,479	81,125	22,472	65,593	11,347	255,016
Segment liabilities	(25,929)	(20,339)	(4,389)	(13,243)	(51,971)	(115,871)

March 2021	UK  000	Europe  000	North America £000	Asia £000	Common amounts £000	Total £000
Revenue
Revenue from external customers	64,116	72,151	9,596	42,298	-	188,161
Inter-segment revenue	4,776	1,359	143	6,987	-	13,265
Total revenue	68,892	73,510	9,739	49,285	-	201,426
Underlying operating result	3,744	5,221	(574)	6,522	(2,931)	11,982
Net financing costs	(129)	(105)	(64)	(48)	(626)	(972)
Underlying segment result	3,615	5,116	(638)	6,474	(3,557)	11,010
Separately disclosed items						(3,226)
Profit before tax						7,784
Specific disclosure items
Depreciation and amortisation	(2,000)	(2,787)	(237)	(1,915)	(103)	(7,042)
Government support income	679	373	-	976	35	2,063
Assets and liabilities
Non-current asset additions	818	1,161	19	1,041	1,658	4,697
Segment assets	63,441	67,309	8,002	59,300	11,864	209,916
Segment liabilities	(26,559)	(17,935)	(1,860)	(13,344)	(18,414)	(78,112)

	Annual report Note	2022	2021
Underlying profit before tax and separately disclosed items		£000	£000
Underlying profit before tax		13,759	11,010
Separately disclosed items within administrative expenses
Acquired intangible amortisation	13	(1,593)	(1,428)
Project Atlas		(1,041)	(1,082)
Restructuring costs		-	(377)
Loss on disposal of TR Formac (Malaysia) SDN Bhd		-	(280)
Equity raise costs		-	(59)
Acquisition costs	36	(508)	-
Profit before tax		10,617	7,784

	Annual report Note	2022	2021
		£000	£000
Underlying EBITDA		20,409	17,596
Separately disclosed items within administrative expenses
Project Atlas		(1,041)	(1,082)
Restructuring costs		-	(377)
Loss on disposal of TR Formac (Malaysia) SDN Bhd		-	(280)
Equity raise costs		-	(59)
Acquisition costs	36	(508)	-
EBITDA		18,860	15,798
Acquired intangible amortisation		(1,593)	(1,428)
Depreciation and non-acquired amortisation		(5,663)	(5,614)
Operating profit		11,604	8,756

In addition to the above, there were £0.4m separately disclosed items in relation to VIC patent box claims set against the tax charge in FY2022 (FY2021: £nil).

FY2022 Annual report and Annual General Meeting (AGM)

In addition to the link on the front of this announcement to a pdf the Annual report, it will be available in due course to view and download from the Company website at www.trifast.com , and it will also be uploaded to the National Storage Mechanism in due course. https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism.

The 2022 Annual report and financial statements is also available on request by writing to: The Company Secretary, Trifast plc, Trifast House, Bellbrook Park, Uckfield, East Sussex TN22 1QW, alternatively email: [e-mail].

Details of the AGM, which is to be at 12noon on Wednesday, 7 September 2022, will be sent to shareholders in due course together with the Annual report, Notice of Meeting and Form of Proxy.

The financial information set out in this release does not constitute the Group's statutory Report and Accounts for the years ended 31 March 2022 or 2021 however, it is derived from the 2022 Report and Accounts (pdf attached to this announcement on page 1).

The Report and Accounts for 2021 have been delivered to the Registrar of Companies and those for 2022 will be delivered in due course. The external auditor has reported on the 2022 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.  

The Auditors Report can be read on pages 134-141 of the Annual report

The 2022 Annual report and Financial statements were approved by the Board of Directors on 25 July 2022.

Forward Looking Statement

This document may contain certain forward-looking statements. The forward-looking statements reflect the knowledge and information available to the Company during the preparation and up to the publication of this document. By their very nature, these statements depend upon circumstances and relate to events that may occur in the future thereby involve a degree of uncertainty. Therefore, nothing in this document should be construed as a profit forecast by the Company.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.  Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

 

END

 

 

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