Annual results - 31 March 2023 - Annual Report

Trifast PLC

11 July 2023

 

Tuesday, 11 July 2023 07.00hrs

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.

Trifast plc

(Trifast, TR or the Company)

Annual results for the year ended 31 March 2023

Publication of the 2023 Annual report and financial statements

Trifast publishes the Group's audited Annual report and Financial statements for the year ended 31 March 2023. The following information contained within this announcement is a summary extracted from the Group's audited FY2023 Annual report and financial statements. The publication can be read in full via this link:

http://www.rns-pdf.londonstockexchange.com/rns/5662F_1-2023-7-10.pdf

"My role is not to fundamentally change the corporate strategy but to align this strategy with greater focus. The task is building on TR's reputation as a trusted and reliable partner by accelerating the pace of execution and creating an aligned leadership team with the skills and necessary capabilities, visions and drive to maximise 50 more years of success"

Scott Mac Meekin, Interim CEO

Key operational highlights

·       After a challenging period, TR is now focused on continuing its momentum to deliver profitable growth and its medium-term aspirations

·       Strong revenue growth of 9.1% at Constant exchange rate (CER) (organic: 7.3%; acquisition: 1.8%; 11.8% at Actual exchange rate (AER))

·       Pass through of inflationary cost successfully concluded by January 2023 with some key customers

·       Growth momentum sustained in FY23 Q4; along with record level of contract wins for the year totalling £25.6m

·       Underlying profit before tax reduces to £9.3m at AER resulting in underlying diluted earnings per share of 5.13p

·       Comprehensive UK operational improvement plan developed, annualised savings in excess of £5m

·       Gross stock levels reduced by more than £10m during Q4 although flat year on year

·       Reflecting confidence in the future, proposing final dividend of 1.50p per share, up 7.1% over 2022

·       Post year end - new banking facilities with a combined limit of £120m

Group financial performance

Underlying measures:	CER FY23	CER change	AER FY23	AER change	AER FY22
Revenue	£238.5m	9.1%	£244.4m	11.8%	£218.6m
Gross profit %	25.3%	(140)bps	25.3%	(140)bps	26.7%
Underlying operating profit (UOP)1	£11.2m	(24.1)%	£12.0m	(18.7)%	£14.7m
Underlying operating profit %1	4.7%	(200)bps	4.9%	(180)bps	6.7%
Underlying profit before tax1	£8.6m	(37.7)%	£9.3m	(32.4)%	£13.8m
Underlying diluted earnings per share1	-	-	5.13p	(36.9)%	8.13p
Adjusted leverage ratio1,3	-	-	2.19x	0.92x	1.27x
Adjusted net debt1,2	-	-	£(38.0)m	£(14.2)m	£(23.8)m
Return on capital employed (ROCE)1	-	-	5.4%	(290)bps	8.3%
Total dividend	-	-	2.25p	7.1%	2.10p
GAAP measures
Operating (loss) /profit	-	-	£(0.0)m	(100.1)%	£11.6m
Operating (loss) / profit %	-	-	(0.0)%	(530)bps	5.3%
(Loss) / profit before tax	-	-	£(2.7)m	(125.4)%	£10.6m
Diluted (loss) / earnings per share	-	-	(2.12)p	(132.3)%	6.56p
1.Before separately disclosed items (see note 1)
2.Adjusted net debt is stated excluding the impact of IFRS 16 Leases. Including right-of-use lease liabilities, net debt increases by £(15.8)m to £(53.8)m (FY22: net debt increases by £(13.7)m to £(37.5)m)
3.Adjusted leverage ratio is calculated using adjusted net debt against adjusted underlying EBITDA
Note: Unless stated otherwise, amounts and comparisons with prior year are calculated at constant currency (Constant Exchange Rate (CER)). Where reference is made to 'underlying' this is defined as being before separately disclosed items.

Reference links:

The Board believe that the 2023 Annual report gives a fair and balanced review of the Trifast business and its strategy for the future. For ease of reference, the following links will be of interest:

To read more about:	Refer to:
Where we operate	Page 3
Our strategy for growth	Pages 8-15
Key strategic and performance indicators	Pages 18-21
Our business model	Page 16-17
Our sectors	Page 22 -23
Board and leadership structure	Pages 68-70
Stakeholder engagement	Page 24-31

Presentation of results webcast

The Company is holding a 'live' presentation via the Investor Meet Company platform (IMC).  The session will start at 11.30am today.  To register and join the event please follow the link:

https://www.investormeetcompany.com/trifast-plc/register-investor

About Trifast plc (TR)

Founded in East Sussex in 1973, 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. 

The Group supplies to customers in c.70 countries across a wide range of industries, including light vehicle, heavy vehicle, health & home, energy, tech, & infrastructure (ET&I), general industrial and distributors. As a full service provider to multinational OEMs and Tier 1 companies spanning several sectors, we deliver comprehensive support to our customers across every requirement, from concept design through to technical engineering consultancy, manufacturing, supply management and global logistics.

As an international business we are able to provide 24/7 customer support from across key regions in the UK, Asia, Europe and North America. In addition to our service locations we operate a number of manufacturing facilities focused on high volume cold forged fasteners and special parts. We have also established Technical & Innovation Centres to support R&D and customer collaboration across the world.

To read more on our 50 years of progress please refer to pages 4-5 of the 2023 Annual report.

The 2023 Sustainability Report is available on the Company website.

For more information, visit:

TRIFAST PLC TRI Stock | London Stock Exchange

Our website: www.trifast.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

LEI number: 213800WFIVE6RWK3CR22

Trifast plc

Annual results for the year ended 31 March 2023

Extracts from the letter to shareholders from the Non-executive Chair, Jonathan Shearman

Introduction

In this, TR's 50th anniversary year, it is only right to express our gratitude to 'the Mikes' (Timms and Roberts). We joined with them on 4 June this year to celebrate the Company's 'birth' and it is a privilege for me and the team to be involved in the business today. Trifast has experienced a significant amount of change and evolution since 1973. Over the last 12 months, we have once again seen this, some of which has been encouraging and some of which has been challenging but necessary for the business and its future. Simplifying and better aligning the business will provide the foundations for a bright and rewarding future for all of our stakeholders.

Dividend policy

Our focus on growth allows us to remain committed to a progressive dividend policy that shares the benefit of ongoing profitable growth with our shareholders.

Reflecting our confidence in the prospects for the business, the Board is proposing an increased final dividend of 1.50p (FY22: 1.40p). This, together with the interim dividend of 0.75p (paid on 14 April 2023), brings the total for the year to 2.25p per share, an increase of 7.1% on the prior year (FY22: 2.10p). The final dividend, subject to shareholder approval at the AGM, will be paid on 13 October 2023 to shareholders on the register at the close of business on 29 September 2023. The ordinary shares will become ex-dividend on 28 September 2023. The dividend cover is currently 2.3x, however the Board continues to consider that an appropriate future level of dividend cover is in the range of 3.0x to 4.0x.

Board and Senior Management changes

In November 2022, we announced that Darren Hayes-Powell and Louis Eperjesi were both joining the Board as Chief Financial Officer and Non-Executive Director, respectively. The Company is already benefiting from their contributions and counsel. In addition, Dan Jack, who joined Trifast in June 2020, was promoted to Chief Operating Officer. Scott Mac Meekin, previously a Non-executive director, stepped in as interim Chief Executive Officer in February 2023, following the resignation of Mark Belton. Scott's pace, approach and immense sector knowledge is proving extremely insightful, and feedback from customers, employees and stakeholders has been positive.

In August our previous CFO, Clare Foster, also, left the business. We take this opportunity to thank Clare and Mark for the contributions to the Group and wish them well in their future endeavours.

Annual General Meeting

The forthcoming AGM in September will be the final time I will be seeking re-election. Together with the Board, I now feel that the baton can be safely passed to the next Chair.

People

I acknowledge that this has been a year of change and disruption, and it has resulted in some hard decisions having to be made. Over the last 50 years, many colleagues have contributed to TR's growth and I thank all of them around the world for their personal and collective contribution, including during this challenging period. They make Trifast what it is and they will continue to drive us forward into our future.

Finally, having navigated the many challenges of the last few years, I am encouraged that we now have a Board and leadership structure with the experience and capabilities to support the business and capitalise on the many opportunities that lie ahead.

To read the Chair's letter in full please refer to page 4 of the 2023 Annual report.

Extracts from the Review by the Interim Chief Executive Officer, Scott Mac Meekin

Introduction

When the Board asked me to step into this role in February this year, I took the opportunity without hesitation. As interim CEO, my role is not to fundamentally change the corporate strategy, but to align this strategy with greater focus. I see my task as building on TR's reputation as a trusted and reliable partner by accelerating the pace of execution and creating an aligned leadership team with the skills and necessary capabilities, visions and drive to maximise 50 more years of success.

Operating background in FY23

Throughout the year we witnessed macroeconomic and geopolitical elements impacting the business directly and through our suppliers and customers. We encountered extraordinary input cost increases, which combined to pressure several of our customer segments, in particular the health & home sector.

This 'mixed' environment, coupled with a host of corrective actions, implemented throughout the year, and a full year contribution from our Falcon acquisition, resulted in a reasonable start to FY23 across all regions in terms of volume.

However, during the first half, this was accompanied by challenges specifically at TR VIC, our Italian operation, and the loss of a full two months trading due to Covid-19 in our China operations, both of which impacted our margins.

During the second half of the year, the business enjoyed a gradual return towards more normal levels of lead times, freight costs and raw material costs, though, by Q4, several of our businesses were further affected by the changing macroenvironments.

More detail on the operating background is contained within the CFO's Financial review.  

Significant changes in FY23

·      Global wins: The year under review saw new highs for both revenue and contract wins, the latter, significantly within the automotive and energy, tech & infrastructure sectors. This momentum included both of our North American businesses.

·      Revenue growth: In FY23 we saw revenue growth in Europe and North America. Asia operations recorded moderate growth in the year and was even able to overcome the impacts of the national shutdown in China.

·      Dynamic pricing: During the year, several major customers' multi-year contracts were due for renegotiation. It is satisfying to report that the team has, in partnership with these key accounts, successfully renewed these contracts which now incorporate a flexible price mechanism that will automatically adapt for extraordinary up or downside changes in a broad basket of input prices. This is a significant step towards building in a more dynamic pricing model for the business as a whole.

·      Customer centricity: We have recently launched a global programme designed to help us focus our resources more acutely on a well-defined set of market segments and key customers. This programme is a comprehensive review of our existing and potential customer engagements, providing our teams across the Group with a clear and standardised lens. This initiative will assist us in determining the optimal customers and prospects for us to partner with, and what are the most effective services and products for each unique customer.

·      Our IT journey - beyond Atlas: I am happy to say that, after a long period of transformation and learning, the Group has now proven they are able to roll out our finance and operations solutions using Microsoft D365 together with our standard operating procedures (SOPs) and data templates. The availability of key data from the completed implementations has provided the basis for many of our recent decisions and will continue to be a key strategic part of our development road map.

Going forward

Following my appointment, I agreed an initial 100-day plan with the Board, which largely flowed from the key points instigated in the previous quarter, namely reduction of working capital and therefore debt and the execution of a cost reduction programme focused on the UK.

By the end of the financial period, we had introduced quarterly sprints, with Sprint 2 having started in June. A significant objective of this process is to implement a much tighter focus allowing us to postpone or sequence the many other, albeit important, competing tasks, allowing for faster execution of those tasks agreed as priorities within any sprint.

Most importantly, the people of TR

The most important part of Trifast is its people. They are renowned worldwide for their tireless commitment to customer service and reliability, priding themselves on delivering excellent product, service and quality. As part of a key driver of our future success, we intend to enhance our training and leadership efforts. Our mission is to implement a 'winning team' programme over the next 24 months consisting of three fundamental elements:

·      Building a climate for action

·      Competencies for success

·      Commitment to results

Outlook

As we said in April's update, the Group's business foundations remain strong, and there is significant potential to be realised during the coming years. We are also mindful that the short-term macro-economic outlook remains challenging.

We continue to take meaningful steps across a range of operational and financial initiatives, including an on-going reduction in working capital, a focus of Sprint 2 being further integration of Asia into the Group and improved utilisation of our in-house manufacturing.

We have added further new contract wins in the year to date, especially in our North American and European regions, alongside an increasingly healthy pipeline. These, together with the initial benefits from our operational improvement programmes, support the Board's continued expectation in delivering an improvement in performance in FY24, albeit weighted towards the second half of the year.

The Company looks forward to updating shareholders of further progress over the coming year.

To read the CEO review in full please refer to page 6 of the 2023 Annual report.

Trifast plc

Annual results for the year ended 31 March 2023

Financial review by the Chief Financial Officer, Darren Hayes-Powell

FY23 presented well-documented challenges for the Group, however, our focus on our immediate priorities in Q4 showed a positive boost. This, combined with robust growth in the second half, enabled us to deliver revenues up 9.1% CER to £238.5m (AER: 11.8% to £244.4m; FY22: £218.6m). 7.3% of that growth was organic, with the remaining 1.8% reflecting five months' trading from TR Falcon.

By the end of FY23, we had successfully achieved most of our price increase programme, incorporating a flexible pricing mechanism with our key customers, and we are pleased to report that in March 2023 our margins improved.

This growth reflected persistent demand in most of our underlying markets and was achieved through focused sales initiatives across a number of sectors.

Gross profit has reduced to 25.3% (AER: 25.3%; FY22: 26.7%) as the positive impact of higher revenues has been offset by the lag in pass-through of cost factors due to freight, higher electricity and raw material cost deltas. During the final quarter of 2023 the flexible pricing mechanisms with key customers were agreed to ensure costs were fairly passed on to our end customer. Supply chain and energy challenges are now stabilising across most of the world allowing a normalisation of our cost deltas we have faced in HY1, although this is still working its way through stock holdings in the first half of FY24.

Underlying operating profit reduced by £3.5m to £11.2m (AER: £12.0m; FY22: £14.7m) due to investments in overheads relating to recruitment, Project Atlas (Microsoft D365) BAU costs as well as inflationary cost impacts. As a result of the increased overhead levels, we commenced a strategic review of operations and function costs that is anticipated during FY24 to start delivering savings in excess of £5m per annum.

Gross inventory levels at c.£97m (AER: c.£99m; FY22: c.£98m) are back in line with FY22, reflecting a more balanced trade position and a significant reduction from HY1 levels of £107m. The continued reduction in gross stock levels will remain a key focus in FY24. The inventory provision in FY23 was c.£8m (FY22: c.£9m).

Adjusted net debt has risen to £38.0m (HY23: £40.4m; FY22: £23.8m) as underlying cash inflow of £11.5m has been more than offset by a reduction in creditors (£11.7m), capex, Atlas investments (£7.3m) and other amounts including interest, tax, dividends and FX.

Following these cash movements, our leverage ratio, calculated in line with the banking agreement, at 31 March 2023 was 2.19x (FY22: 1.27x). Whilst this is higher than historically, it remains within our covenant range of < 3.0x and therefore continues to provide flexibility. Facility headroom as of 31 March 2023 was £10.2m (FY22: c.£29.3m), as stated before an additional £40m accordion option.

Revenue

We have seen a mixed performance across the regions with Europe and North America showing strong growth whilst the UK remains flat and Asia has shown small growth. Across our key market sectors, the majority have seen strong growth, most notably in light vehicle, with only distributors and health & home showing reductions year-on-year.

Europe has seen a 10.4% increase to £89.0m (AER: 9.8% to £88.4m; FY22: £80.6m). This was driven by strong growth across the heavy vehicle sector, predominantly in our Swedish operation, as well as robust growth in light vehicle driven by our entities in Holland and Spain. Germany continues to grow strongly in the general industrial sector supported by transfer of business from the UK in the distributors sector. TR VIC, Italy, has seen a reduction in revenue year-on-year, mostly from the health & home sector due to the downturn in customer sentiment and the indirect impact the Ukraine conflict is having on some of our customers.

In Asia, we have seen a revenue increase of 2.6% to £56.8m (AER: 9.1% to £60.4m; FY22: £55.4m). Growth in the region was hampered by China imposing Covid-19 lockdowns at the start of FY23, impacting our operations in Shanghai, a key health & home customer in our Singaporean entity undertaking a significant de-stocking exercise which resulted in a flat year-on-year position for the sector. The light vehicle sector has shown a significant uplift in business in Malaysia and Thailand.

Trading levels in the UK businesses have been impacted differently, with light vehicle showing strong growth, offset by a reduction in distributors due to the transfer of business to TR Kuhlmann, Germany. In our biggest trading entity, TR Fastenings, UK, we have seen strong growth in energy, tech & infrastructure and general industrial offset by a fall in health & home.

We have seen the highest growth from our North American business, 50.3% to £26.6m (AER: 68.8% to £29.9m; FY22: £17.7m) with investment in new leadership quickly helping to co-ordinate our legacy and acquired businesses. Organic growth has driven 28.5% of this as new platform builds in the light vehicle sector come online and energy, tech & infrastructure sales gain momentum. TR Falcon has provided 21.8% acquisition growth to the region. It has also performed well organically in the period, with revenues running ahead of expectation. Whilst this has started from a low base, the ability to now take advantage of global customers has enabled this business to perform.

Underlying operating profit

Underlying operating margins reduced by 200bps, to 4.7% (FY22: 6.7%) resulting in operating profit of £11.2m (AER: £12.0m; FY22: £14.7m).

As a Group we have been impacted by the macroeconomic environment, most notably raw material, freight and energy deltas, but as we finished FY23 the positive impact of stronger sales and aligned pricing gives us a good base moving forward. Key investments include Project Atlas business-as-usual costs now roll-out is underway (including amortisation of £0.5m), further investments into our Group functions and targeted recruitment into our commercial and compliance teams.

Towards the end of FY23 we commenced a strategic review of operations and functions to identify specific measures that could support profitability without adversely impacting our growth momentum or customer service levels. The output of this review shows expected savings during FY24 rising to an annualised saving in excess of c.£5m.

In North America we have seen an improvement in year-on-year margins from a negative position of (0.4)% in FY22 to a positive margin of 3.9% (AER: 4.2%), as very strong sales growth has driven operational gearing gains, and following the acquisition of TR Falcon in August 2021.

Our European region has fallen, recording a reduction of 140bps to 3.4% margin (AER: 3.3%; FY22: 4.8%), as sales growth gains are more than offset by gross margin pressures due to the delays in the pass-through of inflationary cost pressures, most notably energy. Cost increases have impacted underlying operating profits across all regions and are now stabilising as pricing negotiations are becoming an everyday and key part of doing business.

The UK businesses fell by 310bps to 6.6% margin (FY22: 9.7%) as it has been impacted greatly by the macroeconomic slowdown combined with stock write-downs and the transfer of distribution business to Germany. As the inventory is coming back to lower levels, we do not expect this to continue. We anticipate the margin recovering towards the medium term target as costs reduce due to operational improvement programme.

All of our regions are showing underlying operating profits, with Asia continuing to bring in the highest returns at 15.5% (AER: 15.7%; FY22: 12.9%). The majority of this improvement has come from trading and efficiencies in our distribution and contract business.

Operating profit (at AER)

At a Group level, operating profit reduced by £11.6m to a loss of <£0.1m (FY22: £11.6m). Outside of the factors mentioned in underlying operating profit (£2.7m), the reduction is caused by the recognition of a restructuring and related charges (£4.2m), the impairment of goodwill in TR VIC (£2.9m), settlement for loss of office (£1.1m) and an increase in Project Atlas costs (£0.7m).

The restructuring and related charges relates to the centralisation of multi-site distribution centres into a National Distribution Centre (NDC) in the Midlands and the closure of our UK manufacturing site in Uckfield, for TR Fastenings, our largest subsidiary. Costs within the figure of £4.2m include redundancy costs in respect of a downsizing of personnel and impairment of non-current assets due to the closure of certain offices and warehouses. This was approved by the Board in March 2023 and is expected to be completed by March 2024. We have excluded these costs from our underlying results, to reflect the size and one-off nature of this project. Further details can be found in Note 1 to this announcement.

Net financing costs (at AER)

Net interest costs have increased to £2.7m (FY22: £1.0m) as average gross debt (including IFRS 16) has increased to £80.9m (FY22: average £44.4m). Net marginal interest rates (net of commitment fees) have increased. Post year-end the Group has signed a new revolving credit facility (RCF) agreement, supported by a UK export finance - export development guarantee (UKEF - EDG) agreement to allow the Group flexibility on future cash investments.

This combined facility limit of £120m, with the same lenders, provides strength and support to enable the Group to meet its future strategic growth plans. Interest margins have increased in line with market conditions and will now be within a range of 2.10-3.60% compared to 1.10-2.20% under the previous RCF.

Taxation (at AER)

The underlying effective tax rate (ETR) is higher at 25.6% (FY22: underlying effective tax rate: 19.1%). The main reason for this is an increase in the amount of tax on dividends. Despite recording a loss before tax at statutory level, there still remains a tax charge as some significant accounting entries in the year (e.g. TR VIC impairment of goodwill and aborted acquisition costs) have no tax credit associated to them. Removing these one-off accounting entries, the effective tax rate is 35.7%, which is still high due to the low profit before tax relative to the increase in the amount of tax on dividends. 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.

Underlying diluted earnings per share (AER)

Reflecting the challenging performance as explained above, our underlying PBT at AER is down 32.4% to £9.3m (FY22: £13.8m). This, coupled with the increase in our underlying effective tax rate, has resulted in a reduction in underlying diluted earnings per share (EPS) of 36.9% to 5.13p at AER (FY22: 8.13p).

Net debt (AER)

The Group's adjusted net debt has increased by £14.2m to £38.0m (FY22: £23.8m). An increase in working capital contributed to £7.2m of this as a decrease in creditors, due to ongoing stock reductions, was only partially offset by other working capital movements. A major focus will remain on working capital management, reducing the inventory levels and managing debtors accordingly.

Capital expenditure in the period amounted to £7.3m (FY22: £6.3m), including £3.0m in relation to increasing capacity at our Italian operations as well as £2.6m on Project Atlas.

Including the impact of IFRS 16 Leases, the Group's net debt position was £53.8m (FY22: £37.5m).

Return on capital employed (at AER)

As at 31 March 2023, the Group's shareholders' equity decreased to £135.9m (FY22: £139.1m). The £(3.2)m reduction reflects a decrease in retained earnings of £(6.1)m, a movement on own shares held reserve of £0.5m, and a foreign exchange reserve gain of £2.4m. With this reduced asset base and lower profits, our ROCE has reduced by 290bps to 5.4% (FY22: 8.3%). At 31 March 2023, the number of ordinary shares held by the Employee Benefit Trust (EBT) to honour future equity award commitments was 1,896,098 shares (FY22: 2,194,470 shares).

Outlook

There can be no doubt that this has been a very challenging year, particularly with macro-level supply chain issues and inflationary cost pressures. However, the recent performance, together with renewed focus, starts to give us confidence on achieving our plans in FY24.

In Q4 FY23, the Group achieved its key immediate priorities together with robust future orders received. Our record-breaking order book of £25.6m together with a focused, customer engagement programme allows us to work towards our medium-term objectives.

Our price increase programme for some of our key customers ensures price mechanisms are in place to manage future key cost drivers as our ongoing way of doing business. This, combined with our focused drive on working capital, especially inventory management, ensures we manage our customer expectations at controlled and appropriate levels. Our target for FY24 is to achieve a balanced inventory level with a continued focus to reduce further through innovative tools.

We have prepared for the future by renegotiating debt facilities, which will allow us to grow through organic and acquisition investments. This is in two forms: first, renegotiation of our RCF to £70m; and second, with a new UKEF-EDG supported debt facility of £50m. This combined facility will allow us the flexibility to invest and grow the business in the key sectors on a global basis.

In support of our ongoing growth journey and developing the foundations for the future we are targeting our capex on sustainable opportunities combined with short financial payback periods. FY24 is key to complete the revised roll-out for our business transformation D365 project by the end of the year.

As a result of this we are confident in the medium term that we can return to our KSI targets for both UOP% and ROCE.

There can be no doubt that the macroeconomic, finance markets and geopolitical environment continue to present challenges in the short term. Notwithstanding this, we are confident with the fundamentals of the business and our position across the globe to deal with macro-level issues, while continuing to invest for growth for the medium term. Consequently, the Board remains committed to the Group's strategic journey and medium-term profitable growth aspirations.

To read the Financial review in full please refer to page 50 of the 2023 Annual report.

Trifast plc

The notes on pages 139-197 of the 2023 Annual Report form part of these financial statements.

Consolidated income statement

Annual results for the year ended 31 March 2023

	Annual report note	2023 £000	2022 £000
Continuing operations
Revenue	3, 35	244,391	218,618
Cost of sales		(182,462)	(160,189)
Gross profit		61,929	58,429
Other operating income	4	510	565
Distribution expenses		(6,727)	(5,296)
Administrative expenses before separately disclosed items		(43,728)	(38,952)
Acquired intangible amortisation	2, 13	(1,798)	(1,593)
Project Atlas	2	(1,722)	(1,041)
Restructuring and related charges	2	(4,235)	-
Impairment of goodwill	2, 13	(2,926)	-
Settlement for loss of office	2	(1,050)	-
Aborted acquisition costs	2	(261)	-
Acquisition costs	2, 36	-	(508)
Total administrative expenses		(55,720)	(42,094)
Operating (loss) / profit	5, 6, 7	(8)	11,604
Financial income	8	158	31
Financial expenses	8	(2,842)	(1,018)
Net financing costs		(2,684)	(987)
(Loss) / profit before taxation	3	(2,692)	10,617
Taxation	9	(174)	(1,640)
(Loss) / profit for the year (attributable to equity shareholders of the Parent Company)		(2,866)	8,977
(Loss) / earnings per share
Basic	25	(2.12)p	6.61p
Diluted	25	(2.12)p	6.56p

Consolidated statement of comprehensive income

for the year ended 31 March 2023

	2023 £000	2022 £000
(Loss) / profit for the year	(2,866)	8,977
Other comprehensive income for the year:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations	4,053	2,907
Loss on a hedge of a net investment taken to equity	(1,655)	(147)
Other comprehensive income recognised directly in equity	2,398	2,760
Total comprehensive (expense) / income recognised for the year
(attributable to the equity shareholders of the Parent Company)	(468)	11,737

Consolidated statement of changes in equity

for the year ended 31 March 2023

	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 2022	6,804	22,512	16,328	(3,487)	12,284	84,704	139,145
Total comprehensive expense for the year:
Loss for the year	-	-	-	-	-	(2,866)	(2,866)
Other comprehensive income for the year	-	-	-	-	2,398	-	2,398
Total comprehensive expense recognised for the year	-	-	-	-	2,398	(2,866)	(468)
Issue of share capital	1	18	-	-	-	-	19
Share-based payment transactions (net of tax)	-	-	-	-	-	5	5
Movement in own shares held	-	-	-	470	-	(470)	-
Dividends	-	-	-	-	-	(2,812)	(2,812)
Total transactions with owners	1	18	-	470	-	(3,277)	(2,788)
Balance at 31 March 2023	6,805	22,530	16,328	(3,017)	14,682	78,561	135,889

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

Note: Company statement of changes in equity can be found on pages 134 to 135 of the Annual report.

Statements of financial position

at 31 March 2023

		Group		Company
	Annual report note	2023	2022	2023	2022
		£000	£000	£000	£000
Non-current assets
Property, plant, and equipment	10, 11	19,417	20,297	6	2,216
Right-of-use assets	12	14,395	12,757	36	40
Intangible assets	13, 14	40,451	42,981	7,854	7,027
Equity investments	15	-	-	42,298	42,298
Non-current trade and other receivables	19	-	-	76,848	66,344
Deferred tax assets	16, 17	4,289	2,787	998	724
Total non-current assets		78,552	78,822	128,040	118,649
Current assets
Inventories	18	90,948	88,933	-	-
Trade and other receivables	19	61,906	60,520	3,754	1,888
Assets classified as held for sale	10, 11	2,130	-	2,130	-
Cash and cash equivalents	26	31,798	26,741	640	604
Total current assets		186,782	176,194	6,524	2,492
Total assets	3	265,334	255,016	134,564	121,141
Current liabilities
Trade and other payables	21	35,332	45,249	2,395	1,569
Right-of-use liabilities	12, 20, 26	3,498	3,028	21	19
Provisions	23	2,809	-	396	-
Tax payable		2,560	2,455	-	-
Total current liabilities		44,199	50,732	2,812	1,588
Non-current liabilities
Other interest-bearing loans and borrowings	20, 26	69,825	50,507	69,825	50,507
Right-of-use liabilities	12, 20, 26	12,315	10,683	17	23
Provisions	23	1,443	1,088	-	-
Deferred tax liabilities	16, 17	1,663	2,861	-	-
Total non-current liabilities		85,246	65,139	69,842	50,530
Total liabilities	3	129,445	115,871	72,654	52,118
Net assets		135,889	139,145	61,910	69,023
Equity
Share capital		6,805	6,804	6,805	6,804
Share premium		22,530	22,512	22,530	22,512
Merger reserve		16,328	16,328	16,328	16,328
Own shares held		(3,017)	(3,487)	(3,017)	(3,487)
Reserves		14,682	12,284	-	-
Retained earnings		78,561	84,704	19,264	26,866
Total equity		135,889	139,145	61,910	69,023

The loss after tax for the Company is £4.3m (FY22: £4.1m).

Statements of cash flows

for the year ended 31 March 2023

		Group		Company
	Annual report note	2023	2022	2023	2022
		£000	£000	£000	£000
Cash flows from operating activities
(Loss) / profit for the year		(2,866)	8,977	(4,325)	(4,106)
Adjustments for:
Depreciation and amortisation	10, 11, 13, 14	5,471	4,125	638	84
Right-of-use asset depreciation	12	3,640	3,131	23	19
Unrealised foreign currency gain		(50)	(34)	(43)	(45)
Financial income	8	(158)	(31)	(1,268)	(155)
Financial expense (excluding right-of-use liabilities)	8	2,412	692	2,383	683
Right-of-use liabilities' financial expense	8, 12	430	326	1	-
Loss on sale of property, plant, and equipment, intangibles and investments		149	6	9	145
Dividends received		-	-	(7,434)	(3,358)
Equity settled share-based payment charge		24	772	(398)	325
Impairment of goodwill	2, 13	2,926	-	-	-
Impairment of right-of-use assets and property, plant, and equipment on restructuring	2, 10, 11, 12	1,426	-	-	-
Taxation expense / (income)	9	174	1,640	(300)	(13)
Operating cash inflow / (outflow) before changes in working capital and provisions		13,578	19,604	(10,714)	(6,421)
Change in trade and other receivables		1,644	(5,950)	(536)	916
Change in inventories		215	(31,716)	-	-
Change in trade and other payables		(11,739)	2,922	661	299
Change in provisions		2,792	-	396	-
Cash generated from / (used in) operations		6,490	(15,140)	(10,193)	(5,206)
Tax paid		(3,529)	(2,757)	-	-
Net cash generated from / (used in) operating activities		2,961	(17,897)	(10,193)	(5,206)
Cash flows from investing activities
Proceeds from sale of property, plant, and equipment		27	36	-	-
Interest received		138	31	366	196
Acquisition of property, plant and equipment and intangibles	10, 11, 13, 14	(5,625)	(5,248)	(1,394)	(1,481)
Acquisition of subsidiary, net of cash acquired		-	(5,847)	-	-
Lending to subsidiary undertakings		-	-	(9,897)	(21,638)
Repayment by subsidiary undertakings		-	-	2,125	-
Dividends received		-	-	7,434	3,358
Net cash used in investing activities		(5,460)	(11,028)	(1,366)	(19,565)
Cash flows from financing activities
Purchase of own shares	24	-	(3,035)	-	(3,035)
Proceeds from the issue of share capital	24	19	53	19	53
Proceeds from new loan		16,423	32,980	16,423	32,980
Repayment of loans from subsidiaries		-	-	-	(4,248)
Repayment of right-of-use liabilities	12	(3,792)	(2,977)	(24)	(19)
Dividends paid	24	(2,812)	(2,156)	(2,812)	(2,156)
Interest paid		(2,477)	(805)	(2,011)	(456)
Net cash generated from financing activities		7,361	24,060	11,595	23,119
Net change in cash and cash equivalents		4,862	(4,865)	36	(1,652)
Cash and cash equivalents at 1 April		26,741	30,265	604	2,256
Effect of exchange rate fluctuations on cash held		195	1,341	-	-
Cash and cash equivalents at 31 March		31,798	26,741	640	604

Notes to the Annual Results Announcement

1. Underlying profit before tax and separately disclosed items

	FY23 Annual report Note	2023	2022
	note	£000	£000
Underlying profit before tax		9,300	13,759
Separately disclosed items within administrative expenses:
Acquired intangible amortisation	13	(1,798)	(1,593)
Project Atlas		(1,722)	(1,041)
Restructuring and related charges		(4,235)	-
Impairment of goodwill	13	(2,926)	-
Settlement for loss of office		(1,050)	-
Aborted acquisition costs		(261)	-
Acquisition costs	36	-	(508)
(Loss) / profit before tax		(2,692)	10,617

	FY23 Annual report Note	2023	2022
	note	£000	£000
Underlying EBITDA		19,297	20,409
Separately disclosed items within administrative expenses:
Project Atlas		(1,722)	(1,041)
Restructuring and related charges		(4,235)	-
Impairment of goodwill	13	(2,926)	-
Settlement for loss of office		(1,050)	-
Aborted acquisition costs		(261)	-
Acquisition costs	36	-	(508)
EBITDA		9,103	18,860
Acquired intangible amortisation	13	(1,798)	(1,593)
Depreciation and non-acquired amortisation		(7,313)	(5,663)
Operating (loss) / profit		(8)	11,604

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 FY22.

Recurring items

Intangible amortisation relating to acquisitions has been separately disclosed so as to present the trading performance of the respective entities with a charge on a comparable basis to other entities in the Group.

Event-driven items

Project Atlas is a multi-year investment into our IT infrastructure and underlying business processes. As a consequence of the work undertaken to date on this project, we have incurred direct costs of £1.7m in FY23 (FY22: £1.0m), largely relating to the project team and the ongoing roll out. We have excluded these costs from our underlying results, to reflect the unusual scale and one-off nature of this project. The cost has been excluded 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. The financial impact of the work undertaken to date on this project totals direct costs of £2.6m in FY23 (cumulatively £17.4m) of which £0.9m has been recognised (cumulatively £7.9m) as intangible assets on the balance sheet. Out of the £7.9m recognised as intangible assets on the balance sheet, £6.6m has been capitalised in relation to the sites which have gone live on the new IT system.

Restructuring and related charges of £4.2m are a result of a strategic review of operations and functions initiated in Q4 FY22 and approved by the Board on 28 March 2023. The charges include costs in respect of a down-sizing of personnel primarily within the UK due to the centralisation of multi-site distribution centres into a national distribution centre (NDC) in the Midlands and the closure of our UK manufacturing site in Uckfield. These efficiency initiative results in restructuring costs including redundancies. The charges also include impairment of non-current assets due to the closure of certain offices and warehouses within the UK directly related to the restructuring programme initiative and setting up the NDC. The closure of the offices/warehouses and redundancies would happen over the financial year FY24 and is planned to be completed by 31 March 2024. We have excluded these costs from our underlying results, to reflect the size and one-off nature of this project.

Impairment of goodwill of £2.9m relates to the TR VIC SPA cash generating unit. We have excluded these costs from our underlying results both due to their size and incidence.

Settlement for loss of office costs of £1.0m (FY22: £nil) were recognised in the year due to the CFO and CEO leaving the Group with immediate effect on 31 August 2022 and 18 February 2023 respectively. The costs include payment in lieu of notice, compensation for loss of office and loss of contractual benefits. We have excluded these costs from our underlying results both due to their size and incidence.

Aborted acquisition costs of £0.3m (FY22: £nil) were incurred in the year in relation to a potential target which was aborted in July 2022. They are excluded from underlying results to help provide a better understanding of the trading performance of the Group.

Acquisition costs of £nil (FY22: £0.5m) were incurred in the year. In FY22, £0.5m of costs were incurred in relation to the acquisition of TR Falcon on 31 August 2021. They were excluded from underlying results to help provide a better understanding of the trading performance of the Group in relation to the acquisition of Falcon on 31 August 2021.

Management removes the event-driven costs and certain non-trading items discussed above to allow the reader of the accounts to understand the underlying trading performance of the Group. Further reconciliations of underlying measures to GAAP measures can be found in note 32 in the Annual report.

2. 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 Executive Committee). Performance is measured based on each segment's underlying operating result 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

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 Executive Committee (the "EC") 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 2023	UK  £000	Europe  £000	North America £000	Asia £000	Common amounts £000	Total £000
Revenue
Revenue from external customers	77,857	85,362	29,657	51,515	-	244,391
Inter-segment revenue	6,032	3,077	271	8,893	-	18,273
Total revenue	83,889	88,439	29,928	60,408	-	262,664
Underlying operating result	5,509	2,915	1,256	9,473	(7,169)	11,984
Net financing costs	(367)	(643)	(593)	28	(1,109)	(2,684)
Underlying segment result	5,142	2,272	663	9,501	(8,278)	9,300
Separately disclosed items						(11,992)
Loss before tax						(2,692)
Specific disclosure items
Depreciation and amortisation	(2,279)	(3,500)	(902)	(1,770)	(660)	(9,111)
Government support income	-	-	-	-	-	-
Assets and liabilities
Non-current asset additions	1,101	5,832	1,082	2,222	1,412	11,649
Segment assets	74,423	82,259	27,426	69,475	11,751	265,334
Segment liabilities	(23,247)	(16,817)	(3,612)	(13,608)	(72,161)	(129,445)

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)

There were no material differences in Europe and North America between the external revenue based on location of the entities and the location of the customers. Of the UK external revenue, £12.0m (FY22: £16.2m) was sold into the European market. Of the Asian external revenue, £5.8m (FY22: £9.0m) was sold into the North American market and £7.6m (FY22: £9.8m) was sold into the European market.

Within Europe, TR VIC has revenue of £27.3m (FY22: £28.3m) and non-current assets of £11.7m (FY22: £13.1m).

Within Asia, TR Formac Singapore has revenue of £20.4m (FY22: £20.3m) and non-current assets of £4.5m (FY22: £4.4m).

Revenue is derived solely from the manufacture and logistical supply of industrial fasteners and Category 'C' components.

3. 2023 Annual report

The Annual report and financial statements for the year ended 31 March 2023 were approved by the Board of Directors on 10 July 2023.

In addition to the link on the front of this announcement to a pdf of the 2023 Annual report, a copy together with the Notice of Meeting will in due course be available to view and download from the Company website at www.trifast.com.

The documents will also be uploaded to the National Storage Mechanism at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

The financial information set out in this release does not constitute the Group's statutory Report and Accounts for the years ended 31 March 2023 or 2022. However, it is derived from the 2023 Report and Accounts http://www.rns-pdf.londonstockexchange.com/rns/5662F_1-2023-7-10.pdf.

The Report and Accounts for 2022 has been delivered to the Registrar of Companies and those for 2023 will be delivered in due course. The external auditor has reported on the 2023 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 Independent auditor's report to the members of Trifast plc can be read on pages 122 to 129 of the 2023 Annual report.

4. Annual General Meeting (AGM)

The Annual General Meeting will be held at 11.30am on Friday, 15 September 2023 at Peel Hunt LLP, 100 Liverpool Street, London, EC2M 2AT.

The Notice of Meeting, which includes special business to be transacted at the AGM together with an explanation of the resolutions to be considered at the meeting, will be made available on the Company website around 18 July, and communicated directly to shareholders.

Any questions relating to the 2023 Annual report can be sent to: The Company Secretary, Trifast plc, Trifast House, Bellbrook Park, Uckfield, East Sussex TN22 1QW, alternatively email: [e-mail].

Further enquiries please contact:
Trifast plc
Scott Mac Meekin, Interim Chief Executive Officer Darren Hayes-Powell, Chief Financial Officer Christopher Morgan, Company Secretary	Tel: [phone] Email: [e-mail] Shareholders: [e-mail]
Peel Hunt LLP (Stockbroker & financial adviser)
Mike Bell	Tel: [phone]
TooleyStreet Communications, (IR & media relations)
Fiona Tooley	Tel: [phone] Email:[e-mail]

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.

 

END