Interim Results
Trifast PLC
26 November 2001
Issued by Citigate Dewe Rogerson Ltd, Birmingham
Date: Monday, 26 November 2001 Embargoed: 7.00am
Trifast plc
'Global Assembly Partners'
Interim Results
for the six months ended 30 September 2001
* Turnover £52.3 million
* Operating profit before goodwill and
redundancy costs £1.6 million
* Pre-tax profit before goodwill and redundancy costs £1.3 million
* Adjusted fully diluted Earnings per share 0.62 pence
* Re-based interim dividend per share 0.60 pence
* Increase in cash during the first half £1.7 million
* Inventory since April, excluding SFE reduced by £3.4 million
* Successful integration of Taiwanese acquisition, SFE
completed in June
* New Midlands Hub operational
'The severe international economic downturn being experienced across industry,
in particular manufacturing, has provided a difficult and challenging backdrop
to our business in all three Continents.
'We believe that our swift actions to not only remove operational costs but
also continue to invest in the business this year will put us in a lead
position to take advantage of the general up-turn which we believe will happen
between the short and medium term, especially outside the UK.'
FULL STATEMENT ATTACHED
Enquiries:
Malcolm Diamond, Chief Executive Today: 020 7282 8000 (8.00am - 12.30pm)
John Wilson, Group Finance Director Mobile: 07979 518493 (MMD)
Trifast plc Mobile: 07711 103915 (JW)
Thereafter: 01825 747600
Web-site: www.trifast.com
Email: ceooffice@trifast.com
Fiona Tooley Today: 020 7282 8000
Citigate Dewe Rogerson Mobile: 07785 703523
Thereafter: 0121 455 8370
-2-
Trifast plc
Interim Results for the six months ended 30 September 2001
JOINT STATEMENT BY THE CHAIRMAN, DAVID DUGDALE AND
CHIEF EXECUTIVE, MALCOLM DIAMOND
The severe international economic downturn being experienced across industry,
in particular manufacturing, has provided a difficult and challenging backdrop
to our business in all three Continents. This downturn is totally
unprecedented in our 28 year history.
As we reported at our AGM in August, sales in the first four months to July
were 14% below the comparable period. This clearly reflected the collapse in
demand and build-up of excessive inventory stocks in the supply chain in our
major markets - telecoms and information technology sectors. This trend
continues. However, despite the lower volumes, we have not lost any of our
major customers and we continue to have a good level of business enquiries
from customers outside the IT hardware sector.
Results
Turnover for the six months ended 30 September 2001 was £52.31 million, with
Europe accounting for 85%; Far East 11% and the Americas 4%. Group exports
increased by 22% and accounted for 15% of Group turnover.
Although we have seen a reduction in gross margins to 23% since the year-end,
this is wholly attributable to a combination of stock write-offs of £1.45
million, adverse variances in UK manufacturing, and the overall change in the
mix of the business, all of which has principally been caused by the slowdown
in our higher margin technology business.
As a result of the market conditions, we implemented our cost-down programme.
In the early part of the first half, we removed annualised costs of £1 million
and by the end of the period, we further reduced costs by £2 million on an
annualised basis, some of which will not be realised until the beginning of
Q4. Redundancy costs were £0.77 million.
Group overheads therefore, before redundancy costs, as a percentage of sales
were 20%.
As a result, the Group's operating profits (before goodwill and redundancy
costs) were £1.60 million. Net interest charged was £0.34 million and covered
four times by operating profits (pre-goodwill and redundancy costs). Adjusted
fully diluted Earnings per Share was 0.62 pence.
Capital expenditure in the first half was £0.90 million, as was the
depreciation charge. We do not expect any significant capital expenditure
during the remainder of the year, although, we will continue with our planned
strategic business investments.
Since April, stock levels (excluding SFE), have been reduced by £3.45 million.
The remaining areas of working capital have been reduced in line with the
levels of business activity. Predominantly as a result of these working
capital reductions, the Group generated around £1.72 million of cash.
continued...
-3-
Debtor management remains a priority and debtor days have reduced by two. No
significant bad debts were incurred in the period.
At the end of the period, Group net borrowings totalled £13.93 million
representing gearing of 37%. The Balance Sheet remains healthy with
shareholders funds of £39.22 million.
Review
The trading conditions that exist have been influenced by a number of major
factors outside our control and therefore have been the most difficult we have
ever seen.
Following the unprecedented collapse in volumes at the beginning of the year,
we began to feel by August that the market deterioration in our core arena had
begun to level off. However, recent events further knocked market confidence,
but possibly only temporarily. Our entire focus in the first half has been to
reduce operational costs in such a way as to minimise the weakening of our
ability to profit from the market recovering, albeit slowly, during 2002.
As part of our cost-down programme, within the European territory, we made the
decision to close three of our eighteen UK sites and restructured the
operating management teams. The US operation also experienced an extremely
difficult first half and we have taken action to reduce the headcount and
focus its business on high margin activities. Since April 2001, excluding the
acquisition of SFE, headcount across the Group has been reduced by 14%.
On a positive note, we successfully completed our move to our new Midlands Hub
and fully integrated the distribution businesses of Coventry and Telford. Our
Hungarian facility is now fully incorporated and the new Mexican facility has
been completed. In addition, we have expanded our Dutch facility. Following
the successful 'implant relationship' at Electrolux two years ago, we have
nearly completed our stand-alone facility in France. All of these initiatives
will provide vital support in mainland Europe to service existing and new
customers that have been successfully secured through our on-going focussed
sales & marketing drive in these territories.
Growing our international network remains a key driver for our business, both
through acquisitions and alliances. Our Taiwanese acquisition SFE was
completed in June and has integrated well into the Group. Like other parts of
the business the slowdown in the USA had an impact on its performance, however
our strategic objective for acquiring the business was not only to utilise its
high quality, low cost manufacturing capability but also to develop an Asian
purchasing/stocking Hub providing our international business teams with high
quality/low cost components and better delivery times into Europe and the
Americas.
Our 'New Horizons' global marketing programme continues to develop and will
increasingly provide valuable data on our multi-national customers to our
worldwide business teams. This customer product enables them to share customer
and market knowledge and enhance the geographic spread of existing and new
relationships to the benefit of both parties.
Customer activity remains mixed. Within the high-tech and telecoms sector, we
have continued to see excess stock and inventory in the supply chain and we
believe that the recovery here is taking longer than originally anticipated to
feed through the chain. However, we have seen increases in our activities
outside the IT and Telecoms category and new customers secured include General
Trailers (formerly Crane Fruehauf), Flymo, Stadco and Rieter.
continued...
-4-
The value of developing our partnerships with multi-national customers remains
important as witnessed by the recent agreements with Delphi Diesel Systems and
Electrolux to service other mainland European factories. We are also supplying
additional sites for existing customers such as Filtronic, Compair (part of
the Invensys Group), NCR, and several multi-national sub-contract
manufacturers ('SCM').
Prospects
Trading remains challenging and current limited visibility means it remains
difficult for us to forecast going forward. The economic outlook remains very
uncertain, particularly for our customers in the IT and Telecoms sectors.
However, assuming no further deterioration in the economy, through the actions
we have already implemented we will achieve an improved performance in the
second half, although we expect results for the full year will be below
current market expectations.
Enquiry levels remain high and we continue to negotiate a number of
significant new business opportunities including customers outside our
traditional key market sectors. Although investment in some of our new
substantial logistics contracts is underway, we do not expect to reap the
benefits of these until the second half of the next financial year.
Despite the events of the last six months and the uncertain visibility across
the world economy going forward, your Board remains committed to its strategy
of further developing our international network of world-class global assembly
partners, and serving our multi-national OEM's to the high quality standards
to which they have become accustomed, whilst at the same time attaining
revenues and acceptable margins thus restoring our quality of earnings and
building shareholder value.
We believe that our swift actions to not only remove operational costs but
also continue to invest in the business this year will put us in a lead
position to take advantage of the general up-turn which we believe will happen
between the short and medium term, especially outside the UK.
Dividend
In light of these results and the lack of visibility going forward, your Board
has taken the decision to re-base the dividend to a level which reflects the
current requirements of the business and provide a platform for future growth.
An interim dividend of 0.60 pence per ordinary share will be paid on 23
January 2002 to shareholders on the Register as at 7 December 2001.
This move in no way reflects any reduced level of confidence in the
longer-term prospects of the Group, but endorses our need to maintain
investment in geographic expansion whilst competitors are downsizing.
The final dividend will be reviewed in light of the financial outcome for the
full year. It is the intention of the Board to continue to structure the
dividend payments so that the interim dividend represents broadly one third of
the total payment for the year.
26 November 2001
-5-
Consolidated Profit and Loss Account
Unaudited interim results for the six months ended 30 September 2001
Six months Six months
ended ended Year
Note 30 30 ended
September September 31 March
2001 2000 2001
£'000 £'000 £'000
Turnover
Existing operations 49,735 60,826 121,426
Acquisitions 2,574 - -
52,309 60,826 121,426
Cost of sales (40,260) (43,372) (86,430)
Gross profit 12,049 17,454 34,996
Net operating expenses (excluding (10,446) (11,410) (22,753)
redundancy costs)
Redundancy costs (770) - -
Operating profit before goodwill
amortisation
Existing operations 676 6,044 12,243
Acquisitions 157 - -
833 6,044 12,243
Goodwill amortisation (335) (164) (327)
Profit on ordinary activities before
interest 498 5,880 11,916
Net interest (341) (194) (390)
Profit on ordinary activities before
taxation 157 5,686 11,526
Taxation on profit on ordinary activities 2 (59) (1,706) (3,185)
Profit on ordinary activities after
taxation 98 3,980 8,341
Dividends 3 (431) (898) (2,680)
Retained (loss)/profit 7 (333) 3,082 5,661
Earnings per share
Basic 4 0.14p 5.58p 11.67p
Diluted 0.14p 5.47p 11.54p
Adjusted diluted 0.62p 5.70p 12.00p
-6-
Summarised Consolidated Balance Sheet
Unaudited interim results as at 30 September 2001
30 30
September September 31 March
Note 2001 2000 2001
£'000 £'000 £'000
Intangible fixed assets - Goodwill 15,737 5,904 5,741
Tangible fixed assets 15,909 14,177 14,579
31,646 20,081 20,320
Current assets 5 50,291 52,579 53,275
Creditors: amounts falling due within one
year (24,433) (28,510) (26,659)
Net current assets 25,858 24,069 26,616
Total assets less current liabilities
57,504 44,150 46,936
Creditors: amounts falling due after more
than one year (17,534) (6,934) (6,615)
Provisions for liabilities and charges (747) (825) (723)
Net assets 39,223 36,391 39,598
Capital and reserves
Called up share capital 3,593 3,564 3,590
Share premium 4,585 3,229 4,470
Revaluation reserve 1,017 1,017 1,017
Merger reserve 391 783 726
Profit and loss account 7 29,637 27,798 29,795
Equity shareholders' funds 8 39,223 36,391 39,598
-7-
Summarised Consolidated Cash Flow Statement
Unaudited interim results for the six months ended 30 September 2001
Six Six
months months Year
ended ended Ended
30 30 31
September September March
Note 2001 2000 2001
£'000 £'000 £'000
Net cash inflow from operating activities 9 3,512 3,606 8,003
Returns on investment and servicing of finance (222) (206) (376)
Taxation paid (1,232) (1,349) (3,869)
Capital expenditure and financial investment (881) (1,276) (2,558)
Acquisitions and disposals (8,077) - (446)
Equity dividends paid (1,789) (1,628) (2,533)
Cash (outflow) before use of liquid resources
and financing (8,689) (853) (1,779)
Net cash inflow/(outflow) from financing 10 10,412 (49) 98
Increase/(decrease) in cash in the period 11 1,723 (902) (1,681)
-8-
Notes to the Interim Statement
Unaudited interim results for the six months ended 30 September 2001
1 Basic of preparation
This interim statement has been prepared on the basis of
accounting policies set out in the Group financial statements for
the year ended 31 March 2001.
This statement does not comprise full financial statements within
the meaning of Section 240 of the Companies Act 1985. The statement
is unaudited but has been reviewed by KPMG Audit Plc and their
report is set out below.
The figures for the year ended 31 March 2001 have been extracted
from the full Annual Report and Accounts filed with the Registrar
of Companies on which the Auditors gave an unqualified report.
2 Taxation
The charge for tax is an estimate based on the anticipated
effective rate of tax for the year ending 31 March 2002.
3 Dividends
The directors have declared an interim dividend of 0.60p per
ordinary share to be paid on 23 January 2002 to shareholders on the
register on 7 December 2001.
4 Earnings per share
The calculation of earnings per 5p ordinary share is based on
profit on ordinary activities after goodwill amortisation and after
taxation and the weighted average number of shares in the period of
71,853,855 (September 2000: 71,267,901: March 2001: 71,470,971).
The calculation of the fully diluted earnings per 5p ordinary
share is based on profit on ordinary activities after goodwill
amortisation and after taxation. In accordance with FRS 14 the
weighted average number of shares in the period has been adjusted
to take account of the effects of all dilutive potential ordinary
shares. The number of shares used in the calculation amount to
69,335,767 (September 2000: 72,699,343: March 2001: 72,251,246).
The adjusted fully diluted earnings per share is presented so as to
show more clearly the underlying performance of the group and is
calculated as above using the profit on ordinary activities before
goodwill amortisation but after tax.
5 Current assets
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2001 2000 2001
£'000 £'000 £'000
Stocks 22,509 22,083 24,961
Debtors 23,004 26,422 25,050
Cash at bank and in hand 4,778 4,074 3,264
50,291 52,579 53,275
continued...
-9-
6 Purchase of Subsidiary Undertakings
2001
£'000
Net assets acquired 5,354
Goodwill 10,331
Consideration given 15,685
The consideration was satisfied by:
Cash 12,441
Deferred consideration 3,244
15,685
7 Profit and loss account
Six months Six months Year
ended ended ended
30 30 31
September September March
2001 2000 2001
£'000 £'000 £'000
Opening balance 29,795 24,493 24,493
Retained (loss)/profit for period (333) 3,082 5,661
Exchange differences (82) 59 199
Transfer from merger reserve 335 164 327
Capitalisation of reserves on issue of shares to
QUEST (78) - (887)
Reduction in goodwill - - 2
29,637 27,798 29,795
8 Reconciliation of movements in shareholders' funds
Six Six
months months Year
ended ended ended
30 30 31
September September March
2001 2000 2001
£'000 £'000 £'000
Profit for the financial period 98 3,980 8,341
Dividends (431) (898) (2,680)
Retained (loss)/profit for the period (333) 3,082 5,661
Issue of ordinary shares 118 30 1,403
Capitalisation of reserves on issue of shares to
qualifying QUEST (78) - (887)
Exchange gains/(losses) (82) 59 199
Reduction in goodwill - - 2
Net (reduction)/addition to shareholders' funds (375) 3,171 6,378
Opening shareholders' funds 39,598 33,220 33,220
Closing shareholders' funds 39,223 36,391 39,598
continued...
-10-
9 Net cash flow from operating activities
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2001 2000 2001
£'000 £'000 £'000
Operating profit after goodwill amortisation
498 5,880 11,916
Depreciation charge 871 800 1,658
Loss on sale of tangible fixed assets 47
24 78
Goodwill amortisation 335 164 327
Decrease/(increase) in working capital
1,784 (3,285) (5,976)
3,512 3,606 8,003
10 Net cash inflow from financing
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2001 2000 2001
£'000 £'000 £'000
Issue of ordinary share capital 40 30 407
Increase /(decrease)in debt 10,372 (79) (309)
10,412 (49) 98
11 Reconciliation of net cash flow to movement in debt
Six months Six months Year
ended ended ended
30 30 31
September September March
2001 2000 2001
£'000 £'000 £'000
Increase/(decrease) in cash in the period 1,723 (902) (1,681)
Cash inflow from (increase)/decrease in debt and
lease financing (10,372) 79 309
Change in net debt resulting from cash flows (8,649) (823) (1,372)
Loans and finance leases acquired with
subsidiaries (99) - -
Translation difference (126) (26) (7)
Movement in net debt in the period (8,874) (849)(1,379)
Net debt at beginning of period (5,057) (3,678)(3,678)
Net debt at end of the period (13,931) (4,527)(5,057)
12 This statement will be posted to shareholders shortly. Further
copies will be available from the Company's Registered Office: Trifast
House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, or via
ceoffice@trifast.com.
-11-
Independent review report by KPMG Audit Plc to Trifast Plc
Introduction
We have been instructed by the company to review the financial information set
out on pages 5 to 10 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the
Listing Rules of the Financial Services Authority which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts
except where they are to be changed in the next annual accounts in which case
any changes, and the reason for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999
/4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of Group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially
less in scope than an audit performed in accordance with Auditing Standards
and therefore provides a lower level of assurance than an audit. Accordingly
we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2001.
KPMG Audit Plc
Chartered Accountants
Crawley
26 November 2001
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