Preliminary Results for the Y

RNS Number : 6784N
Trifast PLC
16 June 2010
 



 

Issued by Citigate Dewe Rogerson Ltd, Birmingham

Wednesday, 16 June 2010

Embargoed: 7.00am

 

 

Preliminary Results for the year ended 31 March 2010

"New three-phased strategy playing a key role in the TR recovery story"

 

Key points - financial

H1

H2

Full Year

Full Year


30.09.09

31.03.10

2010

2009

Continuing Operations





Revenue

£39.85m

£46.09m

£85.94m

£104.90m

Adjusted EBITDA*

£0.59m

£1.54m

£2.13m

£4.55m

Overheads

£9.87m

£10.29m

£20.16m

£23.41m

Adjusted pre-tax profit*

-

£0.92m

£0.92m

£2.54m

Operating cash generation

£2.25m

£1.66m

£3.91m

£5.91m

Net debt

£5.57m

£4.68m

£4.68m

£8.40m

 

* excludes discontinued operations and separately disclosed items

 

Key points - commercial

·      Return to 'sales led' structure

·      By the year-end and ahead of management expectations, all TR business units traded profitably whilst stocks were reduced by £3.8m

·      Recovering optimism coming through from customers and key TR sectors

·      Market positioning substantially improved, both domestically and with multinationals

·      Sales daily run-rate continues to perform well and enquiry levels are higher than for many months. Global sales contracts secured beginning to come on stream and the focus on key sectors is driving further opportunities.

·      Trading in Asia remains buoyant in both manufacturing and in distribution, whilst UK, Europe and the US are beginning to recover

·      Broadening leadership team to drive strategy

 

"The uplift in Q4 in the year being reported has continued into Q1 of the current financial year and we would hope to report further positive news as we go through the period. Our focus will remain sales-led with margin improvement, tight control on costs and working capital, the reduction in debt and the ability to continue to generate cash."

 

"The on-going optimism of customers from within the key sectors we serve which include medical equipment, electronics and automotive, provides a solid foundation for us to remain cautiously optimistic that Trifast is now positioned for recovery."

 

"We anticipate the Group will make further progress during this current financial year as we implement "Phase 2" of our growth strategy and the Directors are confident that TR remains on target with its three-pronged strategy and stated objective to return the business back to stronger levels of profitability."

 

Enquiries:


Trifast plc

Citigate Dewe Rogerson

Malcolm Diamond, Executive Chairman

Fiona Tooley, Director

Mobile: +44 (0)7979 518493 (MMD)

or +44 (0)20 7 638 9571 (7.15am-10.00am)

Today: +07785 703523 or

+44 (0)20 7638 9571

Jim Barker, Chief Executive

Keith Gabriel, Senior Account Manager

Mobile: + (0)7769 934148

+44 (0)121 362 4035

Office Telephone: +44 (0)1825 747366

 


Arden Partners plc


Richard Day or Adrian Trimmings


Tel: +44 (0)20 7614 5900


 

Editors Note:

 

LSE Ticker: TRI

Group website: www.trifast.com

 

Trifast's trading business TR Fastenings is a leading international manufacturer and distributor of industrial fastenings to the assembly industries, with operations in Europe, the Americas and Asia. For more information, please visit www.trfastenings.com.

Trifast plc

Review of the year ended 31 March 2010

 

Joint Statement by: Malcolm Diamond, Chairman and Jim Barker, Chief Executive.

 

Introduction

The recovering optimism initially witnessed in our Q3 period by customers followed through into Q4 particularly within some of the sectors we serve. This, together with our implemented 'Phase 1' recovery strategy instigated during the year by the Board has seen the Group improve its market positioning significantly by the end of March 2010.  As we finished the year, all 21 business units traded profitably and ahead of management expectations, this underpins our confidence that TR's recovery can be sustained.

 

As we enter the second year since we returned to Trifast in March 2009, it is pleasing to report that our recovery plan is performing ahead of target, however, as a team, we are well aware of the need continually to apply ourselves to a further array of improvement opportunities that have been clearly identified during Phase 1 of our turnaround programme.

 

Key operational targets for year 2010/11 are vendor development, internal warehousing, logistics and freight, transactional sales within the UK and Europe as well as HR management (including the restoration of staff appraisals and management training schedules that had been abandoned in 2007).

 

The Rebuild Strategy

Manufacturing demand for assembly components is increasingly Asia centric and the activity in this region clearly demonstrates that an economic recovery has now arrived in the Far East whilst Europe ticks over at a steadily increasing rate, with the UK manufacturing presence regaining momentum. America is gradually showing more activity, and with Trifast having only a minor market share there, there is increasing opportunity for us to grow the business in this region going forward, especially as we are gaining a good reputation for TR branded products.

 

This demand profile provides a clear and simple pointer to our strategic planning.

 

Historically, multinationals based in the UK employed local staff who wanted the reassurance of locally held component supplies along with local sales and technical support. Being a sales/customer led organisation, during the nineties, TR successfully established a network of branches across the UK to satisfy this demand.

 

The market is different now. Many multinationals, especially in Scotland, have fled to lower cost countries, plus the present day sophistication with freight logistics has drastically reduced - even removed the need to hold stock within a network of localised warehouses, with current best practice creating centralised stocking "Hubs" feeding long distance overnight next-day customer deliveries. We have already benchmarked such systems against successful hub based organisations in Sweden and Denmark which serve their network of Western European mainland customers on a next-day delivery basis from a single stockholding location.

 

However, this strategy has to be combined with retaining knowledgeable sales and technical customer facing personnel placed geographically local to their existing and potential clients.

 

Therefore, this removes stock duplication, reduces incoming freight and packaging costs, warehousing and materials handling costs, simplifies quality control and enhances the scope for vendor management - and all without sacrificing customer care and service reaction speed.

Key points include broadening leadership teams and investing in processes and expertise whilst also continuing to 'work smarter' to further profitability and efficiencies.

 

It is both rare and motivating in the current economic climate to be able to implement a cost rationalisation strategy that reduces indirect costs without the loss of key employees. This is the main element of Phase 2 - our 'rebuild' year.

 

This in turn permits us to return to making capital investment within our Asian manufacturing and distribution facilities.

 

Group Structure

As we have previously indicated, the Board's review of the TR Group business will remain on-going so we not only ensure that we have the core skills to drive the business forward but that they also accurately reflect our commercial position.

 

Whilst in the main, the restructuring of our Asian and Mainland Europe operations is complete, TR's UK programme remains in progress and whilst a number of issues have already been addressed we anticipate further consolidation during the current year: these plans are well advanced and we expect to roll-out the initiatives over coming months.

 

People

The Trifast Board are keen to acknowledge the enthusiasm and willingness of the TR teams around the world; they have all embraced our continuous improvement and "working smarter" philosophy in the key areas of service, supply chain, logistics, pricing and packaging.

 

In what has been one of the toughest two-year periods for the business, on behalf of all stakeholders we thank every one of our people for their hard work and determination to pull this business around and working with the management towards a sustained recovery.

 

Our ability to sustain our continuous improvement momentum is, of course, totally dependent on the commitment, energy and focus of our entire workforce, which to date has been outstanding; however, with many having to accept a four-day working week during much of 2009 plus a pay freeze for the last two years, it would be irresponsible of the Board to fail to attempt at least a partial remedy to this situation during the financial year ending March 2011.

 

Broadening the skills of the Board

As Trifast continue their recovery strategy, a key element is to ensure that the Board is even more operationally focused with Group wide responsibility and authority in order to implement new initiatives quickly and consistently.

 

In order to drive our next phase of growth across our global operations and to ensure continuity and implementation of consistent policies across the Group the Board is making a number of senior appointments at both Board and Senior Management level:- 

 

We welcome the following to the Main Board with effect from today (16 June 2010):

·      Mark Belton appointed Group Finance Director

·      Seamus Murphy, Director of Operations, HR and IT

·      Glenda Roberts, Group Sales Director

 

Taking on Senior Posts are:-

·      Roberto Bianchi as Director of Sourcing

·      Keith Gibb as SD TR Branded Products

·      Ian Carlton as Director of Quality

 

The last twelve months has enabled the Main Board to work with the management teams around the business and we expect these appointments to play key roles in driving this business forward in the future.

The Board is mindful of the fact that the above additions stretches the ratio of Independent Directors (NEDs) to Executives beyond recommended Best Practice. It is considered that, with the high level of time commitment and support being received from the two incumbent Independent Directors, the recruitment of a third director is not an immediate business priority. Nevertheless, the Board has agreed to revisit the situation by Q4 of this financial year.

 

Further details of all our people can be found on our website www.trifast.com

 

Financing and Banking Facilities

We believe the banking facilities put in place in the latter part of the year provide the Company with adequate resources to achieve its short term financial objectives and also form an important part of enabling us to deliver our strategy going forward.

 

Our on-going focus remains on working capital and cash management; as a result, debt and stock levels continue to reduce, and at the same time, we have had sufficient scope to allow the Trifast teams to compete effectively.

 

Further details of the Group's banking facilities are contained within the Group Finance Review.

 

Current Trading

The uplift in Q4 in the year being reported has continued into Q1 of the current financial year ending March 2011 and we would hope to report further positive news as we go through the period.

 

Our focus will remain sales-led with margin improvement, whilst also mindful of retaining a tight control on costs and working capital, reducing debt and continuing the ability to generate cash.

 

Whilst a growing number of UK manufacturers are enjoying a rise in demand for their products overseas and in UK markets we have to be mindful of the number of external macro-factors which could slow global and UK economic recovery.

 

This apart, looking at Trifast, as we have already touched on, trading in Asia remains buoyant in both manufacturing and in distribution, whilst UK, Europe and the US are beginning to recover.

 

We are encouraged with sales daily run-rate and enquiry levels are higher than for many months. Global sales contracts successfully secured in the latter part of 2009 are beginning to come on stream and the focus on key sectors is driving further opportunities. This coupled with the on-going optimism of customers from within the key sectors we serve which include medical equipment, electronics and automotive, provides a solid foundation for us to remain cautiously optimistic that Trifast is now positioned for recovery.

 

Summary

We anticipate the Group will make further progress during this current financial year as we implement "Phase 2" of our growth strategy.

 

The Directors are confident that TR remains on target with its three-pronged strategy and stated objective, to return the business back to stronger levels of profitability through lean logistics, targeted sales and marketing with on-going margin improvement.

 

We look forward to updating throughout the coming year of our progress.

Finance Review by Mark Belton, Group Finance Director

 

A review of the year is set out in the Joint Chairman's and CEO Statement.

 

Results for the year

 

The income statement for the year ended 31 March 2010 can be summarised as follows:

 

H1

H2

Full Year

Full Year


30.09.09

31.03.10

2010

2009

Continuing Operations





Revenue

£39.85m

£46.09m

£85.94m

£104.90m

Adjusted EBITDA*

£0.59m

£1.54m

£2.13m

£4.55m

Overheads

£9.87m

£10.29m

£20.16m

£23.41m

Adjusted pre-tax profit*

-

£0.92m

£0.92m

£2.54m

Pre-tax profit/(loss) from

 continuing operations

 

£0.18m

 

£(2.99)m

 

£(2.81)m

 

£(11.00)m

Operating cash

 generation

 

£2.25m

 

£1.66m

 

£3.91m

 

£5.91m

Net debt

£5.57m

£4.68m

£4.68m

£8.40m

 

*These figures exclude discontinued operations and take into account the separately disclosed items below, which the management believe provide a better understanding of the Company's underlying profit.

 

Revenue

As indicated in our 2010 half-year statement, turnover reached its lowest point in Q4 2009 (January to March 2009). This level remained unchanged for the first half of 2010 providing some degree of stability. Then in H2 2010 we began to see a gradual rise, in particularly Q4 2010 (Jan '10 - Mar '10) as demand increased, reflecting now, what we believe be the underlying usage.

 

Adjusted pre-tax profit operating margins

To stem the losses of H2 2009 (Oct '08 - Mar '09), Management continued to cut costs and improve efficiencies, thus enabling the Group to breakeven during H1 2010. Further rationalisation was undertaken during H2 2010 primarily in the UK (which had been the hardest hit by the recession).

 

As at 31 March 2010 the Board is encouraged in being able to show an underlying profit figure for the Group of £0.92 million (2009: £2.54 million). The underlying profit figure is derived before separately disclosed items as stated below. The Board believe this profit figure provides a better understanding of the Group's underlying performance.

 

Asia was the first area to see demand increase, followed slowly by Mainland Europe, then the UK and USA.  This was reflected in the Regional underlying results before Central costs, with Asia showing an adjusted profit of £2.79 million, whilst the UK and the Rest of the World lagged behind with adjusted losses of £0.59 million and £0.34 million respectively.

 

Gross profit margins by the year end stood at 24.4% compared with 25.3% in 2009. This decrease is due to fixed overheads being spread over a lower revenue base. However a clearer picture is shown when comparing to H2 2009, which had a gross profit margin of 22.8%. This shows an increase of 1.6 percentage points reflecting the efficiency savings made during the year.

 

Overheads are down by £3.25 million compared to last year based on the saving initiatives already implemented. If we exclude the foreign exchange cost swing between the years of £1.07 million, the true overhead savings were actually £4.32 million.

The Board continue to remain vigilant and review areas where efficiencies can be made. However, they are mindful that to achieve on-going growth, further investment will be required.

 

Separately disclosed items

The following items are shown separately in the Income Statement and need to be taken into consideration to truly understand the underlying performance of the Group:

 

(i)

Sale of associate

£0.33 million

(ii)

Restructuring programme

(£3.42 million)

(iii)

Expense of changing banking facilities

(£0.52 million)


Intangible amortisation

(£0.26 million)


IFRS 2 credit

£0.14 million






(3.73 million)

 

i)      Sale of associate

 

On 24 September 2009, the Company sold its 25% shareholding in the associate undertaking, Techfast Holding Bhd. Techfast is a Malaysian company, listed on the Kuala Lumpur Stock Exchange. The sale generated a one-off gain and a positive cash impact of £0.33 million.

 

ii)     Restructuring programme

 

Phase 1 of the restructuring programme has been implemented, totalling £3.42 million in the year. £2.80 million is in relation to closures and downsizing of sites within the UK. £0.62 million refers to redundancy / compensation payments, £0.56 million of which, relates to the UK.

 

The cash effect of the above restructuring costs will total £3.42 million, £0.63 million of which had been incurred during 2010.

 

iii) Expense of changing banking facilities

 

In February 2010 the Group renegotiated its old banking facilities and secured new more flexible banking arrangements. The cost of achieving this was £0.52 million in respect of one-off legal, due diligence, and bank arrangement fees. £0.30 million of the £0.52 million cash outflow was incurred during 2010.

 

Interest and interest cover

Net interest before one-off financing cost has fallen significantly from £0.80 million to £0.15 million. This is due to the Group's lower net debt levels and reduced interest base rates.

 

Net interest cover has increased from 5.7 to 14.2 (defined as EBITDA to net interest, before the one-off separately disclosed items).

 

Going forward, it is anticipated that finance expenses will increase as higher banking charges have been agreed as part of the new banking facilities.

 

To protect against significant interest rate increases, the Company has taken out a 3% fixed cap interest rate hedging instrument for three years.

 

Taxation

Overall there was a tax credit of £0.62 million, ETR 22%; (2009: a tax charge of £0.52 million, ETR 4.7%) in the year. This largely reflects a deferred tax credit as a result of the increase in the UK's deferred tax asset in relation to brought forward losses.

 

All of the 2010 current tax charge related to overseas operations.

Balance Sheet and Funding

At 31 March 2010, total shareholder equity amounted to £40.18 million (2009:£42.47 million) a decrease of 5.4%, reflecting the loss incurred in the period.

 

Net working capital fell by £3.58 million, largely as a result of the Group's reduction in gross stock levels in order in generate cash.

 

As a result of the Group's concerted effort to generate cash, the Board is pleased to show that Net Debt reduced significantly from £8.40 million in 2009 to £4.68 million as at 31 March 2010.

 

In February 2010 the Group's banking facilities were changed in order to provide more security and flexibility. The existing Gross Debt of £14.82 million was repaid and the overdraft facility of £6.00 million cancelled; replacing these were a 3 year Asset Based Lending facility of £13.50 million (as at 31 March 2010, £7.22 million was utilised), a bridging loan of £2.00 million and a term loan of £4.00 million (as at 31 March 2010 the amount outstanding was £4.88 million).

 

Trading forecasts show that these new facilities provide sufficient headroom up until the date of renewal.  In addition current forecasts show that the Group will retain liquidity headroom beyond this date, however the Board are keen to renegotiate terms of facilities with the Bank to provide the Group with more security and flexibility for the longer-term.

 

As a result of the above changes, Gross debt at 31 March 2010 was £12.10 million a reduction of £2.72 million. Overall gearing is down to 12% (2009: 20%) reflecting the reduced Net Debt position.

 

The Group's net cash balances were £7.42 million (2009: £6.42 million) of which £7.81 millionwas held in foreign currencies (2009: £6.42 million). As a Group, our policy is, where possible to hold the same local currency as the respective local entity. We monitor exchange rates and buy and sell currencies in order to minimise our open exposure to foreign exchange rates but remain mindful of operational requirements. We do not speculate on rates.

 

Cash Flow

Cash generation is a continual key objective of the Group. Stock levels have been driven down to an optimum level, but without being detrimental to the business.

 

Cash generated from operations was £3.91million before tax (2009: £5.91 million). However, during the year, cash paid out on one-off separately disclosed items was £2.61 million, which reflects that the underlying cash generation was £6.52 million and the true cash generated from working capital was £7.80 million.

 

Debtor days remain strong at 69 (2009: 70) and bad debts in the period were £0.07 million, which is felt acceptable given the current economic climate.

 

Capital expenditure in the period was modest at £0.22 million. Although conservation of cash is still extremely important, the Board will not stifle Capex plans that will expand the business and lead to future cash and profit generation.

 

Dividend

No dividend payment is being proposed in respect of the year ended 31 March 2010.

 

As already indicated, the restoration of a yield is an important issue and it is the Directors intention to redress the situation as soon as practical.

Consolidated income statement

for year ended 31 March 2010

 

 

 

Note

2010

2009



£000

£000

Continuing operations








Revenue

3

85,935

104,901

Cost of sales


(64,927)

(78,312)

 

Gross profit


 

21,008

 

26,589

Other operating income before separately disclosed items:


218

156

 Sale of associate

2

332

-

Total other operating income


550

156

Distribution expenses


(2,146)

(2,814)





Administrative expenses before separately disclosed items:


(18,015)

(20,593)

IFRS2 credit / (charge)


143

(55)

Intangible amortisation

2, 7

(261)

(266)

Goodwill impairment

2, 7

-

(8,303)

Settlement claim

2

-

(555)

Restructuring costs

2

(3,420)

(3,701)

Impairment of associate

2

-

(659)





Total administrative expenses


(21,553)

(34,132)

 

Operating loss

 

4

 

(2,141)

 

(10,201)





Financial income


96

99

Financial expenses before separately disclosed items:


(246)

(896)

Expense of changing banking facilities


(517)

-

Total financial expenses


(763)

(896)

Net financing costs


(667)

(797)

 

Loss before tax

 

2, 3

 

(2,808)

 

(10,998)

Taxation

5

621

(520)

 

Loss from continuing operations

 (attributable to equity shareholders of the Parent Company)

 

 

 

 

(2,187)

 

 

(11,518)





Discontinued operations

3, 6



 Loss from discontinued operations (net of income tax)


-

(3,792)

 

Loss for the period


 

(2,187)

 

(15,310)

 

Loss per share (total)




Basic

12

(2.57p)

(17.98p)

Diluted

12

(2.57p)

(17.98p)





Loss per share (continuing operations)




Basic

12

(2.57p)

(13.53p)

Diluted

12

(2.57p)

(13.53p)





Dividends




Interim paid 2010 - nil (2009: 0.93p)

11

-

793


Statements of comprehensive income for year ended 31 March 2010

Group

Company


2010

2009

2010

2009


£000

£000

£000

£000

 

(Loss)/profit for the year

(2,187)

(15,310)

4,530

(8,900)

 

Other comprehensive income:





Foreign currency translation differences

42

7,135

-

-

 

Net (loss)/gain on hedge of net investment in foreign subsidiary

(1)

7

-

-

 

Other comprehensive income recognised directly in equity net

 of income tax

 

 

41

 

 

7,142

 

 

-

 

 

-

 

Total comprehensive (expense)/income recognised for the

 Year (attributable to equity shareholders of the Parent Company)

 

 

(2,146)

 

 

(8,168)

 

 

4,530

 

 

(8,900)

 

 

Consolidated statement of changes in equity for year ended 31 March 2010

Share

Capital

Share

Premium

Translation

Reserve

Retained

Earnings

Total

Equity


£000

£000

£000

£000

£000

 

Balance at 1 April 2009

4,262

12,167

8,958

17,083

42,470

 

Total comprehensive income for the year:






Loss for the year

-

-

-

(2,187)

(2,187)

Other comprehensive income:






Foreign currency translation differences

-

-

42

-

42

Net loss on hedge of net investment in foreign

subsidiary

 

-

 

-

 

(1)

 

-

 

(1)

 

Total other comprehensive income

 

-

 

-

 

41

 

-

 

41

 

Total comprehensive income/(expense)

 recognised for the year

 

 

-

 

 

-

 

 

41

 

 

(2,187)

 

 

(2,146)

 

 

Transactions with owners, recorded directly in equity

 






Share based payment transactions

-

-

-

(143)

(143)

 

Total transactions with owners

 

-

 

-

 

-

 

(143)

 

(143)

 

Balance at 31 March 2010

 

4,262

 

12,167

 

8,999

 

14,753

 

40,181

 

Consolidated statement of changes in equity for year ended 31 March 2009

Share

Capital

Share

Premium

Translation

Reserve

Retained

Earnings

Total

Equity


£000

£000

£000

£000

£000

Balance at 1 April 2008

4,248

12,167

1,816

34,734

52,965

 

Total comprehensive income for the year:






Loss for the year

-

-

-

(15,310)

(15,310)

Other comprehensive income:






Foreign currency translation differences

-

-

7,135

-

7,135

Net gain on hedge of net investment in foreign

 subsidiary

 

-

 

-

 

7

 

-

 

7

 

Total other comprehensive income

 

-

 

-

 

7,142

 

-

 

7,142

 

Total comprehensive income/(expense)

 recognised for the year

 

 

-

 

 

-

 

 

7,142

 

 

(15,310)

 

 

(8,168)

 

 

Transactions with owners, recorded directly in equity

 






Share based payment transactions

14

-

-

41

55

Dividends

-

-

-

(2,382)

(2,382)

Total transactions with owners

14

-

-

(2,341)

(2,327)

 

Balance at 31 March 2009

 

4,262

 

12,167

 

8,958

 

17,083

 

42,470


Company statement of changes in equity for year ended 31 March 2010

Share

Capital

Share

Premium

Merger

Reserve

Retained

Earnings

Total

Equity


£000

£000

£000

£000

£000

 

Balance at 1 April 2009

 

4,262

 

12,167

 

1,521

 

(6,976)

 

10,974

 

Total comprehensive income for the year:






Profit for the year

-

-

-

4,530

4,530

Other comprehensive income:






Foreign currency translation differences

-

-

-

-

-

Net gain/(loss) on hedge of net investment in

 foreign subsidiary

 

-

 

-

 

-

 

-

 

-

 

Total other comprehensive income

 

-

 

-

 

-

 

-

 

-

 

Total comprehensive income recognised for

 the year

 

 

-

 

 

-

 

 

-

 

 

4,530

 

 

4,530

 

 

Transactions with owners, recorded directly in equity

 






Share based payment transactions

-

-

-

(143)

(143)

Total transactions with owners

-

-

-

(143)

(143)

 

Balance at 31 March 2010

 

4,262

 

12,167

 

1,521

 

(2,589)

 

15,361

 

 

Company statement of changes in equity for the year ended 31 March 2009

Share

Capital

Share

Premium

Merger

Reserve

Retained

Earnings

Total

Equity


£000

£000

£000

£000

£000

 

Balance at 1 April 2008

4,248

12,167

2,393

3,393

22,201

 

Total comprehensive income for the year:






Loss for the year

-

-

-

(8,900)

(8,900)

Other comprehensive income:






Foreign currency translation differences

-

-

-

-

-

Net gain/(loss) on hedge of net investment in

 foreign subsidiary

 

-

 

-

 

-

 

-

 

-

 

Total other comprehensive income

 

-

 

-

 

-

 

-

 

-

 

Total comprehensive expense recognised for the year

 

 

-

 

 

-

 

 

-

 

 

(8,900)

 

 

(8,900)

 

 

Transactions with owners, recorded directly in

 equity






Utilisation of merger reserve

-

-

(872)

872

-

Share based payment transactions

14

-

-

41

55

Dividends

-

-

-

(2,382)

(2,382)

Total transactions with owners

14

-

(872)

(1,469)

(2,327)

 

Balance at 31 March 2009

 

4,262

 

12,167

 

1,521

 

(6,976)

 

10,974


Statements of Financial Position

at 31 March 2010

 

Note

Group

Company



2010 

2009

2010

2009



£000

£000

£000

£000

Non-current assets






Property, plant and equipment


7,740

8,606

2,624

2,711

Intangible assets

7

16,358

16,380

-

-

Equity investments


-

-

21,874

21,874

Deferred tax assets


2,046

707

-

-







Total non-current assets


26,144

25,693

24,498

24,585

 

Current assets






Stocks

8

20,141

23,952

-

-

Trade and other receivables


20,458

18,362

1,397

1,677

Cash and cash equivalents

9

7,420

9,063

2,176

4,019







Total current assets


48,019

51,377

3,573

5,696







Total assets

3

74,163

77,070

28,071

30,281

 

Current liabilities






Bank overdraft

9

-

2,641

6,524

5,728

Other interest-bearing loans and borrowings

10

12,103

2,547

4,877

1,135

Trade and other payables


16,701

14,838

1,215

1,175

Tax payable


847

8

-

-

Provisions


841

1,166

-

517







Total current liabilities


30,492

21,200

12,616

8,555

 

Non-current liabilities






Other interest-bearing loans and borrowings

10

-

12,271

-

10,446

Provisions


3,144

781

-

-

Deferred tax liabilities


346

348

94

306




             


             

Total non-current liabilities


3,490

13,400

94

10,752

 

Total liabilities

 

3

 

33,982

 

34,600

 

12,710

 

19,307

 

Net assets


 

40,181

 

42,470

 

15,361

 

10,974

 

Equity






Share capital

11

4,262

4,262

4,262

4,262

Share premium


12,167

12,167

12,167

12,167

Reserves


8,999

8,958

1,521

1,521

Retained earnings


14,753

17,083

(2,589)

(6,976)







Total equity


40,181

42,470

15,361

10,974


Statements of cash flows

for year ended 31 March 2010

 

 

Note

Group

Company



2010 

2009

2010

2009



£000

£000

£000

£000

Cash flows from operating activities






(Loss)/profit for the year


(2,187)

(15,310)

4,530

(8,900)

Adjustments for:






Depreciation, amortisation and impairment


1,329

9,780

87

9,419

Financial income


(96)

(99)

(2)

(51)

Financial expense


763

896

520

678

Loss on sale of property, plant and equipment and investments


 

10

 

436

 

-

 

-

Loss on disposal of subsidiary

6

-

2,950

-

-

Dividends received


-

-

(5,289)

(4,679)

Equity settled share based payment (credit)/charge


(143)

55

(105)

 (32)

Gain on sale of associate


(332)

-

(332)

-

Impairment of associate


-

659

-

500

Taxation


(621)

585

(212)

136

 

Operating cash outflow before changes in working

 capital and provisions


 

 

(1,277)

 

 

(48)

 

 

(803)

 

 

(2,929)

Change in trade and other receivables


(1,983)

8,078

242

(356)

Change in stocks


3,748

2,746

-

-

Change in trade and other payables


1,599

(5,847)

113

373

Change in provisions


1,821

976

(667)

508

 

Cash generated from/(used) in the

 operations


 

 

3,908

 

 

5,905

 

 

(1,115)

 

 

(2,404)

Tax recovered/(paid)


119

(2,270)

-

-







Net cash from operating activities


4,027

3,635

(1,115)

(2,404)

 

Cash flows from investing activities






Proceeds from sale of property, plant

   and equipment


 

13

 

41

 

-

 

-

Interest received


97

103

3

51

Proceeds from sale of associate


332

-

332

-

Disposal of discontinued operation, net of cash disposed of

6

-

(104)

-

(573)

Acquisition of property, plant and equipment


(220)

(730)

-

(29)

Dividends received


-

-

5,289

4,679

 

Net cash from investing activities


 

222

 

(690)

 

5,624

 

4,128

 

Cash flows from financing activities






Proceeds from new loan

10

12,103

-

4,877

-

Repayment of long term borrowings


(14,818)

(2,732)

(11,581)

(1,506)

Dividends paid

11

-

(2,382)

-

(2,382)

Interest paid


(620)

(1,030)

(444)

(799)







Net cash from financing activities


(3,335)

(6,144)

(7,148)

(4,687)



             

             

             

             

Net change in cash and cash equivalents


914

(3,199)

(2,639)

(2,963)

Cash and cash equivalents at 1 April


6,422

8,247

(1,709)

1,254

Effect of exchange rate fluctuations on cash held


84

1,374

-

-







Cash and cash equivalents at 31 March

9

7,420

6,422

(4,348)

(1,709)


Notes

1          Basis of preparation

 

A review of the business activity and future prospects of the Group are covered in the Chairman's and CEO's Statement and the Directors' Business Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Finance Review.  Detailed information regarding the Group's current facility levels, liquidity risk and maturity dates are provided in the Report & Accounts.

 

The asset backed lending facility (max £13.50 million) has a three year term. The Group term loan of £4.00m is due to be repaid by 31 December 2010. Current forecasts show that the Group has sufficient liquidity headroom to continue to operate within its facilities beyond this date. However, management remain keen to renegotiate term facilities with the bank to provide the Group with more secure and flexible facilities for the longer term.

 

As a result, the Group has held a number of positive discussions with its bankers about its future borrowing needs and no matters have been drawn to its attention to suggest that renewal, if required, may not be forthcoming on acceptable terms.

 

Considering the Directors understanding of the bank's current position and in conjunction with its current forecasts, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

2    Underlying profit and separately disclosed items

Note

2010

2009



£000

£000





Underlying profit before tax


915

2,541





Separately disclosed items within other operating income:




Sale of associate


332

-





Separately disclosed items within administrative expenses




Goodwill impairments

7

-

(8,303)

Restructuring costs


(3,420)

(3,701)

Impairment of associate


-

(659)

Settlement claim


-

(555)

Intangible amortisation

7

(261)

(266)

IFRS 2 share based payment credit/(charge)


143

(55)





Separately disclosed items within financial expenses




Expense of changing banking facilities


(517)

-





Loss from continuing operations before tax


(2,808)

(10,998)

3          Operating segmental analysis

Geographical operating segments

 

March 2010

UK

Mainland

Europe/

USA

Asia

Common

Costs

Total








£000

£000

£000

£000

£000







Revenue*






Revenue from external customers

46,464

18,027

21,444

-

85,935

Inter segment revenue

1,154

271

2,596

-

4,021







Total revenue

47,618

18,298

24,040

-

89,956







Segment result before separately

 disclosed items

 

(590)

 

(341)

 

2,787

 

(941)

 

915







Separately disclosed items

 (see note 2)





 

(3,723)







Loss before tax





(2,808)







Specific disclosure items






Depreciation and amortisation

318

49

615

347

1,329

Impairment loss

-

-

-

-

-







Assets and liabilities






Segment assets

27,799

8,608

29,249

8,507

74,163

Segment liabilities

(21,351)

(2,031)

(4,356)

(6,244)

(33,982)


 

March 2009

UK

Mainland

Europe/

USA

Asia

Common

Costs

Total








£000

£000

£000

£000

£000







Revenue*






Revenue from external

 customers

 

58,881

 

20,717

 

25,303

 

-

 

104,901

Inter segment revenue

2,749

369

3,900

-

7,018







Total revenue

61,630

21,086

29,203

-

111,919







Segment result before separately disclosed

 items

 

789

 

732

 

3,906

 

(2,886)

 

2,541







Separately disclosed items (see note 2)





(13,539)







Loss before tax from continuing operations





(10,998)







Discontinued Turkish business loss

 before tax (see note 6)





 

(3,727)













Loss before tax





(14,725)







Specific disclosure items






Depreciation and amortisation

458

72

588

359

1,477

Impairment loss

-

-

1,503

7,608

9,111













Assets and liabilities






Segment assets

24,487

9,884

30,739

11,960

77,070

Segment liabilities

(11,743)

(2,117)

(6,561)

(14,179)

(34,600)

 

*Of the Asian external revenue, £2.01 million (2009: £3.3 million) was sold into the American market and £4.68 million (2009: £5.2 million) sold into the European market.

 

There were no major customers that represent more than 10% of the revenue.

 

4          Expenses and auditors' remuneration

Included in loss for the year are the following:

Note

2010

2009



£000

£000





Depreciation


1,068

1,211

Impairment/amortisation of acquired intangibles

7

261

9,377

Forex loss/(gain)


524

(546)

Auditors' remuneration:


Audit of these financial statements

34

Audit of financial statements of subsidiaries pursuant to legislation

164

Other services relating to taxation

84

All other services

47

 

5          Taxation

Recognised in the income statement

Note

2010

2009



£000

£000

Current UK tax expense




Current year


-

755

Double taxation relief


-

(755)



-

-

Current tax on foreign income for the year


790

1,079

Adjustments for prior years


(76)

(31)







714

1,048





Total current tax


714

1,048

Deferred tax expense




   Origination and reversal of temporary differences


(1,254)

(475)

   Adjustments for prior years


(81)

(53)



             

             



(1,335)

(528)

Tax in income statement from continuing operations


(621)

520

Tax from discontinued operations

6

-

65





Total tax in income statement


(621)

585

 

Reconciliation of effective tax rate ("ETR") and tax expense

 

2010

ETR

2009

ETR


£000

%

£000

%






Loss for the period

(2,187)


(15,310)


Tax from continuing operations

(621)


520


Tax from discontinued operations

-


65


Loss before tax

(2,808)


(14,725)



             


             


Tax using the UK corporation tax rate of

 28% (2009: 28%)

 

(786)

 

28

 

(4,123)

 

28

Goodwill impairment

-

-

2,325

(16)

Impairment of associate

-

-

185

(1)

Tax suffered on dividends

94

(3)

579

(4)

Non-deductible expenses

168

(6)

294

(2)

IFRS2 share option (credit)/charge

(7)

-

164

(1)

Sale of associate

(93)

3

-

-

Deferred tax assets not recognised

343

(12)

616

(4)

Losses from discontinued operations

-

-

1,107

(8)

Different tax rates on overseas earnings

(183)

6

(478)

3

Over provided in prior years

(157)

6

(84)

1

 

Total tax in income statement

 

(621)

 

22

 

585

 

(4)

 

6          Discontinued operation

In March 2009, the Group sold the Turkish business (TR Keba Ltd) back to Keba's original management team and this was shown as a discontinued operation as at 31 March 2009.

 

2009


£000



Results of discontinued operation


Revenue

2,697

Expenses

(3,474)

Results from operating activities

(777)

Income tax

(65)

Results from operating activities, net of income tax

(842)

Loss on sale of discontinued operation (including goodwill impairment)

(2,950)



Loss for the period

(3,792)



Basic loss per share

(4.45p)

Diluted loss per share

(4.45p)



Cash flows from/(used in) discontinued operation


Net cash used in operating activities

(426)

Net cash from investing activities

387

Net cash used in financing activities

(2)

Net cash used in discontinued operation

(41)



Effect of disposal on the financial position of the Group


Goodwill

808

Property, plant and equipment

65

Stock

1,031

Trade and other receivables

939

Cash and cash equivalents

104

Deferred tax liabilities

(207)

Trade and other payables

210

Net assets and liabilities

2,950



Consideration received, satisfied in cash

-

Cash disposed of

(104)

Net cash outflow

(104)

 

7          Intangible assets - Group

Goodwill

Other

Total


£000

£000

£000





Cost




Balance at 1 April 2008

27,001

2,152

29,153

Effect of movements in foreign exchange

2,586

-

2,586





Balance at 31 March 2009

29,587

2,152

31,739





Balance at 1 April 2009

29,587

2,152

31,739

Effect of movements in foreign exchange

(476)

-

(476)





Balance at 31 March 2010

29,111

2,152

31,263

 

Amortisation and impairment




Balance at 1 April 2008

4,636

689

5,325

Amortisation for the year

-

266

266

Impairment losses on continuing operations

8,303

-

8,303

Impairment loss on discontinued operations

808

-

808

Effect of movements in foreign exchange

657

-

657





Balance at 31 March 2009

14,404

955

15,359





Balance at 1 April 2009

14,404

955

15,359

Amortisation for the year

-

261

261

Effect of movements in foreign exchange

(715)

-

(715)





Balance at 31 March 2010

13,689

1,216

14,905





Net book value




At 1 April 2008

22,365

1,463

23,828





At 31 March 2009

15,183

1,197

16,380





At 31 March 2010

15,422

936

16,358

There were no impairments made during 2010 (2009: £9.11 million).

 

The following cash generating units have significant carrying amounts of goodwill:

2010

2009


£000

£000




Special Fasteners Engineering Co. Ltd (Taiwan) ('SFE')

8,927

8,688

TR Fastenings AB (Sweden)

1,063

1,063

Lancaster Fastener Company Ltd (UK)

1,245

1,245

Serco Ryan Ltd (within TR Fastenings Ltd) (UK)

4,083

4,083

Other

104

104


15,422

15,183



Taiwan

UK

Sweden


2010

2009

2010

2009

2010

2009

Pre-tax discount rate

17%

16%

17%

16%

17%

16%








Growth rate

4%

4%

3%

3%

2%

2%

 

Long-term growth rate

Five year management plans are used for the Group's value in use calculations. Long-term growth rate into perpetuity has been determined as the lower of:

 

-       the nominal GDP rates for the country of operation; and

 

-       the long-term compound annual growth rate in EBITDA in years six to ten estimated by management.

 

Pre-tax risk adjusted discount rate

The discount rate applied to the cash flows of each of the Group's operations is based on the risk free rate for ten year bonds issued by the government in the respective market, adjusted for a risk premium to reflect both the increased risk of investing in equities and the systematic risk of the specific Group operating company.

 

In making this adjustment, inputs required are the equity market risk premium (that is the increased return required over and above a risk free rate by an investor who is investing in the market as a whole) and the risk adjustment, beta, applied to reflect the risk of the specific Group operating company relative to the market as a whole.

 

In determining the risk adjusted discount rate, management has applied an adjustment for the systematic risk to each of the Group's operations determined using an average of the betas of comparable listed fastener distribution and manufacturing companies and, where available and appropriate, across a specific territory. Management has used a forward-looking equity market risk premium that takes into consideration both studies by independent economists, the average equity market risk premium over the past ten years and the market risk premiums typically used by investment banks in evaluating acquisition proposals.

 

The table above discloses pre-tax discount rates of 17% across the three CGU's. This reflects that certain components increase the discount rate in one region more than others, such as higher cost of debt in Asia. However, the slower recovery and automotive exposure in the UK & Sweden means a higher territorial premium has been applied. Overall, the Board is confident the pre-tax adjusted discount rates adequately reflect the circumstances in each region and are in accordance with IAS36.

Sensitivity to changes in assumptions

Other than as disclosed below, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of any cash generating unit to exceed its recoverable amount.

 

The estimated value in use at 31 March 2010 of the Group's operations in Taiwan, UK and Sweden were S$ 0.80 million, £3.02 million and £0.30 million above their respective carrying value and, consequently, any material adverse change in key assumptions would, in isolation, cause an impairment loss to be recognised.

 

The tables below show the key assumptions used in the value in use calculation for Taiwan, UK and Sweden and the amount by which each key assumption must change in isolation in order for the estimated recoverable amount to be equal to its carrying value.

 

Taiwan

UK

Sweden





Pre-tax adjusted discount rate

18%

19%

18%

Budgeted change in EBITDA

3%

15%

11%

Long term growth rate

3.6%

0.2%

0.3%

8          Stocks

Group


2010

2009


£000

£000




Raw materials and consumables

1,625

2,109

Work in progress

749

376

Finished goods and goods for resale

17,767

21,467


20,141

23,952

 

9          Cash and cash equivalents/bank overdrafts

Group

Company


2010

2009

2010

2009


£000

£000

£000

£000






Cash and cash equivalents per balance sheet

7,420

9,063

2,176

4,019

Bank overdrafts per balance sheet

-

(2,641)

(6,524)

(5,728)

 

Cash and cash equivalents per cash flow

 statements

 

 

7,420

 

 

6,422

 

 

(4,348)

 

 

(1,709)


10        Other interest-bearing loans and borrowings

 



Current

Non-Current

Initial Loan Value

Company

Rate

Maturity

2010

2009

2010

2009




£000

£000

£000

£000

Bridging loan £2.00m

Base +4.00%

2010

1,210

-

-

-

Term loan £4.00m

Libor +3.75%

2010

3,667

-

-

-

Acquisition SEK 30m

Libor +0.95%

2009

-

64

-

-

Acquisition £15.0m

Libor +0.91%

2012

-

1,071

-

10,446




4,877

1,135

-

10,446

Other Group







Acquisition $21.78m

Libor +0.80%

2011

-

1,412

-

1,825

Asset based lending £13.50m (maximum)

Base (+2.25% to 2.75%)

2013

 

7,226

 

-

 

-

 

-




7,226

1,412

-

1,825

Total Group



12,103

2,547

-

12,271

 

 

11        Capital and reserves

Capital and reserves - Group and Company

Please refer to Statements of changes in equity that will be contained in the Report & Accounts.

 

Share capital

Number of

Ordinary shares


2010

2009




In issue at 1 April

85,246,086

84,965,427

Shares issued

-

280,659




In issue at 31 March - fully paid

85,246,086

85,246,086

 

2010

2009


£000

£000

Authorised



Ordinary shares of 5p each

10,000

10,000


             


Allotted, called up and fully paid



Ordinary shares of 5p each

4,262

4,262


Dividends

During the year the following dividends were declared and paid by the Group:

2010

2009


£000

£000




Final paid 2009 - nil p (2008: 1.87p) per qualifying ordinary

 share

 

-

 

1,589

 

Interim paid 2010 - nil p (2009: 0.93p) per qualifying

 ordinary share

 

-

 

793


-

2,382

 

After the Balance sheet date no final dividend per qualifying ordinary share was proposed by the Directors (2009: nil p).

 

2010

£000

2009

£000

Final proposed 2010 - nil p, (2009: nil p) per qualifying

 ordinary share

 

-

 

-

 

12        Earnings per share

Basic earnings per share

 

Weighted average number of ordinary shares

2010

2009




Issued ordinary shares at 1 April

85,246,086

84,965,427

Effect of shares issued

-

171,098

 

Weighted average number of ordinary shares at 31 March

 

85,246,086

 

85,136,525

 

Diluted earnings per share

Weighted average number of ordinary shares (diluted)

2010

2009




Weighted average number of ordinary shares at 31 March

85,246,086

85,136,525

Effect of share options on issue

1,016,263

-

 

Weighted average number of ordinary shares (diluted)

 at 31 March

 

 

86,262,349

 

 

85,136,525

 

 

 
EPS (Total)
2010
EPS
2009
EPS
 
Earnings
£000
Basic
and
Diluted (1)
Adjusted
Diluted
(2)
Earnings
£000
Basic
Diluted
Loss for the financial year
(2,187)
(2.57p)
(2.54p)
(15,310)
(17.98p)
(17.98p)
Separately disclosed items:
 
 
 
 
 
 
Goodwill & intangible impairment
261
0.31p
0.30p
8,569
10.07p
10.07p
 Associate impairment
-
-
-
659
0.77p
0.77p
 Sale of associate
(332)
(0.39p)
(0.38p)
-
-
-
 Restructuring costs
3,420
4.01p
3.97p
3,701
4.35p
4.35p
 Settlement claim
-
-
-
555
0.65p
0.65p
 IFRS2 Share option
(143)
(0.17p)
(0.17p)
55
0.06p
0.06p
 Tax charge on adjusted 
  items
(958)
(1.12p)
(1.11p)
(1,036)
(1.22p)
(1.22p)
 
 
 
 
 
 
 
Adjusted
61
0.07p
0.07p
(2,807)
(3.30p)
(3.30p)

 

 

 

EPS (Continuing operations)

2010

EPS

2009

EPS


Earnings

£000

Basic

and

Diluted

(1)

Adjusted

Diluted

(2)

Earnings

£000

Basic

Diluted

Loss for the financial year

(2,187)

(2.57p)

(2.54p)

(11,518)

(13.53p)

(13.53p)

Separately disclosed items:







     Goodwill & intangible impairment

261

0.31p

0.30p

8,569

10.07p

10.07p

     Associate impairment

-

-

-

659

0.77p

0.77p

     Sale of associate

(332)

(0.39p)

(0.38p)

-

-

-

     Restructuring costs

3,420

4.01p

3.97p

3,701

4.35p

4.35p

     Settlement claim

-

-

-

555

0.65p

0.65p

     IFRS2 Share option

(143)

(0.17p)

(0.17p)

55

0.06p

0.06p

    Tax charge on adjusted items

(958)

(1.12p)

(1.11p)

(1,036)

(1.22p)

(1.22p)








Adjusted

61

0.07p

0.07p

985

1.15p

1.15p

(1) The diluted loss per share is equal to the basic loss per share of (2.57p) as IFRS does not allow loss per share to be reduced by the effect of share options in issue.

 

(2) However, the adjusted earnings per share does need to reflect the dilutive effect of these share options and is therefore reconciled to non-adjusted loss per share in the tables above.

 

13      The financial information in this announcement which was approved by the Board of Directors does not constitute the Company's statutory accounts for the years ended 31 March 2009 or 2010 but is derived from those accounts. Statutory accounts for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under s498(2) or (3) Companies Act 2006.

 

This preliminary announcement has been prepared in accordance with the accounting policies adopted under IFRS.

14        Annual General Meeting

 


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