Final Results

3 June 2019

Tricorn Group plc

Final Results

For the year ended 31 March 2019

Tricorn Group plc ('Tricorn' or the 'Group'), (AIM: TCN.L) the tube manipulation specialist, announces its audited final results for the year ended 31 March 2019.

Highlights

· Revenue up 2.6% to £22.763m

· Profit before tax up 31.6% to £1.088m

· Improved profitability of the Transportation Division

· Continued strong growth in profits from the China Joint Venture

· Recommended final dividend of 0.2p per share

· US expansion announced post year end

Financial Summary

* All references to EBITDA, profit before tax and earnings per share are before intangible asset amortisation, share based payment charges and fair value charges relating to foreign exchange contracts.

Commenting on the results and the Group's prospects, Andrew Moss, Chairman of Tricorn, said:

"I am delighted to report that Group revenues increased 2.6% in the year whilst profit before tax improved by 31.6% to £1.088m. Earnings per share increased by 14.0% to 3.02p. These results reflect our focus on growth and our continuing investment in our global operations.

Our Transportation division delivered strong revenue growth coupled with improved margins. The increased contribution from our joint venture in China resulted from strong operational performance.

We are excited by the recently announced expansion of our capabilities in the USA. This allows us to bring in-house previously sub-contracted painting processes and also addresses our plans to broaden our product offering in this key market.

Given the progress made to date and our confidence in the future prospects of the Group, the Board is recommending the reinstatement of a final dividend of 0.2p per share."

Enquiries:

Notes to Editors:

Tricorn is a value added manufacturer and specialist manipulator of pipe and tubing assemblies to niche markets worldwide in the Energy and Transportation sectors.

Headquartered in Malvern, UK, Tricorn employs around 300 employees and has five manufacturing facilities in the UK, USA and China.

Chairman's and Chief Executive's statement

Performance in the year ended 31 March 2019

Revenue for the year at £22.763m was 2.6% higher than the previous year (2018: £22.180m)

New business growth in the Transportation division more than offset the reduction in revenue in the Energy division which, as anticipated, saw significantly lower demand from the power generation rental sector. The Company's joint venture in China continues to perform well.

Underlying profit before tax at £1.088m was up 31.6% on the previous year (2018: £0.827m).

Post year end, the Group announced that it had extended its capabilities in the USA with the purchase of a custom built, installed and fully operational, powder coat and wet spray painting line. The paint line is located at Rabun Gap close to the Group's existing facility and will provide up to 100,000 square feet of additional manufacturing space. This allows previously sub-contracted painting processes to be brought in-house and also addresses plans to broaden its product offering in the USA.

Transportation

The Transportation division is focused on rigid, nylon and hybrid tubular products for engines, braking systems, transmission lubrication, fuel sender sub-systems and hydraulic actuation in a variety of on and off road applications, including construction, trucks and agriculture.

External revenue for the year ended 31 March 2019 was £17.052m (2018: £15.901m) and underlying profit before tax increased by 38.8% to £0.569m (2018: £0.410m).

In the USA, Tricorn USA continued to make good progress. Market conditions were favourable and the pipeline of new business opportunities remains encouraging. A tight labour market presented challenges in recruiting and retaining skilled employees especially in the first half, however, these were largely overcome by year end. Post year end, as set out above, the Group announced that it had extended its capabilities in the USA with the purchase of a custom built, installed and fully operational, powder coat and wet spray painting line.

In the UK, the West Bromwich facility made excellent progress on all fronts. The rigid hydraulic tube business continues to grow and production has commended successfully on the brake pipe assembly business for the London Electric Vehicle Company. In addition, the operation invested in an in-house tube cutting cell that yielded significant efficiency gains through the latter part of the year.

Energy

The Energy division is focused on the design and manufacture of larger tubular assemblies and fabrications for diesel engines and power generator sets. The key markets served through its customers are power generation, mining, marine and oil and gas applications.

The Malvern facility made good progress in developing new business opportunities and in improving operational performance. Testing of the proposed new IT system, as utilised in West Bromwich, progressed well and will provide further efficiency gains once deployed. External revenue for the year at £5.711m was lower (2018: £6.279m) with, as anticipated, lower demand from the power generation rental sector. Underlying profit before tax at £0.472m was also down on the previous year (2018: £0.567m) with efficiency gains helping to offset some of the impact of the lower volume.

China

Our Chinese joint venture, Minguang-Tricorn Tubular Products, performed well. Market conditions softened slightly in the second half of the year but the strong operational performance saw the Group's share of profit before tax increase to £0.282m, up 34.9% (2018: £0.209m).

Business Review

The Group's five manufacturing facilities serve a global blue chip OEM customer base, many of whom have major facilities in the UK, USA, and China as well as elsewhere in the world.

With manufacturing operations now firmly established in each of these key locations and performing well, the Group is ideally positioned to support its customers' facilities as they continue to seek to localise supply and technical support.

Historically, the Group's two main business divisions have focused on the transportation and energy sectors. As a result of Tricorn's geographic expansion, the Board has carried out a review of the Group's organisational structure and concluded that the current structure was no longer appropriate. As a result, post year end, the Group's brands have been consolidated into the following geographic divisions:

· Tricorn UK: comprising Malvern Tubular Components and Maxpower Automotive;

· Tricorn USA: comprising Franklin Tubular Products and the recently announced expansion at Rabun Gap;

· The joint venture in China remains as Minguang-Tricorn Tubular Products

Financial Review

The Group built on the good trading performance of the prior year and continued to expand on its manufacturing capability which resulted in solid improvements in both revenue and profitability. The Group has made a point over recent years of making considerable investment where it believes that this will yield significant benefits in the short and medium term. This was again the case in the year, with investments being made in tangible assets and development costs to secure contracts with new and existing customers, which are already beginning to deliver returns.

All of the Group's subsidiary businesses were again profitable in the year. Group EBITDA for the year was £1.872m (2018: £1.575m) and underlying profit before tax at £1.088m (2018: £0.827m).

Income Statement

Revenue for the year, at £22.763m, increased by 2.6% (2018: £22.180m). Whilst revenue in the Energy division was lower than the prior financial year, this was more than offset by an increase in demand within the Transportation division. In line with Group policy when reporting the results for its joint venture in China, the Group has reported its share of the profit before tax whilst the revenue figure for the joint venture is not reported in the Group consolidated income statement.

Gross margins were up slightly at 38.4% (2018: 38.3%) and distribution costs were largely unchanged at £1.022m (2018: £1.005m). While the Group's administration costs increased to £6.701m (2018: £6.646m), operational gearing reduced to 29.4% (2018: 29.9%).

The Group's Chinese joint venture, Minguang-Tricorn Tubular Products, showed further growth in profitability over the prior year, with the Group's share of profit for the year increasing to £0.282m (2018: £0.209m).

EBITDA for the year was £1.872m (2018: 1.575m). Finance costs for the year were £0.209m (2018: £0.226m) and the Group delivered an underlying profit before tax for the year of £1.088m (2018: £0.827m).

After deducting intangible asset amortisation and share based payment charges, the profit before tax was £0.950m (2018: £0.606m).

Basic earnings per share (EPS) was 2.62p (2018: 2.00p) and after adjusting for non-underlying items, the underlying EPS was 3.02p (2018: 2.65p).

Given the progress made and our confidence in the future prospects of the Group, the Board is recommending the reinstatement of a final dividend of 0.2p per share (2018: Nil). If approved by the shareholders at the Company's Annual General Meeting, to be held on 11 September 2019, the dividend will be paid on 18 October 2019 to all shareholders who are on the register on 4 October 2019.

Cash Flow

The Group's cashflow from operations in the year was £1.189m (2018: £1.532m) and it achieved a cash generated by operations to EBITDA ratio of 0.64:1 (2018: 0.97:1). This was below the target ratio of 1:1 largely as a result of adverse working capital movements, particularly on creditors. Part of this is a timing issue at the year end on supplier payments, with director incentive payments during the year also having an impact.

After interest payments and net tax receipts, cash generated by operating activities was £0.943m (2018: £1.321m).

During the year, the net cash outflow from investing activities was £1.001m (2018: £0.696m). Expenditure on the purchase of plant and machinery was £0.723m (2018: £0.696m). In addition, the Group had expenditure of £0.278m (2018: Nil) on intangible assets. In a number of instances, the Group makes the decision to invest in order to develop the capabilities and infrastructure required to support a particular customer contract. During the financial year, the Group secured a contract where an existing customer was outsourcing work which it had previously manufactured in-house. This required a level of investment by the Group to transfer and develop the manufacturing processes, equipment, tooling and know-how. This expenditure is reported by the Group as an intangible asset.

As a result of the Group's expenditure on investing activities in the year, net debt increased over the prior year to £3.290m (2018: £2.982m), cash and cash equivalents were £0.493m (2018: £0.692m) and gearing was 45.0% (2018: 47.6%).

The Group uses short term borrowings to fund its operating activities, with selected capital additions and larger projects being financed by lease finance arrangements. At the year end, the Group did not have any term debt in place and had no covenants on its borrowings.

Balance Sheet

Total assets of the Group as at 31 March 2019 were £15.044m, which was £0.685m higher than the prior year, driven mainly by the increase in the value of the Group's investment in its joint venture in China and increases in tangible and intangible assets, as discussed above. Net working capital for the Group increased in the year to £4.040m (2018: £3.475m).

On translation of its overseas assets and liabilities, the Group made an exchange gain of £0.125m (2018: loss £0.487m). This is a non-cash movement, which is not hedged and is treated as a movement in other comprehensive income. As a result, the translation reserve in shareholders' funds now shows a £0.014m surplus (2018: deficit £0.111m).

People

The Board would like to take the opportunity to thank all our employees for their hard work and support throughout the year.  Their commitment and dedication ensures that we continue to drive the business forward and deliver quality products to our customers.

Outlook 

We are delighted to report that Group revenues increased by 2.6% in the year whilst profit before tax improved by 31.6% to £1.088m. Earnings per share increased by 14.0% to 3.02p. These results reflect our focus on growth and our continuing investment in our global operations.

Our Transportation division delivered strong revenue growth coupled with improved margins. The increased contribution from our joint venture in China resulted from strong operational performance.

We are excited by the recently announced expansion of our capabilities in the USA. This allows us to bring in-house previously sub-contracted painting processes and also addresses our plans to broaden our product offering in this key market.

Given the progress made to date and our confidence in the future prospects of the Group, the Board is recommending the reinstatement of a final dividend of 0.2p per share.

Andrew Moss Mike Welburn

Chairman Chief Executive

Group income statement

For year ended 31 March 2019

All of the activities of the Group are classed as continuing.

Group statement of comprehensive income

For year ended 31 March 2019

Group statement of changes in equity

For year ended 31 March 2019

Group statement of financial position

At 31 March 2019

Group statement of cash flows

For year ended 31 March 2019

1 General information

Tricorn Group plc and subsidiaries' (the 'Group') principal activities comprise high precision tube manipulation and systems engineering.

The Group's customer base includes major blue chip companies with world-wide activities in key market sectors, including Power Generation, Oil & Gas, Off Highway, Commercial Vehicles, Agriculture and Automotive.

Tricorn Group plc is the Group's ultimate parent company. It is incorporated and domiciled in the United Kingdom. The address of Tricorn Group plc's registered office, which is also its principal place of business is Spring Lane, Malvern, Worcestershire, WR14 1DA. Tricorn Group plc's shares are quoted on the AIM market of the London Stock Exchange.

The consolidated financial statements have been approved for issue by the Board of Directors on 31 May 2019. Amendments to the financial statements are not permitted after they have been approved.

The financial information set out in this final results announcement does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The group income statement, the group statement of comprehensive income, the group statement of changes in equity, the group statement of financial position, the group statement of cash flows and the associated notes for the year ended 31 March 2019 have been extracted from the Group's financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 498 of the Companies Act 2006. The statutory accounts for the year ended 31 March 2019 will be delivered to the Registrar of Companies following the Group's Annual General Meeting.

2 Accounting policies

Basis of preparation

This financial information has been prepared under the required measurement bases specified under International Financial Reporting Standards (IFRS) and in accordance with applicable IFRS as adopted by the European Union and IFRS as issued by the International Accounting Standards Board.

The Group distinguishes between underlying and non-underlying items in its Consolidated Income Statement. Non-underlying items are material items which arise from unusual non-recurring or non-trading events. They are disclosed on the face of the Consolidated Income Statement where in the opinion of the Directors such disclosure is necessary in order to fairly present the results for the period. Non-underlying items comprise exceptional costs of Group restructuring, intangible assets amortisation and share based payment charges.

Adoption of new standards

Revenue recognition

Revenue arises from the sale of tubular components to customers. To determine whether to recognise revenue, the Group follows a 5-step process:

1 Identifying the contract with a customer

2 Identifying the performance obligations

3 Determining the transaction price

4 Allocating the transaction price to the performance obligations

5 Recognising revenue when/as performance obligation(s) are satisfied.

The Group contracts with customers to deliver specific products to the customer. At the start of the contract, the total transaction price is estimated as the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods to the customer. This is a fixed sales price, discounts are not offered and amounts are not refundable once received. Control transfers at the point in time the customer takes delivery of the goods, and this is the point at which revenue is recognised. Invoices are due on receipt by the customer.

Financial instruments

IFRS 9 'Financial Instruments' replaces IAS 39 and makes changes to guidance on the classification and measurement of financial assets and introduces an 'expected credit loss' model for the impairment of financial assets. When adopting IFRS 9, the directors have considered the historical credit losses experienced in relation to trade receivables and concluded that the adoption of IFRS 9 does not have a material impact on the financial statements.

There have been no changes to the classifications of financial assets.

3 Segmental reporting

The Group operates two main business segments:

§ Energy: manipulated tubular assemblies for use in power generation, oil and gas and marine sectors.

§ Transportation: ferrous, non-ferrous and nylon material tubular assemblies for use in on and off-highway applications.

The financial information detailed below is frequently reviewed by the Chief Operating Decision maker.

3 Segmental reporting (continued)

* Before intangible asset amortisation, share based payment charges and fair value charges on foreign exchange contracts.

The Group's revenue from external customers (by destination) and its geographic allocation of total assets may be summarised as follows:

4 Earnings per share

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.

The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post tax effect of dividends and/or interest, on the assumed conversion of all dilutive options and other dilutive potential ordinary shares.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

4 Earnings per share (continued)

The directors consider that the following adjusted earnings per share calculation is a more appropriate reflection of the Group's performance.

5 Dividend

The Board is recommending the reinstatement of a final dividend for the financial year of 0.2p per share. If approved by shareholders at the Company's Annual General Meeting, to be held on 11 September 2019, the dividend will be paid on 18 October 2019 to all shareholders who are on the register on 4 October 2019.

6 Availability

Copies of this announcement are available from the Company's registered office, Spring Lane, Malvern, Worcestershire, WR14 1DA, and on its website, www.tricorn.uk.com.