Interim Results

10th Dec 2009 07:00



Unaudited Interim Results

Tricorn Group plc (the 'Group'), the AIM listed tube manipulation specialist, today released its interim figures for the period ended 30 September 2009. 

Summary of results

	Unaudited	Unaudited	Unaudited	Audited
	six months	six months	six months	year
	to 30	to 30	to 31	ended 31
	September	September	March	March
	2009	2008	2009	2009
	£'000	£'000	£'000	£'000
Sales revenue	6,965	12,103	10,142	22,245
EBITDA*	369	1,125	684	1,809
Profit before tax*	105	821	413	1,234
Profit for the period	44	545	40	585
Adjusted earnings per share - basic*	0.26p	1.83p	1.33p	3.16p
Cash & equivalents	901	440	713	713
Net debt	1,049	2,471	2,064	2,064

*(before intangible asset amortisation, restructuring charges and interest rate swap valuation)

Highlights

-	Net debt down 49.2% to £1,049k since 31 March 2009
-	Cash and cash equivalents up 26.3 % to £901k
-	Profit for the period up 10% at £44k on second half of 2009
-	Markets stabilising and signs of modest improvement in second half

 

Nick Paul CBE, Tricorn Chairman commented:

"We are pleased to report that markets now appear to have stabilised following very sharp reductions in demand through the first half of the year and we now anticipate modest growth in the second half. Our early and decisive actions to align capacity, reduce costs and focus on cash generation have proved to be extremely effective and highlight the resilience of the Group which remained profitable for the period. "

Chairman and Chief Executive's statement

Performance for the half year ended 30 September 2009

The Group's businesses responded well to the difficult market conditions experienced through the first half. Revenues for the period were 42.5 % down compared to the strong first half of the previous year with EBITDA down 67.2% to £369k on the same period.

The short term strategy as outlined at the time of the preliminary results focussed on three key areas:

-	Rapid capacity alignment to match lower levels of demand
-	Reduction in overheads to improve operational gearing
-	Cash optimisation to ensure that the Group’s balance sheet continues to strengthen

We are pleased to report significant progress in all three areas:

-	Direct headcount has been rigorously managed against demand and we have continued to focus on operational improvements to good effect. Productivity gains have been delivered in a number of key business areas despite the lower demand levels and this has contributed to the 1% improvement in gross profit margins to 32.4% when compared to the second half of the previous year
-	Administration costs were reduced by £1,029k, representing a 36.4% year on year improvement and include a 29.6 % permanent reduction in indirect headcount, staff pay reductions, the elimination of all bonus payments and tight control over expenditure. The Group’s subsequent operational gearing has positioned us well as volumes improve
-	Net debt reduced by £1,015k to £1,049k with inventory levels £853k lower than a year earlier. Cash and cash equivalents increased 26.3% over the period to £901k. Capital expenditure for the first half was held substantially below our full year target of 50% of depreciation

 

Financial Review

Income Statement

The challenging market conditions of the first half saw turnover reduce against the prior year. However, despite this the Group remained profitable and delivered a 10% increase in profits for the period when compared to the second half of last year.

Turnover at £6,965k was 42.5% down against September 2008. Gross profit margins improved 1% to 32.4% when compared to the second half of last year reflecting the successful alignment of capacity to demand and continued improvements in productivity. The rigorous focus on cost reduction resulted in combined administration and distribution costs reducing 38.6% against September 2008.

Net interest charges for the first half of the year at £56k were £54k (49.1%) lower than last year. This is a reflection of the lower level of Group borrowings and lower interest rates experienced through the first half. In addition, finance income includes a £16k benefit from the gradual unwinding of the interest rate swap fair value adjustment, as highlighted in the 2009 full year results.

Adjusted EBITDA (before intangible asset amortisation and interest rate swap valuation) for the six months was £369k which was 67.2% lower than the first half of last year. Basic and diluted EPS stood at 0.13p, against 1.65p and 1.54p respectively at September 2008.

Cash Flow

Net cash inflow from operating activities was £1,039k against £581k at September 2008. This improvement was driven primarily by a £582k reduction in inventories for the six months.

The cash outflow on investing activities was £19k. Capital expenditure in the first half was £21k, and at 11% of depreciation reflects our commitment to maintain investment levels below 50% of this figure for the full year.

Cash and cash equivalents for the six months stood at £901k and borrowings were also reduced by £827k to £1,950k compared to the position at 31 March 2009, reflecting a strong first half performance. This performance will be impacted in the second half by corporation tax payments of c.£300k and increased capital investment.

Balance sheet

Net working capital decreased to £3,855k. This is a reduction against both September 2008 and the full year of £1,206k and £726k respectively, and is a reflection of the Group's continued focus on reducing inventories. The Group's alignment to a blue chip customer base is reflected in average debtor days, which remain in line with last year.

Net debt at the half year stood at £1,049k, and is a reduction of £1,422k (57.5%) against the previous half year, and £1,015k (49.2%) against the full year. Gearing, measured as long term debt to equity, reduced to 12.0%. As a measure of total net debt to equity, gearing was 22.2% against 53.3% last half year and 44.1% at the full year.

In November 2009 the Group successfully renewed its invoice discounting facility. The term loan continues to be repaid, and has a final repayment date of 2012. The Group continues to perform comfortably within the term loan banking covenants.

Operations Review

The Group operates four main business segments which are focussed on the energy, transportation, aerospace and utilities sectors.  Following the adoption of IFRS 8 Operating Segments, the Group's segmental financial results are now prepared in accordance with these business definitions.  All segments have strong underlying growth potential albeit with some cyclicality. Whilst markets have been extremely demanding through the current year the Group's businesses continue to demonstrate a significant degree of resilience and have responded well to the presented challenges.

Energy 

Our Malvern Tubular Components business specialises in fabricated and manipulated tubular assemblies for large diesel engines and radiator sets used within the energy sector. These are principally for power generation, mining and oil and gas applications. This segment was late to experience the adverse economic conditions and the 52.4% reduction in revenues for the first half is set against an exceptionally strong first half of the previous year. Its major customers have indicated that they believe quarter 3 of the current financial year marks the trough point in the cycle and this is supported by the increases in demand that the business is starting to see as we move into the second half of the Group's financial year. 

Transportation

Maxpower Automotive is focussed on nylon, rigid and hybrid tubular products for engines, braking systems and fuel sender sub-systems used within the transportation sector. Market conditions deteriorated earlier within this segment with further reductions through the first quarter of the financial year. It was the first Group business to realign capacity and reduce its operating costs. H1 revenues dropped 48.4% compared to the first half of last year however, second quarter sales showed a marked uplift on the previous quarter and this has continued into the second half. The sales uplift together with the good progress in improving productivity resulted in improved profitability in the second quarter and a small loss for the first half.

Aerospace

RMDG Aerospace supplies rigid pipe assemblies used in a variety of applications within the aerospace sector. As we anticipated, there has been some softening within the segment, but not at levels experienced elsewhere within the Group. Year on year revenues were down 9.2%. Whilst we still have much to do to improve operational performance to targeted levels the segment delivered a marked improvement with segmental profits up £162k to £103k despite lower revenues. Markets appear to be holding firm for the second half.

Utilities

Redman Fittings supplies major OEM's with a patented jointing solution for connecting multi layer polyethylene pipe systems. The multi layer pipes are being increasingly used within the water industry as an alternative to wrapped ductile iron in brown field site developments providing advantages in ease of use and overall cost. The Redman system is increasingly being specified in these applications due to its ease of use and effectiveness. Whilst demand levels are significantly softer than a year earlier, reflecting the lower level of new build activity, the business remains profitable and continues to deliver double digit segmental profit margins.

Outlook

Revenues in quarter two were broadly in line with the first quarter for the Group as markets stabilised and we are now seeing some signs of improvement partly due to destocking activity nearing completion. As a result, we are anticipating a modest improvement in revenues through the second half and the Group remains on track to meet market expectations for the full year.

Enquiries:

Tricorn Group plc
Mike Welburn, Chief Executive	Tel +44 (0)1684 569956
[email protected]	www.tricorn.uk.com
Phil Lee, Group Finance Director	Tel +44 (0)1684 569956
[email protected]	www.tricorn.uk.com
Collins Stewart Europe Limited
Tom Hulme/Adam Miller	Tel + 44 (0)207 523 8350

  

Consolidated interim statement of comprehensive income

		Unaudited six months to 30 September 2009	Unaudited six months to 30 September 2008	Audited year ended 31 March 2009
	Note	£'000	£'000	£'000
Continuing operations
Revenue	3	6,965	12,103	22,245
Cost of sales		(4,711)	(7,792)	(14,750)
		-------------------------	-------------------------	-------------------------
Gross profit		2,254	4,311	7,495
Distribution costs		(285)	(559)	(947)
Administrative costs		(1,792)	(2,821)	(5,118)
		-------------------------	-------------------------	-------------------------
Operating profit before amortisation and restructuring costs		177	931	1,430
Amortisation		(59)	(59)	(118)
Restructuring costs		-	-	(239)
		-------------------------	-------------------------	-------------------------
Operating profit		118	872	1,073
Finance income		2	13	20
Finance costs		(74)	(123)	(216)
Fair value income/(charge) of interest rate swap		16	-	(100)
		-------------------------	-------------------------	-------------------------
Profit before tax	3	62	762	777
Income tax expense		(18)	(217)	(192)
		-------------------------	-------------------------	-------------------------
Profit for the period		44	545	585
Other comprehensive income		-	-	-
Total comprehensive income for the period		44	545	585
		=========================	=========================	=========================
Attributable to:
Equity holders of the parent		44	545	585
		=========================	=========================	=========================
Earnings per share:
Basic earnings per share	4	0.13p	1.65p	1.77p
		=========================	=========================	=========================
Diluted earnings per share	4	0.13p	1.54p	1.71p
		=========================	=========================	=========================

 

Consolidated interim statement of financial position

 

Consolidated interim statement of changes in equity

 

	Share capital	Share premium account	Merger reserve	Profit and loss account	Share based payment reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2008	3,302	1,448	1,388	(2,238)	193	4,093
	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------
Profit for the period	-	-	-	545	-	545
	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------
Total recognised income for the period	-	-	-	545	-	545
	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------
Balance at 30 September 2008	3,302	1,448	1,388	(1,693)	193	4,638
	=========================	=========================	=========================	=========================	=========================	=========================
Profit for the period	-	-	-	40		40
	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------
Total recognised income for the period	-	-	-	40	-	40
	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------
Balance at 31 March 2009	3,302	1,448	1,388	(1,653)	193	4,678
	=========================	=========================	=========================	=========================	=========================	=========================
Profit for the period	-	-	-	44	-	44
	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------
Total recognised income for the period	-	-	-	44	-	44
	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------	-------------------------
Balance at 30 September 2009	3,302	1,448	1,388	(1,609)	193	4,722
	=========================	=========================	=========================	=========================	=========================	=========================

  

Consolidated interim statement of cash flows 

 

	Unaudited Six months to 30 September 2009	Unaudited  Six months to 30 September 2008	Audited Year Ended 31 March 2009
	£'000	£'000	£'000

Profit after taxation	44	545	585
Adjustments for:
Depreciation	192	194	379
Net interest charge in the income statement	56	110	296
Amortisation charge	59	59	118
Taxation expense recognised in the income statement	18	217	192
Decrease in trade and other receivables	541	638	1,889
Decrease/ (increase) in inventories	582	(541)	(270)
Decrease in trade and other payables	(394)	(519)	(1,600)

	-------------------------	-------------------------	-------------------------
Cash generated from operations	1,098	703	1,589
Interest paid	(74)	(122)	(216)
Income taxes received/(paid)	15	-	(218)
	-------------------------	-------------------------	-------------------------
Net cash from operating activities	1,039	581	1,155
	-------------------------	-------------------------	-------------------------

Acquisition of subsidiaries	-	-	(195)
Purchase of property, plant and equipment	(21)	(117)	(263)
Interest received	2	12	20
	-------------------------	-------------------------	-------------------------
Net cash used in investing activities	(19)	(105)	(438)
	-------------------------	-------------------------	-------------------------

Issue of ordinary share capital	-	-	178
Repayment of short term borrowings	(601)	(214)	(140)
Repayment of bank borrowings	(150)	(150)	(300)
Payment of finance lease liabilities	(81)	(69)	(139)
	-------------------------	-------------------------	-------------------------
Net cash used in financing activities	(832)	(433)	(401)
	-------------------------	-------------------------	-------------------------

Net increase in cash and cash equivalents	188	43	316
Cash and cash equivalents at beginning of period	713	397	397
	-------------------------	-------------------------	-------------------------
Cash and cash equivalents at end of period	901	440	713
	=========================	=========================	=========================

  

Notes to the consolidated interim financial statements 

1. Nature of operations and general information

Tricorn Group plc and subsidiaries' (the 'Group') principal activities include the development and manufacturing of pipe solutions to a growing and increasingly international customer base.

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, United Kingdom. Tricorn Group plc's shares are listed on the Alternative Investment Market of the London Stock Exchange.

These consolidated interim financial statements have been approved for issue on 10 December 2009 by the Board of Directors. Amendments to the financial statements are not permitted after they have been approved.

The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 March 2009 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 237(2) of the Companies Act 1985. 

2 Basis of preparation

These unaudited interim consolidated financial statements are for the six months ended 30 September 2009. They have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2009, which have been prepared in accordance with International Financial Reporting Standards.

The principal accounting policies adopted to prepare the unaudited interim financial information are consistent with those adopted to prepare the Company's 2009 Annual Report, except for the adoption of IAS 1 Presentation of Financial Statements (Revised 2007) and IFRS 8 Operating Segments.

The adoption of IAS 1 (Revised 2007) does not affect the financial position or results of the Group, but gives rise to additional disclosures. The measurement and recognition of the Group's assets, liabilities, income and expenses is unchanged. IAS 1 (Revised 2007) affects the presentation of owner changes in equity and introduces a "Statement of comprehensive income".

The adoption of IFRS 8 has changed the segments that are disclosed in the interim financial statements. In the previous annual and interim financial statements, segments were identified by reference to dominant source and nature of the Group's risks and returns. Under IFRS 8 the accounting policy for identifying segments is now based on the internal management reporting information that is regularly reviewed by the chief operating decision maker. Following the adoption of IFRS 8 which required retrospective application, the comparative segment information for the same period in the prior year is restated to conform with the new requirements.

These consolidated interim financial statements have been prepared under the historical cost convention.

 3 Segment analysis 

The Group operates four 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 off-highway, medical, and other such applications
-	Aerospace: specialised rigid pipe assemblies for use the aerospace sector.
-	Utilities: the pipefittings sector produces innovative jointing systems for polyethylene pipes, typically within the utility industry.

The revenues and net result generated by each of the Group's business segments are summarised as follows:

6 months to 30 September 2009

 

	Energy	Transportation	Aerospace	Utilities	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	2,147	1,971	2,625	222	-	6,965
	_______________________________________	_______________________________________	_______________________________________	_______________________________________	_______________________________________	_______________________________________
Segmental (loss)/ profit before tax	(37)	(24)	103	34	-	76
	_______________________________________	_______________________________________	_______________________________________	_______________________________________	_______________________________________	_______________________________________
Amortisation						(59)
Corporate recharges						29
Swap valuation						16
						_______________________________________
Profit before tax						62
						=========================
Segmental total assets	2,934	1,770	2,883	173	2,152	9,912
	=========================	=========================	=========================	=========================	=========================	=========================

 

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. No increase in the weighted average of dilutive shares has been included within the 30 September 2009 diluted earnings per share as the price of all options at the period end were above the closing market price on 30 September 2009.

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

 

	30 September 2009
	Profit	Weighted average number of shares	Earnings per share
	£'000	Number '000	Pence
Basic earnings per share	44	33,020	0.13p
Dilutive shares	-	-	-
Diluted earnings per share	44	33,020	0.13p

	30 September 2008
	Profit	Weighted average number of shares	Earnings per share
	£'000	Number '000	Pence
Basic earnings per share	545	33,020	1.65p
Dilutive shares	-	2,435	-
Diluted earnings per share	545	35,455	1.54p

	31 March 2009
	Profit	Weighted average number of shares	Earnings per share
	£'000	Number '000	pence
Basic earnings per share	585	33,020	1.77p
Dilutive shares	-	1,198	-
Diluted earnings per share	585	34,218	1.71p

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

 

	30 September 2009
	Profit	Weighted average number of shares	Earnings per share
	£'000	Number '000	Pence
Basic earnings per share	44	33,020	0.13p
Amortisation	59
Interest rate swap gain	(16)
Adjusted earnings per share	87	33,020	0.26p
Dilutive shares	-	-	-
Diluted earnings per share	87	33,020	0.26p

	30 September 2008
	Profit	Weighted average number of shares	Earnings per share
	£'000	Number '000	Pence
Basic earnings per share	545	33,020	1.65p
Amortisation	59	-	-
Adjusted earnings per share	604	33,020	1.83p
Dilutive shares	-	2,435	-
Diluted earnings per share	604	35,455	1.70p

	31 March 2009
	Profit	Weighted average number of shares	Earnings per share
	£'000	Number '000	pence
Basic earnings per share	585	33,020	1.77p
Amortisation	118
Restructuring	239
Interest rate swap loss	100
Adjusted earnings per share	1,042	33,020	3.16p
Dilutive shares	-	1,198	-
Diluted earnings per share	1,042	34,218	3.05p

5 Dividends

The Directors do not recommend the payment of a dividend (September 2008: nil).

 

ENDIR UUGGAPUPBGMB

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