Trifast — Update 16 February 2017

Trifast — Update 16 February 2017

Trifast

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Trifast

Faster fasteners

Trading update

Industrial support services

16 February 2017

Price

223p

Market cap

£266m

Net debt (£m) at 30 Sept 2016

14.2

Shares in issue

118.8m

Free float

80%

Code

TRI

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.7

23.2

102.7

Rel (local)

4.6

14.6

62.8

52-week high/low

223.0p

111.8p

Business description

Trifast is a leading global designer, manufacturer and distributor of high-quality industrial fasteners. Principal operations are in the UK, South-East Asia and continental Europe, while there is a modest, but growing, presence in North America.

Next events

Trading update

Late April 2017

Preliminary results

Mid-June 2017

Analysts

Andy Chambers

+44 (0)20 3681 2525

Nigel Harrison

+44 (0)20 3077 5700

Trifast is a research client of Edison Investment Research Limited

In its Q317 trading update management confirmed that Trifast remains on track to achieve another record full year performance. The shares have continued to perform strongly, rising by 43% since the interim results in October. The progress appears warranted by the FX enhanced trading performance, which has enabled us to modestly increase our FY17 and FY18 forecasts. The shares are now trading on an FY18e P/E of 17.6x.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/15

154.7

14.3

8.68

2.10

25.7

0.9

03/16

161.4

16.0

9.99

2.80

22.3

1.3

03/17e

182.0

19.2

12.40

3.00

18.0

1.3

03/18e

186.0

19.7

12.68

3.20

17.6

1.4

Note: *PBT and EPS are normalised and diluted, excluding intangibles amortisation, exceptional items and share-based payments.

Improved trading in all regions

The continued strength of the US and UK operations has been augmented by the anticipated recovery in Asian trading during H2, for both domestic and export markets. European performance also remains solid with continued growth offset partially by a slightly less favourable mix. The new operation in Barcelona targeting tier one automotive suppliers has also been encouraging. The weakness of sterling is further enhancing Trifast’s performance with more than 70% of sales coming from overseas operations whose contributions are boosted on translation. Sterling has weakened by 15% against a business-weighted basket of currencies in 2016. If current rates are maintained, further near-term benefits will accrue, although management is wary of the inflationary impact on imported input costs for the UK operations. As a result of the combination of improved trading and FX translation gains that have improved management guidance, we are increasing our earnings expectations for FY17 by 6% (12.40p from 11.69p) and FY18 by 5% (12.68p from 12.06p) respectively. A further year-end trading update is expected in late April.

Strategy and balance sheet trump uncertainty

As with most companies at present, management is trying to garner a clearer view of the macroeconomic picture that should emerge from the new US administration’s trade policies, as well as the UK heading for the EU exit door. However, the strategy of building its share of business with its multinational global customer base continues to successfully deliver growth and increase opportunities for upselling. The increased competitiveness of the UK base is a further positive factor and all of this is supported by a strong balance sheet.

Valuation: Potential remains despite re-rating

The shares have risen strongly during 2016 and in our view this has been warranted by the much improved trading and business environment. The current update is in sharp contrast to the situation 12 months ago. The P/E rating of 17.6x for FY18e on our improved estimates has closed the discount to Trifast’s UK distribution group peers, but a discount of 12% remains against Bossard.

Exhibit 1: Financial summary

£'000s

2013

2014

2015

2016

2017e

2018e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

121,544

129,775

154,741

161,370

182,000

186,000

Cost of Sales

(89,969)

(93,809)

(109,866)

(113,366)

(126,859)

(129,897)

Gross Profit

31,575

35,966

44,875

48,004

55,141

56,103

EBITDA

 

 

9,226

10,798

16,491

18,150

21,850

22,300

Operating Profit (before GW and except.)

 

 

7,971

9,696

15,274

16,793

20,100

20,500

Intangibles amortisation/impairments

(331)

(221)

(551)

(974)

(1,400)

(1,200)

Exceptionals

(389)

0

(1,167)

(264)

0

0

Share based payments

(91)

(67)

(741)

(1,687)

(1,200)

(1,200)

Operating Profit

7,160

9,408

12,815

13,868

17,500

18,100

Net Interest

(718)

(534)

(966)

(791)

(900)

(800)

Profit Before Tax (norm)

 

 

7,253

9,162

14,308

16,002

19,200

19,700

Profit Before Tax (FRS 3)

 

 

6,442

8,874

11,849

13,077

16,600

17,300

Tax

(1,734)

(2,276)

(3,455)

(2,852)

(4,250)

(4,350)

Profit After Tax (norm)

5,324

6,820

10,312

12,018

14,950

15,350

Profit After Tax (FRS 3)

4,708

6,598

8,394

10,225

12,350

12,950

Average Number of Shares Outstanding (m)

107.3

108.5

113.5

116.4

118.0

118.5

EPS - normalised (p) contg businesses

 

 

4.96

6.28

9.08

10.33

12.67

12.95

EPS - normalised fully diluted (p)

 

 

4.73

5.96

8.68

9.99

12.40

12.68

EPS - FRS 3 (p)

 

 

4.39

6.08

7.39

8.79

10.47

10.93

Dividend per share (p)

0.8

1.4

2.1

2.8

3.0

3.2

Gross Margin (%)

26.0%

27.7%

29.0%

29.7%

30.3%

30.2%

EBITDA Margin (%)

7.6%

8.3%

10.7%

11.2%

12.0%

12.0%

Operating Margin (before GW and except.) (%)

6.6%

7.5%

9.9%

10.4%

11.0%

11.0%

BALANCE SHEET

Fixed Assets

 

 

32,692

30,044

49,057

57,595

60,745

60,245

Intangible Assets

18,366

16,959

32,162

38,259

39,859

38,659

Tangible Assets

13,360

11,828

15,623

17,171

18,721

19,421

Investment in associates

0

0

0

0

0

0

Deferred tax assets

966

1,257

1,272

2,165

2,165

2,165

Current Assets

 

 

68,437

73,774

92,735

100,438

110,026

114,079

Stocks

30,439

30,574

37,418

39,438

44,480

47,457

Debtors

27,248

27,665

39,864

43,386

48,933

51,008

Cash

10,750

15,535

15,453

17,614

16,614

15,614

Other

0

0

0

0

0

0

Current Liabilities

 

 

(34,578)

(37,903)

(49,052)

(52,813)

(50,855)

(43,957)

Creditors

(21,029)

(24,678)

(34,482)

(33,030)

(37,253)

(38,071)

Other creditors

(2,020)

(2,244)

(2,225)

(2,849)

(3,123)

(3,148)

Short term borrowings

(11,529)

(10,981)

(12,345)

(16,934)

(10,480)

(2,739)

Minority interests

0

0

0

0

0

0

Long Term Liabilities

 

 

(6,129)

(4,248)

(21,060)

(21,470)

(23,170)

(22,370)

Long term borrowings

(4,418)

(2,524)

(16,523)

(16,675)

(18,175)

(17,175)

Other long term liabilities

(1,711)

(1,724)

(4,537)

(4,795)

(4,995)

(5,195)

Net Assets

 

 

60,422

61,667

71,680

83,750

96,746

107,997

CASH FLOW

Operating Cash Flow

 

 

7,872

11,825

6,767

15,873

16,527

19,109

Net Interest

(718)

(534)

(966)

(804)

(900)

(800)

Tax

(1,427)

(1,809)

(4,639)

(3,080)

(3,901)

(4,325)

Capex

(851)

(826)

(1,389)

(2,323)

(2,800)

(2,500)

Acquisitions/disposals

(1,389)

0

(16,240)

(7,684)

(1,450)

0

Financing

233

84

494

181

0

0

Dividends

(534)

(867)

(1,569)

(2,440)

(3,523)

(3,742)

Other

27

(646)

2,097

(2,303)

0

0

Net Cash Flow

3,213

7,227

(15,445)

(2,580)

3,954

7,742

Opening net debt/(cash)

 

 

8,410

5,197

(2,030)

13,415

15,995

12,041

HP finance leases initiated

0

0

0

0

0

0

Other

0

0

0

0

0

0

Closing net debt/(cash)

 

 

5,197

(2,030)

13,415

15,995

12,041

4,300

Source: Company reports, Edison Investment Research estimates

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Trifast and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Trifast and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

NuEvolution — Update 16 February 2017

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