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Design and applicatio n e n g i n
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Trifast plc
Annual Report
for the year ended 31 March 2017
Stock Code: TRI
sluglineslugline
Trifast, leading international
specialists in the engineering,
manufacturing and distribution of
high quality industrial fastenings to
major global assembly industries
Mission and vision
• To continue to grow profitability and improve stakeholder returns through organic and
acquisitive growth, and by driving continual efficiencies throughout the organisation
• To be acknowledged commercially as the market leader in industrial fastenings in terms
of service, quality, engineering support and brand reputation
• To promote an environment that is safe and fair, which motivates, develops and maximises
the contribution and potential of all TR employees
INVEST IN OUR KEY STRENGTHS
1
2
3
Design and application engineering
know-how adds value throughout
the purchasing cycle
High quality, low cost manufacturing
across eight global locations forms the
foundation of our industry reputation
which is second to none
Reliable distribution and supply
solutions around the world that
flex to fit our customers’ needs
4
Continuous investment into
quality and operations and supply
keeps us one step ahead of our
customers’ needs
5
6
A strong balance sheet and flexible
banking facilities provide the
confidence to invest for growth
Progressive dividend policy and
creating shareholder value
Visit our website www.trifast.com
sluglineslugline FINANCIAL HIGHLIGHTS*
Revenue
15.6%
Underlying profit before tax†
28.1%
2017
2016
2015
2014
2013
£186.5m
£161.4m
£154.7m
2017
2016
2015
2014
2013
£129.8m
£121.5m
£9.2m
£7.3m
£20.5m
£16.0m
£14.3m
† Please see the five year history on page 146 for
the GAAP measure
Underlying diluted earnings per share
Diluted earnings per share
28.3%
22.4%
2017
2016
2015
2014
2013
12.82p
9.99p
8.68p
2017
2016
2015
2014
2013
5.95p
4.73p
10.40p
8.50p
7.07p
5.76p
4.18p
Return on capital employed
Dividend per share
140bps
25.0%
2017
2016
2015
2014
2013
19.9%
18.5%
18.6%
16.3%
2017
2016
2015
2014
2013
12.1%
1.40p
0.80p
3.50p
2.80p
2.10p
* Before separately disclosed items (see note 2 in the financial statements). The relevance of these
measures and calculations are also discussed in note 2 and the Glossary on page 144. For reconciliations
to equivalent GAAP measures, please see note 34 in the financial statements and the five year history on
page 146
OPERATIONAL HIGHLIGHTS
— All regions experienced strong revenue growth at CER ranging
from 4.6% in the UK to 12.3% in the US
— Gross margin exceeds 30% for the first time in our history
— Significant FX tailwinds add £2.4m to underlying profit before tax
— Strong cash conversion reduces net debt to £6.4m
(normalised £7.6m)
— TR España – a base to grow from in one of Europe’s most
vibrant economies
— Capital investment of £2.9m increases our manufacturing
capacity and capabilities, with more to follow
Read about our Group Strategy on pages 18 to 19
CONTENTS
Strategic report
The World of Trifast
Chairman’s letter
Trifast culture
Global marketplace
Our Group business model
Our products
Group strategy
Core strategy
Strategy in action
Investing in people
Investment driven growth
Continue to add value and differentiate
Acquisitions
Operational efficiencies
Key performance indicators
Our time at Trifast
Business review
Our Group performance
UK
Europe
USA
Asia
Corporate social responsibility
Trifast in the community
Marketing report
The TR website
Risk management
Introducing the lead team
Celebrating long service across the Group
Other long serving employees
Our governance
Directors’ report
Corporate governance
Audit Committee report
Nominations Committee report
Directors’ remuneration report
Statement of Directors’ responsibilities
Our financials
Independent auditors’ report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Company statement of changes in equity
Statements of financial position
Statements of cash flows
Notes to the financial statements
Shareholder information
Investor perception study
Glossary of terms
Five year history
Company and advisers
Financial calendar
Visit www.trifast.com to view a wide
range of information of interest to
institutional and private investors
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148
01
sluglinewww.trifast.comStrategic Report
slugline STRATEGIC
REPORT
The World of Trifast
Chairman’s letter
Trifast culture
Global marketplace
Our Group business model
Our products
Group strategy
Core strategy
Strategy in action
Investing in people
Investment driven growth
Continue to add value and differentiate
Acquisitions
Operational efficiencies
Key performance indicators
Our time at Trifast
Business review
Our Group performance
UK
Europe
USA
Asia
Corporate social responsibility
Trifast in the community
Marketing report
The TR website
Risk management
Introducing the lead team
Celebrating long service across the Group
Other long serving employees
04
06
08
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18
21
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24
25
27
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slugline
sluglineTHE WORLD OF TRIFASTA MARKET LEADERTrifast is known commercially as TR to its customers and suppliers in Europe, Asia and the Americas We have a reputation as a market leading global engineering, manufacturer and distributor of industrial fastenings and category ‘C’ components to a wide range of industries and customers. Around a third of our income derives from TR’s own manufacturing. The key end markets in which products can be found are automotive, electronics and domestic appliances. Our customers are a mix of multinational and national companies and distributors across the world.Go to www.trifast.com to see our locationsRead the Business review on pages 32 to 41 HOLDING THE WORLD TOGETHERFasteners are all around us, they are used extensively in our everyday lives. So much so, that many of us take them completely for granted. But, what would happen if you were to imagine a world without fasteners ... ? Could you: •comfortably drive a car with seats that don’t move; or•safely spin your clothes in a washing machine where the drum isnot attached; or even•keep your cool this summer without fans, refrigeration or air con?Wherever something needs to slide, rotate, expand, vibrate, be repaired, replaced, or simply stay firmly in place, you need the right fastener for the job and that’s where TR comes in. Whether it’s fasteners for space exploration or simply for vacuuming your home, we have been supplying specialised industrial fasteners to OEMs across Europe, USA and Asia for nearly 45 years. We quite literally have been “Holding the World together” HOLDING THE WORLD TOGETHERIndustrial fastenings specialist High quality manufacturing Global footprint Design and application engineering Full service providerHOLDING THE WORLD TOGETHER04Trifast plc Annual Report 201704Trifast AR2016 Strategic and Governance.indd 421/06/2017 14:20:33 Our sites are based in 27 global locations:
UK
Belfast
Birmingham
East Kilbride
Manchester
Newton Aycliffe
Poole
Uckfield
Lancaster
Europe
Germany – Verl
Holland – Oldenzaal
Hungary – Szigetszentmiklos
Ireland – Mallow
Italy – Fossato di Vico
Norway – Skytta
Poland – Warsaw
Spain – Barcelona
Sweden – Nacka
USA
Houston
Asia
China – Shanghai & Beijing
India – Bangalore & Chennai
Malaysia – Penang & Kuala Lumpur
Singapore
Taiwan – Kaohsiung
Thailand – Bangkok
Revenue by location*
Employees by location
Manufacturing & distribution
Customer sectors
3%
2%
26%
35%
35%
38%
44%
33%
19%
10%
21%
31%
65%
20%
18%
• UK
• Europe
• Asia
• USA
* including intercompany revenues
• UK
• Europe
• Asia
• USA
• Distribution
• Manufacturing
• Automotive
• Electronics
• Other
• Domestic appliances
• Distributors
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Distribution subsidiaries
Manufacturing subsidiaries
Our sites
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05
sluglinewww.trifast.comStrategic Report CHAIRMAN’S
LETTER
Dear Shareholder,
The older that one becomes, the quicker the time passes it seems,
and this is certainly the case with our progress throughout the 2016/17
Financial Year that this, your annual report, will explain.
In recent years, we have dedicated ourselves to blending organic
revenue growth with carefully chosen acquisitions under the umbrella
of Continuous Improvement within our operational processes and
procedures. This recipe for consistent profit growth clearly keeps on
giving as we report another successful year completed and near our first
quarter end for the current 2017/18 period.
Our Board is regularly asked for the business outlook implications
from Brexit, especially with part of our global interests being within the
automotive Tier 1 sector. The most strategic impact is likely to be import
and export tariffs in and out of the UK. Fortunately, with our substantial
logistics facilities based in Germany, Sweden, Hungary and Holland,
plus our new Spanish site, we can switch purchase, warehousing and
sales activities between Europe and the UK should the markets demand.
Our manufacturing and logistics facility in Italy also provides substantial
flexibility to our supply chain should the need arise.
Despite much research and many site visits, this past year has not
yielded a suitable acquisition that we felt comfortable with. However,
our consistent organic growth provides robust investor returns sufficient
for us to maintain our strict acquisition criteria.
This organic growth trajectory is not only driven by selling more to
existing customers, and winning new customers, but also by our
introduction of new product ranges that are known to be already in
demand from our three key market sectors of automotive, domestic
appliances and electronics.
Our most strategic new product investment by far is into enclosure
hardware (e.g. locks, hinges, handles, cable management etc.) where
the global market spend extends to hundreds of millions of dollars, and
where the majority of our international OEMs are already large users,
06
Trifast plc Annual Report 2017
sluglineHOLDING THE WORLD TOGETHER Share price (p)
220.00
170.00
120.00
70.00
20.00
Sept 11
Mar 12
Sept 12
Mar 13
Sept 13
Mar 14
Sept 14
Mar 15
Sept 15
Mar 16
Sept 16
Mar 17
Share price 31 March 2017: 214.3p (1 April 2016: 130.0p)
often paying premium prices due to design, specification and supply
constraints. We believe that our enhanced and unique supply chain
flexibility provides TR with a competitive market advantage on this vast
range of high volume components.
This year has seen another period of major capital and people investment
to help sustain our future prosperity, including the significant decision to
open a greenfield distribution and technical support facility in Barcelona.
Although the UK has grown its automotive production significantly in the
last decade, it is not widely known that Spain produced 50% more units
than the UK last year, providing TR with a clear opportunity to invest to
respond to this market demand.
Market dynamics have also prompted our TR Midlands team to acquire
a second building to accommodate more efficient warehousing plus a
training, technical and customer fulfilment facility – mainly to support
our automotive customers.
The automotive sector is the most prolific exponent of design and
production consolidation and rationalisation on a global basis, which has
seen Trifast ramp up its technical support and supply chain disciplines
across the Group. TR VIC in Italy, TR Kuhlmann in Germany, TR Inc. in
USA and TR Spain are now aligned with TR in the UK, Hungary, India,
Thailand, Malaysia, Taiwan, Sweden and Holland with the consistent
high level capabilities required by this industry. Recent demand has also
turned our focus on to Japan, where currency changes and high quality
demands have made our exports into that country more competitive.
This past year has seen a whole raft of new operational processes and
people resource initiatives, with our Executive team grasping the reins of
a wide range of improvement opportunities that range from broadening
our HR support, management training and succession planning to digital
investments and treasury management. Most of these activities span
more than a year and so I look forward to updating you at a later stage
with what I believe will be significant progress.
Having re-joined Trifast with Jim Barker way back in March 2009, I
have had the absolute privilege in witnessing first the recovery, and now
the ongoing underlying growth and development of what I regard as a
uniquely dynamic, professional and caring organisation that has every
reason to feel confident, but not in any way complacent, about its future
prosperity.
I fundamentally believe that we now have the most competent and
committed management teams across the Group that I have ever seen
in my many years with the Company. This trust has allowed me to step
down from my executive role of the last eight years, while still remaining
loyal and supportive as Non-Executive Chairman of Trifast going forward.
I believe very much that every employee is important and that
management must constantly endorse that personally with daily
encouragement, recognition and mentorship. It is with pride that I can
claim that the TR culture is very light on ego, politics and status seeking,
whilst being big on loyalty, commitment and work ethics. As this is a
core requirement for success I want to sincerely thank our management
and all our staff for their contribution to our Company and its excellent
performance, not only on my behalf but on behalf of all our stakeholders.
Yours sincerely
Malcolm Diamond MBE
Chairman
12 June 2017
Read the Business review on pages 32 to 41
Read about Corporate governance on pages 64 to 65
07
sluglinewww.trifast.comStrategic Report
HOLDING THE WORLD TOGETHER
TRIFAST
CULTURE
IT’S ALL ABOUT
THE PEOPLE
The Trifast Group prides itself on its family culture and this can be felt in every
location, no matter where that is in the world
All of our employees feel part of the Group and are supported to constructively challenge processes and procedures where necessary and to
contribute to the continuous improvement of the Group.
All employees are provided with equal opportunity through our recruitment, selection, training and development processes. We are committed to
ensure all of our workplaces throughout the world are free from unlawful or unfair discrimination of any kind and that all employment decisions are
made in a fair and objective way.
Core values
Trust
Trust
Respectful of each
Respectful of
others’ abilities
each others’
abilities
Integrity / Open
Integrity/
& Honest
open &
honest
Fairness
Fairness
Adding value and
Adding value and
embedding quality in
everything we do
embedding quality in
everything we do
Striving to achieve
Striving to
excellence / continual
improvement
achieve
excellence/
continual
improvement
-
Team player acting for the
Team player
good of the group, recognis-
ing the bigger picture
acting for
the good of
the Group,
recognising the
bigger picture
People focussed /
People
handling with empathy
focused/
handling with
empathy
Leadership giving the
Leadership giving
empowerment to
employees to take
the empowerment
responsibility for their
own actions
to employees to
take responsibility
for their own
actions
Commercially minded /
Commercially
entrepreneurial
& innovative
minded/
entrepreneurial
& innovative
08
Trifast plc Annual Report 2017
Trifast AR2016 Strategic and Governance.indd 8
slugline
9/28/2017 3:28:11 PM
Strategic Report
slugline HOLDING THE WORLD TOGETHER
TRIFAST
CULTURE
GROUP
UNITED KINGDOM
Colin Coddington
IT Director
Helen Toole
HR Director
Dave Fisk
Managing Director
TR Fastenings, UK
Maria Johnson
Finance Director
TR Fastenings, UK
Stevie Meiklem
Operations Director
TR Fastenings, UK
Ian Carlton
Director of Quality
“Those that join TR, and
like it, tend to stay for a
lifetime. I joined 21 years
ago. TR’s success has
been built on a family
culture; employees are
looked after and cared
for in a way that other
companies struggle to
understand and compete
with and are central to
TR’s core values”
Colin Coddington
IT Director
“The Trifast reputation has been built on a
foundation of the highest level of customer
service that is second to none within the
fastener industry. Reliability, quality and
staff excellence underpin the culture of the
Group by forming a brand image recognised
throughout the world as market leader”
Sam Wilson
Managing Director
Lancaster Fasteners
Sam Wilson
Managing Director
Lancaster Fasteners
USA
ASIA
Gary Badzioch
Managing Director
USA
Joe Haymes
Strategic Sales Manager
USA
Charlie Foo
Managing Director
TR Asia
Endy Chin
General Manager
Singapore
Phua Yong Sang
General Manager
China
“ TR incorporates its high standards for
quality and valued customer centric
approach throughout its organisation,
by instilling a ‘family culture’ environment
that represents honour, integrity and
compassion to all its employees”
Gary Badzioch
Managing Director
USA
Wilson Chen
General Manager
Taiwan
Piong Song Tong
General Manager
PSEP, Malaysia
HK Tan
General Manager
TR Formac Malaysia
Victor Cheong
Country Manager
India
David NG
Country Manager
Thailand
10
Trifast plc Annual Report 2017
Trifast AR2016 Strategic and Governance.indd 10
slugline
9/28/2017 3:28:45 PM
Strategic Report
Frank Niggebrügge
Managing Director
Germany
Peter Henning
Director
Germany
Erich Hütter
Director
Germany
Ron Vlutters
Managing Director
Holland
Zoltan Csengeri
Location Head
Hungary
Dara Horgan
Location Head
Ireland
Karol Gregorczyk
Sales & Development Director
Italy
Francesco Cricco
Supply Chain Director
Italy
EUROPE
“ We have been successful implementing our core
values in balance with our responsibility to our
customers, community and employees”
Jan-Erik Storsve
General Manager
Norway
“ It’s a dynamic environment that has allowed me
to grow and develop attitudes towards sales”
“ It’s a multinational Group but designed on a
human scale”
“ Being able to do something and improve your job
is an opportunity that is given to everyone”
“ There are challenges daily – I’m never bored”
TR employees
Italy
“ Trifast believe in a consistent standard when
dealing with everyday tasks to ensure we
provide our customers with trust and confidence.
Putting emphasis on these values will give
us a competitive edge, especially with our
high standard of reputation to maintain. We
need to understand the different business
cultures that surround us in order to have
an advantage over other global players.
Thus moving forward, we should look into
these areas to secure better opportunities
in an increasingly competitive market”
HK Tan
General Manager
TR Formac Malaysia
Charlie Foo
Managing Director
TR Asia
Jan-Erik Storvse
General Manager
Norway
Raul Fernandez
Commercial Director
Spain
Roberto Bianchi
Managing Director
Sweden
www.trifast.com
11
Trifast AR2016 Strategic and Governance.indd 11
slugline
9/28/2017 3:28:57 PM
HOLDING THE WORLD TOGETHER Customer centric Working at corporate level Full service provider Global structuresluglineReflecting on the financial year, my synopsis is that it has been an exciting year, not without some challenges, but rich with opportunities. We faced some unknowns at the start of the year with Brexit and the American elections and how both of these unusual situations could affect some areas of our business. However, I was convinced that we had enough traction with our global sales strategy and that we would be able to ride it out, as we have, and still have a long term solid pipeline of business in place. The sales and marketing strategy is constantly being reviewed, refined and enhanced. We have had strategies in place to manage each of the key sectors for automotive, electronics, domestic appliances, other and sales to key distributors since 2008.Our global strategic business team is made up of Global Account Directors ‘GADs’, and Strategic Account Managers ‘SAMs’ who work at corporate level with multinational companies across the world. Their role is to penetrate more of the sites giving them the service level they require, with all the systems and processes they expect. These are very discerning clients, but once we have been approved as a vendor to supply, the doors open to a world of opportunity in their multiple sites. From early design involvement, providing proactive technical support right through to the logistics service that we provide is where we add value. We are seen as an ‘FSP’ and that elevates our status above that of many of our competitors. This is the highest growth area of our business and we work very closely with over 100 companies globally, with multiple sites, on this basis. We have regional, and very important accounts that are strategic to our local sites, either based on turnover value or potential for growth. We follow the same strategies at regional level and these are serviced by Business Development Managers (‘BDM’), many of whom have technical backgrounds which is a vital part of the customer requirements. There has been significant growth this year through the distributors who purchase our proprietary products, much of which we manufacture ourselves in the UK and in Singapore. We are constantly adding additional sizes to enhance the range and despite, or because, of Brexit we have seen our sales in Europe from the UK grow substantially. This is due to the excellent service we are able to offer and our sound stocking policies, ensuring we have the right stock positioned to take advantage of the increased interest from Europe. Both Lancaster Fasteners and TR Fastenings, Uckfield have seen the most growth during this time, and it continues unabated. We have had successes with two major catalogue companies who carry an extensive range of our Group products, and we have work in progress with a third company. Sales of our self-clinch product, the plastics range and the newly launched enclosure range has further enhanced the sales growth. In essence we have a channel to market strategy for each sector, type of customer, including the transactional ‘one off sales’ where we have an extensive stock range that meets their needs with a fast delivery turnaround. GLOBAL STRATEGIC TEAM This team was formed initially to manage and retain business that was transitioning from the UK and Europe to lower cost countries in Asia 16 years ago. The team has expanded and now encompasses Strategic Account Management (‘SAM’) servicing multinationals. We work with their corporate teams to leverage business opportunities, becoming a Full Service Provider (‘FSP’), and support them in multiple locations with a consistent customer centric service. Within the team we have sourcing experts managing the ‘AVL’ vendors that are critical to the supply chain, product specialists, and a project management team working in tandem with global marketing. We work with our local sites in a bottom up / top down method using the business intelligence and relationships that are key to winning and retaining business with these discerning customers. Of course we have to be commercially competitive but the value add of the service we provide is a currency too. This is a key pillar in our sales strategy and we have seen consistent growth in the top 100 accounts, and our penetration into more of their sites. GLOBALMARKETPLACEHOLDING THE WORLD TOGETHER12Trifast plc Annual Report 2017Trifast AR2016 Strategic and Governance.indd 1221/06/2017 14:20:36 Strategic Report
Glenda Roberts
Group Sales Director
Jo Devlin
Head of Projects –
Strategic Team
Chris Black
Director of Automotive
Business Development
Jeremy Scholefield
Director of Strategic Business
Martin Greenwood
Director of Supply Chain
Development
Kevin Rogers
Plastic Products Sales
Development Manager
Phil Callaghan
Group Logistics Manager
Our focus is on constantly adding more products to our portfolio to
increase our ‘share of wallet’ in existing customers and creating new
sales to new customers. This year we launched the enclosure range of
products. This has been the most ambitious and extensive range that
we have ever brought to market. We have substantial sales already with
sheet metal and enclosure companies and following the principal of
increasing our penetration with these existing accounts.
We have a further two new product ranges to bring to market this year
which will stimulate more organic growth within existing customers and
attract new potential ones.
We have had challenges in the UK since Brexit and the ensuing forex
issues. We have worked with our global AVL vendors to try to at least
share the burden of the price increases or leverage more volumes with
them to negate increases. We are having some degree of success
and as our revenue continues to grow they will see the benefits of this
reflected in new business.
Our global enquiry log continues to show that we have a strong pipeline
ahead of us, particularly in the automotive sector. Many of the platform
builds that we have won have a life span of at least six years. The enquiry
data it provides assists us with our forecasting as we track our wins, for
which TR site and when the builds commence, proving once again what
an invaluable and unique tool this is.
The marketplace is buoyant and we have seen growth in the electronics
industry particularly in middle and eastern Europe. Our product is in the
biggest brands in the world supplying companies that want the support
and service that we provide in these volume and fast paced production
facilities.
We also have seen hard work pay off in less buoyant markets such as
Northern Ireland where there has been dogged determination by the team to
take a larger slice of a smaller cake. So much so that their site is bursting at
the seams and they will be moving to a new and larger facility soon.
Together with the strategic team we put a plan together to open a site
in Barcelona to capitalise on the growing automotive and electronics
sectors. We now have an ultra-modern site in a great location, close to the
automotive clusters, and we have been operational since March 2017.
The Houston team have had double digit revenue growth this year and
have seen automotive grow to 26% of their turnover. They have a strong
forward pipeline and they too will move to much larger premises this year,
as they have outgrown the facility that we only opened six years ago.
Asia is embracing the automotive sector too as we follow and develop
the same companies we are servicing in Europe who have now located
out there. TR China have grown their automotive business to 27% of
their turnover in less than four years and have some large recently won
contracts already secured.
We continue to recruit technical sales engineers, and three new
engineers have recently started in the UK, China and Japan.
Our strategy for growth continues and I am confident that we have
enough momentum to achieve our forecasts.
Glenda Roberts
Group Sales Director
13
sluglinewww.trifast.com OUR GROUP
BUSINESS MODEL
We are a 24/7 ‘full service provider’ offering ‘end-to-end’ support to all our
customers. Our success and ongoing growth is based on a unique mix of high
quality manufacturing, sourcing know-how and adaptable, reliable global logistics
N A N D APPL
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CIN G O F COM
P
O
R
U
O
S
N
E
N
T
S
Read about Corporate governance on pages 64 to 65
Read the Business review on pages 32 to 41
What we offer
At TR we pride ourselves on the end-to-end support that we offer to
all customers. We don’t just sell industrial fastenings – we design, we
problem-solve, we engineer, we manufacture, we source and we reliably
deliver high quality, value adding components and logistical solutions to
production lines across the world.
TR is a recognised and established global brand across a wide range of
manufacturing sectors. We differentiate ourselves in the market by offering
a unique blend of high quality manufacturing with sophisticated supply
chain distribution and logistics.
14
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017
Strategic Report
So how do we do it?
Design & application
Global logistics
A large proportion of our sales are driven by customer specific assembly
components, including our unique product introductions within the
automotive, electronics and domestic appliances sectors.
Our engineering teams, through their strong relationships with our
customers’ R&D departments, look to get involved from the start of the
enquiry process, helping our multinational OEM customers to make the
right fastener design decisions before full scale production begins.
Our technically skilled engineers can deliver cost savings to the customer
through specific component design or process applications, adding
value and generating efficiencies throughout the supply relationship by
working with our customers to reduce product volume, assembly
time or weight. In turn, these savings help us to manage price
discounting demands, win customer loyalty and further enhance our
reputation for adding value.
High quality, low cost manufacturing
Our eight manufacturing plants spread across Asia, Europe and the UK
allow us to provide reliable, timely and high quality product to our key
multinational OEMs around the world. Our experienced manufacturing
teams are able to work directly with our customers to rapidly design,
produce and develop product samples, whilst on an ongoing basis,
our factories are regularly audited, giving our customers complete
confidence in the continuing quality of our supply.
‘Just in Time’ supply chains and advancements in robotic assembly have
driven expectations and demand for zero defect components. By self-
manufacturing we are better able to invest to meet these challenging and
changing demands.
Sourcing of components
Two-thirds of the Group’s revenue is sourced from our established
network of world class external suppliers. This means we are not
restricted by what we can manufacture in-house, instead we are able to
offer our customers a truly ‘one-stop’ solution for all their fasteners and
related components.
In a rapidly changing world, at both the micro and macroeconomic level,
our established high quality supplier network, in conjunction with our
in-house manufacturing capacity, means we can respond to both our
customers’ urgent supply situations and longer term market changes
with equal success.
We have been a global supplier of fasteners and related components for
over 40 years. Over that time we have established secure and proven
logistic networks across the world. We now offer seamless and reliable
supply to over 60 countries. From complex VMI and ‘Just-in-Time’
delivery to straightforward ex-works solutions, we are able to provide
the most cost effective supply logistics to suit our multinational OEMs’
needs.
With our core facilities in Asia, North America and Europe mirroring the
global spread of our customer base, we are able to meet the challenging
geographical requirements of our customers. By offering logistic solutions
from transportation, warehousing, distribution, through to production lines,
we can give our customers a cost effective and efficient service.
It is these extensive and flexible networks that help to drive our core
organic growth strategy, allowing us to continue to increase our revenues,
profits and penetration across our key multinational OEMs’ sites.
Investing for growth
Nothing stands still in this ever-changing world. In order to make the
most of the opportunities for growth and to keep moving forward, we
must continue to invest in our business, whether this is in our people, our
manufacturing capabilities and quality or in finding the next successful
acquisition.
Ongoing capital expenditure in new manufacturing and inspection plant
within our factories is almost routine, with significant investment currently
underway at our Italian, Singaporean and Malaysian sites, whilst over the
course of the last two years, we have also seen significant investment
in our people, not just via recruitment, but also through training
programmes and succession planning.
Opportunities for growth
The strong relationships we have built with our key global multinational
OEMs over the last 40+ years are considered a significant asset to
the Group. We continue to prioritise the development, protection and
maintenance of these relationships so as to grow market share across
the world.
It’s not just about existing relationships, we are also always looking
at how we can gain access to new customers. At any point in time
we will be working on a number of new multinational OEMs – building
networks and trust, developing a better understanding of their needs
and spotting the opportunities that will provide us with that initial route
to supply.
As a wider business, we are also constantly looking beyond specific
customer relationships. Our engineering, sales, marketing and innovation
teams are continuously tasked with searching the market to identify the
next big thing. Be it a specific product range, patented technology, a
new market focus or a geographical hot spot, we are always working
together to drive our ongoing growth.
www.trifast.com
15
slugline OUR
PRODUCTS
ENCLOSURE
PRODUCTS
Enhancing the range of product that we can supply to existing
customers, and attracting new customers, is a key part of the sales
strategy. TR is already an acknowledged leader in the field of supply to
sheet metal and enclosure manufacturers. To complement the extensive
range of self-clinch fastenings, blind rivets and rivet nuts, rivet bushes
and thread forming screws, we have extended our range and now
design and supply locking systems and locks, hinges and latches,
clamps and terminals, gaskets and accessories.
To launch this range we conducted market research, assessed the
competition, discussed with our customer base their specific needs and
then developed a full marketing plan. This has been the most significant
product introduction since our plastics commodity launch.
A training program was created and, with the support and imagination
of our in-house marketing team, we produced our own animation
describing the end-2-end process and the key characters involved. We
had a lot of fun doing this and it captured the imagination of the sales,
sourcing and procurement teams internally. The range was launched
on our website in November 2016 with over 2,500 parts, increasing the
number of products on the website to 50,000. We created in-house a
unique product configurator to enable engineers to design their own
locks, and the capability of downloading the generated parts as a
drawing. This has increased the traffic to our website substantially, and
has attracted new customers and opportunities, many of whom have
said our website has been easy to navigate and with the detail to hand
that they require.
The range is constantly growing as we meet customers’ demands and
service interest from other industry sectors.
Industries serviced:
Energy
Transport
Technology
General industrial & HVAC
Glenda
Roberts
Martin
Greenwood
Abi
Burnett
Aleksandra
Kuczynska
Kevin
de Stadler
Ian
Salmond
Jeremy
Schofield
16
Trifast plc Annual Report 2017
sluglineHOLDING THE WORLD TOGETHER Strategic Report
TR SWEDEN
TR NORWAY
Sponsors stylish Swedish-designed Sidebuddy, the
new eco-solution for city transportation
Space odyssey: Supplying fasteners for the
new Mars rover
As our cities become increasingly congested with traffic and
pollution, bicycles are proving an increasingly popular way to get
around town more quickly and easily and with the added benefit
of zero emissions.
However, sometimes cycling may not be practical, if you have
to transport children, pets or shopping for example. Swedish
designer Jordi Hans saw an opportunity to invent a versatile
add-on solution – the SideBuddy side trailer.
Inspired by the classic designs of motorbike sidecars, the
SideBuddy can be attached to either standard bicycles or new
electric models and fits up to three children (aged 0–7 years) or
cargo up to 120kg. Multi-functional and versatile, it is ideal for
families, street sellers, tourists, commuters and even surfers!
Always keen to support new and innovative ideas, when TR
Fastenings, Sweden were approached by the designers of
SideBuddy to be a possible sponsor, they were keen to hear more.
“As a leading manufacturer and supplier of industrial components,
environmental thinking is an area we are particularly interested
in. In our opinion, the Sidebuddy is a unique project with huge
commercial potential and one we are delighted to support. The
components that were selected, such as screws, nuts, washers,
springs and rubber parts, were already approved and validated
for use in the automotive sector and readily available for us to
supply to the customer. This amounted to a huge saving in terms
of time for the Sidebuddy team.”
Eugen Kuhnl
Engineering and R&D Manager
TR Sweden
TR Fastenings Norway, is pleased to have been asked to supply
essential rivets and tools for a Radar Imager for the new NASA
Mars Exploration Rover which launches in 2020. This is the first
time components TR have supplied have gone into space, and
it is exciting to be a small part of future history.
The Norwegian Defence Research Establishment (FFI) which
is designing and developing the Radar Imager on behalf of
NASA, required components which were robust enough to
withstand the extreme conditions of the atmosphere on Mars,
where temperatures can plummet to minus 125 degrees
centigrade. Drawing on its experience of working within the
telecommunications and energy sector, TR Fastenings Norway
was able to tap into the company’s global network of suppliers
and deliver the components to FFI within the required timeframe.
The Radar Imager will be used in Mars subsurface experiment,
known as RIMFAX. It will add a new dimension to the Rover’s
toolset by providing the capability to image the shallow
subsurface beneath the Rover in unprecedented detail. It will
explore the ancient habitability of its field area and select a set of
promising samples that will eventually be returned to Earth.
“We are extremely proud to be involved in the development of
this new Mars Exploration Rover. It is incredible to think that our
fasteners will be used in outer space and is a testament to the high
regard our products have with such a prestigious customer as FFI.”
Jan-Erik Storsve
General Manager
TR Norway
Sean
Cushen
Kenneth
Hultberg
Keith
Gibb
Martin
Elliott
David
Griffin
Joe
Haymes
Sian
Whitlock
17
sluglinewww.trifast.com GROUP STRATEGY
CORE STRATEGY
Market research indicates that total global demand for fasteners is set to
continue to grow
For TR this is further supported by expected global growth across all of
our of key sectors: in automotive, domestic appliances and electronics.
We therefore see the next few years as being a period of continued
investment and growth. Using as a base the strong foundations we
have built and the investments we have already made over the course
of 2017, we will continue to make carefully targeted investments in the
coming years, to ensure that we are best able to seize the opportunity to
grow alongside our key global customers and markets for the long term.
We are a value-add supplier of specialist component parts, with over
75% of our revenues being derived from customer specific, branded, or
licensed products. We provide guaranteed quality and reliability of global
supply (sometimes for hundreds of parts at a time), as well as the ability
to solve complex and sometimes urgent manufacturing challenges for
our customers. Because of this, we are able to avoid competing solely
on price and therefore can retain and build on our business relationships
for the longer term.
Description
Our core business is supplying high volume assembly multinational
OEMs around the world with fastenings and related components. Our
customers rely on us to deliver consistent quality, price and availability
in order to supply automotive assemblies, white goods, mobile phone
base stations, computer enclosures, cash dispensers and other
equipment, in their often numerous sister plants spread globally.
Over 46% of Group sales come from our 25 key multinational OEMs.
We carry ‘preferred supplier’ status to these multinationals, several
of which own more than 200 plants, making comparable or identical
finished products. Our average percentage of total fastening spend with
each of our multinational OEMs is less than 25% globally, so therefore,
developing this pipeline, as well as building relationships with new
multinational OEMs, is the backbone of our overall growth strategy.
Performance so far
We have trading relationships with over 100 multinational OEMs and
currently assign strategic account status to 25 of these. These are made
up of a mixture of household names and Tier 1 manufacturers across the
automotive, domestic appliances and electronics sectors. We have been
supplying 19 of these for over ten years, and four for over five.
Plans for the future
Maintaining and developing the strength of these relationships, as well
as winning new multinational OEMs continues to be a key focus for the
Group. We are investing in our sales teams around the world to help us
do that. In part by increasing head count to expand our sector expertise
and knowledge across different geographies and by ensuring that
our sales teams work closer together on a global basis to continue to
improve site penetration levels at our multinational OEMs.
To make this possible, specific investments are being made into our
global customer relationship management systems, and our internal key
account management structure. Head count and skills gap analysis is
already underway across all of our global and local sales and marketing
teams. Specific key gaps have already been successfully filled and an
ongoing investment programme will be put in place over the coming year
to continue to develop and increase our skills in this area.
In the medium term we see our revenue to our top multinational OEMs
continuing to increase organically and for us to build meaningful trading
relationships with at least another ten multinational OEMs over that same
time period to be identified as key development accounts.
18
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Strategic Report
Strategic pillar
Investing in people
KPI’s
• Group total revenue
• Key multinational OEM revenue
• Return on capital employed (‘ROCE’)
• Broaden skills of management
• Group total revenue
Investment driven growth
• Return on capital employed (‘ROCE’)
• Manufacturing to distribution ratio
• Underlying cash conversion as a % of
underlying EBITDA
• Group total revenue
Continue to add value and differentiate
• Key multinational OEM revenue
Acquisitions
• Underlying operating margin enhancement
• Group total revenue
• Return on capital employed (‘ROCE’)
• Underlying diluted earnings per share (‘EPS’)
• Manufacturing to distribution ratio
• Group total revenue
Operational efficiencies
• Underlying operating margins enhancement
• Group underlying profit before tax
• Underlying diluted earnings per share (‘EPS’)
• Underlying cash conversion as a % of
underlying EBITDA
Link to Strategy in Action
Read more on
pages 21 to 22
Read more on
page 23
Read more on
page 24
Read more on
pages 25 to 26
Read more on
page 27
Read about KPI’s on pages 28 to 29
19
sluglinewww.trifast.com HOLDING THE WORLD TOGETHER
STRATEGY
IN ACTION
slugline Strategic Report
INVESTING
IN PEOPLE
Our people continue to be the driving force of our business and their length of
service, their loyalty, their enthusiasm and their skills and experience form the
backbone of our success
We understand how important it is to retain skills and to actively
encourage and fairly reward our employees.
Succession planning formed a major part of our activity in 2016 and
will continue to be a focus for the coming years. We are very keen to
provide development and promotion opportunities for our employees
where possible, as well as experiences in areas of the business that they
may not be familiar with. With this in mind we are looking to develop a
programme of secondments, giving employees the opportunity to work
in different locations.
A full resource planning process was carried out within our UK operation
during FY2017 allowing us to pull together the number of projects either
underway or planned for the future. This process also allows us to
manage and co-ordinate our employee activity, as well as being able
to identify areas within the business where either additional resource
or investment in skills is needed.
Our training and development programmes have been enhanced within
the last 12 months to ensure that we are able to provide the relevant
skills to those that want to progress within the business. We continue
to run our team leader training course, which provides the important
training for those who are either about to start, or have just started a
supervisory/line management role. We are continually reviewing the
training provision to complement our competency framework and we
are now enrolling more employees onto professional qualification courses
including the Association of Accounting Technicians and the Chartered
Institute of Procurement and Supply.
“ We are very keen to provide development and
promotion opportunities for our employees where
possible, as well as experiences in areas of the
business that they may not be familiar with”
Following the success of the functional training for Health and Safety and
the environment, where we brought together the representatives from
each location in Europe and the USA for an update on developments
and global policies and procedures, we will be developing similar training
programmes for the different functions within the business that would
benefit from such a global approach. Learning together has further
improved communication between our operating sites.
We have continued with our leadership programme, based on
‘Transactional Analysis’, a theory that allows participants in the
programme to identify their own work drivers and to recognise those of
others within their team. Through this recognition and understanding,
leaders and managers are able to adapt their behaviour and
communication styles to more easily interact with and better motivate
their teams.
A number of groups, including all of our European and USA heads
of location, have attended this training, meaning that we now have a
common language and understanding throughout the management level
of the Group.
Our performance management system is in the process of being
enhanced, which will allow us to break down further the skills for each
of the roles within the business, allowing us to quickly analyse training
needs as well as being able to more easily identify high performers. The
improved system will also enable managers and employees to interact
more frequently in a framework that is more flexible.
There are now even closer ties between all of our operating sites through
the roll-out across the globe of the HR and IT strategies; these include
global policies and procedures that have been implemented within all of
our locations, allowing greater understanding and better and consistent
application of global processes.
21
sluglinewww.trifast.com STRATEGY
IN ACTION
Helen Toole
HR Director
Rebecca Rutter
HR Representative
Luke Murphy
UK HR Manager
Human resources strategy
The implementation of the global HR strategy is underway. The strategy
is entitled ‘Working together to manage growth’ and covers the
following areas:
• Recruitment and selection
• Legal compliance
• Performance management
• Communication
• Systems and technology
• Health and safety
• Environment
• Payroll and benefits
• Corporate social responsibility
• Monitoring and measurement
• Brand management
A new corporate code of conduct is being developed for those policies
and procedures that apply to all Trifast sites and employees. As far
as is reasonably practicable, Group policies and processes will be
implemented to improve our ability to monitor and measure employee
activity and development.
22
UK APPRENTICESHIP
PROGRAMME
Our apprenticeship programme in the UK continues to be a
great recruitment tool as well as a meaningful business training
opportunity with apprentices joining many of our UK sites during
the year.
Apprentices that started with the Company during the year were:
Nathan Blake
Marketing Apprentice
Uckfield
Alex Hobden
Business Apprentice
Uckfield
Ruth Eastwood
Business Apprentice
Uckfield
Gagandeep Malhi
Quality Administration
Apprentice
Birmingham
Alex Pyle
Warehouse Apprentice
Newton Aycliffe
Casey Scott
Office Apprentice
Newton Aycliffe
Bethany Tomlinson
Sales Office Apprentice
Manchester
Denhom Lewis
Warehouse Apprentice
Manchester
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 INVESTMENT
DRIVEN GROWTH
Description
At TR we are in a sustained period of growth with FY2017 representing
our seventh consecutive year of growth.
Growth needs investment, not just in terms of our people, but also via
capital expenditure in our warehousing, manufacturing capacity and
our digital capabilities. By expanding our manufacturing capabilities
and capacities around the world, we will not only reduce our reliance
on purely distribution revenues, but we will also be able to improve our
profit margins as revenues increase faster than the underlying semi-fixed
cost bases we have in our manufacturing sites.
Performance so far
Over the last year we have invested around the world in our
manufacturing. In our Italian site we have spent over £1m on a state-
of-the-art heat treatment plant. This will allow us to bring significantly
more of our heat treatment in-house, solving a manufacturing bottle-
neck and also providing us with better quality assurance to support our
growing on-site automotive production, having achieved TS16949 quality
certification locally during the year.
In PSEP Malaysia, we have made additional investments in our sorting
and quality machinery in the year. This has allowed us to better access
the automotive export market, particularly in Japan, where we have won
a new contract with one of our key automotive multinational OEMs to
supply into what is a new geographical market for us.
Plans for the future
Looking ahead, we continue to see capital investment as a core part
of our ongoing strategy for growth.
Specific plans have already been approved for an exciting new
mezzanine extension within our well established and very profitable
Singapore site. An initial investment of c.£1m will increase our local
capacity by one third, allowing us to bring more manufacturing in-house
for margin retention and quality assurance as well as to better cover fixed
costs across the board as manufacturing levels increase.
Outside of our manufacturing sites, we are also looking at investing in
our distribution and warehousing facilities in both Belfast and Houston
to support the growing revenues we are seeing in these regions. We
anticipate both of these sites will move to bigger premises over the
course of FY2018 to better support that ongoing growth.
“ Looking ahead, we continue to see capital
investment as a core part of our ongoing
strategy for growth”
Read about Operational efficiencies on page 27
Read about Cyber security on pages 48 and 49
23
sluglineStrategic Report STRATEGY
IN ACTION
CONTINUE TO ADD VALUE
AND DIFFERENTIATE
External recognition is also evident in the awards we have once again
received during the year.
Plans for the future
Looking ahead we see investing in quality and engineering as an ongoing
requirement, as the demands our customers place on us increase across
all sectors of our business. We have a very strong foundation to work
from, with plans already in place to continue to invest in and build our
teams around the world.
In the medium term, we are looking to further develop our in-house
technical and engineering expertise. A team will be pulled together, and
will be further supported by targeted capital investments to allow us to
better showcase our capabilities externally to customers, as well as to
act as a training and go to problem-solving resource to further widen our
internal knowledge and expertise around the Group.
Having already invested in our website and our cyber security in recent
years, we are also in the process of reviewing our overall digital strategy
and are expecting to make additional investment in this area over the
next few years. Ongoing investment is expected in our external and
investor website, our customer relationship and enquiry management
capabilities as well as ongoing development and maintenance of our
cyber security and global IT policies and procedures.
Description
Our application engineering teams help to differentiate us by bringing
fastener solutions to our customers at all stages of the build, from initial
design to ongoing manufacture, whilst continuous investment has helped
to build and maintain our reputation for high quality within the industry at
a time when customers are beginning to focus more and more on this.
Our engineering knowledge and experience, supported by our high
quality manufacturing locations, means we are able to add real value to
our customers throughout the purchasing cycle. From initial enquiry and
product development, through to ongoing supply management, we have
the skills across the world to problem solve, and to drive efficiencies
throughout the life of the build.
Our reputation in the industry for quality is second to none. We are
known for our commitment and ability to go the extra mile for our
customers, solving issues before they arise and stepping in where
competitors have fallen short. All of this commitment is supported by
established supplier networks and valuable licences that mean we can
offer a full range of quality product to meet our customers’ component
requirements across a broad range of sectors.
Performance so far
Our application engineers have solved problems and created efficiencies
for customers across all our sectors. We continuously undergo customer
audits across our manufacturing and distribution locations. Over the last
12 months we have successfully passed our first Japanese automotive
customer audit at our PSEP site in Malaysia, as well as an initial audit
from a key new multinational OEM customer in America. In Taiwan, our
latest customer audit result was 99.2% reflecting their well-deserved
reputation for high quality, particularly within the Tier 1 automotive
marketplace.
242424
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Strategic Report
ACQUISITIONS
Description
Trifast has shown it is capable of delivering a firm trend of healthy
organic growth. However, this is not enough to maximise the
opportunities available to us in what is a very fragmented industry,
with no one player having more than 5% of the market share.
The acquisition of TR Kuhlmann, although small, exemplifies what
constitutes an ideal target for the business, namely knowledge and skills,
capable self-managing and ongoing management teams, niche market
positioning, growing revenue, profitability and earnings enhancing.
Performance so far
Kuhlmann has integrated very well in its first full year with the Group
and their performance is ahead of expectations having generated
“ A detailed acquisition strategy has been
developed to identify key criteria and
geographies, which is driving our proactive
search for the next acquisitions”
£6.0m of revenues, £1.3m of operating profit and £1.2m of the Group’s
cash from operations. Whilst new business plans, taking advantage of
Kuhlmann’s geography and the network of existing customers, have
already been developed and are progressing well.
Plans for the future
Looking ahead for the medium term, a detailed acquisition strategy has
been developed to identify key criteria and geographies, which is driving
our proactive search for the next acquisition. To better aid this process,
we have set up an internal acquisitions team to allow us to focus on not
just finding that next acquisition opportunity, but also to help build up a
pipeline of potential businesses that in time may come to fruition.
This team, although based in Uckfield, is truly global, receiving input from
all of our local Managing Directors and key people in the market place to
aid our ongoing search in this very important market for us.
Read about Investment driven growth on page 23
25
sluglinewww.trifast.com STRATEGY
IN ACTION
ACQUISITIONS
TR VIC’S VIEWS
OF JOINING TRIFAST
TR KUHLMANN’S VIEWS
OF JOINING TRIFAST
Since October 2015 we are a Trifast company – and this is
great.
We have got a lot of new impressions and new opportunities.
One of the most impressive points is the support from the
TR Family.
Together, after only a few months of being with Trifast, we
achieved the target to secure TR Kuhlmann as the first
nomination from the automotive industry in Germany. This is just
one example of how many great new wins TR could achieve in
Germany in the near future.
It was also fantastic to see that, from the first day, every
employee in TR Kuhlmann was absolutely committed to Trifast,
and for this, we would like to say a ‘big thank you’ to the Board.
The Board spoke personally to every single employee and, as a
result of those conversations, everyone understood that Trifast
is one big strong family team.
It is wonderful to see how strong the global structure inside
the Company is. To work as one team globally in 18 countries,
sharing the huge knowledge around the world is an amazing
achievement. All these different parts to the puzzle make us very
optimistic for the future.
We are happy to say that we are proud to be a part of the Trifast
family.
Peter Henning
Director
TR Kuhlmann
After the acquisition finalised on 30 May 2014, the next milestone
was a management change on 1 June 2016 after an era of family
managed business.
With some resistance and doubts from the team, we started the
journey towards a corporate structure and all its advantages. With
a significant investment plan, unleashed human potential and
willingness to change, the conversion wasn’t hard or painful. We
have defined the objectives, united and focused on the target,
and results are visible; stable growth, production cost reduction,
increased capacity, new projects and more possibilities.
The team effort resulted in the award of the ISO/TS16949
certification and many new automotive projects. In 2016 we were
audited seven times, all with excellent scores.
Cooperation with demanding automotive businesses is providing a
great lesson to all of our team members along with the chance to
have our products inside high end automotive manufacturing.
Being part of Trifast gave us an opportunity to understand the
organisation of other Group manufacturing sites and to adopt this
at VIC. All of the changes have been implemented and has made
VIC a better place to work. Constant change and continuous
improvement has become our new philosophy.
Nevertheless, we cannot forget all the heritage of the Perini
family who laid a solid and strong foundation for the application
innovation, finding not obvious but smart solutions for our
customers and the curiosity to understand all the aspects of the
fastener business.
All this together gives us a right to see the future in bright colours
where, with a great team, we can reach new goals.
Karol Gregorczyk
Sales and Development Director
TR VIC
26
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 OPERATIONAL
EFFICIENCIES
Description
As a Group, TR is committed to continuous improvement. We are always
looking for ways to make our processes more efficient, whether that is
by improving our manufacturing capacity and utilisation, working with
our vendor base to manage costs, increasing our available warehousing
space or improving our management and business information systems.
We understand the importance of an efficient and effective cost
structure, so as to best future proof the business and to support our
strategy for growth.
Performance so far
Since 2010, our gross profit margins have increased by 666bps (AER),
our underlying operating margins by 1,003bps (AER) and our overheads,
as a percentage of sales at AER, have fallen from 23.5% in 2010 to
19.8% in 2017.
In the last 12 months, we have specifically focused our efforts in a
number of areas to achieve an improved underlying operating margin
of 11.3% (2016: 10.4%).
Manufacturing
The investments we have made in our Italian manufacturing have
successfully removed a key bottle-neck which was standing in the way
of increasing capacity more widely at this site and, in the long term,
will help improve efficiencies and maintain gross margins as in-house
production levels increase.
In PSEP, we have been working very successfully as a global team to
ensure we make better use of their unique capability within the Group
to manufacture very high quality safety critical automotive parts. Our
global and local sales, sourcing and manufacturing teams have been
working very closely together over the last 12 months to ensure that
wherever relevant external opportunities are identified, we are making
the right ‘make or buy’ decisions on a Group level. Our internal quoting
times have been significantly shortened and the direct involvement of
the PSEP team with end customers has helped us to win substantial
additional business, most notably in Japan and America.
Warehousing & sourcing
In the UK we have introduced further ‘lean-lift’ technology to help reduce
picking times and further improve efficiencies. In Italy, we have invested
in automated packaging machines to increase efficiencies and reduce
costs at this final stage of the production process.
Over the second half of FY2017, we have started to see some pressure
on import costs into the UK due to the protracted weakness in Sterling.
This is not out of sync with the wider market, but we have been working
hard at a Group and UK sourcing level to manage these pressures and
also put in place appropriate mechanisms for dealing with this in the
medium term.
Plans for the future
In terms of our manufacturing efficiency, in the medium term we expect
to see ongoing efficiencies as a result of the investments made over the
last 12 months in Malaysia and Italy, but the most exciting opportunity
lies with our investment in Singapore. This is already one of our most
profitable sites, which, as a result of the mezzanine expansion, will see
capacity increase by one third, allowing an increased in-house margin.
Outside of this, an increased integration within and between both the
manufacturing and distributions sides of our business, is expected to
help share best practise more widely and also help us to better leverage
off our global supplier relationships.
In terms of our wider management and business information systems,
we are also in the process of looking at further investment opportunities
that will allow us to generate information more efficiently, so as to reduce
costs in the longer term. In the medium term this has been focused
predominantly on our customer relationship management, human
resources and Group level finance functions.
27
sluglinewww.trifast.comStrategic Report KEY PERFORMANCE
INDICATORS
The Board and the Operational Management teams regularly monitor and
develop a range of financial and non-financial Key Performance Indicators
(KPIs) to allow them to measure performance against expected targets,
which can be analysed under various categories
The following represents a selection of these indicators:
Financial KPIs
Group total revenue
Link to strategy
Underlying operating
margin enhancement
Group underlying profit
before tax
Underlying Cash
conversion as a % of
underlying EBITDA
Return on Capital
Employed (‘ROCE’)
Relevance and performance
Our clear strategy for growth makes turnover an important barometer of the Group’s
success.
Turnover has grown significantly from 2013, increasing by 53.5% to £186.5m (2013:
£121.5m), equating to 11.3% p.a.
Growth is about more than just the top line. Controlling our cost base is a key part of
our investment plans.
Reflecting our success in this area, underlying operating margin has increased by
470bps, from 6.6% in 2013 to 11.3% in 2017. This represents margin growth since
2013 of 14.4% p.a.
Underlying profit before tax is a key measure of the underlying performance of the
business.
Our underlying profit before tax has grown by over 180.8% (or 29.4% p.a.) since 2013.
Our quality of earnings is reflected in our ability to consistently turn underlying EBITDA
in to underlying cash.
2017 was strongly cash generative with a conversion rate of 97.3% (2013: 85.3%).
50.2%
ROCE measures the return that we are able to provide to both our equity and debt
investors. Maintaining this continues to be a key focus of the Group.
Since 2013 our ROCE has grown by 13.3% p.a. to 19.9% (2013: 12.1%).
Underlying diluted
earnings per share (‘EPS’)
EPS is a key target for the Group. Our clear strategy for growth is focused on
increasing this ratio year-on-year.
Since 2013 underlying diluted EPS has increased by 8.09p to 12.82p (2013: 4.73p).
Key multinational
OEM revenue
Non-financial KPIs
Broaden skills of
management
Manufacturing to
distribution ratio
28
£86.0m of Group sales come from 25 key multinational OEMs. Working to grow this
revenue as well as building relationships with new multinational OEMs is the backbone
of our overall growth strategy.
Link to strategy
Relevance and performance
Training programmes continue to be developed that allow our employees across
the globe to learn together and share best practice. These programmes include
operational, functional and leadership elements and are designed for our employees to
enhance existing, and acquire, new skills.
By expanding our manufacturing capabilities and capacities around the world, we will
not only reduce our reliance on purely distribution revenues, but we will also be able to
improve our profit margins as revenues increase faster than the underlying semi-fixed
cost bases we have in our manufacturing sites.
Historic performance
Position on target?
Over the last three years, 21% of UK employees have
completed the management development programme.
2017
2016
2015
35%
34%
33%
65%
66%
67%
Historic performance
Position on target?
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
£16.0m
£14.3m
£186.5m
£161.4m
£154.7m
11.3%
10.4%
9.9%
£20.5m
97.3%
88.9%
19.9%
18.5%
18.6%
12.82p
9.99p
8.68p
£86.0m
£75.4m
£66.9m
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Strategic Report
Group total revenue
Our clear strategy for growth makes turnover an important barometer of the Group’s
success.
our investment plans.
2013 of 14.4% p.a.
business.
Turnover has grown significantly from 2013, increasing by 53.5% to £186.5m (2013:
£121.5m), equating to 11.3% p.a.
Growth is about more than just the top line. Controlling our cost base is a key part of
Reflecting our success in this area, underlying operating margin has increased by
470bps, from 6.6% in 2013 to 11.3% in 2017. This represents margin growth since
Underlying profit before tax is a key measure of the underlying performance of the
Our underlying profit before tax has grown by over 180.8% (or 29.4% p.a.) since 2013.
Our quality of earnings is reflected in our ability to consistently turn underlying EBITDA
in to underlying cash.
2017 was strongly cash generative with a conversion rate of 97.3% (2013: 85.3%).
ROCE measures the return that we are able to provide to both our equity and debt
investors. Maintaining this continues to be a key focus of the Group.
Since 2013 our ROCE has grown by 13.3% p.a. to 19.9% (2013: 12.1%).
Underlying diluted
earnings per share (‘EPS’)
EPS is a key target for the Group. Our clear strategy for growth is focused on
increasing this ratio year-on-year.
Since 2013 underlying diluted EPS has increased by 8.09p to 12.82p (2013: 4.73p).
£86.0m of Group sales come from 25 key multinational OEMs. Working to grow this
revenue as well as building relationships with new multinational OEMs is the backbone
of our overall growth strategy.
Underlying operating
margin enhancement
Group underlying profit
before tax
Underlying Cash
conversion as a % of
underlying EBITDA
Return on Capital
Employed (‘ROCE’)
Key multinational
OEM revenue
Non-financial KPIs
Broaden skills of
management
Manufacturing to
distribution ratio
Link to strategy
Relevance and performance
Historic performance
Position on target?
Key to Strategic Pillar icons
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
£186.5m
£161.4m
£154.7m
£16.0m
£14.3m
50.2%
11.3%
10.4%
9.9%
£20.5m
97.3%
88.9%
19.9%
18.5%
18.6%
12.82p
9.99p
8.68p
£86.0m
£75.4m
£66.9m
Acquisitions
Continue to add value
and differentiate
Investing
in people
Investment
driven growth
Operational
efficiencies
Read about our Group Strategy
on pages 18 and 19
Link to strategy
Relevance and performance
Training programmes continue to be developed that allow our employees across
the globe to learn together and share best practice. These programmes include
operational, functional and leadership elements and are designed for our employees to
enhance existing, and acquire, new skills.
By expanding our manufacturing capabilities and capacities around the world, we will
not only reduce our reliance on purely distribution revenues, but we will also be able to
improve our profit margins as revenues increase faster than the underlying semi-fixed
cost bases we have in our manufacturing sites.
Historic performance
Over the last three years, 21% of UK employees have
completed the management development programme.
2017
2016
2015
35%
34%
33%
65%
66%
67%
Key
Distribution
Manufacturing
Position on target?
29
sluglinewww.trifast.com OUR TIME
AT TRIFAST
Having qualified as an Accountant in 1994 with KPMG, I joined Trifast as
the Group Accountant in 1999 and immediately I felt at home. I was joining
an international organisation, which put quality and its people at the heart
of everything it did. Within a month, I was involved in my first acquisition
of what is now called TR Fastenings A.B. (Sweden). I was thrown in
very much at the deep end and realised very quickly that Trifast is about
empowering its employees and giving them the opportunity to succeed.
As most decisions ultimately have a financial impact I have been very
fortunate to be involved in key decisions within the business, which has
enabled me to travel around the Group meeting and working with a lot of
people, providing me with a deeper understanding commercially of the
markets and sectors in which TR operate.
I became Group Finance Controller and Company Secretary in 2004,
which gave me a deeper knowledge of the legal system and corporate
governance as well as giving me exposure to the strategic thinking of the
PLC Board and our stakeholders.
Following the financial crisis and global downturn in 2008/9, Trifast went
through its toughest two years – the top team changed and Malcolm
Diamond (Chairman) and Jim Barker (CEO) returned to the business. I
became Group Finance Director and, along with Geoff Budd (Commercial
Director and European Managing Director) and Glenda Roberts (Group
Sales Director), we began turning around a £15m loss making company
with a share price of 8.5p.
It was not easy but, with loyal and resilient support from my colleagues
and staff around the world, we were able to lay the foundations that gave
TR the platform to once again grow its business and return to profitability.
The Global sales team was reinvigorated and after a careful review of
our acquisition strategy, we added three great companies namely, PSEP
(2011, Malaysia), VIC (2014, Italy) and Kuhlmann (2015, Germany). Being
heavily involved in all three transactions, I once again realised it was not
just about financials but ensuring each business’ core values, culture and
commercial desire fitted into the TR model.
Our business is all about innovation, product development and delivering
high quality customer service 24/7 across the organisation.
Then on 1 October 2015, after an externally managed recruitment
process, I was honoured to take up the mantle of CEO from Jim Barker.
My CFO replacement, Clare Foster, had joined us in 2015 to take up the
role as Group Financial Controller and Company Secretary and having
known her for over 15 years whilst she worked at KPMG I recognised she
knew our business and culture well and had the strategic thinking and
financial experience to take up a more senior role within the organisation.
Consequently, on 1 October 2015 Clare took over my role as CFO and
fitted right in.
I am also very privileged to work with a great Executive and Non-
Executive team who, with a very talented operational team, bring years of
knowledge, expertise, support and wisdom across the globe.
Looking ahead, I am excited about our future and the opportunities
we have. There is so much to go for in what is a large and growing
fragmented market both at home and internationally. In all this, our core
strategy remains the same; focused on being a full-service provider from
value-add design and manufacture to global supply to our customers.
To achieve this, I am aiming to bring the Group even closer together,
investing further in staff and capex and as always looking out for that next
acquisition to join the TR team.
30
Trifast plc Annual Report 2017
MARK BELTON Chief Executive OfficersluglineHOLDING THE WORLD TOGETHER I am something of a late comer to the TR party having only joined the
business in January 2015. However, my history with the Group goes
back far beyond that.
I first met the TR team in September 1998 when, as a new Audit
Assistant working for KPMG, I was assigned to the half year review and I
went on to stay on the audit for the next decade, learning in the process
an incredible amount about the Trifast business and the people within it.
Trifast, from the moment I started on the audit, had me by the heart-
strings. Here was a business that prided itself on quality and integrity
and the way that it looked after and treated its people, customers and
suppliers. All good things must come to an end and in the Spring of
2009, I somewhat reluctantly handed over my Senior Audit Manager
role to another. I continued to stay in touch with Mark and to watch with
interest the period of great adjustment and recovery that the Group was
going through.
In January 2015, having spent three very exciting years directing national
strategic investment projects at KPMG, I got the opportunity to become
Financial Controller and Company Secretary of this wonderful Group,
that I had known for all of my professional life. As Mark moved up to
CEO in October 2015, I was invited to join the Board and take on the
role of CFO.
The last two and a half years have been an incredible journey. As a
Group, we are firmly out of recovery and into a period of investment
driven growth and so I couldn’t have asked for a more exciting time to
join. We have already seen seven years of continuous growth, supported
by a strong balance sheet and superb cash generation and, looking
ahead, the opportunities for investment driven growth, both organically
and via acquisition, are significant, whilst our loyal investor and banking
relationships continue to provide us with the fire power we need to seize
opportunities.
Internally, I am very lucky to be supported by an incredible team of
people, not just at HQ in Uckfield, but also around the world. I recognise
that it is only with their support that we have been able to continue to
develop and improve the way in which we work, the strategic value that
we add to the wider business and the level of cohesion that we have, not
just as a finance team, but also across the different functions within our
global business.
Someone once told me ‘all roads lead to finance’, well my key aim is to
make sure that road is a two-way street because, for me, the true value
of an effective finance function will always be to help support and drive
sustainable growth as much as it is to account for it accurately when it
happens.
Strategic Report
31
CLARE FOSTER Chief Financial Officersluglinewww.trifast.com BUSINESS
REVIEW
Unless stated otherwise, amounts and comparisons with prior year are calculated at constant currency (‘Constant Exchange Rate’ or ‘CER’, see
note 34 for definition and explanation of rates used) and, where we refer to ’underlying’ this is defined as being before separately disclosed items
(see notes 2 and 34 for reconciliations to GAAP measures and relevance for these items being separately disclosed)
OUR GROUP PERFORMANCE
Revenue
Gross Profit (GP)
GP%
Underlying operating profit (UOP)
UOP%
Operating profit (OP)
OP%
Underlying profit before tax
Profit before tax
Underlying diluted EPS
Diluted EPS
Underlying ROCE
“ Another record breaking financial year with
strong profitable growth across every region and
continual improvements shown in our KPI’s”
Gross margin
31.1% (2016: 29.7%)
For the first time in our history we
have ended the year with a gross
margin in excess of 30%
12.82p (2016: 9.99p)
Underlying diluted EPS at AER
FY 2017
CER
£172.6m
£53.6m
31.1%
£18.6m
10.8%
£15.6m
9.0%
£18.1m
£15.1m
11.28p
8.97p
FY 2017
AER
£186.5m
£58.0m
31.1%
£21.0m
11.3%
£17.9m
9.6%
£20.5m
£17.3m
12.82p
10.40p
19.9%
FY 2016
£161.4m
£48.0m
29.7%
£16.8m
10.4%
£13.9m
8.6%
£16.0m
£13.1m
9.99p
8.50p
18.5%
Growth at
CER
7.0%
11.7%
+140bps
10.9%
+40bps
12.5%
+40bps
13.2%
15.4%
12.9%
5.5%
Growth at
AER
15.6%
20.9%
+140bps
25.2%
+90bps
28.8%
+100bps
28.1%
32.6%
28.3%
22.4%
+140bps
Our performance across the business has delivered another record
breaking financial year with strong trading results ahead of our
expectations. Strong profitable top line growth has continued across
every region, up by 7.0% at CER and leading to revenues of £186.5m at
Actual Exchange Rate (‘AER’) for 2017.
Our underlying businesses have performed well with foreign exchange
tailwinds also having a positive impact.
By far the biggest driver of our performance in 2017 has been organic
growth (5.2%; 13.7% at AER), with the focus on our core strategy
leading to sales increases to our 25 key multinational OEMs of 14.2% at
AER. On the non-organic side, 2017 has seen the first full year of trading
from our acquisition of TR Kuhlmann, successfully generating 1.8%
(1.9% at AER) of revenue growth for the Group.
The strongest measure of the Group’s success this year has been at the
profit level. For the first time in our history we have ended the year with
a gross margin in excess of 30%, representing the achievement of a
long held ambition. Gross margin has increased by 140bps to 31.1% (at
both AER and CER; 2016: 29.7%) and our gross profit is up by 11.7% to
£53.6m (£58.0m at AER; 2016: £48.0m).
Against this gross margin increase, our Group underlying operating
margin has stayed more consistent at 10.8% (11.3% at AER; 2016:
10.4%), reflecting the ongoing investments for growth that we have been
making around the Group in our sales and operational teams as well as
our capital investment programmes. Despite this ongoing investment
for future growth, our underlying operating profit has continued to grow
strongly with a 10.9% increase at CER and 25.2% at AER.
All of the above factors has helped to drive substantial growth in our
underlying diluted EPS, up by 28.3% at AER to 12.82p (2016: 9.99p).
32
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Strategic Report
Given the significant weakening of Sterling since June 2016, CER continues to be the best way of understanding the positive
progress of our underlying business. The impact of AER on some of our key metrics is illustrated in the graph below:
FX Effects
Revenue
£13.9m
£172.6m
Shareholders’
funds
£6.3m
£95.4m
Normalised
net debt
†
£0.5m
£7.1m
Underlying
PBT*
£2.4m
£18.1m
Underlying
diluted
EPS*
1.54p
11.28p
* Before separately disclosed items which are shown in note 2
† Before outstanding NI and income tax on share options. See nebt debt section on page 36 for further details
AER
CER
Dividend policy
With our proven track record, a strong balance sheet and a confident
strategy for growth, we remain committed to a progressive dividend
policy.
As a result the Directors are proposing, subject to shareholder approval,
a final dividend of 2.50p per share. This together with the interim
dividend of 1.00p (paid on 13 April 2017), brings the total for the year to
3.50p per share, an increase of 25.0% on the prior year (2016: 2.80p).
The final dividend will be paid on 13 October 2017 to shareholders
on the register at the close of business on 15 September 2017. The
ordinary shares will become ex-dividend on 14 September 2017.
The 2017 final proposed dividend means that over the last six years
dividends have grown from 0.50p to 3.50p, equating to a compound
annual growth rate (‘CAGR’) of 47.6%.
At the same time, dividend cover has fallen, now representing a cover of
3.7x. For the medium term, we believe an appropriate level of cover will
continue to be in the range of 35 to 45. As is always the case, the actual
dividend each year will need to take in to account our ongoing strategy
of investment driven growth, potential acquisitions and the working
capital requirements of a growing business.
Dividend progression
Dividend cover
1
2017
2016
2015
2014
2013
2012
Interim
Final
0.00p
0.50p
1.00p
1.50p
2.00p
2.50p
3.00p
3.50p
1. To be approved at the 2017 AGM
2017
3.7×
2016
3.6×
2015
4.1×
2014
4.3×
2013
5.9×
5.9×2012
7.5×
33
sluglinewww.trifast.com BUSINESS
REVIEW
Unless stated otherwise, amounts and comparisons with prior year are calculated at constant currency (‘Constant Exchange Rate’ or ‘CER’, see
note 34 for definition and explanation of rates used) and, where we refer to ’underlying’ this is defined as being before separately disclosed items
(see notes 2 and 34 for reconciliations to GAAP measures and relevance for these items being separately disclosed)
Share price – recovery to growth:
The significant increase in our share price over the last five years illustrates Trifast’s successful recovery into growth. (compound annual growth rate:
38.7%)
Share price (p)
220.00
170.00
120.00
70.00
20.00
Sept 11
Mar 12
Sept 12
Mar 13
Sept 13
Mar 14
Sept 14
Mar 15
Sept 15
Mar 16
Sept 16
Mar 17
Share price 31 March 2017: 214.3p (1 April 2016: 130.0p)
Revenue
This year’s key revenue message is one of consistent growth. In
FY2017, all of our regions have experienced strong top line growth
ranging from 4.6% in our UK businesses to 12.3% in the US (4.6% to
28.2% at AER).
In Europe, our total growth has been 9.8%, made up of 4.6% of organic
growth and 5.2% from acquisitions. This reflects a particularly strong
HY1, specifically in our Italian domestic appliances business, and
FY2017 gains in electronics in Hungary and automotive in Sweden.
In Asia, we have seen a robust return to growth, with total sales
(including intercompany) in the region growing by 6.5% to £47.8m (2016:
1.1% and £44.9m) following a strong HY2. Growth at entity level has
been equally good, with Singapore continuing to perform well, up by
9.4% (25.2% at AER), in the domestic appliances market and Shanghai,
up 9.8% (18.4% at AER), on the automotive side. Most notable is
the successful return to growth in our PSEP, Malaysia business. A
contraction in the local automotive market has reduced trading levels
over recent years. However, in FY2016 we saw this bottom out and in
FY2017 top line growth of 6.2% (16.1% at AER) has come from of a mix
of both domestic and export sales.
Revenue by region (CER)†
2017
£5.3m
+12.3%
2016
£4.7m
£47.8m
+6.5%
£69.3m
+4.6%
£44.9m
£66.2m
£172.6m
+7.0%
*
£59.7m
+9.8%
£161.4m
*
£54.4m
• UK • Europe • Asia • USA
* After eliminating intercompany revenues
† Regional revenues include intercompany. AER values can be found in note 3 of
the financial statements
“ This year’s key revenue message is one of
consistent growth. In FY2017, all of our regions
have experienced strong top line growth ranging
from 4.6% in our UK businesses to 12.3% in the
US (4.6% to 28.2% at AER)”
34
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017
Strategic Report
Underlying operating profit and
margin by region (CER)†
2017
£0.3m
5.3%
2016
£0.4m
8.5%
£7.0m
14.6%
£6.5m
9.4%
£6.7m
15.0%
£6.2m
9.3%
*
£18.6m
10.8%
£8.5m
14.3%
*
£16.8m
10.4%
£6.9m
12.7%
• UK • Europe • Asia • USA
* After deducting central costs
† Before separately disclosed items which are shown in note 2
For our UK businesses, it has also been a year of good growth in what
is a mature market. Overall total revenues are up 4.6% to £69.3m (2016:
£66.2m), with the biggest increase being seen across our distribution
businesses, 10.4% to £12.5m at AER, predominantly arising out of
additional sales volumes to our European distributors. Outside of this,
growth has largely come from increased sales to our multinational OEMs
in the automotive sector.
In the US, we continue to see very strong revenue growth of 12.3%
to £5.3m (£6.0m at AER; 2016: £4.7m) again largely as a result of our
ongoing multinational OEMs focus.
Gross margin
The Group’s gross margin has increased by 140bps (at both AER
and CER) to 31.1% (2016: 29.7%). Outside of the US, gross margin
improvements have been seen across all regions. This is most
specifically within Europe, largely due to favourable cost variances and
capacity increases at our Italian manufacturing site.
In the UK, gross margins have increased by 100bps, largely due
to transactional gains on our export revenues caused by positive
movements in the Euro exchange rate. Whilst in Asia, a change in
product mix and capacity increases at our Singapore and Malaysian sites
has had a similar margin impact.
In the US gross margins have fallen by 410bps as the result of product
mix changes and an increased focus on the automotive sector.
Underlying operating margin
Underlying operating margins have increased by 40bps to 10.8% (11.3%
at AER; 2016: 10.4%). The biggest increase is in Europe of 160bps
(180bps at AER), largely as the result of the increase in gross margin
noted above. In Asia, margins have fallen by 40bps to 14.6% (14.9% at
AER; 2016: 15.0%) partly as the result of a foreign exchange balance
sheet translation loss of £0.2m (2016: gain of £0.2m) due to the ongoing
weakness in the Euro and Sterling as well as additional investments to
support ongoing growth in the region.
In the UK, margins have remained broadly stable at 9.4% (2016: 9.3%),
whereas in the US we have seen the drop in gross margin feeding down
into a similar fall at the underlying operating profit level. As sales continue
to build, we expect underlying operating profits in this region to improve
as planned investments for growth can be better absorbed.
Net financing costs (at AER)
Interest costs have continued to fall to £0.5m (2016: £0.8m) reflecting
both a decrease in the average net debt balance to £12.2m (2016:
£16.6m) and a reduction in the interest margin charged following an
amendment of our HSBC banking facilities on the 7 October 2016.
“ The Group’s gross margin has increased by 140bps to
31.1% (2016: 29.7%). Outside of the US, gross margin
improvements have been seen across all regions”
www.trifast.com
35
slugline BUSINESS
REVIEW
Unless stated otherwise, amounts and comparisons with prior year are calculated at constant currency (‘Constant Exchange Rate’ or ‘CER’, see
note 34 for definition and explanation of rates used) and, where we refer to ’underlying’ this is defined as being before separately disclosed items
(see notes 2 and 34 for reconciliations to GAAP measures and relevance for these items being separately disclosed)
“ Our net debt position has significantly decreased
by £9.6m to £6.4m (2016: £16.0m). One of the key
reasons driving that reduction is our very strong
cash generation”
Taxation (at AER)
The Underlying Effective Tax Rate (‘UETR’) has reduced slightly in the
year to 23.6% (2016: 24.9%) largely as a result of an increase in the tax
deductibility of certain permanent staff costs in Italy.
Subject to future tax changes and excluding prior year adjustments, our
UETR is expected to be c.25% going forward.
Net debt (at AER)
Our net debt position has significantly decreased by £9.6m to £6.4m
(2016: £16.0m). One of the key reasons driving that reduction is our very
strong cash generation. In FY2017 our underlying EBITDA to underlying
operating cash conversion rate was 97.3% (2016: 88.9%, 102.7% net of
the de-factoring in VIC). This led to an operating cash inflow of £22.5m,
and despite our significant increase in trading (15.6% and £25.1m at
AER), a working capital increase of only £0.8m reflecting our continued
high focus on working capital levels around the Group.
Our normalised net debt position at 31 March 2017 is higher at £7.6m.
This adjustment reduces our cash holding at year end to take into
account the £1.2m of cash specifically held to settle the NI and income
tax payments (due in April 2017) relating to Malcolm Diamond’s exercise
of 1,000,000 share options on 17 February 2017. Further information is
included in the Directors’ Remuneration Report regarding this transaction
and Malcolm’s shareholding.
Banking facilities
The Group finalised amended banking facilities with HSBC on 7 October
2016. In summary, the amendments reduce the Group’s reliance on the
asset backed lending facilities, decrease the overall cost structure and
extend the maturity profile of a proportion of our borrowings to better
reflect the Group’s core funding and investment requirements.
Taking these changes into account, headroom has increased by
c.£5.0m, helping to support our strategy of investment driven growth.
In addition, an accordion facility of £20.0m has been written into the
agreement, providing the potential flexibility to debt finance future
acquisitions and investments.
Return on Capital Employed (at AER)
As at 31 March 2017, the Group’s shareholders’ equity had increased
significantly to £101.7m (2016: £83.8m). This £17.9m movement is
made up of retained earnings of £11.3m, share issues totalling £0.3m
and a substantial foreign exchange reserve gain of £6.3m which arose
due to the sustained weakening in Sterling in the financial year.
Over this increased asset base, our very strong trading performance has
led to a higher underlying ROCE of 19.9% (2016: 18.5%).
Net debt bridge (AER)
16.0m
1.5m
22.5m
£20.0m
£17.5m
£15.0m
£12.5m
£10.0m
£7.5m
£5.0m
£2.5m
0.0
-£2.5m
-£5.0m
-£7.5m
t
b
e
d
t
e
N
h
s
a
c
t
e
N
3.0m
7.6m
1.2m
6.4m
6.0m
2.8m
0.8m
Net debt
31 March
2016
Deferred
consideration
Operating cash
inflow before
changes
in working
capital
Working
capital
changes*
Net
capital
expenditure
Interest, tax
and foreign
exchange
Dividends less
proceeds from
share issues
Normalised
net debt
31 March
2017
Outstanding
NI and income
tax on
share options
Net debt
31 March
2017
* Before outstanding NI and income tax on share options.
36
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017
Looking ahead
Group outlook
Looking ahead, the global fastenings market is forecast to grow by 5% a
year over the next five years, with all our regions predicting growth.
Geographically Europe, Asia and USA all remain key focus areas for us
both organically and non-organically and with our new Spanish greenfield
site now up and running, we are in a prime position to continue to
develop that important market in the future.
The current financial year has started well and, with a robust pipeline in
place, there is no indication this will change. The additional investments
we are making in our people across the world, including into our global
and local sales teams, mean the Group is in a good position to move
forward. Moreover, the strategic investments we are making in our global
Customer Relationship Management (‘CRM’) systems and our key
account management have been specifically targeted to further support
our core strategy of focusing on our multinational OEMs.
In manufacturing, our capital expenditure plans will increase capacity
at both our Italian and Singaporean sites so as to reduce our per part
production costs, and allow us to retain higher profits per sale by
bringing more manufacturing in-house in the future.
To complement these strong underlying growth plans, further
acquisitions remain an important strategic growth pillar for the Group.
Our acquisition strategy has been developed to identify key criteria
and geographies and we will continue to use this to drive our proactive
search for the next successful acquisition.
There are, of course, some macroeconomic factors we cannot fully
mitigate, including movements in foreign currency and the ongoing
volatility in the raw materials markets, as well as the wider potential
implications of Brexit on our business and the UK economy. We are
already starting to see some purchase price challenges arising out of
both the ongoing weakness in Sterling and the relative strength of the US
Dollar, which we expect to increase over time if circumstances persist.
However, taking the Group as a whole, with our geographical diversity,
our balanced sector mix and our clear strategies for growth, we remain
optimistic about the Group’s prospects.
37
sluglinewww.trifast.comStrategic Report BUSINESS
REVIEW
Unless stated otherwise, amounts and comparisons with prior year are calculated at constant currency (‘Constant Exchange Rate’ or ‘CER’, see
note 34 for definition and explanation of rates used) and, where we refer to ’underlying’ this is defined as being before separately disclosed items
(see notes 2 and 34 for reconciliations to GAAP measures and relevance for these items being separately disclosed)
UK – 39% of Group revenues
Revenue by sector
19%
5%
32%
30%
14%
• Automotive
• Electronics
• Other
• Domestic appliances
• Distributors
Revenue†
£69.5m
£69.0m
£68.5m
£68.0m
£67.5m
£67.0m
£66.5m
£66.0m
£65.5m
£65.0m
£64.5m
2017
2016
† Including intercompany revenues
Underlying operating profit
£6.8m
£6.6m
£6.4m
£6.2m
£6.0m
£5.8m
£5.6m
£5.4m
£5.2m
£5.0m
38
2017
2016
Dave Fisk
TR UK Managing Director
Sam Wilson
Lancaster Fastener Managing Director
This year has seen a strong return to growth for the
UK region, with total revenues growing by 4.6% largely
across our distributor and automotive sectors
Regional performance
The region overall delivered a stronger than
expected sales performance. For our TR
Fastenings UK business, the Midlands, Uckfield,
Scotland and the North East locations all got off
to a solid start in the first quarter as customer
demand increased in the automotive, general
industrial, aerospace and defence sectors.
Looking ahead
Following the appointment and induction of Kevin de
Stadler, Director of TR Sales for UK and Ireland, the
implementation of the new TR UK sales strategy has
begun. A great deal of work has already been carried
out within the business with the key stakeholders to
ensure that we are well positioned to capitalise on the
future opportunities this will provide.
Following quieter trading mid-year, the UK returned
to a growth position for year end, with excellent
results achieved across the sites in the last quarter.
Manchester delivered impressive growth compared
to its prior year position. Belfast delivered a steadier
FY2017 following a couple of years of rapid growth
and are now in the process of reviewing options for
additional space.
Product based European distributor sales have
exceeded expectations, both within TR Fastenings and
Lancaster Fastener. In fact the latter have had their best
year ever, growing by 16.2% to £5.7m (2016: £4.9m).
Automotive contributes 32.2% of UK sales. Although
still growing, we experienced some delays with one of
the major OEMs revising forecasts for two production
builds, which resulted in a two-to-three month
reduction against the original forecast. The electronics
sectors saw a slight decline this year, but still accounts
for 14.3% of UK sales, while other sectors have
remained flat.
Gross margins were positively impacted by 100bps
due to transaction gains on our € sales, as well as
a broadening of our product mix. Our underlying
operating profit margin has remained consistent
at 9.4% (2016: 9.3%) reflecting the ongoing
investments for growth we are making.
We are actively recruiting, to increase sales resource
into all locations in the UK. Through the recent
successes of developing and expanding the TR
product ranges, we have dedicated new resource
to assist the sales teams and locations with the
plastics and enclosure product ranges, and have
also supplemented the commercial team to assist
with the increased demand in sourcing, supply chain
development and new product introduction.
Towards the end of the year, we had already started
to see some pricing increase requests being made
from suppliers. Looking ahead, we recognise that
these inflationary pressures will continue to rise if the
current Sterling weakness persists. We are already
working hard to manage this risk, but as a business
we expect this could lead to a temporary depression
of our UK gross margin in FY2018.
Currently the UK economy is continuing to grow,
albeit more slowly, despite the wider uncertainty
that exists as a result of the EU referendum in June
2016. We will continue to monitor the situation closely
over the coming months to ensure we are able to
react quickly and appropriately to any changes in
circumstances. However, as only one part of an
international business, we are confident that the UK,
in conjunction with the strength of the wider Group,
will have the flexibility to successfully manage and
adapt to any challenges and opportunities as they
arise.
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017
Strategic Report
EUROPE – 34% of Group revenues
29%
12%
Revenue by sector
1%
41%
17%
• Automotive
• Electronics
• Other
• Domestic appliances
• Distributors
Revenue†
£80.0m
£70.0m
£60.0m
£50.0m
£40.0m
£30.0m
£20.0m
£10.0m
£0.0m
2017
2017
2016
† Including intercompany revenues
Underlying operating profit
£11.0m
£10.0m
£9.0m
£8.0m
£7.0m
£6.0m
£5.0m
• CER
• AER
2017
2017
2016
Geoff Budd
Commercial Director and European Managing Director
This has been a year of impressive sales and profit
growth across Europe, with good progress made in
all our key locations
Regional performance
Revenue growth across the region has been very
strong at 9.8% to £59.7m (£67.8m at AER; 2016:
£54.4m). This in part reflects the ongoing success
story that is TR Kuhlmann, Germany, where a first
full year of trading in the Group has driven non-
organic regional revenue growth up by 5.2%. On
the organic side, growth has been spread across
a number of our European entities, but most
specifically in Sweden in the automotive sector and
in Hungary in Electronics.
During the year, we successfully established a
greenfield site in Barcelona to serve existing and
known customers, primarily in the tiered automotive
sector. By the end of FY2017, TR España was
fully operational with first invoicing taking place in
April 2017.
Underlying operating margins have also continued
to improve, up 160bps to 14.3% (14.5% at AER;
2016: 12.7%). The largest driver of this increase is
in Italy where HY1 saw favourable cost variances
for both raw material and finished goods. Whilst
purchase price inflation in HY2 had eroded some
of these gains by year end, we expect our ongoing
investments in capacity (discussed below) to help
mitigate some of this impact going forward.
Looking ahead
Over the course of FY2017 VIC has received
significant capital expenditure of £1.7m for
production equipment, heat treatment plant, quality
inspection equipment, a complex automated
packing machine and sophisticated zero-defect
checking machines. This strategic investment
plan will continue to roll out into FY2018, albeit
at a lower level, to drive production volumes
and efficiencies going forward. Whilst achieving
TS16949 accreditation in 2016 has opened up
opportunities to grow our European automotive
manufacturing in the future.
We continue to see Europe as a key growth market
for the Group across not just automotive, but also
the domestic appliances and electronics sectors.
The recent establishment of TR España and the
acquisition of TR Kuhlmann have provided us
with a good foothold in two of the region’s key
geographies from which we can grow. Whilst on the
non-organic side, we will carry on with our proactive
search for our next successful acquisition.
39
sluglinewww.trifast.com BUSINESS
REVIEW
Unless stated otherwise, amounts and comparisons with prior year are calculated at constant currency (‘Constant Exchange Rate’ or ‘CER’, see
note 34 for definition and explanation of rates used) and, where we refer to ’underlying’ this is defined as being before separately disclosed items
(see notes 2 and 34 for reconciliations to GAAP measures and relevance for these items being separately disclosed)
USA – 3% of Group revenues
Revenue by sector
9%
9%
26%
Gary Badzioch
TR Fastenings Inc. Managing Director
The 2017 financial year for TR USA has turned out as
expected, with us comfortably hitting our double digit
target revenue increase at 12.3% (28.2% at AER), and
bringing our CAGR to 17.5% since 2013
Regional performance
Such strong and consistent revenue growth is a
good reflection of the ongoing successful roll out of
management’s growth plans for the region. Equally
in line with those growth plans, we have seen a
temporary fall in underlying operating margin to
5.3% (5.6% at AER; 2016: 8.5%) in the region, as
we have used some of the profit for the year as
investment to solidify the team for the future. Doing
so has continued to strengthen our core team,
giving TR USA the flexibility to be more aggressive
on growth for the future in both the automotive and
electronics market segments.
Our primary growth pattern for the year was
in the automotive sector, which we expect will
continue to provide fuel for the fire for our future
growth. In fact, it was in the automotive sector
that we achieved another new milestone. With the
support of TR globally, particularly with our Asian
manufacturing sites, TR USA was able to add a
new key automotive multinational OEM relationship
to the Group. This was an important step in the
evolution of TR USA, and evidence that we now
have enough experience to be a major contributor
to the larger organisation.
Looking ahead
There are several exciting geographical markets in
the USA presenting opportunities for growth. We
intend to exploit such opportunities going forward
not only to drive growth, but also to ensure we
keep a balanced portfolio of both domestic and
export business in the current political environment.
On top of that, TR USA will begin to test out
new product segments, such as plastics, to
strengthen our portfolio for the future. The plastics
product range has already been very successfully
developed by TR in Europe, and we hope to mirror
its success in the USA.
With our stronger team, we will also bring back
a focus on what got TR USA originally started,
the electronics sector. By combining these new
approaches, while continuing the core strategy
of growing our automotive business in both the
USA and Mexico, we hope to cement our ability
to continue growth at a double digit rate for the
foreseeable future.
56%
• Automotive
• Electronics
• Other
• Domestic appliances
• Distributors
Revenue†
£7.0m
£6.0m
£5.0m
£4.0m
£3.0m
£2.0m
£1.0m
£0.0m
2017
2017
2016
† Including intercompany revenues
Underlying operating profit
£0.5m
£0.4m
£0.3m
£0.2m
£0.1m
£0.0m
• CER
• AER
40
2017
2017
2016
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Strategic Report
ASIA – 24% of Group revenues
Revenue by sector
8%
33%
24%
8%
27%
• Automotive
• Electronics
• Other
• Domestic appliances
• Distributors
Revenue†
£56.0m
£54.0m
£52.0m
£50.0m
£48.0m
£46.0m
£44.0m
£42.0m
£40.0m
2017
2017
2016
† Including intercompany revenues
Underlying operating profit
£8.5m
£8.0m
£7.5m
£7.0m
£6.5m
£6.0m
£5.5m
£5.0m
• CER
• AER
2017
2017
2016
Charlie Foo
TR Asia Managing Director
FY2017 was another great year for Asia. After a slow start
in HY1, Asia achieved strong year on year revenue growth
at CER of 6.5% to £47.8m (£53.8m at AER; 2016: £44.9m)
Regional performance
Underlying the region’s growth were very strong
performances from both our Singapore and
Shanghai entities, recording CER increases of
9.4% and 9.8% respectively. Singapore continues
to perform very well in the electronics sector,
although it is in domestic appliances where we have
continued to see the highest growth. In contrast,
Shanghai’s growth has been largely automotive
driven as start of production dates kicked in on a
number of our key multinational OEM contracts.
In PSEP, we saw a welcome return to growth of
6.2% (16.1% at AER), predominantly as the result of
growing export sales. This turnaround represents the
first stage of success for the export-led strategy that
we put in place in FY2016 to counter weaknesses in
the domestic automotive market.
In addition, during the year, our PSEP factory was
successfully audited by one of our key multinational
OEMs operating in Japan, achieving a high score
of 95 points. This excellent result has opened
up more opportunities for PSEP to supply to our
multinational OEM customers and to continue to
support the Group’s growth into conventionally
difficult markets such as Japan.
Although growth in SFE was more muted at 2.2%
(17.8% at AER), largely due to capacity constraints,
this was still secured from various automotive
multinational OEMs across Europe and USA. Our
Taiwanese entity’s focus continues to be on their
strong commitment to quality, delivery and competitive
cost.
Looking ahead
We see a bright future for our Asia region, in part
due to the specific strategic investments detailed
below. But also, further supported by the strong
macroeconomic environment, with growth for the
ASEAN region as a whole forecast to be c.4.3%
over the next five years. (source: The Economist,
Intelligence unit)
TR Formac Singapore will be the location for
one of our main strategic capital investments in
FY2018. Specific plans have been approved for
a new mezzanine extension. An initial phase one
investment costing c.£1m will increase capacity by
one third and allow us to self-manufacture a greater
proportion of product, both retaining and improving
margins as fixed costs can be better covered.
At TR Formac Shanghai, the ongoing development
of the automotive division in China has already
started showing encouraging signs of growth. And
over the course of FY2018, Shanghai is planning
to expand further into Japan. With the addition of a
full-time Japanese representative, appointed in April
2017, we will be better able to serve the growing
multinational OEM customer base we have there.
Supporting these increased automotive sales, PSEP
will be manufacturing the majority of parts, on the
c. £1.0m ‘6 Dies 6 Blows Cold Former’ machine we
purchased in FY2016. Looking ahead, our investment
in this machine is helping to drive growth beyond
Japan, by supporting several new development
projects awarded by a number of our key automotive
multinational OEMs across China and the USA.
Looking beyond organic growth, Asia also remains
a region of great interest to us for potential non-
organic investment. As a result, at both a Group
and local level, we will continue to proactively
and reactively identify and review acquisition
opportunities as they arise.
41
sluglinewww.trifast.com CORPORATE SOCIAL
RESPONSIBILITY
Health and Safety
As ever, Trifast remains committed to ensuring the health, safety and
welfare of its employees and those involved in sub-contract activities.
Health and Safety responsibilities and authorities at all levels of the
organisation are clearly defined, and communicated via the intranet
based Health and Safety management system. The organisation is
supported in its Health and Safety best practice by the Health, Safety &
Environmental Manager, EHS Coordinator and Compliance Coordinator
alongside appointed EHS representatives, manual handling Instructors,
fire wardens and first aiders in each of our business units.
Our non-conformance and risk action trackers remain in place and have
been improved for increased accuracy in reporting, timely closure rates
and meaningful results trending.
Annual legal compliance audits, management reviews and
representatives meetings continue to be carried out, creating the
base framework for accreditation to ISO45001 (Health and Safety
Management Systems) which is now expected to be released as a final
draft by the International Standards Organisation in late 2017. It is still
the intention of the company to gain accreditation to this standard as
soon as is reasonably practicable following its release.
In January 2017 we achieved our target of ‘A reportable accident free
period of one million working hours’.
We promote a positive Health and Safety culture throughout our business
units, and welcome comments and suggestions from all employees on
Health and Safety best practice. We have provided Health and Safety
Comments boxes to allow suggestions to be made openly or anonymously
at the employee’s discretion – this has been seen to have a positive impact
on the continual improvement of the management system, as some of the
suggestions made have led to business process enhancements.
Environment
Best environmental practice and the impacts that our operations have
on the environment are of great importance to Trifast.
We have previously held ISO14001:2004 in many of our business
units, in December 2016 we successfully passed our Group level
ISO14001:2015 (Environmental Management Systems) audit with a
100% score from the British Standards Institute. This success was
achieved after a one year implementation project carried out by the EHS
Manager, EHS Coordinator and the divisional EHS representatives.
The Environmental Management System is communicated and
implemented throughout the business through strong leadership and
support from the top management.
It is the intention of the management system that it will assess and
control the impacts of the businesses activities, products and services –
it will also serve to implement the Environmental Policy throughout.
EUROPE DISTRIBUTION
1,095 tonnes
(2016: 1,101 tonnes)
2.65 per FTE
0.042 per SQM
EUROPE MANUFACTURING
2,556 tonnes
(2016: 2,476 tonnes)
19.22 per FTE
0.069 per SQM
TOTAL MANUFACTURING
6,057 tonnes
(2016: 5,783 tonnes)
15.48 per FTE
0.124 per SQM
TOTAL DISTRIBUTION
1,778 tonnes
(2016: 1,696 tonnes)
3.19 per FTE
0.053 per SQM
Trifast plc
7,835
(2016: 7,479)
8.22 per FTE
0.095 per SQM
ASIA MANUFACTURING
3,501 tonnes
(2016: 3,307 tonnes)
13.57 per FTE
0.299 per SQM
USA DISTRIBUTION
35 tonnes
(2016: 34 tonnes)
3.18 per FTE
0.035 per SQM
ASIA DISTRIBUTION
648 tonnes
(2016: 561 tonnes)
4.72 per FTE
0.100 per SQM
• Our manufacturing facility in Italy, has had a notable increase of 158.6 tonnes of CO2e due to the operation of 6 new manufacturing machines
• 2016 Asia manufacturing figures have been restated due to a data reporting error re our Taiwan facility in the previous financial year
• We have used emission factors from www.gov.uk “Conversion factors 2015 – Condensed set”
42
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Strategic Report
Jenni Morland
European Health, Safety
and Environmental Manager
Kelly Bennett
Environmental Health and
Safety Co-ordinator
Tracey Nixon-Mordica
Compliance Co-ordinator
Trifast commits to:
• Minimise energy consumption per full time equivalent (FTE) and
square metre as is reasonably practicable
• Prevent pollution as far as is reasonably practicable
• Reduce the production of waste and develop effective waste management
and recycling procedures, as well as disposing of unavoidable waste in
such a way as to minimise its environmental impact
• Minimise emissions when defined as having a significant impact
Date period for
reporting
Total scope 1
Purchased fuels*
Company vehicle use*
Total scope 2
Purchased electricity*
Total GHG emission for
Trifast
01/04/2016 –
31/03/2017
1,710 tonnes CO2e
1,190 tonnes CO2e
520 tonnes CO2e
6,125 tonnes CO2e
6,125 tonnes CO2e
01/04/2015 –
31/03/2016
1,702 tonnes CO2e
-
-
5,777 tonnes CO2e
-
7,835 tonnes CO2e
7,479 tonnes CO2e
• Periodically review its environmental arrangements and performance
against objectives to ensure that it remains relevant and appropriate
• Encourage awareness of internal and external environmental issues,
and this Environmental Policy
* New disclosure requirement for this financial year
Figures are reported in tonnes of CO2e
(carbon dioxide equivalent)
Reports are calculated in the following ways:
• Reduce, control and where applicable prevent the use of restricted
• Tonnes of CO2e
substances
• Conduct its activities in full knowledge of, and compliance with, the
requirements of applicable environmental legislation, Approved Codes
of Practice and other environmental requirements agreed by top
management
Trifast has established environmental objectives and targets through
Group management reviews, and is measuring performance against
these targets utilising an agreed framework.
Carbon footprint 2016–2017
Our emissions data includes all material emissions of the six Kyoto gases from
direct sources, and from purchased electricity, heat, steam and cooling where
applicable. No direct source material emissions have been omitted.
• Tonnes of CO2e per FTE (Full Time Equivalent)
• Tonnes of CO2e per SQM (Square Metres of floor space occupied by
the Company)
Modern slavery
Since the introduction of the Modern Slavery Act 2015, the Trifast Board has
prepared a slavery and human trafficking statement which will be reviewed
each financial year. The statement shows the steps taken to ensure that
slavery or human trafficking is not taking place in our own business or in our
supply chain. The statement is available on our website, http://www.trifast.
com/governance/modern-slavery-policy-statement-2016
BUSINESS AND THE COMMUNITY
We recognise that our business activities can have an impact on the
communities in which we operate. We remain very keen to interact
responsibly with such communities and support the needs of the
local areas.
Our teams continue to take part in community initiatives, sponsorship and
fundraising activities and we encourage them to do so.
We continue to sponsor
Our HR Director continues in her role as an Enterprise Adviser for a
local community college. This has meant supporting their careers
fairs and attending meetings with the senior management team of
the college to discuss how best Trifast can assist and where support
can be provided. In addition, presentations have been made to senior
pupils about how to go about preparing for interviews, what to expect
at an interview and what is expected once they start their careers.
We have also provided TR employees to act in role play situations
for interview skills development for the pupils. The Enterprise Adviser
network comprises representatives from other local businesses and
provides a good opportunity for skills and experiences to be shared.
43
sluglinewww.trifast.com TRIFAST IN THE
COMMUNITY
TR Fastenings Global Customer Quality Manager,
Maddy Webb, has been supporting the Friends
of Mombasa Children (FOMC) charity. Maddy has
been collecting socks and working with voluntary
teams at TR’s UK sites to provide sock-toy making
instructions to teach children in Kenya to make sock-
toys. Maddy has also been collecting sock-toys and
Lego for classroom activities and financial donations
to support the charity’s fundraising goals.
TR Fastenings congratulates
Jake Holmes on winning
the TR sponsored Young
Employee/Apprentice of the
Year category in the 2016
Uckfield Business Awards.
TR Scotland’s Annmarie
McArdle has completed
a collection of chocolate
selection boxes for children
under the care of a local
Women’s Aid shelter for the
third year running.
TR Fastenings has
become an official
sponsor for Ryan Strafford,
a Superbikes racer
who has enjoyed huge
success on the track since
beginning his racing career
six years ago.
TR Fastenings is playing its part in supporting the
next generation of engineers by supplying parts to a
team of Sussex students taking part in the Greenpower
race series. The scheme gives young people the
opportunity to design, build and race an electric-
powered racing car.
The Uckfield Grasshoppers Junior Football Club,
sponsored by TR Fastenings, has introduced
the Football Association (FA)’s Coach Mentoring
Programme helping the development of coaches
at grassroots level.
44
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 TR Hungary is proud to
announce it has become a
sponsor of the Dabas VSE
handball club, home to one
of the 12 teams which will
play in the nation’s premier
league during the 2017/18
season.
TR Fastenings sponsored the Wayfinder Woman
‘Inspiring Through Technology’ Event on 12 May
2017. The event celebrated the progress being made
by businesses to support, encourage and further the
careers of women in business, with a specific focus
on industries in the STEM (Science, Technology,
Engineering and Mathematics) sectors.
Nick Rees, Business
Development Manager
at TR Fastenings Poole,
took part in the ‘White
Christmas Dip’ raising
funds for Macmillan
Caring Locally, supporting
the Macmillan Unit at
Christchurch hospital.
A team of eight TR Fastenings employees, friends
and family took on the challenge of the Hastings Half
Marathon on Sunday 19 March to raise money for
the Papworth Hospital Charity. The TR runners took
between 1 hour 55 minutes and 3 hours to complete
the punishing 13.1 mile course, and raised £2,155, more
than double their original target of £1,000.
TR Fastenings is
pleased to announce
its sponsorship of a
group of Metropolitan
Police (Met) football
teams who are
competing at the
World Police Indoor
Soccer Tournament in
October 2017.
Lancaster Fastener Co provides sponsorship to the
Under 11 Blacks team at Thornton Cleveleys FC.
To see all updates on community events and both local and international sponsorship stories visit our
website: www.trfastenings.com/news/community
45
sluglinewww.trifast.comStrategic Report MARKETING
REPORT
It has been another busy year for the Marketing team – as TR’s new
strap line, ‘Holding the world together’ suggests, global support has
never been more vital
Abi Burnett
Head of Marketing
Sian Whitlock
Marketing Executive
Dan Jeffryes
Creative Designer
Tom Dewhurst
Marketing Projects
Assistant
Nathan Blake
Marketing Apprentice
Our ongoing product email promotions have continued to be successful
and plans are underway for more specific targeted campaigns to further
ensure our customers are receiving the relevant information from TR.
With so many products and services now available, it is important that
we fully inform existing and potential customers just what TR can offer.
PR and advertising is high on our list of priorities and a focus on industry
is further highlighting TR as a leader in its field. We have a wealth of
knowledge around the Company and we intend to fully utilise this talent
moving forward with up-to-date technical and product related material.
As always, we like to keep an element of fun in our marketing and have
done so with seasonal promotions to our customers, including a trick or
treat campaign and a festive Christmas animation. With our email open
rates being above the national average, it is clear that our customers
appreciate these lighter ways of promoting the Company.
With this in mind we welcomed a new apprentice to the department in
early 2017 to further help us support our teams around the world.
To enhance the promotion of the Group’s capabilities, we supported our
UK, European and USA locations at exhibitions last year. Focusing on
automotive as one of the key industries that TR supports, we exhibited at
Automechanika in Birmingham, the Global Automotive Components and
Suppliers Expo in Stuttgart Germany and Fastener Fair Mexico. All three
shows were hugely successful, so much so that we are again booked in
to exhibit at all three in 2017.
With our new commercial website launched at the beginning of 2016,
our online presence is constantly being enhanced. An extensive range of
products has been added over the last 12 months, increasing our total
range to almost 50,000 parts, which gives our customers access to a
very diverse range of fasteners and components. This is an essential
tool for our global teams and we plan to continue increasing the content
available, including individual sites for our Asian, USA and European
locations and a range of technical animations to support the engineers
and designers that use our commercial website as their go-to resource
for fasteners.
Our product and services literature has continued to grow with
a revamped core product brochure and new combined product
catalogues, including sheet metal and plastic hardware brochures being
developed.
The introduction of a new range of enclosure hardware has enhanced
our already extensive range of sheet metal fasteners and has increased
our product offering by over 5,000 parts. The new products include a
range of hinges, locking systems, clamps and terminals as well
as gaskets and accessories. We launched our new range to
customers in early 2017, which included a brochure showing
an overview of the entire range available.
46
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 THE TR
WEBSITE
Strategic Report
Just over a year ago we launched our new customer support website
Glenda Roberts
Group Sales Director
Keith Gibb
Head of Web Development
Peter Webb
Software Development
Manager
Anjie Baker
Web Project Manager
Tim Vince
Software Developer
Abi Burnett
Head of Marketing
Jo Devlin
Head of Projects – Strategic Team
Designed, programmed and controlled entirely in-house, we now have a
secure, dynamic website that is growing every month.
As our website is primarily used by design engineers to specify the
fasteners and components they require, we decided from the outset
what would be needed from the new site:
• A database driven site that would allow us to add new products
quickly
• Reference drawings for our entire range of parts
• Downloadable PDF drawings and CAD models that would allow
engineers to specify us easily
• A responsive website that would work on any device
• A totally reliable hosting service that could expand as required
It was a daunting task which required thousands of new drawings and
graphics to be created as well as compiling a database containing
dimensional and technical information on over 40,000 parts. In addition,
the entire site had to be programmed from scratch within 12 months.
The in-house team of Keith Gibb, Peter Webb and Anjie Baker, supported
by Abi Burnett and her marketing team delivered on time and the site,
hosted on Microsoft’s Azure Cloud, was launched in February 2016.
Head of Web Development, Keith Gibb says, ‘The response from
customers has been terrific with many commenting on the design and
quality of the site. Just as importantly, our customers’ engineers really
appreciate the sheer amount of information we have on the site and how
easy we’ve made it to specify our products.’
Just over a year after launch and the site has grown to over 50,000 parts
with the most recent addition being a full range of enclosure hardware.
Every month the TR site is visited over 25,000 times with the average
visitor staying for more than three minutes per visit. That’s over 1,200
hours every month that customers are on our website. In addition, 1,400
of our 3D CAD models are downloaded every month.
Googlewhack
When we launched the site, we also introduced a global web reference
system. Each reference number specifies a product precisely by type,
size, material and finish and can be recognised by any TR location
across the world. One unexpected benefit is search engines like them
too. Entering almost any TR web reference into Google usually results
in what’s known as a Googlewhack. This is where a search returns only
one result. Clicking on this result in Google goes straight to the exact
part on the TR website.
What next?
From the outset, our aim has always been to have the largest, most
innovative, most visited fastener website in the world. To help achieve
this, our plans for the next 12 months include:
• More products with the addition of over 20,000 new parts
• Customer areas of the site allowing companies to see products and
information specific to them
•
Interactive 3D models of every product range
•
‘How it works’ animations for many of the more complex products
• Expansion of the much used knowledgebase
All of the in-house programming so far has been done by TR’s Software
Development Manager, but it became obvious that to meet the demands
of the web team, more resource was required. In September 2016, a
new programmer was appointed, who will be spending much of his time
helping to develop the website further.
Go to www.trifast.com
to see the full list of our locations
47
sluglinewww.trifast.com RISK
MANAGEMENT
The IT health checks carried out around the Group have already started to prove
their worth
We are now putting in place schedules to rollout the ISO/IEC 27001:2013
Standard to the whole Group. This will be carried out on an incremental
basis throughout the UK first and then to Europe and the USA/Asia.
As I am sure most of you are aware there have recently been two major
IT incidents, the first one being the WannaCry ransomware virus. We are
happy to report that TR was not affected by this ransomware and would
like to think the investment in our cyber security that the Company has
made prevented this.
The second incident was the airline system crash caused by a power
outage in their data centre and lack of adequate backup processes.
Again, TR has a secure datacentre that has a more than adequate
backup power source which is tested on a regular basis and we can
report that we have never lost any connectivity during the switch to
backup power. Also, TR has multiple backup processes continually
running that provide the organisation with the ability to restore the
Company’s systems and data within an appropriate time frame.
One of the consistent cyber threats to TR and its Group of companies
is email traffic. Email threats come in different varieties, from a simple
phishing mail to a more direct virus hidden in an attachment. TR have
invested heavily in this area and, as you can see from the statistics, the
investment has paid dividends.
IT Risk management
TR Systems have had a busy year assessing and addressing IT risk
around the Group and, as mentioned in last year’s report, the IT team
have tackled the risk head on.
IT health checks have been carried out in all European sites and the
process has also started in Asia. Further visits to Asia and the USA are
planned for FY2018 to complete the IT risk review of the entire Trifast plc
Group of companies.
The IT health checks have already started to prove their worth as,
following on from health checks carried out around the Group in 2016,
potential weaknesses in the IT Infrastructure were identified.
To confirm these weaknesses penetration tests were carried out by PTP
(Pen Test Partners). PTP are a leading penetration testing and security
company with which we have established a good working relationship.
Their reports highlight the risks and vulnerabilities and exactly what
needs to be addressed in risk priority.
Alongside the IT health checks and penetration tests, 2016 saw a
major effort by all sections of the TR Systems department to address
the requirements of the ISO/IEC 27001:2013 Information Security
Management System, with the aim to achieve accreditation by the British
Standards Institution (BSI). The process involved consideration of all
aspects of information security with risk assessments being the major
starting point. All members of the team were asked to consider any
area that could be susceptible to security threats and where these were
found they were immediately addressed. December 2016 saw the final
push and we were pleased to be awarded the accreditation at the final
assessment before Christmas.
To ensure information security is seen as a continual process, an
Information Security Forum (ISF) has been established. This forum is
made up of personnel from across the business and meets regularly to
review all aspects of information security including any security incidents
that may have occurred.
Internal audits are also carried out throughout the year with annual BSI
assessments scheduled to ensure the Company continues to comply
with the Standard. Information security is included as part of our day-to-
day processes.
We have already seen benefits of compliance to the Standard with new
and existing customers now being assured of our ongoing commitment
to the security of both our own and our customers’ information.
48
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Colin Coddington
IT Director
Stephen Hopkins
IT Operations Manager
Peter Webb
Software Development
Manager
Stephen Maxwell
Web Developer
Tim Vince
Software Developer
Stephen Whittle
Analyst Programmer
Damian White
Systems Engineer
Graham Morrison
Junior Technician
Kerry Moran
Support Desk Manager
Chris Tull
Support Desk Analyst
Lucy Sinden
Support Desk Analyst
Dan Perrin
Support Desk Analyst
Incoming mail summary
message category
Stopped by reputation filtering
Stopped as invalid recipients
Spam detected
Virus detected
Detected by advanced malware protection
Messages with malicious URLs
Stopped by content filter
Stopped by DMARC
S/MIME verification/decryption failed
%
Messages
93.0
34,907,012
0.7
0.8
0.0
0.0
0.0
0.0
0.0
0.0
262,815
296,159
2,260
384
13,640
11,231
0
0
UK
Asia
Ireland
Total threat messages:
94.5
35,493,501
Marketing messages
Social networking messages
Spain
Bulk messages
Global
IT
S/MIME verification/decryption successful
Italy
Clean messages
Total attempted messages:
Total graymails:
1.2
0.1
0.4
1.7
0.0
3.8
450,394
30,963
132,496
613,853
0
1,439,753
37,547,107
Hungary
Holland
USA
Sweden
Norway
Germany
Key:
3rd Party Support Partner
Managed by Group IT Services
Managed by Group IT Services Partner
In summary TR have received 37,547,107 emails in the last year. 36,107,354 were
blocked by our collection of email defence solutions. This means that only 1,439,753
emails were delivered which equates to c.4% of mail traffic. Assuming it takes the
average user five seconds to process a mail this is a saving of 5.7 years of one
person’s time.
TR Systems have worked hard on establishing a global IT support structure. With many
subsidiaries spread far and wide around the globe the best solution is to form good
relationships with third party support partners that, under TR Systems guidance, will
deliver the same level of security that the majority of TR locations already receive. This
model also allows flexibility when new acquisitions join the Group.
49
sluglinewww.trifast.comStrategic Report RISK
MANAGEMENT
VIABILITY STATEMENT
In line with provision C.2.2 of the code, the Directors have assessed the prospects of the Company taking into account the current position
and principal risks to determine whether there is a reasonable expectation that the Group will be able to meet its liabilities as they fall due over a
specified period of time.
The Directors have carried out this longer term viability assessment over a period of three years as this aligns with the Group’s detailed forecast
which is approved at Board level. Three years is considered an appropriate period of time for the Group as it strikes the right balance between
the need to plan for the long term whilst considering the uncertainty that arises in relation to assumptions the further you look ahead. The period
is also within the term of the HSBC banking facilities which have been disclosed in note 20 and 26 to the financial statements.
In assessing the prospects of the Group over the three year period, the Directors have also considered the Group’s current financial position
as well as its financial projections in the context of the Group’s debt facilities and associated covenants. These financial projections are based
on a bottom-up budgeting exercise for FY2018 and FY2019 which has been approved by the Board and a more top down view aligned to the
Group’s strategic objectives for FY2020. The Group’s base projections indicate that debt facilities and projected headroom are adequate to
support the Group over the next three years.
In conducting the assessment, the Directors have considered the principal risks outlined on pages 51 to 53 to perform stress testing on the
forecast so as to determine the impact on the financial position and performance of the Group. These risks have been identified by the Board,
and are actively monitored on an ongoing basis, the most significant of which are considered in more detail below:
1. Potential impact that Brexit could have on the business due to foreign exchange movements, the possibility of a general downturn in the
UK economy and/or the future impact of WTO tariffs. To date the impact has largely been in the form of foreign exchange translation tail
winds, which have significantly increased our Group results at AER. In time there is a risk that this could reverse if the relative value of Sterling
were to increase again, although such a reversal will only bring our results back to where we were in FY2016, which was itself a year of
strong profitable growth for the Group. We are also starting to experience some pricing pressures due to the extended weakness of Sterling
against the US Dollar and recent increases in raw material pricing. We are monitoring this situation closely and are already in negotiation with
a number of our key suppliers and customers to ensure that we can minimise the impact of this. In the longer term, as a global business
with worldwide logistics and over 70% of our revenue generated outside of the UK, we consider have the flexibility to withstand any UK
specific challenges by either adjusting our supply routes in the medium term, or even potentially following our customer base overseas if UK
manufacturing moves in the longer term.
2. A serious quality issue occurring, both in terms of an immediate reduction in revenue, and possible penalties incurred, and longer term,
considering the impact to our reputation, including the possible risk that this could lead to the loss of one or more of our key multinational
OEM customers. We have robust quality processes in place around the world, both in terms of our own manufacturing processes and our
vendor assessment and sourcing policies. In addition, our established global quality team and issue resolution procedures ensure that any
supply problems that do arise are dealt with and resolved as soon as possible for our customers, ensuring that the costs incurred by us and
the end customer are minimised as far as possible. However, although this has not happened in our 43 year history, it is possible to imagine
a more significant quality issue arising with a customer which could result in substantial recall costs and penalties. In these circumstances,
our comprehensive global guarantee and recall insurance would be utilised to cover any direct costs incurred. Although, the ongoing negative
impact on the business may still be significant whilst the market builds back up its trust in the Group.
3. The risk of a significant cyberattack, or data security breach could incur penalties and have a serious impact on the Group’s ability to trade
in the short term, with longer term negative implications to our reputation in the marketplace and therefore our ability to meet our growth
targets in the medium term. We have made substantial additional investments in to our cyber security, including our back-up data storage
and power systems in recent years and have global IT policies in place that are managed by a dedicated in-house team. We continue to
invest in IT security and are rolling out ISO 27001 around the world. However, in this world of heightened cyber risk, it is not impossible that a
circumstance could arise where our trading results have been negatively impacted as a result of a cyber threat or data loss.
The scenarios above are hypothetical and purposefully severe for the purpose of creating outcomes that have the ability to threaten the
viability of the Group. It is considered unlikely, but not impossible, that the crystallisation of a single risk would test the future viability of the
Group. However, as with many companies, it is possible to construct scenarios where either multiple occurrences of the same risk, or single
occurrences of different risks could put pressure on the Group’s ability to meet its financial covenants. In the case of these scenarios arising,
various options are available to the Group in order to maintain liquidity so as to continue in operation such as: accessing new external funding
early; more radical short-term cost reduction actions; and reducing capital expenditure. None of these actions are assumed in our current
scenario modelling.
After considering the risks identified and on the basis of the assessments completed, the Directors believe that there is a reasonable expectation
that the Company will be able to continue to operate and meet its liabilities as they fall due over the next three years.
50
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Strategic Report
Risk Table
How the business manages risk
As a Public Listed Company and in line with the UK Corporate Governance Code, “The Board is responsible for determining the nature and extent
of the principal risks it is willing to take in achieving its strategic objectives. The Board should maintain sound risk management and internal control
systems”. The Board recognises that the management of risk is required to enable the business to meet its objective to create ‘stakeholder value’.
Risk management
Risk
Personnel &
resource
Quality and
manufacturing
Foreign
exchange
volatility
Description and
potential impact
Without both adequate
resource and appropriate
investment in our people and
succession planning across
all levels of the business from
the Board down, we may not
be able to deliver our future
strategic plans and long term
success
We recognise that the quality
of our manufactured and
externally sourced products
is of critical importance.
Any major failure will affect
customer confidence and may
lead to immediate financial
penalties
A significant portion of the
Group’s revenue and profit
is generated outside of the
UK. Due to translation risk,
the Group results could be
adversely impacted by an
increase in the value of Sterling
relative to foreign currencies.
In addition, a transactional risk
exists as the Group sources
certain products from the Far
East for sale across Europe
Current mitigation
Has the risk materialised?
Trend
Our succession planning and gap
analysis processes identify key employees
and roles within the business and are
designed to broaden and transfer our
specialist knowledge and skills base. We
invest heavily in our people via ongoing
training and our Group wide Performance
Development Programme to ensure there
is adequate opportunity to allow our
people to ‘move up’ within TR. Rewards
are reviewed annually to ensure they
remain at levels that are competitive
within the marketplace
Our established global quality team
maintains our Group wide quality
compliance protocols. Quality inspection
processes across our manufacturing and
distribution sites and vendor base are
robust, allowing us to offer zero-defect
supplies to customers where required and
appropriate insurance is maintained and
reviewed annually
Transactional hedging is achieved via
the commercial matching of transactions
wherever possible. Non-functional
currency balance sheet items are
minimised and net investment hedging is
used for any significant acquisition finance
We regularly review our foreign exchange
mitigation strategies with our advisors to
ensure that these remain fit for purpose in
these challenging times
The Group enjoys extremely high
retention levels with 46% of staff
having been in the Group for more
than ten years and the average
length of service being over ten
years. All key succession risks are
appropriately managed
The Group has not experienced
any substantial quality issues,
although quality is moving further
up the agenda across all sectors
of our client base
Foreign exchange volatility has
been significantly higher with
increases of c.10% across
a basket of the Group’s key
currencies
Our results have been presented
at CER and AER to assist our
stakeholders’ understanding of
the underlying business. Further
information in respect of the
Group’s policies on financial risk
management objectives including
policies to manage foreign
exchange is given in note 26
www.trifast.com
51
slugline RISK
MANAGEMENT
Risk
Macro-
economics
Description and
potential impact
Traditionally distribution/
manufacturing sectors bear the
effect of inventory reduction in
challenging economic periods
earlier than other industries
Loss of a key
customer and
debtor
exposure
Interruption
of supply
Inventories
obsolescence
Good relationships with
our customers is key to the
business. Any lack of holistic
support or an inconsistent
approach to the trading and
management of key global
customers across the Group
increases our exposure to
customer loss
Increased trading levels lead to
higher debtor balances, raising
our exposure to customer
failure and bad debt write
downs
The Group sources products
both internally and externally
for customers around the
world. If we were unable to
supply a customer in line with
their ongoing manufacturing
requirements, the risk both to
our reputation and in terms of
potential stoppage penalties
would be substantial
The Group holds substantial
inventory balances across the
world. As the business grows
these levels will increase to
meet both transactional needs
and the requirements of our
multinational OEM customers.
Higher stock levels lead to an
increased exposure to obsolete
inventory
52
Current mitigation
Has the risk materialised?
Trend
By operating globally and across a
number of sectors, the Group is better
able to manage the risk of regional or
industry contractions. As customers
move, or expand, we have the capability
and flexibility to move with them, whilst
our first class customer service works to
protect us from rapid supplier changeover
We hold less than 1% of a £25bn target
market meaning growth via market share
remains credible even in a falling market
Our global multinational OEM focus
means we are able to build strong head
office and local relationships with our key
multinational customers. Improving our
supplier power and helping us to retain
and grow key trading relationships for the
longer term
We maintain strong credit control
procedures from new customer set
up, through to regular monitoring as
trade develops. We also have global
catastrophe credit insurance cover
We hold appropriate stock levels to
service our customers’ needs at all times.
Our pan-global presence means we are
able to operate along multiple transport
routes, shielding us from localised issues.
For all key products we maintain multiple
sources to ensure adequacy of supply.
Our approved vendor due diligence
processes also help to mitigate the risk
of a supply chain breakdown. We ensure
that our top 20 suppliers are visited at
least every year to maintain this
Stock management processes are a key
part of the Group’s internal controls and
stock days are a KPI, monitored locally
and at Board level. We continue to invest
in stock management processes and
systems to ensure we keep optimum levels
across the world. Our multi-locational set
up, allows us to reduce lead times, and
therefore stock holding, as far as possible
The global economy remains in
a period of growth, albeit that
current conditions have become
significantly less settled than in
previous years
The Group has not in recent
years experienced any substantial
credit issues and attrition of our
key multinational OEMs remain
very low
In recent times, political and climatic
instability have increased in a
number of countries across in the
world. Where we have encountered
issues, our established and flexible
logistics have allowed us to
continue to offer timely and reliable
supply to our customers
Customers’ requirement and our
product mix are ever evolving.
Our tight stock management
and engineering know-how allow
us to view these changes as an
opportunity to develop and sell
new lines, rather than as a risk to
the business
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Strategic Report
Risk
Cyber
security
Description and
potential impact
Unauthorised access to, or
a breach of, our systems,
networks or premises, could
immediately and materially
affect our reputation with
possible implications for
revenue and growth over the
short to medium term. Such
a breach may also cause
financial loss
Impact of
BREXIT:
FX/ Transaction risk/ pricing
pressures
The prolonged weakness in
Sterling may bring inflationary
pressures to our imported
purchase costs into the UK
Post-Brexit trading rules
(WTO)
A default to WTO rules could
have a negative impact on
trading between our UK sites
and the EU/our EU sites and
the UK
UK macro-economic
environment
Given the degree of uncertainty
in the wider market, the
extended weakness in Sterling
and the risk of restrictions
to our ongoing access to
the single market the UK
economy may contract in the
medium term. If we are unable
to react to a possible slow
down sufficiently quickly and
effectively, then temporary
trading/ restructuring losses
could be incurred if the UK
business needs to resize
Current mitigation
Has the risk materialised?
Trend
The Group has not to date
experienced any significant cyber
security threats
We are proud to have this year
achieved accreditation of the ISO/
IEC 27001:2013 standard for
Information Security Management
Systems in our Group IT function,
which is to be rolled out to the
wider Group
Towards the end of the financial
year, we have started to see
some pricing increase requests
being made from suppliers and
negotiations have begun to
manage this risk
The situation at the moment is
unclear, but a hard Brexit may lead
to a default to WTO rules. We are
currently reviewing our options as
a business, in advance of greater
clarity
The UK economy continues to
grow, albeit slower than expected
in recent weeks. The automotive
sector is our largest UK sector
and positive discussions have
been held by Theresa May (UK
Prime Minister) with a number of
the UK’s major car manufacturers
We will continue to monitor the
situation closely over the coming
months to ensure we are able to
react quickly to any change in
circumstances
We have undertaken a review of our
cyber security controls worldwide.
Additional investment has been made
where required to manage our risk. Our
IT policies are managed by a dedicated
in-house team and access to systems is
strictly limited to appropriate personnel.
IT risk reviews are routinely carried out
across all our sites
We perform ongoing reviews of our global
supplier base as a matter of course to
manage pricing pressures that arise. In
the UK these reviews have been designed
to specifically focus on the ongoing
impact of foreign exchange fluctuations to
ensure we continue to strike the best deal
with our suppliers
As a global group with a number of EU
subsidiaries we are in a strong position
to manage our supply chain to allow
trading routes that bypass a UK-EU or
EU-UK transfer to a large extent. We see
this challenge as an opportunity to insert
greater efficiencies into our supply chain
Regular quarterly forecasting and sales
trend analysis at UK level will identify any
issues as soon as possible. Whilst our
access to the UK distribution market,
acts as a good barometer of the wider
marketplace, providing us with an early
insight in to toughening market conditions
and allowing us to react quickly and
effectively if a changing situation
demands it
In the short term, manufacturing levels
are protected by existing manufacturing
investments in the UK, most specifically
in the automotive sector
In the long term, we are a global business
with the flexibility to follow our customers
wherever they may end up following
any prolonged downturn in the UK
manufacturing industry
53
sluglinewww.trifast.com HOLDING THE WORLD TOGETHER
INTRODUCING
THE LEAD TEAM
GEOFF BUDD
Commercial Director & European Managing
Director
Length of service
41 years; appointed to the plc Board in 1986
Key areas of expertise
Geoff has extensive knowledge of the industry,
European and Asian markets particularly
in sales & purchasing, manufacturing
management and quality. His role gives him
responsibility for all of the European operations
but he also holds the responsibility for the
Group on all aspects of the commercial
business, specifically advising the Board on
capex requirements for the manufacturing sites
Committee membership
By invitation
GLENDA ROBERTS
Group Sales Director
Length of service
27 years; appointed to the plc Board in 2010
27 years as Director of TR Fastenings Limited
and Director for TR USA since July 2012
Key areas of expertise
Global sales & marketing experience in
logistics & global supply chain, Key Account
Management (KAM) and customer relationship
management
Committee membership
By invitation
MALCOLM DIAMOND MBE
Non-Executive Chairman
Length of service
Total 42 years; appointed as Non-Executive
Chairman on 1 April 2017
Formerly, Trifast Executive Chairman after being
re-appointed in 2009, CEO for 18 years before
retiring in 2002. 1984-2002 Managing Director,
TR Fastenings Limited
Key areas of expertise
Significant commercial skills and leadership
experience gained from growing an
international business covering Sales
and marketing, strategic planning and
implementation, business development and
investor relations
Other directorships
Non-Executive Chairman (appointed May 2014)
at Flowtech Fluidpower plc , the UK’s leading
supplier of technical hydraulic fluid power
products (Ticker- AiM: FLO) and joined the Board
of Acal plc, a leading designer and manufacturer
of specialist electronic components (Ticker: ACL),
in November 2015 before being appointed Non-
Executive Chairman in April 2017
Committee membership
Chairman of the Nominations Committee and
by invitation
54
Trifast plc Annual Report 2017
sluglineHOLDING THE WORLD TOGETHER CLARE FOSTER
Chief Financial Officer
MARK BELTON
Chief Executive Officer
LYNDSEY CASE
Company Secretary
Length of service
2 years; appointed to the plc Board 1 October
2015
Length of service
18 years; appointed to the plc Board in 2010
and CEO on 1 October 2015
Length of service
17 years; appointed as Company Secretary
1 April 2016
Key areas of expertise
All aspects of group financial management,
accounting governance and strategic planning
and implementation across all levels
Committee membership
By invitation
Key areas of expertise
Over his career with Trifast, Mark has forged a
wealth of knowledge and great understanding
of the industry, the TR model, key sectors
and our customer portfolio. As Group Finance
Director, he also played a pivotal role in the
successful acquisitions of PSEP in Malaysia,
VIC in Italy and Kuhlmann in Germany. Other
skills include all aspects of strategic and
financial planning, and investor relations
Committee membership
Nominations Committee and by invitation
Key areas of expertise
Lyndsey joined the Group’s TR Fastenings
UK Finance team in 2000 before moving to
the Group Finance Team in 2006. She is an
FCCA and experienced in financial accounting,
reporting and compliance
Committee membership
Secretary to the Committees and by invitation
slugline Strategic Report
NEIL WARNER
Senior Independent Non-Executive Director
JONATHAN SHEARMAN
Independent Non-Executive Director
Length of service
2 years; appointed to the plc Board on
16 June 2015
Length of service
8 years; appointed to the plc Board
in 2009
SCOTT MAC MEEKIN
Independent Non-Executive Director
Length of service
4 years; appointed to the plc Board
in 2013
Key areas of expertise
Investment Fund management,
stockbroking and investment banking, and
charitable foundations
Other directorships
Non-executive director at AiM listed
Orchard Funding Group
Committee membership
Chair of the Remuneration Committee and
a member of the Audit Committee and the
Nominations Committee
Key areas of expertise
Experienced Senior Independent Director
with strong City relations. Extensive
knowledge of international businesses
gained over 30 years in commerce; solid
understanding of key strategic drivers –
growing sustainable businesses globally,
M&A, compliance, risk management and IT
Other directorships
Non-Executive Director at Vectura Group
plc (VEC) and of AiM listed Directa plus
(DCTA)
Committee membership
Chair of the Audit Committee and a
Member of the Remuneration Committee
and the Nominations Committee
Key areas of expertise
30+ year career in both commercial and
corporate structures across all major
continents and cultures in finance, M&A,
global logistics, technology, distribution
and manufacturing
Other directorships
Director at Morgan Legend Limited Hong
Kong, Director at Tes-Amm Private Limited,
and CEO at Dearman Engine Company
Member of Harvard Alumni Association
& National University Singapore Alumni
Association
Committee membership
Member of the Audit Committee and
Remuneration Committee
Trifast plc Board
Executive and
senior managers
All other
employees
Trifast Executive
Board
Female
25%
Male
75%
Female
Male
Female
Male
28%
72%
32%
68%
Female
50%
Male
50%
www.trifast.com
56
slugline HOLDING THE WORLD TOGETHER
CELEBRATING LONG SERVICE
ACROSS THE GROUP
Malcolm Diamond
1975–to date
Geoff Budd
1976–to date
Glenda Roberts
1990–to date
1973 TR Fastenings established by Mike Timms and Mike Roberts
1975 Started working at TR
1976 Started working at TR, in the warehouse and as a driver
First UK in-house manufacturing facility established and the Hank name purchased
1982 Acquired the rights to the BINX Nut and sole global manufacturer
1982-1990 Six new TR sites opened across UK
1984 Appointed to the Board
1986 Appointed to the Board
1990 Started working at TR
1992 Introduced Vendor Managed Inventory into the fastenings industry (VMI)
1993 Acquired Fastener Techniques (UK)
1994 Acquired Southern Industrial Fasteners (Southern Ireland)
Obtained a full listing on the London Stock Exchange
1996 Acquired: Magne Bjorlo (Norway), Microscrew (UK)
1997 Acquired Formac Technologies (Singapore), Polyfasteners (Malaysia)
1998 Acquired: Miller Holding (Holland), Lancaster Fastener (UK), Samson Industries (USA)
1999 Acquired FCF (Sweden)
2000 Set up greenfield distribution site in Hungary
2001 Acquired SFE (Taiwan)
2003 Acquired the globally recognised trademark of Pozidriv
2005 Acquired Serco Ryan (UK)
2009 Business restructured and new strategy implemented
2010 Appointed to the Board
2011 Acquired PowerSteel and Electro-Plating Works (Malaysia)
2013 TR Celebrates 40 years of trading
2014 Acquired Viterie Italia Centrale (Italy)
2015 Acquired Kuhlmann Befestigungselemente (Germany)
2016 Set up greenfield distribution site in Spain
57
Trifast plc Annual Report 2017
slugline
HOLDING THE WORLD TOGETHER
OTHER LONG
SERVING EMPLOYEES
Charlie Foo
44 years
Sharon Cain
42 years
Colin Styche
41 years
Ahmed Sidat
40 years
Nick Beeney
40 years
Philip Nutley
39 years
Poh Seng
Khong
38 years
Emanuele Dolce
37 years
Nigel Miller
37 years
Nick Barton
37 years
Mick Hussey
35 years
Jerry Howe
35 years
Sam Wilson
35 years
Bernie Wells
35 years
Graham Fox
33 years
Tamilaasin
Subramaniam
33 years
Roberto Bianchi
31 years
Samantha
Hobbs
33 years
Krishnasamy
Velayathem
30 years
Simon
Lockeyear
33 years
James Craft
31 years
Darren Hector
30 years
Per Edlund
29 years
Wilson Chen
29 years
Tara Barden
29 years
Jumiran
Tukiman
29 years
Geoff Blackford
29 years
David Stamp
29 years
Ashley Edge
29 years
Mandy Scott
28 years
Michelle
Horscroft
28 years
Glenn Blackford
28 years
Paul Leys
28 years
Sylvia Millsom
28 years
58
Kennady
Subramaniam
33 years
Martin
Greenwood
31 years
Muniandy
Subramaniam
29 years
Tony Lemiech
29 years
sluglineTrifast plc Annual Report 2017 Strategic Report
Fernando
Gaggioli
28 years
Keith Gibb
27 years
Md Suhairi Md
Jauhari
26 years
Alessio
Alessandrini
28 years
Wayne
Coupland
27 years
Ismail Hadi
26 years
Lee-Andrew
McCurry
26 years
Loganathan
Kasinathan
25 years
Poh Chai Lim
28 years
Ping Siong Tong
28 years
Ban Wah Foo
28 years
Chin-Hwa
Chang
27 years
Hamdan Mohd
Yahaya
27 years
John Stewart
27 years
Stephen Smith
27 years
Sarojah Iriesan
26 years
Wayne Carr
26 years
Chris Speed
26 years
Guy Dalleywater
26 years
Andy Dawes
26 years
Perumal
Pichamuthu
25 years
Kin Kok Chong
25 years
James Mileham
25 years
Stevie Meiklem
25 years
Stuart Harkness
25 years
Susan Blackford
25 years
Paul Standing
25 years
Dale Edge
25 years
Baharuddin Mat
Jahya
25 years
Husaini Lutfi
Husain
25 years
The Strategic report was approved by the Board of Directors on 12 June 2017 and signed on its behalf by:
Malcolm Diamond MBE
Non-Executive Chairman
Trifast House, Bellbrook Park,
Uckfield, East Sussex,
TN22 1QW
Company registered number: 01919797
59
sluglinewww.trifast.com slugline OUR
GOVERNANCE
Directors’ report
Corporate governance
Audit Committee report
Nominations Committee report
Directors’ remuneration report
Statement of Directors’ responsibilities
62
64
66
69
70
87
slugline DIRECTORS’
REPORT
The Directors present their Annual Report on the affairs of the Group,
together with the Financial Statements and Auditor’s Report, for the
year ended 31 March 2017
Results and proposed dividends
Total Group revenue from continuing operations was £186.5m
(2016: £161.4m) and the profit for the year before taxation was
£17.3m (2016: £13.1m). Underlying profit before tax for the Group
was £20.5m (2016: £16.0m); see note 2 for breakdown.
The Directors’ remuneration and their interests in share capital are shown
in the Remuneration report on pages 70 to 86. Those Directors who are
retiring and, being eligible, offer themselves up for re-election, are shown
in the Corporate governance statement on pages 64 to 65. Biographical
details can be found in Board of Directors on pages 54 to 56.
Substantial shareholdings
Details of the share structure of the Company are disclosed in note 24.
As at the year end on 31 March 2017, the Company was aware of the
following material interests, representing 3% or more of the issued share
capital of the Company.
Axa Framlington Investment Managers
Schroder Investment Management
BlackRock Investment Management
(UK)
Mr Michael Timms
Hargreave Hale
Liontrust Asset Management
Hargreaves Lansdown Asset
Management
JP Morgan Asset Management
Threadneedle Investments
No. of
shares held
11,356,034
11,200,000
% of
shareholding
9.44
9.31
8,479,718
8,000,000
7,752,814
7,268,917
4,297,598
4,130,000
3,666,653
7.05
6.65
6.44
6.04
3.57
3.43
3.05
As at 1 June 2017, material interests representing 3% or more of the
issued share capital of the Company were:
AXA Framlington Investment Managers
Schroder Investment Management
Black Rock Investment Management (UK)
Liontrust Asset Management
Hargreave Hale
Mr Michael Timms
JP Morgan Asset Management
Hargreaves Lansdown Asset
Management
Threadneedle Investments
No. of
shares held
11,356,034
11,200,000
9,136,736
7,519,783
7,519,314
7,456,304
4,130,000
% of
shareholding
9.44
9.31
7.60
6.25
6.25
6.20
3.43
4,065,554
3,622,790
3.38
3.01
Financial instruments
Information in respect of the Group’s policies on financial risk
management objectives including policies to manage credit risk, liquidity
risk and foreign currency risk are given in note 26 to the financial
statements.
The Directors recommend a final dividend of 2.50 pence (2016: 2.00p)
per ordinary share to be paid on 13 October 2017 to shareholders
registered at the close of business on 15 September 2017. This together
with the interim dividend of 1.00 pence (paid on 13 April 2017)
(2016: 0.80p) brings the total of the year to 3.50 pence (2016: 2.80p).
The 2017 recommended final dividend has not been included within
creditors as it was not approved before the year end. The 2017 interim
dividend is also unrecognised as it was paid post year end.
The Strategic report provides a detailed analysis of the results in the year
and an indication of future developments.
Annual General Meeting
The Annual General Meeting will be held on 27 July 2017 at Trifast
House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW.
Directors and Directors’ interests
The Directors who held office during the year were as follows:
Chairman
MM Diamond MBE
Non-Executive Director
(appointed 1 April 2017; previously Executive
Chairman)
Chairman of Nominations Committee
Executive Directors
MR Belton
CL Foster
GP Budd
GC Roberts
Chief Executive Officer
Chief Financial Officer
Commercial Director &
European Managing Director
Group Sales Director
Independent Directors (Non-Executive)
NW Warner
Senior Independent
Chairman of Audit Committee
Chairman of Remuneration Committee
JPD Shearman
SW Mac Meekin
62
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017
Disclosure of information to auditor
The Directors who held office at the date of approval of this Directors’
report confirm that, so far as they are each aware, there is no relevant
audit information of which the Company’s auditor is unaware; and each
Director has taken all the steps that they ought to have taken as a
Director to make themselves aware of any relevant audit information and
to establish that the Company’s auditor is aware of that information.
Auditor
The Board has decided to propose KPMG LLP to be reappointed as
auditor of the Company and a resolution concerning their appointment
will be put to the forthcoming Annual General Meeting of the Company.
By order of the Board
Lyndsey Case
Company Secretary
Trifast House
Bellbrook Park
Uckfield
East Sussex
TN22 1QW
Company registration number: 01919797
Corporate governance
The Corporate governance statement on pages 64 to 65 should be read
as forming part of the Directors’ Report.
Takeover directive
Where not provided elsewhere in the Directors’ report, the following
provides the additional information required to be disclosed as a result
of the implementation of the Takeover Directive.
There are no restrictions on the transfer of ordinary shares in the capital
of the Company other than certain restrictions which may from time to
time be imposed by law (for example, insider trading law). In accordance
with the Listing Rules of the Financial Conduct Authority, certain
employees are required to seek the approval of the Company to deal
in its shares.
The Company is not aware of any agreements between shareholders
that may result in restrictions on the transfer of shares or on voting rights.
No person has any special rights of control over the Company’s share
capital and all its shares are fully paid.
The rules governing the appointment and replacement of Directors are
set out in the corporate governance section of the Directors’ report on
pages 64 to 65. The Company’s Articles of Association may only be
amended by a special resolution at a General Meeting of shareholders.
The Company is party to a number of banking agreements that, upon
a change of control of the Company, could be terminable by the bank
concerned.
Outside of the extension of certain Directors’ rolling contract periods
and notice periods (see page 80), there are no agreements between
the Company and its Directors or employees which provide for
compensation for loss of office or employment (whether through
resignation, purported redundancy or otherwise) that occurs because of
a takeover bid.
The Company is not aware of any contractual or other agreements which
are essential to its business which ought to be disclosed in the Directors’
report.
Employees
The Group has a policy of offering equal opportunities to employees at
all levels in respect of the conditions of work. Throughout the Group it
is the Board’s intention to provide possible employment opportunities
and training for disabled people and to care for employees who become
disabled having regard to aptitude and abilities. Our Corporate Social
Responsibility Statement can be found on our website www.Trifast.com
and further details are provided in the Strategic Report.
Regular consultation and meetings, formal or otherwise, are held with all
levels of employees to discuss problems and opportunities. Information
on matters of concern to employees is presented in the in-house letters
and publications.
63
sluglinewww.trifast.comOur Governance CORPORATE
GOVERNANCE
(forming part of the Directors’ report)
With exceptions as highlighted below, the Company complied with
the provisions of the UK Corporate Governance Code issued by the
Financial Reporting Council in September 2014
The Board met seven times during the period, with attendance as
follows:
MM Diamond
MR Belton
CL Foster
GP Budd
GC Roberts
NW Warner
JPD Shearman
SW Mac Meekin
Attendance
in 2016/17
7
7
7
6
6
6
7
7
The Directors retiring by rotation are Neil Warner and Scott Mac Meekin
who, being eligible, offer themselves for re-election at the forthcoming
Annual General Meeting. In addition, following his appointment to
Non-Executive Director, from Executive Director, Malcolm Diamond offers
himself for re-election at the forthcoming Annual General Meeting. The
Chairman and Senior Independent Non-Executive Director confirm that
following formal performance evaluation, the individuals seeking election
and re-election continue to be effective and demonstrate commitment to
the role.
The Company has separate posts of Chairman and Chief Executive. The
Chairman leads the Board and the Chief Executive is responsible for
the management of the Company, implementing policies and strategies
determined by the Board.
The contracts of appointment of Non-Executive Directors are available
for inspection on request to the Company Secretary.
The Independent Non-Executive Directors have full access to the
external auditor and to management and there is a formal procedure for
Directors to obtain independent professional advice in the furtherance
of their duties should this be necessary. All Directors have access to the
advice and services of the Company Secretary.
Appropriate and relevant training is provided to the Directors as and
when required.
The Board acknowledges Malcolm Diamond is a Non-Independent
Non-Executive Chairman (Executive Chairman until 1 April 2017) which
does not comply with the requirements of section A.3.1 of the Corporate
Governance Code. However, the Board believes that, given Mr Diamond
sits as Chairman and is a non-executive in other companies, his
experience from these appointments and his previous knowledge of
Trifast is invaluable and can best be delivered through the position of
Chairman.
The Company has applied the principles set out in the Code, including
both the main principles and the supporting principles, by complying
with the Code as reported above. Further explanation of how the
principles and supporting principles have been applied is set out below
(including in the Audit Committee and Nominations Committee reports
and in the Directors’ remuneration report on pages 70 to 86 and in the
Viability statement on page 50). Details of substantial shareholdings of
the Company can be found on page 62.
The structure of the Board and its standing committees is as follows:
The Board
Currently the Board consists of four Executive Directors, three
Independent Non-Executive Directors and a Chairman. The Non-
Executive Directors are considered to be independent of management
and free from any business or other relationship which could interfere
with the exercise of their independent judgement for the purposes of
the Code. The Chairman, who is a Non-Executive Chairman, is not
considered by the Board to be independent. On 1 April 2017, Malcolm
Diamond moved from being Executive to Non-Executive Chairman.
The appointment, replacement and powers of the Directors are governed
by the Company’s Articles of Association, the Corporate Governance
Code, the Companies Act, prevailing legislation and resolutions passed
at the Annual General Meeting (‘AGM’) or other general meetings of the
Company.
The Senior Independent Non-Executive Director is Neil Warner, who was
chosen due to his executive and non-executive board experience with
other companies.
All Independent Non-Executive Directors have the authority to meet with
shareholders without first seeking approval from the Chief Executive or
the Chairman.
Upon appointment the Directors are required to seek election at the
first AGM following appointment. All Directors are required to submit
themselves for re-election at regular intervals and a minimum of one third
of Directors must be re-elected on an annual basis.
64
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 During the year being reported upon we engaged with:
Peel Hunt LLP — Stockbroker to the Company, Institutional Fund
Managers
TooleyStreet Communications — Investor Relations Analysts,
Private Client Brokers and Media
Edison Investment Research — Investment Research, available
on the Trifast website
The members of the Audit, Remuneration and Nominations Committees
will be available to speak to shareholders at the AGM in order that they
understand the views of the shareholders. In addition, shareholders can
contact them at any time by writing to Trifast plc, Trifast House, Bellbrook
Park, Uckfield, East Sussex, TN22 1QW.
Going concern
After making enquiries, the Directors have reasonable expectations that
the Group has adequate resources to continue in operational existence
for the foreseeable future. Further information is given in the Basis of
Preparation, note 1. For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
By order of the Board
Lyndsey Case
Company Secretary
Trifast House
Bellbrook Park
Uckfield
East Sussex
TN22 1QW
The Board meets a minimum of five times a year and is supplied as
early as practical with an agenda and appropriate papers. Directors
are appointed by the Board on recommendation from the Nominations
Committee. The Board monitors the financial performance of the
Group, and approves and reviews major projects and acquisitions. The
Board has formally adopted a schedule of matters which are reserved
to the Board for decision, thus ensuring that it maintains control over
appropriate strategic, financial, organisation and compliance issues to
ensure the long term success of the Company.
The Board undertakes annual evaluation of its own performance, that
of its Committees and individual Directors and continues to train and
evaluate senior managers below Board level in order to maintain its
continuous succession policy. As part of this evaluation, the Board
considers the balance of skills, experience, the independence and
knowledge of the Board, its diversity, including gender, and how
effectively the Board works together as a unit.
The Board has delegated specific responsibilities to the Audit,
Nominations and Remuneration Committees. Details are described on
pages 66 to 86.
The Directors have carried out a robust assessment of the principal risks
facing the group, including those that would threaten its business model,
future performance, solvency or liquidity. The principal risks have been
disclosed on pages 51 to 53.
Internal audit
As detailed in the Audit Committee report on pages 66 to 68, the Board,
via the Audit Committee, formally considers the requirement for internal
audit on an annual basis as part of its terms of reference. A formalised
internal review process called a ‘health check’ has been in operation
for some years. Whilst the Board recognises that this process does not
constitute a fully independent internal audit function, it believes that due
to the size of the Group, this provides appropriate comfort as to the
operational and financial controls in place.
Shareholder relations
The Group has a website, www.Trifast.com, which is regularly updated
to ensure that shareholders and other providers of capital are fully aware
of the Group’s activities. The Group’s Registrar, Computershare, is linked
to the Trifast website and offers services for shareholders.
The Group also works with City specialists to ensure all levels of
shareholders receive Trifast information.
65
sluglinewww.trifast.comOur Governance
AUDIT COMMITTEE
REPORT
In a year of increased focus internally and externally on culture, values and
judgements made to support strategic growth, I am pleased to report good
progress in improving the quality of people, processes and systems that
underpin all these elements
Neil Warner, Chairman of the Audit Committee
Dear Shareholder,
I am pleased to present the Audit Committee (“the Committee”) report
for the year ended 31 March 2017, which has been prepared by the
Committee and approved by the Board.
As a Committee, we have focused on the integrity, completeness and
clarity of financial reporting, the areas where judgements and estimates
are required in the financial statements and the quality and effectiveness
of audit processes to complement the other risk management activities.
The Board and Committee have also focused on the recently introduced
governance requirements regarding the Annual Report and consider
that, taken as a whole, the 2017 Annual Report is fair, balanced and
understandable with appropriate references being made throughout the
various sections, which I hope you will find helpful in understanding the
information and disclosures contained within them.
The Committee meetings are held to coincide with key dates within the
financial reporting and audit cycle and I also meet with management
on an ad-hoc basis. I would like to thank the Committee members,
the executive management team and our external auditor, KPMG LLP
(‘KPMG’) for the open discussions that take place at our meetings and
the importance they all attach to its work.
On behalf of the Audit Committee
Neil Warner
Chairman of the Audit Committee
12 June 2017
Committee membership and attendance
In accordance with the Code, the Audit Committee consists entirely of
the Independent Non-Executive Directors and met three times in the year
Neil Warner (Chairman)
Jonathan Shearman
Scott Mac Meekin
Attendance
in 2016/17
3
3
3
The external auditor KPMG, the Non-Executive Chairman, the Chief
Executive, the Chief Financial Officer and the Company Secretary
are also invited to attend meetings, although it is only the Committee
Chairman and its members who are entitled to be at a meeting of the
Committee.
The Board are satisfied that the members of the Committee have the
breadth of knowledge, experience and financial dynamics to effectively
fulfil their responsibilities. The Chairman, Neil Warner, has significant,
recent and relevant financial experience as a former CFO of a FTSE
250 company and through his other Non-Executive appointments. The
Director’s summary biographies can be found on pages 54 to 56 of
this Report.
Role and responsibilities
The Committee operates within its terms of reference, which are
reviewed on an annual basis and are available on the Company’s website
or on request to the Company Secretary.
The role of the Committee is to assist the Board in fulfilling its oversight
responsibilities by reviewing and monitoring:
•
the integrity and compliance of the financial information provided
to shareholders including the strategic report, financial results,
announcements and financial statements
•
the appropriateness of accounting policies and the supporting key
judgements and estimates
• whether the Annual Report and Accounts, taken as a whole, is fair,
balanced and understandable
•
the Company’s system of internal controls and risk management
including the identification of principal risks and their mitigation and
the requirement for a formal internal audit function (see pages 51 to
53 for Risk Management)
66
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017
the external audit process and external auditors, making
recommendations to the Board on appointment, remuneration,
performance, expertise, independence and objectivity, along with the
effectiveness of its scope, of the external auditor
•
•
•
•
the processes for compliance with laws, regulations and ethical
codes of practice including procedures for detecting, monitoring
and managing the risk of fraud and the adequacy and security for its
employees in relation to whistleblowing
Key matters considered and activities during the year
During the year, the Committee met to agree the audit strategy for the
full year audit, reviewed the results of the external audit for the financial
year and reviewed the external auditor’s half year review and the half
year results. It also considered the results of the internal review process
(‘health checks’) carried out as part of the cycle (more details of this
process are given in the section ‘internal audit’ below) and finally it
reviewed the Annual Report and the financial statements contained
within it.
The Committee reports to the Board on how it has discharged its
responsibilities on a regular basis.
The Committee’s prime areas of focus have been:
•
•
the integrity, completeness and consistency of financial reporting
and disclosures
the areas where significant judgements (during the year, at and post
the balance sheet date) and estimates are required in the financial
statements
•
the materiality level to apply to the audit
• whether the going concern basis of accounting should continue to
apply in the preparation of the annual financial statements; and
•
•
•
the appropriateness of the bases of disclosure in the company’s
viability statement
the appropriateness of transactions separately identified and
disclosed as one-off in order to highlight the underlying performance
for the periods presented in the financial statements
the appropriateness of transactions presented in Alternative
Performance Measures (APM’s) in order to compare relevant results
for the periods presented in the financial statements
the key assumptions, judgements and estimates as detailed in
note 31 to the financial statements
to review the Group’s cyber risk strategy to ensure controls and
testing are in place to mitigate the Group’s exposure to this
growing risk
Financial reporting and significant financial risks
The Committee concluded that there were two significant financial risks
arising from the financial statements which would require particular
consideration during the year:
• Valuation of customer-specific specialised inventory (recurring)
The Group has significant inventory holdings which are specific to
individual customer requirements. The Board recognises that as the
business continues to grow the Group is required to carry additional
inventory to meet its transactional and OEM business. This carries
with it an increased exposure to recoverability of these balances.
The Committee is satisfied that sufficient focus is given to this whole
area and, in particular, the adequacy of provisions made for customer
specific, slow moving and obsolete inventory.
• Valuation of goodwill and other intangible assets (recurring)
The determination of whether or not goodwill has been impaired
requires a review of the value in use of the asset. The main
judgements in relation to the review were considered to be the
achievability of the long term business plan and the impact upon
the plan of macroeconomic and regulatory issues. In addition, the
Committee reviewed the discount rates used in projecting future cash
flows to ensure they were within an acceptable range. The calculation
of the value in use was undertaken and the Committee reviewed
the conclusion, including sensitivity calculations. The Committee
also held discussions with KPMG. The Committee concurred with
management’s conclusion that goodwill is not impaired.
Internal audit
A formalised internal review process called a ‘health check’ has been
in operation for some years and all business units are the subject
of a health check on a rotational basis. The reviews, covering both
operational and financial controls, are carried out by senior Group
finance personnel, from Head Office, who are separated from the day
to day activities within the entity which is the subject of the review. All
health checks are presented by the Chief Financial Officer to the Audit
Committee and remedial actions agreed. Whilst the Board recognises
that this process does not constitute a fully independent internal audit
function, it believes that due to the size of the Group, this provides
appropriate comfort as to the operational and financial controls in place.
67
sluglinewww.trifast.comOur Governance
AUDIT COMMITTEE
REPORT
Internal control
The Board is ultimately responsible for the system of internal control and
for reviewing its effectiveness. The system of internal control is designed
to manage rather than eliminate the risk of failure to achieve strategic
business objectives and can only provide reasonable and not absolute
assurance against material misstatement or loss.
The Corporate Governance Code requires that the Board reviews the
effectiveness of the system of internal controls, in accordance with
section C.2, including those of an operational and compliance nature,
as well as internal financial controls. Having done so, the Committee is
of the view that there is an appropriate ongoing process for identifying,
evaluating and managing significant risks. Operating policies and
controls are in place and have been in place throughout the year under
review, and cover a wide range of issues including financial reporting,
capital expenditure, information technology, business continuity and
management of employees. Detailed policies ensure the accuracy
and reliability of financial reporting and the preparation of Financial
Statements including the consolidation process.
The key elements of the Group’s ongoing processes are:
• a full detailed review of the business risks undertaken as part of the
ongoing day-to-day procedure of the business
• an organisational structure with clearly defined lines of responsibility
and delegation of authority
•
•
•
•
•
•
that Group policies for financial reporting, accounting, financial risk
management, information security, capital expenditure appraisal and
Corporate Governance are well documented
that detailed annual budgets and rolling forecasts are prepared for all
operating units and reviewed and approved by the Board
that performance is monitored closely against budget and material
variances reported to the Board
that the Committee is to deal with any significant control issues raised
by the auditor
that a formal schedule of matters specifically reserved for decisions
by the Board is maintained
that capital expenditure is controlled by the budgetary process with
authorisation levels in place. Any single item of capital expenditure
over £50,000 goes to the Board for approval with detailed written
proposals and financial analysis of expected returns
There were no significant control deficiencies identified during the year.
External auditor
The external audit is a continuous process. At the start of the audit cycle,
KPMG present their audit strategy identifying their assessment of the
key risks for the purposes of the audit and the scope of their work. For
2017 these risks were: the calculation of customer-specific inventory and
valuation of goodwill. More detail is set out in KPMG’s report on pages
91 to 94.
During the year the FRC’s Audit Quality Review team reviewed our
external auditor’s (KPMG) audit of our 2016 financial statements. We
have discussed the report with KPMG and the Audit Quality Review
team. The review identified three areas for improvement in the audit
which KPMG have addressed for the audit of our 2017 financial
statements. Overall, the results of the review raised no issues which cast
doubt on the fundamental quality of our audit or raised issues about our
financial reporting.
KPMG reports to the Committee at both the half and full year, setting
out their assessment of the Group’s judgements and estimates in
respect of key risks and the adequacy of the reporting. The Chairman
of the Committee speaks to the lead audit director before each meeting
and the whole Committee meets with KPMG in private at least once a
year without executive management present. The Committee reviews
the external auditor’s performance and ongoing independence and
concluded that the external audit process is operating effectively and
KPMG continues to prove effective in its role as external auditor.
Non-audit services provided by KPMG
In order to ensure the independence and objectivity of the external
auditor, the Committee has a policy which provides clear definitions
of services that the external auditor can and cannot provide. Tax
compliance and advisory services are currently provided by another
professional services firm PricewaterhouseCoopers LLP (‘PwC’). The
policy also establishes a formal authorisation process, including either
the tendering for non-audit services or pre-approval by the Committee
for allowable non-audit work.
The fees in relation to non-audit services are found in note 5 of the
Annual Report. These relate to tax compliance services for PSEP and TR
Formac in Malaysia.
Reappointment of external auditor
Following the completion of the audit, the Committee reviews
the effectiveness and performance of KPMG with feedback from
Committee members, senior executive management and finance
personnel, covering overall quality, independence and objectivity,
business understanding, technical knowledge, responsiveness and cost
effectiveness.
The Committee acknowledges the new EU rules with regard to auditor
rotation and the requirement for companies to put audit services
contracts out to tender at least every ten years (outside of transitional
rules). KPMG has been our auditor for over 20 years. The current lead
audit director at KPMG was appointed in September 2016 and will be
required to stand down no later than the Annual General Meeting in
2020. Accordingly, and in line with the arrangements set out by the EU,
the Committee continues to recommend to the Board that the tendering
of the external contract should be either at the next rotation of audit
lead director or earlier, if appropriate circumstances arise. There are
no contractual obligations which restrict the Audit Committee’s choice
of external auditor. The Committee and the Board have concluded
that KPMG provides an effective audit and have recommended their
reappointment at the 2017 AGM.
68
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 NOMINATIONS COMMITTEE
REPORT
The Nominations Committee’s key focus is to evaluate and examine the
skills and characteristics that are needed in Board members to ensure the
leadership team has the right balance of skills to deliver its progressive
strategy for the benefit of all stakeholders
Malcolm Diamond MBE, Chairman of the Nomination Committee
Role
The Committee keeps under review and regularly evaluates the
composition of the Board and its Committees in order that they retain
and reflect the appropriate balance of skills, knowledge, experience and
independence to ensure their continued effectiveness.
Succession planning
The Nominations Committee has always had a robust plan to ensure
that the Company’s successful culture, business model and growth
strategy firmly established by the Senior Executive Board and the senior
management team can be sustained well into the future.
It is clearly evidenced that management development throughout the
Group has prospered on the basis of promotion from within.
Mark Belton is now into his second year as CEO, as is Clare Foster
as CFO, and both have presided over a record year for revenue and
profitability over the Company’s 43 year history, supported by Lyndsey
Case, who was promoted to Company Secretary on 1 April 2016.
In summary, the leadership team has the right experience, knowledge
and determination to positively lead and take Trifast to the next stage of
its growth aspirations.
Malcolm Diamond MBE
Chairman of the Nominations Committee
12 June 2017
Appropriate succession plans for the Non-Executive Directors, the
Executive Directors and the Group’s senior management are also kept
under review.
The Nominations Committee’s terms of reference are available on the
website or on request to the Company Secretary.
Committee membership and attendance
The Nominations Committee consists of two Independent Non-Executive
Directors, including the Senior Independent Non-Executive Director, the
Chairman and the CEO.
Boardroom diversity
Appointing the best people to the Board is critical to the success of
the Company. The Committee has therefore concluded that while
diversity, including gender diversity, is important when reviewing the
composition of the Board and possible new appointees, the single most
important factor is to identify and recruit/ develop people based on skills,
leadership and merit. Given our commitment to appointing the best
people and making sure that all employees have an equal chance of
developing their careers with the Group, the Committee does not think
it is appropriate to set targets for Board appointments; however, the
current Executive Board comprises a 50:50 gender balance.
Malcolm Diamond MBE (Chairman)
Neil Warner
Jonathan Shearman
Mark Belton
Attendance
in 2016/17
2
2
2
2
69
sluglinewww.trifast.comOur Governance DIRECTORS’ REMUNERATION
REPORT
We want this Executive team to continue into the next stage of growth for
the Company whilst operating a Policy that is fit for purpose
Jonathan Shearman, Chairman of the Remuneration Committee
Dear Shareholder,
Introduction
As Chairman of the Trifast plc Remuneration Committee (the
‘Committee’), I am pleased to introduce our remuneration report for 2017
which has been prepared by the Committee in accordance with the
relevant legal and accounting regulations, then approved by the Board.
In arriving at the annual bonus and deferred equity outcomes for the
2017 financial year, the Committee assessed the achievement of the
Group’s financial performance targets and the Executive team’s personal
performance targets that were set at the start of the year:
• Underlying diluted earnings per share growth of 28.3% exceeded the
stretch target of 22%
— It is worth noting that for the deferred equity element of the
bonus scheme, the maximum performance target (threshold) was
achieved ignoring the positive impact of currency movements in
the year
• ROCE of 19.9% ensured that the underpin of ROCE exceeding group
WACC + 2% (12%) was met
• Each Executive Director’s personal objectives were met such that
there was no requirement to apply a reduction to the formulaic bonus
outcome based on the achievement of the EPS target and the ROCE
underpin
• As a result, each Executive Director will receive the maximum annual
bonus entitlement of 100% of salary and the maximum deferred
equity award of 100% of salary
The Committee is comfortable that the 2017 annual bonus and deferred
equity outcomes reflect the underlying performance of the Company.
Proposed remuneration Policy and structural changes
The remuneration structure that shareholders approved in 2014 and
2015 was designed for a specific purpose, pre-dominantly to bridge a
period of management transition during a time when long-term target
setting was difficult. Whilst the current Policy has been effective, given
the Company’s development since 2015, the Committee now feels
comfortable setting long-term targets that would allow a more traditional
remuneration model to be operated.
The role of the Committee is to ensure that the remuneration provided
to our Executive Directors motivates them, aligns them with delivery of
our strategy and creates shareholder value in a sustainable manner. In
addition, it is our task to ensure that the remuneration received by the
Executive Directors is proportionate to the performance achieved and
the returns received by you as shareholders.
To fulfil our role, the Committee undertook a review of the Company’s
remuneration Policy (‘Policy’) during the year and consulted with
shareholders on proposed changes to the current Policy. Details of the
proposed Policy are set out in this report and I look forward to your
support for the changes at the 2017 AGM.
Key 2017 remuneration outcomes
This year has been another successful one for Trifast. At Actual
Exchange Rates (AER), our revenue grew by 15.6%, we delivered
growth of 28.3% in underlying diluted Earnings per Share and ROCE
remained extremely healthy at 19.9%. In addition, over the past year,
our shareholders have benefitted from an increase in Total Shareholder
Return (‘TSR’) of c.70%, a substantial outperformance against the FTSE
Small Cap and industry benchmarks.
Our Annual Report sets out the key areas where we have made
substantial progress against our strategic priorities with some key
highlights including the successful integration of Kuhlmann into our
business, opening a new distribution and technical centre in Barcelona
and the continuing enhancement of our manufacturing capacity.
It is now nearly two years since Mark Belton moved into the role of Chief
Executive Officer with Clare Foster joining as Chief Financial Officer.
Any management change involves significant risks, but the Committee
is delighted with the successful transition that has taken place and
already seen Mark and Clare playing key roles in Trifast’s success. They,
together with the continued support of Malcolm Diamond, Geoff Budd
and Glenda Roberts, are overseeing a significant transformation of the
business which will further benefit shareholders in the years to come.
70
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 As you will be aware, with effect from 1 April 2017, Malcolm Diamond
transitioned from Executive Chairman to Non-Executive Chairman. In
light of changes to the composition of the Executive team and the shift of
responsibilities of Executive Directors, the Committee decided it was an
appropriate time to review and adjust base salary levels. In line with the
current and proposed Policy, set out in this report, with effect from 1 April
2017 the Committee will make the following salary increases:
• CEO: Increase base salary from £250,000 to £300,000
• CFO: Increase base salary from £200,000 to £230,000
• Other Executive Directors: Increase base salary from £200,000 to
£210,000
In addition, given Malcolm Diamond’s transition from Executive to
Non-Executive Chairman, the Committee has determined that his fee
will reduce from £200,000 to £150,000 from 1 April 2017 with a further
reduction to £125,000 from 1 April 2018. This reduction reflects the
Chairman’s phased reduced time commitment to the role.
The Committee considered whether base salary increases should
be staged over a number of years given their impact on the overall
remuneration package. However, the Committee felt that given strong
individual and corporate performance a one-time immediate increase
was appropriate.
There will be no change to our Policy in relation to Non-Executive
Director fees. The Board reviewed Non-Executive Director fees which
have been unchanged for three years and compared current fee levels
to levels in organisations of comparable size and complexity. In order
to ensure Non-Executive Director fees reflect the increasing level of
responsibility and time commitment as the Company grows, fees paid
from 1 April 2017 will be based on a maximum of the following:
• NED base fee: £42,000
• SID fee: £6,000
• Audit / Remuneration Committee Chair: £8,000
• Audit / Remuneration Committee member: £5,000
The Committee also acknowledges that a number of shareholders
voted against the current Policy and its implementation given its focus
on the short-term. We take shareholder feedback seriously and the
changes to our remuneration Policy have been designed to reflect
these views. The Committee also consulted, more recently, with its
major shareholders regarding the introduction of the new Policy. Those
shareholders will note that we have responded to many of the issues
raised and made changes, highlighted in this statement, in an effort to
ensure that we adopt a Policy that has the support of a large majority of
our shareholders. We are grateful for the time shareholders have taken to
review and comment on the Policy we are proposing and will continue to
engage with our shareholders on remuneration matters and take account
of those views.
Overall, the Policy has been constructed to provide management with
a remuneration opportunity that is competitive against companies of a
similar size and complexity, but with a greater emphasis on the variable
elements of the package than those peers. Broadly, the Committee
targeted lower quartile salaries combined with an above median
incentive opportunity to provide a total remuneration opportunity at or
approaching the median. As such, management will be well rewarded
if material long-term sustainable value is delivered for shareholders but
total remuneration is limited to the fixed elements of the package if
performance falls below expectations.
The significant changes from the current Policy are in relation to the
simplification of the annual bonus and the introduction of a traditional
long-term incentive arrangement with a three year performance period.
The new Policy has been specifically designed to meet the following
objectives:
• Alignment with the long-term business strategy during the Group’s
next stage of development
• Focus on the key performance metrics that drive shareholder value
creation
• Motivate, retain and attract top talent from a competitive talent pool
• Align the interests of executives and shareholders
• Be in line with UK corporate governance best practice
Further details of the new Policy can be found on the pages hereafter in
the Directors’ Policy Report but outlined below are the key highlights.
Base salary and Non-Executive Director fees
The Committee determined that Executive Director base salaries will not
usually be increased by a higher percentage than the average annual
increase in salaries for UK employees. Larger increases may be awarded
if, subject to performance, there is i) a material change in the role and
responsibilities of the Executive Director, or ii) an Executive Director has
been appointed at below the market level to reflect experience, or iii) an
Executive Director has been promoted internally and their salary is below
the market level.
71
sluglinewww.trifast.comOur Governance DIRECTORS’ REMUNERATION
REPORT
Looking Ahead
The company has had a number of years of successfully implementing
its strategy, evidenced by our record EPS performance as well as value
created for shareholders. We remain committed to the delivery of further
growth from both organic and acquisitive sources.
Furthermore, the Committee believes that a key reason for the
successes of the business has been having the right management team
in place. We want this four strong Executive team to continue into the
next stage of growth for the Company whilst operating a Policy that
is fit for purpose. In order to do so we look forward to your support in
approving our proposals at July’s AGM.
Jonathan Shearman
Chairman of the Remuneration Committee
12 June 2017
Annual Bonus
The annual bonus is being simplified. The primary performance condition
will remain as Earnings per Share (“EPS”) growth (75% of opportunity)
alongside the introduction of a range of Strategic and Operational
measures (25%) such as financial and operational excellence, growth
strategy, customer satisfaction, people and risk mitigation. At least 40%
of the Strategic and Operational measures will be linked to quantitative
metrics and for FY2018 the Committee has determined to assess 10%
of the total bonus opportunity against a ROCE target to ensure earnings
growth is of a quality nature. These measures have been introduced to
provide a holistic assessment of corporate performance. EPS will be
measured on an organic growth basis only i.e. the impact of acquisitions
and share buybacks will be stripped out from the reported EPS figure.
The maximum opportunity will be decreased to 125% of base salary
(from 200%) due to the introduction of a standalone Long Term Incentive
Plan. Up to 100% of base salary will be paid in cash with any bonus in
excess of this being deferred into shares for three years. The deferral
period was increased from two to three years based on feedback from
the shareholder consultation, as was the exclusion of share buybacks in
the EPS calculation.
Long-Term Incentive Plan (LTIP)
A more traditional long-term incentive plan is being introduced to help
shift some focus towards longer-term performance. Awards under the
new LTIP will vest over a three year performance period with a proportion
of awards being subject to a holding period of up to two years.
Awards will be subject to the satisfaction of EPS growth (70% of
opportunity) and relative TSR (30%) performance conditions and the
maximum annual opportunity will be 150% of base salary. A new
shareholding requirement of 200% of salary will also be implemented
alongside the LTIP. The LTIP has been designed to be in line with market
practice in terms of structure and features stretching performance
conditions which support the business strategy and therefore aligns the
interests of management and shareholders.
Performance conditions
EPS has been chosen as the primary performance condition for the
annual bonus and LTIP as the Committee feels it is the most appropriate
measure of growth for Trifast over the coming Policy cycle and provides
a clear line of sight for the Executive team. The weighting of EPS in the
annual bonus and LTIP has been reduced in response to shareholder
feedback. The Committee is comfortable that the balance of EPS,
Strategic and Operational and relative TSR provides a set of measures
that will drive underlying performance in the short- and long-term which
will translate to absolute and relative shareholder returns.
72
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Directors’ remuneration Policy
This section of the remuneration report contains details of the Policy which is being proposed at the AGM on 27 July 2017 and, if approved, will be
effective from that date. As set out in the Chairman’s statement, the proposed Policy has been developed to support the business strategy in the next
stage of the Company’s growth.
1) Policy tables — Executives
Base Salary
Purpose
To provide competitive salary levels recognising the market
value of the role and individual’s skills, experience and
performance as well as their contributions and enable the
recruitment and retention of high calibre Executives
Operation
Base salary is set annually on 1 April. Base salary levels
are reviewed annually by the Committee, taking account of
Company performance, individual performance and levels
of increase for the broader Trifast employee population. The
Committee also considers the impact of any base salary
increase on the total remuneration package. Increases
awarded each year will be set out in the statement of
implementation of Policy
Maximum opportunity
The maximum annual salary increase will not normally exceed
the average increase which applies across the wider Trifast
(UK) employee population (typically inflation based)
Larger increases, than the above maximum, may be awarded
if subject to performance there is i) a material change in the
role and responsibilities of the Executive Director, or ii) an
Executive Director has been appointed at below the market
level to reflect experience, or iii) an Executive Director has been
promoted internally and their salary is below the market level
Changes from Policy approved at the 2014/2015 AGM
No substantive changes
Benefits
Purpose
To provide market-competitive benefits
Maximum opportunity
Capped at the cost of providing the benefits
Operation
The Company provides the following ongoing benefits:
Changes from Policy approved at the 2014/2015 AGM
No change
• Company car (or car allowance)
• Private medical insurance
• Permanent health insurance
• Critical illness cover and life cover
In addition, the Company pays additional benefits when
specific business circumstances require it. For example, for
a non-UK Executive the Company may consider providing
specific benefits appropriate for the local market. The
Company reimburses all necessary and reasonable
business expenses
Pension
Purpose
To offer market-competitive levels of pension provision
Maximum opportunity
20% of base salary
Operation
Executive Directors participate in defined contribution
pension arrangements. Executive Directors may request
a pension allowance to be paid in cash, after deducting
employer National Insurance costs, in place of defined
contribution arrangements
Changes from Policy approved at the 2014/2015 AGM
No change
73
sluglinewww.trifast.comOur Governance DIRECTORS’ REMUNERATION
REPORT
Annual
Bonus
Purpose
To encourage and reward delivery of short-term organic growth
alongside the execution of the Company’s annual strategic
priorities in line with shareholder interests
Operation and performance measures
Each year Executive Directors are eligible to participate in the
annual bonus. The Committee will select performance measures
which it considers appropriate to support the Company’s strategic
priorities and the delivery of value to shareholders. The individual
targets and the weightings will be set annually by the Committee
The annual bonus will reward for Earnings Per Share (EPS)
growth and Strategic and Operational performance over the
financial year as set out below:
Maximum opportunity and timing of payments
The annual bonus will be in the form of cash with a deferred
share component
The maximum annual award level is 125% of base salary
The maximum amount that can be paid as cash is 100%
of base salary and any remainder would be paid as
deferred shares
A deferral period of three years will apply to any portion of the
annual bonus over 100% of base salary that is deferred
into shares
The percentage of bonus earned for differing levels of
performance is:
• 75% of maximum bonus opportunity will be based on
• Threshold: 10% – 35% of maximum opportunity
• Target: 45% – 70% of maximum opportunity
• Stretch: 75% – 100% of maximum opportunity
Changes from Policy approved at the 2014/2015 AGM
Decoupling of short-term and long-term incentive by
removing the majority of the deferred share elements and the
introduction of a more traditional Long-Term Incentive Plan
(discussed below)
Introduction of the Strategic and Operational measures to
replace personal performance which acted as a payout
moderator in the previous Policy
Reduced annual maximum award from 200% to 125% of
base salary
Change in the deferral structure, whereby Executives are
required to defer any bonus over 100% of salary into shares
for three years
organic EPS growth
• 25% of maximum bonus opportunity will be based on a
basket of Strategic and Operational measures. This basket
will include measures relating to the following themes:
financial and operational excellence, growth strategy,
customer satisfaction, people and risk mitigation. The
Committee will determine the three or four most appropriate
targets each year in line with the business plan and at least
40% of these measures will be based on quantifiable metrics
In relation to the EPS element, the impact of current and
previous year acquisitions and share buybacks will be
excluded from the calculation of EPS when determining
performance outcomes.
The performance measures that have been selected, in the
Committee’s view, most appropriately reflect the Company’s
strategy to:
• Generate strong and sustainable organic earnings growth
for the benefit of shareholders
• Focus on delivering challenging specific Strategic and
Operational targets which aid in long-term value creation
A financial underpin will apply such that in order for a payment
under the Strategic and Operational element to be made the
Company will need to achieve at least the threshold level of
EPS growth
Performance targets will be disclosed prospectively, unless they
are deemed commercially sensitive by the Board in which case the
targets and their achievement will be reported on retrospectively
Malus will apply during the bonus year and the share deferral
period and clawback will apply for a period of two years post
bonus payment and/or share vesting
Circumstances where malus and clawback could apply include
misstatement of accounts, fraud or gross misconduct by the
employee and / or any assessment of performance being
based on error, or inaccurate or misleading information
74
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 SAYE
Purpose
Facilitate equity involvement for Executives and staff
Maximum opportunity
Annual savings limit in line with HMRC limit
Changes from Policy approved at the 2014/2015 AGM
No change
Maximum opportunity
The proposed annual award level is to grant awards of 150%
of base salary. The maximum award level will be 250% of base
salary and this would only be considered in certain exceptional
recruitment circumstances
25% of the LTIP award will vest for threshold performance
Changes from Policy approved at the 2014/2015 AGM
Introduction of a new long-term incentive plan
Operation
The Trifast Savings Related Share Option Scheme is HMRC
approved. The Scheme offers three and five year savings
contracts which provide an option to purchase shares after
maturity at a discount to the share price on the date the
contract is taken out (the maximum discount is 20% of mid-
market price)
Long-Term
Incentive
Plan
Purpose
To incentivise delivery of the Group’s long-term business
strategy and sustainable value for shareholders and aid in the
recruitment and retention of senior Executives
Operation and performance measures
The Committee may make an annual award of shares to each
Executive Director in the form of nil-cost options under the
Long-Term Incentive Plan (LTIP). The Committee will select
performance measures at the time of grant taking into account
the Company’s long-term business strategy. The individual
targets and the weightings will be set at grant by the Committee
Performance will be measured against EPS growth and relative
Total Shareholder Return (TSR) targets over three financial
years as set out below:
• 70% of the LTIP award will be based on EPS growth; and
• 30% of the LTIP award will be based on relative TSR versus
the FTSE Small Cap Index (excluding investment trusts)
The EPS targets and relative TSR measures for future LTIP
awards will be disclosed in the implementation of Policy
section of the annual report on remuneration
The EPS and relative TSR measures have been selected to
reward senior Executives for the generation of strong and
sustainable long-term earnings and the delivery of long-term
sustainable value for the benefit of shareholders
On vesting, 50% of after tax vested awards may be sold
immediately. Thereafter, 25% of after tax vested awards will be
subject to a one year holding period and the remaining 25% of after
tax vested awards will be subject to a two year holding period
Malus will apply during the vesting period and clawback will
apply for a period of two years post vesting
The circumstances where malus and clawback could apply
include the misstatement of accounts, fraud or gross misconduct
by the employee and / or any assessment of performance being
based on error, or inaccurate or misleading information
Shareholding
Guidelines
Operation
A 200% of salary shareholding requirement for all Executive
Directors. This is to be built up over five years and shall be
effective at the start of the new Policy
Changes from Policy approved at the 2014/2015 AGM
Changed from minimum holding of 250,000 Trifast shares over
five years
The Committee will annually review the progress against
achievement of these guidelines
75
sluglinewww.trifast.comOur Governance DIRECTORS’ REMUNERATION
REPORT
Legacy incentive awards
All unvested legacy awards granted under the deferred equity arrangement will continue to be operated as per our previous remuneration Policy
approved by shareholders.
2) Illustration of remuneration Policy
The chart below illustrates how applying our remuneration Policy would lead to levels of pay that vary with performance for each of the Executive
Directors:
£1,400,000
£1,200,000
£1,000,000
£800,000
£600,000
£400,000
£200,000
0
38%
31%
32%
25%
37%
31%
32%
25%
37%
31%
32%
24%
37%
31%
32%
24%
100% 43% 31%
100% 43%
32%
100% 44%
32%
100% 44%
32%
m
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a
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i
Mark Belton
Clare Foster
Geoff Budd
Glenda Roberts
Fixed^
Annual variable
Multiple reporting periods
The assumptions used in determining the level of payouts are set out in the table below:
Scenario
Minimum
On target
Maximum
Fixed^
Annual variable (annual bonus)
Multiple reporting periods (LTIP)
The value of these
elements is set
out in the policy table
and the implementation
of proposed Policy for the
financial year ending
31 March 2018
in this report
0% of maximum
(0% of salary)
57.5% of maximum
(71.88% of salary)
100% of maximum
(125% of salary)
0% of maximum
(0% of salary)
62.5% of maximum
(93.75% of salary)
100% of maximum
(150% of salary)
^ Fixed costs include salary, pension and all benefits
Notes
• The minimum payout scenario assumes no incentive payout
• For annual bonus, the target payout is 57.5% of maximum (this is the mid-point of the target payout range of 45% to 70% of maximum). For LTIP,
the target payout is 62.5% of maximum (the mid–point between threshold vesting (25%) and maximum vesting (100%)
• The maximum payout scenario assumes all incentives payout
76
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 3) Policy on recruitment arrangements
The Committee’s approach to Executive Director recruitment remuneration is to pay no more than is necessary to attract candidates of the
appropriate calibre and experience needed for the role. The remuneration package for any new recruit would be assessed following the same
principles as for the current Executive Directors, as set out in the remuneration Policy table.
Remuneration element
Treatment under Policy
Base salary, pension
and other benefits
The salary level will be set taking into account a number of factors including market practice, the individual’s
experience and responsibilities, other pay structures within Trifast and will be consistent with the salary Policy for
existing Executive Directors
Annual bonus and LTIP
The Executive Director shall be eligible to receive pension and other benefits in line with Trifast’s Policy
The Executive Director will be eligible to participate in the Annual Bonus and LTIP as set out in the remuneration
Policy table. The maximum level of variable remuneration that may be offered is 275% of base salary consistent
with that of existing Executive Directors. The exceptional award limit in the LTIP allows this to be increased to
375% of base salary in the year of recruitment (where the increased award of 250% of salary is above the normal
LTIP maximum of 150% of salary)
Share buy-outs and
replacement awards
The Committee’s Policy is not to provide replacement awards as a matter of course. However, should the
Committee determine that the individual circumstances of recruitment justify the provision of a replacement award,
the value of any incentives that will be forfeited on cessation of a director’s previous employment will be calculated
taking into account the following:
• The proportion of the performance period completed on the date of the director’s cessation of employment
• The performance conditions attached to the vesting of these incentives and the likelihood of them
being satisfied
• Any other terms and conditions having a material effect on their value (‘lapsed value’)
The Committee may then grant a replacement award up to the equivalent value as the lapsed value. The
replacement award will be made in equity under 9.4.2(R) of the listing rules subject to a holding period
during which cessation of employment will generally result in forfeiture and subject to the satisfaction of
performance targets
Other
The Company may meet certain mobility costs, including relocation support, expatriate allowances, temporary
living and transportation expenses as appropriate in cases where the new Executive is relocated from one work
base to another
Changes from previous
Policy approved at the
2014/15 AGM
Changes in the Recruitment Policy reflect changes to the remuneration Policy
77
sluglinewww.trifast.comOur Governance DIRECTORS’ REMUNERATION
REPORT
4) Policy on payment for loss of office – cessation of employment and Change of Control
The following tables shows how the Committee would expect to treat Executive Directors on cessation of employment or upon a Change of Control.
Cessation of employment
Notice periods
The notice periods for all Executive Directors is 12 months
Circumstances of
departure of Executive
Directors
A ‘good leaver’ is a person whose cessation of employment is for one of the following reasons:
• death
•
•
•
•
ill-health
injury or disability
redundancy
retirement
• employing company ceasing to be a Group company
•
transfer of employment to a company which is not a Group company
• where the person is designated a good leaver at the discretion of the Committee
A participant who is not a ‘good leaver’ is a ‘bad leaver’
Base salary, pension
and other benefits
Base salary and all taxable benefits (medical, private health insurance, car allowance and life assurance) are paid in
lieu of notice. Neither notice nor a payment in lieu of notice will be given in the event of gross misconduct
Annual bonus
Unless the Remuneration Committee determines otherwise, if a participant is a ‘good leaver’, then any cash bonus
payable in the year of cessation will be pro-rated for time and performance will be tested at the normal date and will
be paid at the usual bonus payment date
Where a participant is a ‘good leaver’ and there is a deferred bonus payable in the year of cessation, then the
portion of the bonus that is required to be deferred will remain subject to deferral and will vest on the original vesting
date. The Remuneration Committee may exercise discretion to pay any deferred element to a ‘good leaver’ in cash
at the usual bonus payment date. Any unvested deferred shares would vest on the usual vesting date unless the
Committee exercises discretion to allow for vesting at the date of cessation
Participants that are ‘bad leavers’ will forfeit any cash bonus in the year of cessation and any unvested
deferred shares
LTIP
The treatment under the LTIP is as follows:
• For good leavers, unvested LTIP awards will be pro-rated for the proportion of the performance period completed
on cessation
• The good leaver will be given the option to have performance assessed on cessation with the award vesting at
that time or waiting until the normal vesting date for performance to be assessed
• Anyone who is not a good leaver will be a bad leaver. Bad leavers will forfeit all unvested awards
• All leavers will remain subject to the sale restrictions under the holding period irrespective of their employment
status
• Where a participant ceases employment during the two year holding period, they will have six months from the
date they cease employment to exercise their vested awards
Some minor changes have been made to the treatment of awards for ‘good leavers’ to reflect market best practice
Changes from previous
Policy approved at the
2014/15 AGM
78
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Change of control
Annual bonus
The treatment under the annual bonus is as follows:
• Cash bonus for the year in which a change of control event occurs will be pro-rated for time and performance. At
the Board’s discretion, the Board may consider whether to dis-apply pro-rating for time
• Unvested deferred share awards will vest on change of control
In the event of an internal corporate reorganisation, the Board may decide to replace unvested deferred share
awards with equivalent new awards over shares in the acquiring company
LTIP
The treatment under the LTIP is as follows:
• Unvested awards will vest early subject to (i) the extent that any applicable performance targets have been
satisfied at that time and (ii) pro-rating to reflect the reduced period of time between grant and early vesting as a
proportion of the vesting period that has then elapsed
• At the Board’s discretion, the Board may consider whether to dis-apply pro-rating for time
In the event of an internal corporate reorganisation, the Board may decide to replace unvested awards with
equivalent new awards over shares in the acquiring company
5) Discretions retained by the Remuneration Committee
The Committee retains discretion, consistent with market practice, in a number of regards to the operation and administration of the annual bonus
and LTIP (the LTIP being operated in general terms according to the rules to be approved by shareholders).
The areas where discretion is retained includes, but is not limited to, the following:
• The participants
• The timing of an award
• The size of an award
• The determination of vesting and/or payout
• Discretion required when dealing with a change of control or restructuring of the Group
• Determination of the treatment of leavers based on the rules of the plan and the appropriate treatment chosen
• Adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events and special dividends)
These discretions, which in certain circumstances can be operated in both an upward and downward manner, are consistent with market practice
and are necessary for the proper and fair operation of the plans so that they achieve their original purpose. However, it is the Committee’s Policy that
there should be no element of reward for failure and any upward discretion will only be applied in exceptional circumstances.
In addition, the Committee has the discretion to amend the Policy with regard to minor or administrative matters where it would be, in the opinion of
the Committee, disproportionate to seek or await shareholder approval.
6) Consideration of conditions elsewhere in the Group
The remuneration Policy throughout the Company is based on ensuring that we can attract and retain the most suitable people. This principle is
consistent with that applied to the development of our remuneration Policy for Executive Directors. Employee views were not specifically sought in
determining this Policy and no comparison metrics were used.
Salary and benefit packages are linked to personal and business performance. All employees receive additional bonus payments (as business
performance allows), this together with inflation based salary reviews should ensure the company remains competitive within the employment market.
All UK employees are eligible to participate in the SAYE scheme. Furthermore, senior management are also eligible to participate in a Long-Term
Equity scheme.
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REPORT
7) Policy table – Non-Executive Directors
Non-Executive Director remuneration is not performance related and is not pensionable. The only other payments made to them are mileage
allowances at HMRC rates and expenses for items incurred during the fulfilment of their roles. An explanation of the Policy with regards to Non-
Executive Directors is set out in the table below:
Non-Executive
Directors
Objective
To attract and retain individuals with the requisite skills and
experience to perform the role
Operation
Set annually on 1 April and determined by the Board.
Non-Executive Directors are paid a base fee and additional
fees for Committee membership and chairmanship. An
additional fee is also payable to the Senior
Independent Director
Any increases in fees will be determined based on time
commitment and take into consideration the level
of responsibility
Maximum opportunity
The previous column sets out the factors that will be taken
into consideration in determining Non-Executive Director
fees
Changes from Policy approved at the 2014/2015 AGM
None
8) External Directorships
Executive Directors are permitted to hold external directorships or offices with the prior approval of the Board. If approved, they may retain the fees
payable from such appointments. No Executive Director currently holds an external directorship
9) Contracts
During the year all Executive Directors had rolling service contracts, details of each Board members’ contract are detailed below:
Executive Director
MR Belton
CL Foster
GP Budd
GC Roberts
Non-Executive Director
MM Diamond
NW Warner
JPD Shearman
SW Mac Meekin
Notice period Date of signing
26 July 2012
12
12 1 October 2015
26 July 2012
12
26 July 2012
12
Notice period Date of signing
1 April 2017
16 June 2015
26 July 2012
25 April 2013
3
3
3
3
When setting notice periods, the Committee has regard for market practice and corporate governance best practice. For new appointments the
notice period for Executive Directors will be set at 12 months and at three months for Non-Executive Directors. The Director contracts are kept at the
Company’s Registered office.
80
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017
Annual Report on remuneration — audited information
This section of the remuneration Report contains details as to how the Company’s remuneration Policy was implemented during the year ended
31 March 2017.
1) Executive Director single figure for remuneration
Annual bonus1
MM Diamond4
Prior year
JC Barker (retired 30 September 2015)
Prior year
MR Belton5
Prior year
CL Foster6
Prior year
GP Budd
Prior year
GC Roberts
Prior year
Totals
Prior year totals
Deferred
equity
(face value)
£000
200
200
–
125
250
225
200
100
200
190
200
180
1,050
1,020
Cash
£000
200
100
–
62
250
113
200
50
200
95
200
90
1,050
510
Taxable
benefits2
£000
21
21
–
9
14
14
15
7
17
16
20
18
87
85
Pensions3
£000
–
–
–
–
47
45
36
20
34
38
36
36
153
139
Salary
£000
200
200
–
125
250
225
200
100
200
190
200
180
1,050
1,020
Total
£000
621
521
–
321
811
622
651
277
651
529
656
504
3,390
2,774
1. See additional details for variable pay element of remuneration below
2. Taxable benefits consisted of the cost of providing a Company car (or car allowance), private medical insurance and critical illness cover
3. Mark Belton, Clare Foster, Geoff Budd and Glenda Roberts are members of the Company’s non-contributory pension plan (2016: Mark Belton, Clare Foster, Geoff
Budd and Glenda Roberts). This is an HMRC approved defined contribution scheme. The rate of Company contribution to this scheme is 20% of base salary. From 1
April 2016, the Executives were provided the option to take pension payments in the form of a cash allowance, after a deduction for Employer’s National Insurance
4. Malcolm Diamond has transitioned from Executive Chairman to Non- Executive Chairman as of 1 April 2017
5. All prior year figures for Mark Belton reflect his position as Group FD during the first half of the 2016 financial year and Group CEO thereafter
6. All prior year figures for Clare Foster reflect her appointment to the Board on 1 October 2015 as Group CFO
Additional details for variable pay element of remuneration: annual bonus and deferred equity awards
A portion of the annual bonus for the year ended 31 March 2017 will be paid in cash following the publication of the annual results and the remainder
deferred in equity for three years. In accordance with the existing Directors’ remuneration Policy, all five Executive Directors have been awarded a
cash bonus and deferred equity bonus as a percentage of base salary of 100% and 100% (2016: 50% and 100%). This is equivalent to 100% of the
maximum annual bonus opportunity.
The performance targets, actual performance achievement and resulting annual bonus as a percentage of the base salaries of the Executive Directors
are summarised below for the year ended 31 March 2017. It should be noted that in relation to EPS, when assessing performance for the deferred
equity element of the bonus scheme, to align with the new proposed Policy, the Committee ignored the unexpected EPS FX gain of 1.5 pence from
currency movements following BREXIT. The maximum performance target for deferred equity was still achieved.
Performance
measure
Group EPS†
Weighting
100%
Threshold
performance
target
10.8p
Maximum
cash
performance
target*
12.2p
Maximum
deferred
equity
performance
target*
11.2p
* Maximum performance EPS is stated after the deduction of any incremental bonus payments
^ As percentage of salary
† Underlying diluted EPS (see note 25)
Actual EPS
excluding FX
gain
11.3p
Actual EPS
12.8p
Bonus achieved^
Cash
100%
Deferred
100%
In the year under review, the Group’s ROCE was 19.9% which was in excess of the underpin of 12% (WACC +2%). In addition, the Committee
determined that all personal performance measures were met in the year such that no reduction to the formulaic outcome of the cash bonus and
deferred equity awards was required.
The personal performance measures across the Executive team for the year ended 31 March 2017 included the following – establishment of a
Spanish operation; increased co-operation across our manufacturing sites; better consideration of strategic risks and distribution of equity to key
management below the board.
81
sluglinewww.trifast.comOur Governance DIRECTORS’ REMUNERATION
REPORT
The Committee is satisfied that individual performance outcomes for the Executive team appropriately reflected overall company performance in the
year and given the level of performance against the corporate goals that individual performance outcomes were acceptable.
The Committee did not exercise discretion during the year.
The number of shares needed to award the face value of the deferred equity bonus is based on the average share price from 1 January to 31 March.
In 2017 this was 499,900 shares and 210p (2016: 868,186 shares and 117p).
2) Non-Executive Director single figure for remuneration
NW Warner
Prior year1
JPD Shearman
Prior year
SW Mac Meekin
Prior year
NS Chapman – retired 16 June 2016
Prior year
Totals
Prior year totals
Chairing of
Audit or Rem
Committee
£000
5
4
5
5
–
–
–
2
10
11
Committee
membership
£000
5
4
5
5
5
5
–
2
15
16
Senior
Independent
Director
£000
5
4
–
–
–
–
–
2
5
6
Core fee
£000
40
32
40
40
40
40
–
19
120
131
Total
£000
55
44
50
50
45
45
–
25
150
164
1. All prior year figures for Neil Warner reflect his appointment to the Board on 16 June 2015 as a Non-Executive Director
3) Payments to past Directors and for loss of office
As set out in the 2016 annual report on remuneration, contractual payments were made to JC Barker until 30 June 2016. These payments were
provided in relation to a consulting service agreement and made after his retirement from the Board and amounted to £67,000 (2016: £134,000).
Further, as reported last year 624,465 shares vested, subject to a two year clawback period on 30 June 2016. The value of these shares as at 30
June 2016 was £861,762.
4) Statement of Directors’ shareholdings
Shareholding
Requirement1
250,000
250,000
250,000
250,000
250,000
N/A
N/A
N/A
Current
beneficial
holding2
1,053,800
268,000
—
232,264
150,000
22,750
N/A
N/A
Deferred
shares
without
performance
measures
Current
shares which
count toward
shareholding
requirements3
Unvested
SAYE
options
Total of all
interests at
31 March
2017
Shareholding
requirement
met?
692,253
712,646
180,335
643,266
594,278
N/A
N/A
N/A
1,746,053
980,646
180,335
875,530
744,278
22,750
N/A
N/A
16,982
16,822
16,822
—
17,571
N/A
N/A
N/A
1,763,035
997,468
197,157
875,530
761,849
22,750
N/A
N/A
Yes
Yes
No
Yes
Yes
N/A
N/A
N/A
Executive Directors
Malcolm Diamond
Mark Belton
Clare Foster
Geoff Budd
Glenda Roberts
Non-Executive Directors
Neil Warner
Jonathan Shearman
Scott Mac Meekin
1. By 31 March 2019
Including options exercised in the year
2.
3. Total of current beneficial holding and deferred equity awards subject to continued employment only
82
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Deferred equity bonus shares:
Name
Malcolm Diamond
Mark Belton
Clare Foster1
Geoff Budd
Glenda Roberts
2014
2015
2016
2017
Total
Number
of shares
234,568
209,877
—
203,704
172,840
Face
value (£)
190,000
170,000
—
165,000
140,000
Number
of shares
192,233
192,233
—
182,622
173,010
Face
value (£)
200,000
200,000
—
190,000
180,000
Number
of shares
170,233
191,512
85,116
161,721
153,209
Face
value (£)
200,000
225,000
100,000
190,000
180,000
Number
of shares
95,219
119,024
95,219
95,219
95,219
Face
value (£)
200,000
250,000
200,000
200,000
200,000
Number
of shares
692,253
712,646
180,335
643,266
594,278
Face
value (£)
790,000
845,000
300,000
745,000
700,000
* Outside of the malus and clawback noted in our existing Executive Director remuneration Policy, the deferred equity bonus shares have no further performance
measures attached once awarded. A service condition of three years, with a good leaver clause applying
1. appointed 1 October 2015
Historic long term incentive awards
The options that were agreed with shareholders and granted on the change of management in 2009, requiring a three month average share price
greater than 51p, combined with a ROCE in excess of 10%, vested during the year ended 31 March 2013. None of the options granted to the Board
remain outstanding at 31 March 2017 (2016: 2,000,000).
2009 share options:
Name
Executive Directors
Malcolm Diamond
^ Excluding SAYE plans (see previous table)
Outstanding at
1 April
2016
Options
exercised^
Outstanding
at 31 March
2017
1,000,000
(1,000,000)
–
No other Executive or Non-Executive Directors have outstanding options under the 2009 share option scheme.
The aggregate gains made on exercising share options in the year totalled £2,030,000 (2016: £nil).
There have been no changes in the interests of any Directors between 31 March 2017 and 13 June 2017.
Annual report on remuneration — Unaudited information
5) Performance graph
The graph below sets out the Total Shareholder Return performance of the Company compared to the FTSE Small Cap Index and FTSE All-Share
Industrial Engineering Index over an eight year period from 31 March 2009. The Remuneration Committee believes it is appropriate to monitor the
Company’s performance against these indices as the Company is a constituent of both.
Total Shareholder Return from 31 March 2009
x
e
d
n
i
R
S
T
2,800
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
Trifast plc
FTSE Small Cap Index
FTSE All-Share Industrial Engineering Index
83
sluglinewww.trifast.comOur Governance
DIRECTORS’ REMUNERATION
REPORT
6) Performance and pay
The table below shows the single figure remuneration and levels of bonus and equity payouts for the Group CEO during the past eight years:
Year
2017
2016
2015
2014
2013
2012
2011
2010
Total
remuneration
£000
811
641†
766
643
1,263
327
265
176
Annual cash
bonus payout
against
maximum
100%
50%
100%
80%
30%
35%
45%
N/A*
Equity award
payout against
maximum
100%
100%
100%
100%
100%*
N/A*
N/A*
N/A*
* This was a year considered as part of the performance period for the 2009 option scheme
†
Includes a full year of CEO remuneration; including remuneration paid to JC Barker for 1 April 2015 to 30 September 2015 and remuneration for MR Belton from
1 October 2015 to 31 March 2016
7) Percentage change in CEO remuneration
The table below compares the percentage increase in the CEO’s total pay (excluding pension) with that of the UK division which is the most
appropriate allowing a consistent tax regime and inflationary environment. In both cases, salaries are reviewed annually in April:
Group CEO*
Mark Belton
UK employees
Salary
Taxable benefits
Annual bonus — cash
Annual bonus — deferred
Salary
Taxable benefits
Annual bonus
2017
£000
250
14
250
250
10,565
457
1,058
2016
£000
250
16
125
250
10,036
362
918
Change
0%
-13%
100%
0%
5.3%
26.2%
15.3%
* The calculation for 2016 reflects the change in Group CEO as follows: Jim Barker – 1 April 2015 to 30 September 2015 and Mark Belton – 1 October 2015 to
31 March 2016
8) Relative importance of spend on pay
The following table shows the relative spend on pay during the past two financial years when compared to other disbursements from profit:
Dividend distributions
Group spend on pay (including Directors)
Other payroll costs (including bonus)
Disbursements
from profit
during year to
31 March 2017
£3.31m
£26.00m
£9.48m
Disbursements
from profit
during year to
31 March 2016
£2.44m
£23.74m
£7.78m
Change
35.7%
9.5%
21.9%
9) Implementation of proposed Policy for the financial year ending 31 March 2018
The remuneration Policy’s implementation (proposed and subject to shareholder approval at the 2017 AGM) for the forthcoming year is summarised
as follows:
Element
Policy
The main elements of Director remuneration are:
Base salaries/total fees effective 1 April 2017 are as follows:
Mark Belton (Chief Executive Officer)
Clare Foster (Chief Financial Officer)
Geoff Budd (Commercial Director & European Managing Director)
Glenda Roberts (Group Sales Director)
Malcolm Diamond (Non-Executive Chairman)
Neil Warner (Non-Executive Director)
Jonathan Shearman (Non-Executive Director)
Scott Mac Meekin (Non-Executive Director)
— £300,000
— £230,000
— £210,000
— £210,000
— £150,000
— £60,000
— £55,000
— £50,000
Structure
84
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 Element
Policy
Structure
Annual bonus:
• Maximum opportunity: 125% of base salary for each of the Executive Directors. Any bonus award above 100% of base salary
will be deferred into Trifast shares for three years
• Performance measures: 75% of maximum bonus opportunity will be based on organic EPS growth, and 25% of maximum
bonus opportunity based on a range of Strategic and Operational measures
• 40% of the Strategic and Operational measures will be linked to a minimum ROCE target
• A financial underpin will apply such that in order for a payment under the Strategic and Operational element the Company will
need to achieve at least the threshold level of organic EPS growth set out below
• The organic underlying diluted EPS growth targets will be as follows:
— 5% organic EPS growth for threshold payout
— 7.5% organic EPS growth for target payout
— 10% organic EPS growth for maximum payout
— Straight-line in between these performance levels
In relation to organic EPS growth, the impact of current and previous year acquisitions and share buybacks will be excluded
from the calculation of EPS when determining performance outcomes
•
• The Committee has established four Strategic and Operational measures for FY2018. Details are included below. Full
disclosure of the measures, the targets and their achievement will be provided in the FY2018 Directors remuneration report:
— ROCE: minimum of 15%
— Growth strategy: establish fully functional acquisition team
— Customer satisfaction: commercially sensitive
— Risk mitigation: commercially sensitive
The table below sets out the percentage of the overall maximum bonus payable at each performance level.
Performance Level
Threshold
Target
Maximum
Threshold to maximum
% of maximum bonus opportunity achieved
Strategic & Operational
0%–25%
0%–25%
0%–25%
Straight line vesting between Threshold & Target and Target & Maximum
Total
10%–35%
45%–70%
75%–100%
EPS
10%
45%
75%
Long term incentive plan
• Annual award of 150% of base salary for each of the Executive Directors
• Performance measures: 70% of opportunity will be based on Underlying diluted Earnings Per Share growth, and 30% of
opportunity based on a relative TSR versus the FTSE Small Cap Index (excluding investment trusts)
• The performance targets will be as follows:
Vesting % of maximum
opportunity achieved
Below threshold (0%)
Threshold (25%)
Maximum (100%)
Threshold to maximum
EPS growth p.a.
Below 5%
5%
15%
Performance required
Relative TSR*
Below FTSE Small Cap Index (excluding investment trusts)
Equal to FTSE Small Cap Index (excluding investment trusts)
8% p.a. outperformance of FTSE Small Cap Index (excluding
investment trusts)
Straight line vesting between Thresholds & Maximums
* TSR growth for Trifast and the FTSE Small Cap Index (excluding investment trusts) will be measured using a three month average prior to the
start and the end of the three year performance period
• The Remuneration Committee wishes to ensure a fair approach when assessing the impact of unexpected FX movements
(translation) as a result of Brexit for LTIP awards granted in the financial year ending 31 March 2018
• As a result, the Committee will offset the financial year ended 31 March 2017 EPS FX gain of 1.5 pence through a reduction
of the base year EPS to the extent to which these gains have reversed over the performance period
Pension and Benefits
Pensions and benefits will be provided in line with the remuneration Policy for Executive Directors.
Non-Executive Director fees effective 1 April 2017 are based on a maximum of the following benchmarking guidance:
• Base fee: £42,000
• SID fee: £6,000
• Audit / Remuneration Committee Chair: £8,000
• Audit / Remuneration Committee member: £5,000
In line with policy, Non-Executive Directors only receives fees as set out above.
85
sluglinewww.trifast.comOur Governance
DIRECTORS’ REMUNERATION
REPORT
10) Functioning of Remuneration Committee
The role of the Committee is to ensure that the remuneration arrangements for Executive Directors provide them with the motivation to deliver our
strategy and create shareholder value in a sustainable manner. In addition, it is our task to ensure that the remuneration received by the Executive
Directors is proportionate to the performance achieved and the returns received by you as shareholders.
To fulfil our role, the Committee undertook a review of the Company’s remuneration Policy (’Policy’) during the year and consulted with shareholders
on proposed changes to the current Policy.
The Committee is composed entirely of Non-Executive Directors. Members have no day-to-day involvement in the running of the business. No
Executive Director sits on the Committee. The Remuneration Committee is formally constituted with written Terms of Reference. A copy of the Terms
of Reference is available to shareholders by writing to the Company Secretary, whose details are set out on the inside back cover of this publication.
Alongside numerous conference calls and meetings with advisors, the Committee had three formal meetings during the year. All members of the
Committee attended each of these meetings. On most occasions, the Executive Chairman, CEO and CFO were invited to attend to ensure the
Committee was in possession of all the relevant facts. During these meetings the Committee initially confirmed the final remuneration outcome for the
year to 31 March 2016, considered any appropriate changes and targets for the year to 31 March 2017 and then the structure of the newly proposed
Policy, including reflecting on shareholder feedback.
During the year the Committee received independent advice from PwC in relation to the remuneration Policy review. The fees paid by the Company
to PwC for services to the Committee during the financial year was £38,950 (excl. VAT). The Group also retains PwC with regard to taxation services
and consulting services in the ordinary course of business of Trifast. The Committee believes that this does not create a conflict of interest and the
advice they receive is independent and objective. PwC is a signatory to the Remuneration Consultants’ Code of Conduct which requires its advice to
be objective and impartial.
The Committee consults with the Company Secretary regarding issues on areas of remuneration and Corporate Governance. With regard to senior
Executives in the Company (excluding Board Directors), the Committee also takes advice from the Executive Board.
Jonathan Shearman (Chairman)
Neil Warner
Scott Mac Meekin
Attendance in
2016/2017
3
3
3
Effective 1 April 2017 and in line with the Committee’s Terms of Reference, Malcolm Diamond was appointed a member of the Committee.
11) Statement of AGM voting
The Group is committed to ongoing shareholder dialogue and takes an active interest in voting outcomes. The Committee acknowledges that a
number of shareholders voted against the current Policy given its focus on the short-term. We take shareholder feedback seriously and the changes
to our remuneration Policy have been designed to reflect these views.
The Committee also consulted, more recently, with its major shareholders regarding the introduction of a new Policy. Those shareholders will note
that we have responded to many of the issues raised during the consultation and made changes which are highlighted in this Report. We are grateful
for the time shareholders have taken to review and comment on the Policy and we will continue to engage with our shareholders on remuneration
matters and take account of those views.
The table below shows the actual voting on the 2016 remuneration report at the AGM held on 27 July 2016:
2016 remuneration report
Votes for
75,225,941
%
98.4
Votes
against
1,183,970
%
1.6%
Votes
withheld
3,194
The following table sets out actual voting in respect of the approval of the 2015 remuneration Policy at the AGM held on 16 September 2015:
2015 remuneration Policy
Votes for
53,684,927
Votes
against
13,288,674
%
80.2
%
19.8
Votes
withheld
1,828,689
This Report was approved by the Board of Directors and signed on its behalf by:
Jonathan Shearman
Chairman of the Remuneration Committee
12 June 2017
86
sluglineHOLDING THE WORLD TOGETHERTrifast plc Annual Report 2017 STATEMENT OF
DIRECTORS’ RESPONSIBILITIES
Statement of Directors’ responsibilities in respect of the Annual Report and the Financial Statements
The directors are responsible for preparing the Annual Report and the
group and parent company financial statements in accordance with
applicable law and regulations.
Responsibility statement of the directors in respect
of the annual financial report
We confirm that to the best of our knowledge:
Company law requires the directors to prepare group and parent
company financial statements for each financial year. Under that law they
are required to prepare the group financial statements in accordance
with IFRSs as adopted by the EU and applicable law and have elected to
prepare the parent company financial statements on the same basis.
•
•
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of
the state of affairs of the group and parent company and of their profit or
loss for that period. In preparing each of the group and parent company
financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
the financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company and the
undertakings included in the consolidation taken as a whole; and
the Directors’ Report includes a fair review of the development and
performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they
face.
• we consider the annual report and accounts, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the group’s position and performance,
business model and strategy.
• state whether they have been prepared in accordance with IFRSs as
adopted by the EU; and
• prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the group and the parent company
will continue in business.
On behalf of the Board
Clare Foster
Chief Financial Officer
12 June 2017
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the parent company’s transactions
and disclose with reasonable accuracy at any time the financial position
of the parent company and enable them to ensure that its financial
statements comply with the Companies Act 2006. They have general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the directors are also responsible for
preparing a Strategic Report, Directors’ Report, Directors’ Remuneration
Report and Corporate Governance Statement that comply with that law
and those regulations.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company’s website.
Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
87
sluglinewww.trifast.comOur Governance slugline OUR
FINANCIALS
Independent auditors’ report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Company statement of changes in equity
Statements of financial position
Statements of cash flows
Notes to the financial statements
91
95
96
97
98
99
100
101
slugline slugline Independent
auditor’s report
to the members of Trifast plc only
Opinions and conclusions
arising from our audit
1. Our opinion on the financial statements is
unmodified
We have audited the financial statements of Trifast
plc for the year ended 31 March 2017 set out on
pages 95 to 139. In our opinion:
— the financial statements give a true and fair
view of the state of the group’s and of the
parent company’s affairs as at 31 March 2017
and of the group’s profit for the year then
ended;
— the group financial statements have been
properly prepared in accordance with
International Financial Reporting Standards as
adopted by the European Union (IFRSs as
adopted by the EU);
— the parent company financial statements have
been properly prepared in accordance with
IFRSs as adopted by the EU and as applied in
accordance with the provisions of the
Companies Act 2006; and
— the financial statements have been prepared in
accordance with the requirements of the
Companies Act 2006; and, as regards the group
financial statements, Article 4 of the IAS
Regulation.
Overview
Materiality:
group financial
statements as a
whole
Coverage
£0.89m (2016: £0.7m)
5% (2016: 5%) of normalised profit
before tax
100% (2016: 92%) of group profit
before tax
Risks of material misstatement vs 2016
Recurring risks
Carrying amount of
inventory
◄►
Recoverability of goodwill ◄►
91
sluglineOur Financials 2. Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements, the risks of material misstatement that had the greatest
effect on our audit, in decreasing order of audit significance, were as follows (unchanged from 2016):
3. Our application of materiality and an
overview of the scope of our audit
Normalised group profit
before tax
£17.9m (2016: £14.2m)
The risk
Our response
Carrying amount of inventory
(£41.9 million; 2016: £39.4m)
Refer to page 67 (Audit
Committee Report), page 104
(accounting policy) and page 119
(financial disclosures).
A proportion of the group’s inventory is
manufactured to meet specific
customer requirements. There is a risk
over the recoverability of these
balances if a customer experiences
financial stress or there is a demand
issue with a customer’s product that
includes a part manufactured by Trifast.
Our audit focused on this customer-
specific inventory.
Recoverability of goodwill
(£29.3 million; 2016: £27.4m)
Refer to page 67 (Audit
Committee Report), page 103
(accounting policy) and pages 114
to 116 (financial disclosures).
Volatility in certain of the group’s
markets has meant that recoverability
of individual elements of the group’s
goodwill presented a risk.
In addition as assessment of
recoverability is dependent on
inherently uncertain forecasting it was a
key judgemental area that our audit
concentrated on.
In particular the recoverability of
goodwill at one component (PSEP) was
more sensitive to changes in forecast
assumptions than other components,
has the lowest value of headroom in
management’s base case projections
and demonstrated lower headroom
compared to the prior year.
Our procedures included:
Tests of details:
— we assessed whether old and slow moving
inventory is provided against in accordance
with the group accounting policy and in
compliance with accounting standards.
We considered the estimation method
applied through historical trend analysis;
— we analysed customer-specific inventory
balances by age and challenged the
group's assumptions of the expected
usage based on our knowledge and
experience of the industry in which the
customer operates;
— we inspected a sample of service level
agreements to compare customers'
minimum purchase commitments to year-
end inventory levels and considered any
residual risk of recoverability; and
Assessing transparency:
— we considered the adequacy of the group's
disclosures about the degree of estimation
involved in arriving at the inventory
provision.
Our procedures included:
Control design:
— we tested the group's budgeting
procedures upon which the forecasts are
based and the principles and integrity of
the group's discounted cash flow model;
Benchmarking assumptions:
— we compared the group's assumptions to
externally derived data as well as our own
assessments based on our knowledge of
the client and experience of the industry in
which it operates. Specifically we
compared their assumptions such as
projected revenue growth, profitability and
discount rates, to industry norms,
components’ historical performance and
external data sources;
Sensitivity analysis:
— we performed sensitivity analyses for
these key inputs and assumptions, and
identified whether any cash generating
units were particularly sensitive to
impairment; and
Assessing transparency:
— we assessed whether the group's
disclosures related to the sensitivity of the
outcome of the impairment assessment to
changes in key assumptions reflected the
risks inherent in the valuation of goodwill.
92
Materiality for the group financial statements as
a whole was set at £0.89 million (2016: £0.7
million), determined with reference to a
benchmark of group profit before tax,
normalised to exclude costs of exercise of
executive share options, of £17.9 million of
which it represents 5%, (2016 £14.2 million,
determined with reference to group profit before
tax normalised to exclude that year’s accelerated
share based payment and acquisition costs, of
which it represents 5%).
We report to the audit committee any corrected
or uncorrected misstatements exceeding
£43,000 (2016: £35,000), in addition to other
identified misstatements that warranted
reporting on qualitative grounds.
Of the group’s 22 (2016: 21) reporting
components, we subjected 10 (2016: 11) to
audits for group reporting purposes. We
conducted reviews of financial information
(including enquiry) at a further 8 (2016: 7) non-
significant components. These components
were not individually significant enough to
require an audit for group reporting purposes but
a review was performed due to the size and risk
profile of these components.
The components within the scope of our work
accounted for the percentages illustrated
opposite.
The Group team instructed component auditors
as to the significant areas to be covered,
including the relevant risks detailed above and
the information to be reported back. The Group
team approved the component materialities,
which ranged from £111,000 to £800,000 (2016:
£77,000 to £650,000), having regard to the mix
of size and risk profile of the Group across the
components. The work on 8 of the 18 reporting
components subject to audit or review (2016: 8
of the 18 reporting components subject to audit
or review) was performed by component
auditors and the rest by the Group team. The
group team performed procedures on the items
excluded from normalised group profit before
tax.
The Group team visited 1 (2016: 1) component
location in Italy (2016: Singapore). Telephone
conference meetings were also held with that
component auditor and others that were not
physically visited. At these visits and meetings,
the findings reported to the Group team were
discussed in more detail, and any further work
required by the Group team was then performed
by the component auditor.
Materiality
£0.89m (2016: £0.7m)
£0.89m
Whole financial
statements materiality
(2016: £0.7m)
£800k
Range of materiality at 22
components £111k to £800k
(2016: £77k to £650k)
14
14
100%*
(2016 92%)
78
86
Normalised group profit
before tax
£43k
Misstatements reported to the
audit committee (2016: £35k)
Group revenue
Group profit before tax
13
9
100%*
(2016 99%)
90
87
Group total assets
17
14
99%
(2016 97%)
83
82
Key:
Full scope for group audit purposes 2017
Specified risk-focused audit procedures 2017
Full scope for group audit purposes 2016
Specified risk-focused audit procedures 2016
Residual components
* Rounded to nearest whole percent
slugline 3. Our application of materiality and an
overview of the scope of our audit
Materiality for the group financial statements as
a whole was set at £0.89 million (2016: £0.7
million), determined with reference to a
benchmark of group profit before tax,
normalised to exclude costs of exercise of
executive share options, of £17.9 million of
which it represents 5%, (2016 £14.2 million,
determined with reference to group profit before
tax normalised to exclude that year’s accelerated
share based payment and acquisition costs, of
which it represents 5%).
We report to the audit committee any corrected
or uncorrected misstatements exceeding
£43,000 (2016: £35,000), in addition to other
identified misstatements that warranted
reporting on qualitative grounds.
Of the group’s 22 (2016: 21) reporting
components, we subjected 10 (2016: 11) to
audits for group reporting purposes. We
conducted reviews of financial information
(including enquiry) at a further 8 (2016: 7) non-
significant components. These components
were not individually significant enough to
require an audit for group reporting purposes but
a review was performed due to the size and risk
profile of these components.
The components within the scope of our work
accounted for the percentages illustrated
opposite.
The Group team instructed component auditors
as to the significant areas to be covered,
including the relevant risks detailed above and
the information to be reported back. The Group
team approved the component materialities,
which ranged from £111,000 to £800,000 (2016:
£77,000 to £650,000), having regard to the mix
of size and risk profile of the Group across the
components. The work on 8 of the 18 reporting
components subject to audit or review (2016: 8
of the 18 reporting components subject to audit
or review) was performed by component
auditors and the rest by the Group team. The
group team performed procedures on the items
excluded from normalised group profit before
tax.
The Group team visited 1 (2016: 1) component
location in Italy (2016: Singapore). Telephone
conference meetings were also held with that
component auditor and others that were not
physically visited. At these visits and meetings,
the findings reported to the Group team were
discussed in more detail, and any further work
required by the Group team was then performed
by the component auditor.
Normalised group profit
before tax
£17.9m (2016: £14.2m)
Materiality
£0.89m (2016: £0.7m)
£0.89m
Whole financial
statements materiality
(2016: £0.7m)
£800k
Range of materiality at 22
components £111k to £800k
(2016: £77k to £650k)
Normalised group profit
before tax
£43k
Misstatements reported to the
audit committee (2016: £35k)
Group revenue
Group profit before tax
14
14
100%*
(2016 92%)
78
86
13
9
100%*
(2016 99%)
90
87
Group total assets
17
14
99%
(2016 97%)
83
82
Key:
Full scope for group audit purposes 2017
Specified risk-focused audit procedures 2017
Full scope for group audit purposes 2016
Specified risk-focused audit procedures 2016
Residual components
* Rounded to nearest whole percent
93
sluglineOur Financials 4. Our opinion on other matters prescribed by the
Companies Act 2006 is unmodified
In our opinion:
— the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with
the Companies Act 2006; and
— the information given in the Strategic Report and the
Directors’ Report for the financial year is consistent
with the financial statements.
Based solely on the work required to be undertaken in the
course of the audit of the financial statements and from
reading the Strategic Report and the Directors’ Report:
— we have not identified material misstatements in those
reports; and
— in our opinion, those reports have been prepared in
accordance with the Companies Act 2006.
5. We have nothing to report on the disclosures of
principal risks
Based on the knowledge we acquired during our audit, we
have nothing material to add or draw attention to in relation
to:
— the directors’ viability statement on page 50,
concerning the principal risks, their management, and,
based on that, the directors’ assessment and
expectations of the group’s continuing in operation over
the three years to 31 March 2020; or
— the disclosures in note 1 of the financial statements
concerning the use of the going concern basis of
accounting.
6. We have nothing to report in respect of the matters
on which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to
you if, based on the knowledge we acquired during our
audit, we have identified other information in the annual
report that contains a material inconsistency with either that
knowledge or the financial statements, a material
misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
— we have identified material inconsistencies between
the knowledge we acquired during our audit and the
directors’ statement that they consider that the annual
report and financial statements taken as a whole is fair,
balanced and understandable and provides the
information necessary for shareholders to assess the
group’s position and performance, business model and
strategy; or
— the Audit Committee Report does not appropriately
address matters communicated by us to the audit
committee.
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
— adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
— the parent company financial statements and the part
of the Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and
returns; or
— certain disclosures of directors’ remuneration specified
by law are not made; or
— we have not received all the information and
explanations we require for our audit.
Under the Listing Rules we are required to review:
— the directors’ statements, set out on page 65, in
relation to going concern and longer-term viability; and
— the part of the Corporate Governance Statement on
pages 64 to 65 relating to the company’s compliance
with the eleven provisions of the 2014 UK Corporate
Governance Code specified for our review.
We have nothing to report in respect of the above
responsibilities.
Scope and responsibilities
As explained more fully in the Directors’ Responsibilities
Statement set out on page 87, the directors are responsible for
the preparation of the financial statements and for being
satisfied that they give a true and fair view. A description of the
scope of an audit of financial statements is provided on the
Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate. This report is made solely
to the Company’s members as a body and is subject to
important explanations and disclaimers regarding our
responsibilities, published on our website at
www.kpmg.com/uk/auditscopeukco2014a, which are
incorporated into this report as if set out in full and should be
read to provide an understanding of the purpose of this report,
the work we have undertaken and the basis of our opinions.
Mark Sheppard (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Forest Gate
Brighton Road
Crawley
RH11 9PT
12 June 2017
94
slugline CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2017
Continuing operations
Revenue
Cost of sales
Gross profit
Other operating income
Distribution expenses
Administrative expenses before separately disclosed items
IFRS2 charge
Acquired intangible amortisation
Net acquisition costs
Profit on sale of fixed assets
Costs on exercise of executive share options
Total administrative expenses
Operating profit
Financial income
Financial expenses
Net financing costs
Profit before taxation
Taxation
Profit for the year (attributable to equity shareholders of the Parent Company)
Earnings per share
Basic
Diluted
The notes on pages 101 to 139 form part of these financial statements
Note
3
4
2, 22
2, 12
2, 32
2
2
5, 6, 7
8
8
2, 3
9
25
25
2017
£000
2016
£000
186,512
(128,495)
58,017
395
(3,964)
(33,430)
(1,512)
(1,273)
—
195
(567)
(36,587)
17,861
60
(581)
(521)
17,340
(4,642)
12,698
10.72p
10.40p
161,370
(113,366)
48,004
317
(3,202)
(28,326)
(1,687)
(974)
(264)
—
—
(31,251)
13,868
60
(851)
(791)
13,077
(2,852)
10,225
8.78p
8.50p
95
sluglinewww.trifast.comOur Financials
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 31 March 2017
Profit for the year
Other comprehensive income/(expense) for the year:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Loss on a hedge of a net investment taken to equity
Other comprehensive income recognised directly in equity
Total comprehensive income recognised for the year
(attributable to the equity shareholders of the Parent Company)
2017
£000
12,698
8,486
(2,155)
6,331
2016
£000
10,225
4,764
(2,537)
2,227
19,029
12,452
96
sluglineTrifast plc Annual Report 2017 CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the year ended 31 March 2017
Balance at 31 March 2016
Total comprehensive income for the year:
Profit for the year
Other comprehensive income for the year
Total comprehensive income recognised for the year
Issue of share capital (note 24)
Share based payment transactions (including tax)
Dividends (note 24)
Total transactions with owners
Balance at 31 March 2017
Share
capital
£000
5,837
Share
premium
£000
21,161
—
—
—
177
—
—
177
6,014
—
—
—
217
—
—
217
21,378
Translation
reserve
£000
8,569
—
6,331
6,331
—
—
—
—
14,900
Retained
earnings
£000
48,183
12,698
—
12,698
(53)
1,888
(3,310)
(1,475)
59,406
Total
equity
£000
83,750
12,698
6,331
19,029
341
1,888
(3,310)
(1,081)
101,698
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the year ended 31 March 2016
Balance at 31 March 2015
Total comprehensive income for the year:
Profit for the year
Other comprehensive income for the year
Total comprehensive income recognised for the year
Issue of share capital (note 24)
Share based payment transactions (including tax)
Dividends (note 24)
Total transactions with owners
Balance at 31 March 2016
Share
capital
£000
5,809
Share
premium
£000
20,978
Translation
reserve
£000
6,342
Retained
earnings
£000
38,551
—
—
—
28
—
—
28
—
—
—
183
—
—
183
—
2,227
2,227
—
—
—
—
5,837
21,161
8,569
10,225
—
10,225
—
1,847
(2,440)
(593)
48,183
Total
equity
£000
71,680
10,225
2,227
12,452
211
1,847
(2,440)
(382)
83,750
97
sluglinewww.trifast.comOur Financials COMPANY STATEMENT OF
CHANGES IN EQUITY
for the year ended 31 March 2017
Balance at 31 March 2016
Total comprehensive income for the year:
Profit for the year
Total comprehensive income recognised
for the year
Issue of share capital (note 24)
Share based payment transactions (including tax)
Dividends (note 24)
Total transactions with owners
Balance at 31 March 2017
Share
capital
£000
5,837
Share
premium
£000
21,161
Merger
reserve
£000
1,521
Retained
earnings
£000
16,013
—
—
177
—
—
177
6,014
—
—
217
—
—
217
—
—
—
—
—
—
21,378
1,521
4,814
4,814
(53)
1,758
(3,310)
(1,605)
19,222
Total
equity
£000
44,532
4,814
4,814
341
1,758
(3,310)
(1,211)
48,135
COMPANY STATEMENT OF
CHANGES IN EQUITY
for the year ended 31 March 2016
Balance at 31 March 2015
Total comprehensive income for the year:
Profit for the year
Total comprehensive income recognised
for the year
Issue of share capital (note 24)
Share based payment transactions (including tax)
Dividends (note 24)
Total transactions with owners
Balance at 31 March 2016
Share
capital
£000
5,809
Share
premium
£000
20,978
Merger
reserve
£000
1,521
Retained
earnings
£000
5,586
Total
equity
£000
33,894
—
—
28
—
—
28
—
—
183
—
—
183
—
—
—
—
—
—
5,837
21,161
1,521
11,068
11,068
11,068
—
1,799
(2,440)
(641)
16,013
11,068
211
1,799
(2,440)
(430)
44,532
98
sluglineTrifast plc Annual Report 2017 STATEMENTS OF FINANCIAL POSITION
at 31 March 2017
Non-current assets
Property, plant and equipment
Intangible assets
Equity investments
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Bank overdraft
Other interest-bearing loans and borrowings
Trade and other payables
Tax payable
Provisions
Total current liabilities
Non-current liabilities
Other interest-bearing loans and borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Reserves
Retained earnings
Total equity
Note
10, 11
12, 13
14
15, 16
17
18
19, 26
3
19, 26
20, 26
21
23
20, 26
23
15, 16
3
Group
Company
2017
£000
19,258
39,682
—
2,359
61,299
41,926
49,360
24,645
115,931
177,230
—
14,872
37,145
2,471
76
54,564
16,221
1,111
3,636
20,968
75,532
101,698
6,014
21,378
14,900
59,406
101,698
2016
£000
17,171
38,259
—
2,165
57,595
39,438
43,386
17,614
100,438
158,033
33
16,901
33,030
2,773
76
52,813
16,675
1,117
3,678
21,470
74,283
83,750
5,837
21,161
8,569
48,183
83,750
2017
£000
2,574
—
41,440
685
44,699
—
31,382
2,587
33,969
78,668
—
11,077
4,362
—
—
15,439
14,930
—
164
15,094
30,533
48,135
6,014
21,378
1,521
19,222
48,135
The notes on pages 101 to 139 form part of these financial statements.
These financial statements were approved by the Board of Directors on 12 June 2017 and were signed on its behalf by:
Malcolm Diamond MBE
Director
Mark Belton
Director
2016
£000
2,362
—
41,440
836
44,638
—
33,613
1,406
35,019
79,657
2,273
12,091
5,720
—
—
20,084
14,866
—
175
15,041
35,125
44,532
5,837
21,161
1,521
16,013
44,532
99
sluglinewww.trifast.comOur Financials STATEMENTS OF CASH FLOWS
for the year ended 31 March 2017
Group
Company
Note
2017
£000
2016
£000
2017
£000
2016
£000
12,698
10,225
4,814
11,068
3,123
165
(60)
581
(184)
—
1,512
4,642
22,477
(3,075)
(273)
3,764
(6)
22,887
(5,136)
17,751
198
60
(1,471)
(2,948)
—
(4,161)
341
2,236
(7,030)
(6)
(3,310)
(581)
(8,350)
5,240
17,581
1,824
24,645
2,331
(119)
(60)
851
15
—
1,687
2,852
17,782
(1,360)
(421)
(58)
(70)
15,873
(3,080)
12,793
16
91
(7,684)
(2,339)
—
(9,916)
181
11,451
(8,969)
(31)
(2,440)
(895)
(703)
2,174
15,014
393
17,581
76
—
(28)
350
—
(10,814)
1,145
402
(4,055)
4,653
—
(1,361)
—
(763)
—
(763)
—
26
—
(288)
10,814
10,552
341
2,100
(5,120)
—
(3,310)
(346)
(6,335)
3,454
(867)
—
2,587
(6,676)
(256)
(32)
406
—
(8,532)
1,224
(277)
(3,075)
(3,914)
—
(3,743)
—
(10,732)
—
(10,732)
—
32
—
(2)
8,532
8,562
181
9,252
(1,825)
—
(2,440)
(419)
4,749
2,579
(3,446)
—
(867)
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation, amortisation and impairment/(reversal)
Unrealised foreign currency loss/(gain)
Financial income
Financial expense
(Gain)/loss on sale of property, plant and equipment
and investments
Dividends received
Equity settled share based payment charge
Taxation charge/(credit)
Operating cash inflow/(outflow) before changes in working
capital and provisions
Change in trade and other receivables
Change in inventories
Change in trade and other payables
Change in provisions
Cash generated from/(used in) operations
Tax paid
Net cash from/(used in) operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Interest received
Acquisition of subsidiary, net of cash acquired
32
Acquisition of property, plant and equipment and intangibles
10, 11, 12
Dividends received
Net cash (used in)/from investing activities
Cash flows from financing activities
Proceeds from the issue of share capital, net of acquisition
Proceeds from new loan
Repayment of borrowings
Payment of finance lease liabilities
Dividends paid
Interest paid
Net cash (used in)/from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at 1 April
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 31 March
24
24
19
19
100
sluglineTrifast plc Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
1
Accounting policies
a) Significant accounting policies
Trifast plc (‘the Company’) is a company incorporated in the United Kingdom. The registered office details are on page 147.
The Consolidated financial statements consolidate those of the Company and its subsidiaries (together referred to as the Group).
The Company financial statements present information about the Company as a separate entity and not about its Group. The profit after
tax for the Company is £4.8m (2016: £11.07m).
Statement of compliance
Both the Company financial statements and the Consolidated financial statements have been prepared and approved by the Directors in
accordance with International Financial Reporting Standards as adopted by the EU (‘Adopted IFRSs’) except as explained below:
On publishing the Company financial statements here together with the Consolidated financial statements, the Company is taking advantage
of the exemption in s408 of the Companies Act 2006 not to present its individual income statement and related notes that form a part of these
approved financial statements.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these Consolidated
and Company financial statements.
b) Basis of preparation
The financial statements are prepared in Sterling, rounded to the nearest thousand. They are prepared on the historical cost basis with the
exception of certain items which are measured at fair value as disclosed in the accounting policies below.
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects current
and future periods.
Judgements made by management in the application of Adopted IFRSs that have significant effect on the financial statements and estimates
with a significant risk of material adjustment in the next year are discussed in note 31.
Going concern
A review of the business activity and future prospects of the Group are covered in the accompanying Strategic report. The financial position of
the Group, its cash flows, liquidity position and borrowing facilities are specifically described in the Business review on pages 32 to 41. Detailed
information regarding the Group’s current facility levels, liquidity, credit, interest and foreign exchange risk are provided in note 26.
Current trading and forecasts show that the Group will continue to be profitable and generate cash. The banking facilities and covenants that
are in place provide appropriate headroom against our forecasts.
Considering the 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.
c) Basis of consolidation
i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to direct relevant activities of an entity so as to
obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the
date that control ceases.
ii) Transactions eliminated on consolidation
Intra-Group balances, and any unrealised gains and losses or income and expenses arising from intra-Group transactions, are eliminated in
preparing the consolidated financial statements.
101
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
1
Foreign currency transactions
Accounting policies (continued)
d) Foreign currency
i)
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated to Sterling at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised in the consolidated income statement. Non-monetary assets and liabilities that are
measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
ii) Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Sterling at
foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Sterling at average
rates of exchange for the period, where this rate approximates to the foreign exchange rates ruling at the dates of the transactions.
Foreign exchange differences arising on retranslation are recognised directly in a separate component of equity, the translation reserve. They are
released into the income statement as part of the gain or loss on disposal.
e) Hedge of net investment in foreign operations
The portion of the gain or loss on an instrument used to hedge a net investment in a foreign operation that is determined to be an effective
hedge is recognised directly in equity in the translation reserve. The ineffective portion is recognised immediately in the income statement. The
effective portion is recycled and recognised in the income statement upon disposal of the operation.
f) Property, plant and equipment
i) Owned assets
Property, plant and equipment are stated at cost or deemed cost less accumulated depreciation (see below) and impairment losses (see
accounting policy (j)).
Certain items of property, plant and equipment that had been revalued to fair value on or prior to 1 April 2004, the date of transition to Adopted
IFRS, are measured on the basis of deemed cost, being the revalued amount at the date of transition.
ii) Depreciation
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant
and equipment. Land is not depreciated. The depreciation rates are as follows:
Freehold and long leasehold buildings — 2% per annum on a straight-line basis or the period of the lease
— period of the lease
Short leasehold properties
— 20–25% on a straight-line basis
Motor vehicles
Plant and machinery
— 10–20% per annum on a straight-line basis
Fixtures, fittings and office equipment — 10–25% per annum on a straight-line basis
When parts of an item of property, plant and equipment have different useful lives, those components are accounted for as separate items of
property, plant and equipment. Where relevant, residual values are reassessed annually.
iii) Leased assets
The rental charges on assets held under operating leases are taken to the profit and loss account on a straight-line basis over the life of the
lease.
Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases.
Where land and buildings are held under leases the accounting treatment of the land is considered separately from that of the buildings. Leased
assets acquired by way of finance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum
lease payments at inception of the lease, less accumulated depreciation and less accumulated impairment losses. Lease payments are
accounted for as described in accounting policy (o).
102
sluglineTrifast plc Annual Report 2017 1
Accounting policies (continued)
iv) Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that
cost is incurred, if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can
be measured reliably. All other costs are recognised in the income statement as an expense as incurred.
Intangible assets
g)
i) On business combinations
All business combinations are accounted for by applying the acquisition method. In respect of business combinations that have occurred since
1 April 2004, goodwill represents the difference between the fair value of the consideration transferred and the fair value of the net identifiable
assets acquired. Identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those
rights are separable.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. For non-equity amounts any subsequent changes to
the fair value are recognised in the profit and loss.
Positive goodwill arising on acquisitions is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating
units and is not amortised but is tested annually for impairment (see accounting policy (j)).
Goodwill arising on acquisitions before 1 April 1998 was written off to reserves in the year of acquisition. Under IFRS1 and IFRS3, this goodwill
will now remain eliminated against reserves. Goodwill arising on acquisitions after 1 April 1998 but before 31 March 2004 is included on the
basis of its deemed cost, which represents the amortised amount recorded under UK GAAP as at 31 March 2004. The classification and
accounting treatment of business combinations that occurred prior to 1 April 2004 has not been reconsidered in preparing the Group’s year-
end balance sheets.
Negative goodwill arising on an acquisition is recognised directly in profit or loss.
ii) Other intangible assets
Intangible assets other than goodwill that are acquired by the Group are stated at cost less accumulated amortisation (see below) and
impairment losses (see accounting policy (j)).
Expenditure on internally generated goodwill and brands is recognised in profit or loss as an expense as incurred.
iii) Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure is expensed as incurred.
iv) Amortisation
Amortisation is charged to the consolidated income statement on a straight-line basis over the estimated useful lives of intangible assets, unless
such lives are indefinite. Goodwill and intangible assets with an indefinite useful life are tested systematically for impairment at each annual
balance sheet date.
The amortisation rates of other intangible assets per annum are as follows:
Customer relationships —
—
Technology
—
Order backlog
—
Other
6.7% to 12.5%
6.7% to 10%
100%
20% to 33%
h) Non-derivative financial instruments
i)
Investments in subsidiaries are held in the Company balance sheet at historic cost net of any impairment (see accounting policy (j)).
Investments in subsidiaries
103
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
1
Accounting policies (continued)
ii) Trade and other receivables
Trade and other receivables are recognised initially at their fair value, and subsequently at amortised cost less impairment losses
(see accounting policy (j)).
iii) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are
repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents
only for the purpose of the Statements of cash flows.
Interest-bearing borrowings
iv)
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-
bearing borrowings are stated at amortised cost.
v) Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequently they are measured at amortised cost.
Inventories
i)
Inventories are stated at the lower of cost and net realisable value with provision being made for obsolete and slow moving items.
In determining the cost of raw materials, consumables and goods purchased for resale, a first-in first-out purchase price is used and includes
expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. For work in progress and finished
goods manufactured by the Group, cost is taken as production cost, which includes an appropriate proportion of attributable overheads based
on normal operating capacity.
Impairment
j)
The carrying amounts of the Group’s assets, other than inventories (see accounting policy (i)), and deferred tax assets (see accounting policy
(p)), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the
asset’s recoverable amount is estimated.
Financial assets are considered to be impaired if objective evidence indicates that one or more events has had a negative effect on the
estimated future cash flows of that asset.
For goodwill and other intangible assets that have an indefinite useful life, the recoverable amount is estimated at each annual balance sheet
date.
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount.
Impairment losses are recognised in the consolidated income statement unless the asset is recorded at a revalued amount in which case it is
treated as a revaluation decrease.
Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to
cash generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash generating unit is the
smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of
assets.
i) Calculation of recoverable amount
The recoverable amount is the greater of net selling price and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the
cash generating unit to which the asset belongs.
ii) Reversals of impairment
An impairment loss in respect of goodwill is not reversed. An impairment loss on any other asset is assessed at each reporting date and is
reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.
104
sluglineTrifast plc Annual Report 2017 1
Accounting policies (continued)
k) Share capital
i) Dividends
Dividends to the Company’s shareholders are recognised as a liability and deducted from shareholders’ equity in the period in which the
shareholders’ right to receive payment is established.
ii) Classification of share capital issued by the Group
Share capital issued by the Group is treated as equity as it is a non-derivative that confers no contractual obligations upon the Company or the
Group to deliver cash or other financial assets with another party under conditions that are potentially unfavourable.
l) Employee benefits
i) Defined contribution plans
The Group operates Defined Contribution Pension Schemes which include stakeholder pension plans. The assets of these schemes are held
separately from those of the Group in independently administered funds. The amount charged against profits represents the contributions
payable to the schemes in respect of the accounting period. The Group pays fixed contributions and will have no legal or constructive obligation
to pay further amounts.
ii) Share based payment transactions
The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognised as an expense,
with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect
the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount
ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting
date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect
such conditions and there is no true-up for differences between expected and actual outcomes.
The fair value of the amount payable to employees in respect of cash settled awards is recognised as an expense with a corresponding
increase in liabilities over the period during which the employees become unconditionally entitled to payment. The liability is remeasured at each
reporting date and at settlement date based on the fair value of the award. Any changes in the liability are recognised in profit or loss.
Where the Company grants awards over its own shares to the employees of its subsidiaries it recognises, in its individual financial statements,
an increase in the cost of investment in its subsidiaries equivalent to the share based payment charge recognised in its consolidated financial
statements with the corresponding credit being recognised in equity or liabilities depending on the method of settlement. Amounts recharged to
the subsidiary are recognised as a reduction in the cost of investment in the subsidiary.
iii) Termination benefits
Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a
formal plan to terminate employment before the normal retirement date.
m) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it
is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when
appropriate, the risks specific to the liability.
n) Revenue
Revenue from the sale of goods rendered is recognised net of VAT in the consolidated income statement when the significant risks and rewards
of ownership have been transferred to the buyer. In accordance with normal practice, this will be on dispatch of goods or at the point of
customer acceptance where appropriate.
o) Expenses
i) Operating lease payments
Payments made under operating leases are recognised in the consolidated income statement on a straight-line basis over the term of the lease.
Lease incentives received are recognised in the consolidated income statement as an integral part of the total lease expense.
105
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
1
Accounting policies (continued)
ii) Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is
allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
iii) Net financing costs
Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method and interest receivable on funds
invested. Interest income is recognised in the consolidated income statement as it accrues, using the effective interest method. Net finance
costs also include the amortisation of arrangement fees and related costs.
p) Taxation
Tax on the profit or loss for the period presented comprises current and deferred tax. Tax is recognised in the consolidated income statement
except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance
sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided
for: the initial recognition of goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting
nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.
Information as to the calculation of income tax on the profit or loss for the period presented is included in note 9.
q) Operating segment reporting
A segment is a distinguishable component of the Group that is engaged in providing products or services within a particular geographical
economic environment whose operating results are reviewed regularly by the Group’s Chief Operating Decision Maker (the Board) in order to
allocate resources and assess its performance and for which discrete financial information is available.
The Group operates in a number of geographical economic environments. The Company only operates in one business segment, being the
manufacture and logistical supply of industrial fasteners and category ‘C’ components.
r) Financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its Group, the Company
considers these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee contract as a
contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.
s) Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted
EPS is determined by adjusting the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary
shares, which comprise share options and deferred equity awards granted to employees.
106
sluglineTrifast plc Annual Report 2017 1
Accounting policies (continued)
t) Underlying measure of profits and losses
The Group believes that underlying operating profit and underlying profit before tax provide additional guidance to statutory measures to help
understand the underlying performance of the business during the financial period. The term ‘underlying’ is not defined under Adopted IFRS. It
is a measure that is used by management to assess the underlying performance of the business internally and is not intended to be a substitute
measure for Adopted IFRSs’ GAAP measures. The Group defines these underlying measures as follows:
Underlying profit before tax is profit before taxation and separately disclosed items (see note 2).
Underlying profit after tax is profit after taxation but before separately disclosed items (see note 2) and is used in the calculation of underlying
earnings per share.
Underlying operating and segment results (see note 3) are operating and segment profit before separately disclosed items.
It should be noted that the definitions of underlying items being used in these financial statements are those used by the Group and may not be
comparable with the term ’underlying’ as defined by other companies within the same sector or elsewhere.
Separately disclosed items are included within the income statement caption to which they relate.
u) Separately disclosed items (see note 2)
Separately disclosed items are those significant items which in management’s judgement should be highlighted by virtue of their size or
incidence to enable a full understanding of the Group’s financial performance.
v) Adopted IFRS not yet applied
The following Adopted IFRSs have been issued but have not been applied in these financial statements. Their adoption is not expected to have
a material effect on the financial statements unless otherwise indicated:
•
IFRS 9 Financial Instruments (effective date 1 January 2018)
•
IFRS 15 Revenue from Contracts with Customers (effective date 1 January 2018)
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing
revenue recognition guidance, including IAS 18.
IFRS 15 is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. This means that it will be effective
for the year ending 31 March 2019 for Trifast. The Group is currently performing an assessment of the potential impact of the adoption but do
not anticipate it being material.
•
IFRS 16 Leases (effective date 1 January 2019)
IFRS 16 introduces a single, on-balance sheet accounting model for lessees. A lessee recognises a right-of-use asset representing its right to
use the underlying asset and a lease liability representing its obligation to make lease payments. There are optional exemptions for short-term
leases and leases of low value items.
IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15
Operating Leases—Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for entities that apply IFRS 15
Revenue from Contracts with Customers at or before the date of initial application of IFRS 16. This will be effective for Trifast in the year ending
31 March 2020. The Group plans to perform an assessment of the impact of IFRS 16 on the financial statements during the current financial
year. Given the value of the Group’s operating lease commitments, it is expected it will have a material impact on the values of gross assets and
gross liabilities recognised in the financial statements.
107
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
2 Underlying profit before tax and separately disclosed items
Underlying profit before tax
Separately disclosed items within administrative expenses
IFRS2 share based payment charge
Acquired intangible amortisation
Net acquisition costs
Profit on sale of fixed assets
Costs on exercise of executive share options
Profit before tax
Underlying EBITDA
Separately disclosed items within administrative expenses
IFRS2 share based payment charge
Net acquisition costs
Profit on sale of fixed assets
Costs on exercise of executive share options
EBITDA
Acquired intangible amortisation
Depreciation and non-acquired amortisation
Operating profit
Note
22
12
32
Note
22
32
2017
£000
20,497
(1,512)
(1,273)
—
195
(567)
17,340
2017
£000
22,868
(1,512)
—
195
(567)
20,984
(1,273)
(1,850)
17,861
2016
£000
16,002
(1,687)
(974)
(264)
—
—
13,077
2016
£000
18,150
(1,687)
(264)
—
—
16,199
(974)
(1,357)
13,868
There were no separately disclosed items in 2017 (2016: £nil) other than the amounts detailed above.
During the period the IFRS2 charge decreased slightly due to the acceleration in the prior year of the 2014, 2015 and 2016 Deferred Equity
Bonus charges for retiring Directors, offset by a charge for the 2017 Deferred Equity Bonus scheme for Directors and the addition of a new
Deferred Bonus Award scheme for senior managers. £1.1m (2016: £1.6m) relates to the Deferred Equity Bonus scheme for Directors of which
£0.1m (2016: £0.8m) relates to retiring Directors. £0.3m (2016: £nil) represents the charge for the Deferred Bonus Award scheme for senior
managers. The remaining £0.1m (2016: £0.1m) relates to the SAYE scheme.
The increase in the acquired intangible amortisation charge is primarily due to the acquisition of Kuhlmann in the prior year now having a full
year effect.
During the year the remaining 2m options granted under the 2009 executive share option scheme were exercised. The Company incurred
£0.6m of employer’s National Insurance in relation to these exercises and the acceleration of the 2014, 2015 and 2016 Deferred Equity Bonus
awards.
Obsolete plant and machinery was sold in our Italian manufacturing company Viteria Italia Centrale. The profit recorded on this sale was £0.2m.
Management feel it is appropriate to remove the one off costs and certain non-trading items discussed above to better allow the reader of the
accounts to understand the underlying performance of the Group. Further reconciliations of underlying measures to GAAP measures can be
found in note 34.
108
sluglineTrifast plc Annual Report 2017
3 Operating segmental analysis
Segment information, as discussed in note 1 (q), is presented in the consolidated financial statements in respect of the Group’s geographical
segments. This reflects the Group’s management and internal reporting structure, and the operating basis on which individual operations are
reviewed by the Chief Operating Decision Maker (the Board).
Performance is measured based on each segment’s underlying profit before finance costs and income tax as included in the internal
management reports that are reviewed by the Chief Operating Decision Maker. This is used to measure performance as management believes
that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within the industry.
Inter-segment pricing is determined on an arm’s length basis.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable
basis.
Goodwill and intangible assets acquired on business combinations are included in the region to which they relate.
Geographical operating segments
The Group is comprised of the following main geographical operating segments:
— UK
— Europe:
includes Norway, Sweden, Hungary, Ireland, Holland, Italy, Germany, Spain and Poland
— USA:
includes USA and Mexico
— Asia:
includes Malaysia, China, Singapore, Taiwan, Thailand and India
In presenting information on the basis of geographical operating segments, segment revenue and segment assets are based on the
geographical location of our entities across the world, and are consolidated into the four distinct geographical regions, which the Board use to
monitor and assess the Group.
March 2017
Revenue
Revenue from external customers
Inter segment revenue
Total revenue
Underlying operating result
Net financing costs
Underlying segment result
Separately disclosed items (see note 2)
Profit before tax
Specific disclosure items
Depreciation and amortisation
Assets and liabilities
Segment assets
Segment liabilities
UK
£000
Europe
£000
66,825
2,443
69,268
6,538
(145)
6,393
67,231
613
67,844
9,818
(73)
9,745
USA
£000
5,900
123
6,023
334
—
334
Asia
£000
46,556
7,262
53,818
8,005
20
8,025
Common
costs
£000
—
—
—
(3,677)
(323)
(4,000)
Total
£000
186,512
10,441
196,953
21,018
(521)
20,497
(3,157)
17,340
423
1,626
25
973
76
3,123
40,348
(19,535)
68,289
(13,689)
3,742
(294)
58,876
(11,581)
5,975
(30,433)
177,230
(75,532)
109
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
3 Operating segmental analysis (continued)
March 2016
Revenue
Revenue from external customers
Inter segment revenue
Total revenue
Underlying operating result
Net financing costs
Underlying segment result
Separately disclosed items (see note 2)
Profit before tax
Specific disclosure items
Depreciation and amortisation
Assets and liabilities
Segment assets
Segment liabilities
UK^
£000
64,156
2,057
66,213
6,172
(278)
5,894
Europe
£000
54,030
341
54,371
6,880
(107)
6,773
USA
£000
4,602
97
4,699
401
(2)
399
Asia*
£000
38,582
6,276
44,858
6,730
(29)
6,701
Common
costs ^
£000
—
—
—
(3,390)
(375)
(3,765)
Total
£000
161,370
8,771
170,141
16,793
(791)
16,002
(2,925)
13,077
231
1,181
22
833
64
2,331
36,525
(15,792)
63,568
(14,952)
3,164
(385)
50,295
(9,679)
4,481
(33,475)
158,033
(74,283)
^ Including the offset of the UK overdrafts from Common costs, as allowable under financing agreements with HSBC
*Historically this was stated after eliminating revenue between Asian entities. However management believe it is more appropriate to include this in the inter segment
revenue number above and therefore this has been restated to £6.3m from £5.8m. In FY2017 the equivalent adjustment was £0.3m
There were no material differences in Europe and USA between the external revenue based on location of the entities and the location of the
customers. Of the UK external revenue £11.3m (2016: £10.4m) was sold into the European market. Of the Asian external revenue, £4.6m
(2016: £3.9m) was sold into the American market and £5.5m (2016: £5.9m) sold into the European market.
Revenue is derived solely from the manufacture and logistical supply of industrial fasteners and category ‘C’ components.
4 Other operating income
Rental income received from freehold properties
Other income
5
Expenses and auditor’s remuneration
Included in profit for the year are the following:
Depreciation and non-acquired amortisation
Amortisation of acquired intangibles
Operating lease expense
Net foreign exchange gain
(Gain)/loss on disposal of fixed assets
Auditor’s remuneration:
Audit of these financial statements
Audit of financial statements of subsidiaries pursuant to legislation
Taxation compliance services
Other assurance services
Other services relating to transaction services
110
Note
10,12
12
27
2017
£000
152
243
395
2017
£000
1,850
1,273
2,529
(46)
(184)
2017
£000
38
222
15
28
—
2016
£000
139
178
317
2016
£000
1,357
974
2,507
(661)
15
2016
£000
41
208
15
27
60
sluglineTrifast plc Annual Report 2017 6
Staff numbers and costs
The average number of people employed by the Group (including Directors) during the year, analysed by category, was as follows:
Office and management
Manufacturing
Sales
Distribution
The aggregate payroll costs of these people were as follows:
Wages and salaries (including bonus)
Share based payments
Social security costs
Contributions to defined contribution plans (see note 22)
7 Directors’ emoluments
Directors’ emoluments
Deferred equity (face value)
Company contributions to money purchase pension plans
Pension cash payments
Group
Number of
employees
2017
107
318
182
597
1,204
2017
£000
30,873
1,512
2,811
1,795
36,991
2017
£000
2,337
1,050
107
46
3,540
Group
2016
109
307
180
589
1,185
2016
£000
27,514
1,687
2,400
1,613
33,214
2016
£000
1,779
1,020
139
—
2,938
The emoluments of individual Directors are shown in the Remuneration Report on pages 70 to 86.
The aggregate of emoluments of the highest paid Director was £0.81m (2016: £0.62m), which included deferred equity (at face value) of
£0.25m (2016: £0.23m), Company pension contributions of £0.03m (2016: £0.05m) made to a money purchase scheme on his behalf and
pension cash payments of £0.02m (2016: £nil). During the year, the highest paid Director exercised 18,000 SAYE share options (2016: nil).
The annual IFRS2 charge relating to Board deferred equity bonuses given in 2014, 2015, 2016 and 2017 was £1.13m (2016: £1.22m).
The highest paid Director’s element of this charge was £0.23m (2016: £0.27m).
Retirement benefits are accruing to the following number of Directors under
money purchase schemes
The number of Directors who exercised share options was
See pages 70 to 86 of the Remuneration Report for more details.
Directors’ rights to subscribe for shares in the Company are also set out in the Remuneration report.
8
Financial income and expense
Financial income
Interest income on financial assets
Financial expenses
Interest payable on bank loans and hire purchase liabilities
Number of
Directors
2017
2016
4
2
4
—
2017
£000
60
581
2016
£000
60
851
111
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
9
Taxation
Recognised in the income statement
Current UK tax expense:
Current year
Adjustments for prior years
Current foreign tax expense:
Current year
Adjustments for prior years
Total current tax
Deferred tax expense (note 15):
Origination and reversal of temporary differences
Adjustments for prior years
Deferred tax income
Tax in income statement
Tax recognised directly in equity
Current tax recognised directly in equity — IFRS2 share based tax credit
Deferred tax recognised directly in equity — IFRS2 share based tax charge/(credit)
Total tax recognised in equity
Reconciliation of effective tax rate (‘ETR’) and tax expense
Profit for the period
Tax from continuing operations
Profit before tax
Tax using the UK corporation tax rate of 20% (2016: 20%)
Tax suffered on dividends
Retention tax
Non-deductible expenses
Tax incentives
IFRS2 share option (credit)/charge
Deferred tax assets not recognised
Different tax rates on overseas earnings
Adjustments in respect of prior years
Tax rate change
Total tax in income statement
2017
£000
12,698
4,642
17,340
3,468
264
102
190
(274)
(1)
511
540
(180)
22
4,642
ETR
%
20
2
1
1
(2)
—
3
3
(1)
—
27
2017
£000
520
(8)
512
4,756
(138)
4,618
5,130
(454)
(34)
(488)
4,642
2017
£000
(522)
130
(392)
2016
£000
10,225
2,852
13,077
2,615
133
71
223
(123)
112
72
256
(558)
51
2,852
2016
£000
554
210
764
3,052
19
3,071
3,835
(196)
(787)
(983)
2,852
2016
£000
(70)
(90)
(160)
ETR
%
20
2
–
2
(1)
1
–
2
(4)
—
22
A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013. Further
reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015, and an
additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Company’s future
current tax charge accordingly. Deferred tax has been calculated based on these enacted rates.
At a consolidated level there is a provision for £1.2m (2016: £1.2m) relating to open enquiries with a tax authority. Negotiations with the tax
authority are ongoing and the Group expects to settle the liability within a year. The Group has consulted with an external tax advisor to
determine an appropriate amount to recognise on the balance sheet. The amount recognised is an estimate and therefore the final outcome
could vary to what is provided in the financial statements. There has been no movements in the provision during the year. The amount
recognised in the Company financial statements is £nil (2016: £nil).
112
sluglineTrifast plc Annual Report 2017 10 Property, plant and equipment — Group
Land and
buildings
£000
Leasehold
improvements
£000
Plant and
equipment
£000
Fixtures &
fittings
£000
Motor
vehicles
£000
Cost
Balance at 1 April 2015
Additions
Acquisitions
Disposals
Effect of movements in foreign exchange
Balance at 31 March 2016
Balance at 1 April 2016
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 March 2017
Depreciation and impairment
Balance at 1 April 2015
Depreciation charge for the year
Acquisitions
Disposals
Effect of movements in foreign exchange
Balance at 31 March 2016
Balance at 1 April 2016
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 March 2017
Net book value
At 1 April 2015
At 31 March 2016
At 31 March 2017
15,620
93
30
—
527
16,270
16,270
319
—
911
17,500
4,197
223
3
—
230
4,653
4,653
262
—
308
5,223
11,423
11,617
12,277
888
31
—
(7)
21
933
933
30
(103)
54
914
629
66
—
(7)
15
703
703
65
(103)
44
709
259
230
205
23,665
1,676
—
(116)
935
26,160
26,160
2,174
(792)
1,955
29,497
20,687
755
—
(107)
809
22,144
22,144
947
(786)
1,607
23,912
2,978
4,016
5,585
4,857
480
233
(286)
71
5,355
5,355
349
(490)
194
5,408
3,994
269
94
(267)
56
4,146
4,146
500
(482)
146
4,310
863
1,209
1,098
556
36
22
(31)
30
613
613
31
(80)
54
618
456
44
16
(28)
26
514
514
47
(80)
44
525
100
99
93
Total
£000
45,586
2,316
285
(440)
1,584
49,331
49,331
2,903
(1,465)
3,168
53,937
29,963
1,357
113
(409)
1,136
32,160
32,160
1,821
(1,451)
2,149
34,679
15,623
17,171
19,258
Included in the net book value of land and buildings is £10.85m (2016: £10.30m) of freehold land and buildings, and £1.43m (2016: £1.32m) of
long leasehold land and buildings.
113
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
11 Property, plant and equipment — Company
Cost
Balance at 1 April 2015
Additions
Balance at 31 March 2016
Balance at 1 April 2016
Additions
Balance at 31 March 2017
Depreciation and impairment
Balance at 1 April 2015
Depreciation charge for the year
Balance at 31 March 2016
Balance at 1 April 2016
Depreciation charge for the year
Balance at 31 March 2017
Net book value
At 1 April 2015
At 31 March 2016
At 31 March 2017
Land and
buildings
£000
Fixtures &
fittings
£000
3,563
—
3,563
3,563
288
3,851
1,155
61
1,216
1,216
74
1,290
2,408
2,347
2,561
569
2
571
571
—
571
553
3
556
556
2
558
16
15
13
Total
£000
4,132
2
4,134
4,134
288
4,422
1,708
64
1,772
1,772
76
1,848
2,424
2,362
2,574
Included in the net book value of land and buildings is £2.56m (2016: £2.35m) of freehold land and buildings. This is provided as security over
the property loan. See note 26 for further details.
12 Intangible assets — Group
Cost
Balance at 1 April 2015
Acquisitions
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 March 2016
Balance at 1 April 2016
Additions
Effect of movements in foreign exchange
Balance at 31 March 2017
Amortisation and impairment
Balance at 1 April 2015
Amortisation for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 March 2016
Balance at 1 April 2016
Amortisation for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 March 2017
Net book value
At 1 April 2015
At 31 March 2016
At 31 March 2017
Goodwill
£000
38,678
1,187
—
—
1,597
41,462
41,462
—
2,298
43,760
13,835
—
—
190
14,025
14,025
—
—
414
14,439
24,843
27,437
29,321
Other
£000
10,148
3,651
23
(742)
1,214
14,294
14,294
45
945
15,284
2,829
974
(742)
411
3,472
3,472
1,302
—
149
4,923
7,319
10,822
10,361
Total
£000
48,826
4,838
23
(742)
2,811
55,756
55,756
45
3,243
59,044
16,664
974
(742)
601
17,497
17,497
1,302
—
563
19,362
32,162
38,259
39,682
The amortisation charge is recognised in administrative expenses in the income statement. Of the £1.30m charge in the year, £1.27m relates to
amortisation on acquired intangibles.
114
sluglineTrifast plc Annual Report 2017 12 Intangible assets — Group (continued)
Other intangible assets are made up of:
• Customer relationships acquired as part of the acquisition of PSEP. The remaining amortisation period left on these assets is 6.75 years
• Customer relationships, technology know-how and technology patents acquired as part of the acquisition of VIC. The average remaining
amortisation period on these assets is 10.72 years (maximum 12.17 years).
• Customer relationships and order backlog acquired as part of the acquisition of Kuhlmann. The average remaining amortisation period
on these assets is 8.50 years.
There were £nil impairments made during 2017 (2016: £nil).
The following cash generating units have carrying amounts of goodwill:
Special Fasteners Engineering Co. Ltd (Taiwan)
TR Fastenings AB (Sweden)
Lancaster Fastener Company Ltd (UK)
Serco Ryan Ltd (within TR Fastenings Ltd) (UK)
Power Steel and Electro-Plating Works SDN Bhd (PSEP) (Malaysia)
Viterie Italia Centrale (VIC) (Italy)
TR Kuhlmann GmbH (Germany)
O ther
2017
£000
10,834
1,063
1,245
4,083
763
9,731
1,498
104
2016
£000
9,780
1,063
1,245
4,083
753
9,020
1,389
104
29,321
27,437
The £1.05m, £0.71m, £0.11m and £0.01m increases in the goodwill of SFE, VIC, Kuhlmann and PSEP respectively refer to foreign exchange
gains as these investments are held in Singapore Dollars, Euros and Malaysian Ringits.
The Group tests goodwill annually for impairment. The recoverable amount of cash generating units is determined from value in use
calculations.
Value in use was determined by discounting the future cash flows generated from the continuing use of the unit. In this method, the free cash
flows after funding internal needs of the subject company are forecast for a finite period of four years based on actual operating results, budgets
and economic market research. Beyond the finite period, a terminal (residual) value is estimated using an assumed stable cash flow figure.
The values assigned to the key assumptions represent management’s assessment of future trends in the fastenings market and are based on
both external and internal sources of historical data. Further information on sources of data used can be found in each description of the key
assumptions below.
The recoverable amount of Special Fasteners Engineering Co. Ltd (Taiwan), Viterie Italia Centrale (Italy) and Serco Ryan Ltd (within TR
Fastenings Ltd) (UK) have been calculated with reference to the key assumptions shown below:
Long term revenue growth rate
Discount rate — post-tax
Discount rate — pre-tax
Terminal EBIT margin
SFE
VIC
Serco
2017
2.0%
8.2%
9.9%
16.0%
2016
2.0%
8.8%
10.6%
16.0%
2017
2.0%
8.9%
12.4%
17.4%
2016
2.0%
9.6%
13.9%
20.0%
2017
2.0%
6.8%
8.5%
11.0%
2016
2.0%
8.2%
10.2%
9.0%
The downward movement in the terminal EBIT margin for VIC has resulted largely from a revised assumption in the long term €:$ rate. This
reflects more recent trends continuing for the longer term.
Long term revenue growth rate
Four year management plans are used for the Group’s value in use calculations. Long term growth rates into perpetuity have been determined
as the lower of:
•
the nominal GDP rates for the country of operation
•
the long term compound annual growth rate in EBITDA in years six to ten estimated by management.
115
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
12 Intangible assets — Group (continued)
Post-tax risk adjusted discount rate
The discount rate applied to the cash flows of each of the Group’s operations is based on the Weighted Average Cost of Capital (‘WACC’)
(using post-tax numbers). The cost of equity element uses 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 systemic 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 systemic 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
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.
To calculate the pre-tax discount rate we have taken the post-tax discount rate and divided this by one minus the applicable tax rate. We
consider this an appropriate approximation of the pre-tax rate. The table above discloses the discount rate on a post and pre-tax basis. This
takes into account certain components such as the various discount rates reflecting different risk premiums and tax rates in the respective
regions. Overall, the Board is confident that the discount rate adequately reflects the circumstances in each location and is in accordance with
IAS36.
Terminal EBIT margin
The margins used in the value in use calculations are based on historic performance adjusted for any known or expected changes to occur
to existing operations based on management plans. Key adjustments relate to known efficiency gains from increased volumes achieved in the
business as well as the transactional foreign exchange impact based on forecast rates.
Sensitivity to changes in assumptions
The impairment test carried out on PSEP assumes a compound annual sales growth rate over the four year period cash flows are projected
of 5.2%, reducing to 2.0% for the terminal year. The basis for this sales growth is a combination of new contracts that PSEP has won and
additional new business that is expected to follow from fulfilling these initial contracts and further extending relationships with these multinational
OEM customers.
Using the assumptions above for sales growth, a terminal EBIT margin of 12.3% and a post-tax discount rate of 10.2% (pre-tax discount rate
13.5%) the recoverable amount of the CGU was estimated to be higher than its carrying amount by £1.0m.
Whilst the year to 31 March 2017 has been very encouraging for PSEP, with sales growth of 6.2%, showing the outlook is improving as a result
of the proactive actions the Group are taking, it is possible the estimated start of production dates for the newly awarded sales contracts could
be delayed or the new follow on business might come through at lower levels than predicted. If the growth rates were to reduce to 1.5% over
the four year period management projects cash flows and also in the terminal year, i.e assuming that growth falls below expected regional GDP
forecasts (4.4% per the Economist Intelligence Unit), with terminal EBIT margin and discount rates remaining the same as the above, this would
lead to a small impairment of c.£0.3m.
In order for the unit’s recoverable amount to equal its carrying amount, in absence of any other changes, the sales growth rate would have to
fall to c.2.0%.
The calculation is also sensitive to budgeted EBIT margins with a break even point of c.11.0%, but as an established business with a good
track record of consistent margin achievement and strong cost control, despite recent trading level fluctuations, management consider the
major sensitivity to be the timing of the revenue growth.
Excluding PSEP, management believe that no reasonably possible change in any of the key assumptions would cause the carrying value of any
other cash generating unit to exceed its recoverable amount.
116
sluglineTrifast plc Annual Report 2017 13
Intangible assets — Company
Cost
Balance at 1 April 2015, 31 March 2016 and 31 March 2017
Amortisation and impairment
Balance at 1 April 2015, 31 March 2016 and 31 March 2017
Net book value
At 1 April 2015, 31 March 2016 and 31 March 2017
14 Equity investments — Company
Investments in subsidiaries
Cost
Balance at 1 April 2015, 31 March 2016, 1 April 2016 and 31 March 2017
Provision
Balance at 1 April 2015
Reversal of provision
Balance at 31 March 2016 and 31 March 2017
Net book value
At 1 April 2015
At 31 March 2016
At 31 March 2017
Other
£000
62
62
—
£000
42,585
7,885
(6,740)
1,145
34,700
41,440
41,440
Details of principal subsidiary and associate undertakings, country of registration and principal activity are included in note 33.
All subsidiaries have a reporting date concurrent with Trifast plc, except TR Formac (Shanghai) Pte Ltd which has a reporting date of
31 December due to local regulatory requirements.
The reversal of the provision in prior year relates to TR Fastenings Inc. An impairment review was conducted using the value in use methodology
and this determined that the asset is now fully recoverable.
In FY2017 the Company’s investment in it’s fully owned subsidiary TR Fastenings Inc was sold at cost to Trifast Overseas Holdings Ltd in a
share for share exchange. This led to no change in the net book value of the equity investments held by the company.
117
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
15 Deferred tax assets and liabilities — Group
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Intangible assets
Inventories
Provisions/accruals
IFRS2 Share based payments
Tax losses
Tax (assets)/liabilities
Tax set-off
Net tax (assets)/liabilities
Assets
Liabilities
Net
2017
£000
(81)
(115)
(774)
(537)
(835)
(457)
(2,799)
440
(2,359)
2016
£000
(70)
(53)
(737)
(327)
(903)
(539)
(2,629)
464
(2,165)
2017
£000
1,697
2,191
—
188
—
—
4,076
(440)
3,636
2016
£000
1,743
2,240
—
159
—
—
4,142
(464)
3,678
2017
£000
1,616
2,076
(774)
(349)
(835)
(457)
1,277
—
1,277
2016
£000
1,673
2,187
(737)
(168)
(903)
(539)
1,513
—
1,513
A potential £2.10m (2016: £1.62m) deferred tax asset relating to the Company’s trapped management losses was not recognised on the
grounds that recovery of these losses is highly unlikely.
Movement in deferred tax during the year
Property, plant and equipment
Intangible assets
Inventories
Provisions/accruals
IFRS2 Share based payments
Tax losses
Movement in deferred tax during the prior year
Property, plant and equipment
Intangible assets
Inventories
Provisions/accruals
IFRS2 Share based payments
Tax losses
1 April
2016
£000
1,673
2,187
(737)
(168)
(903)
(539)
1,513
Recognised in
income
£000
(135)
Recognised in
equity^
£000
78
(270)
15
(188)
(62)
152
(488)
159
(52)
7
130
(70)
252
31 March
2017
£000
1,616
2,076
(774)
(349)
(835)
(457)
1,277
1 April
2015
£000
Recognised in
income
£000
Recognised in
equity^
£000
31 March
2016
£000
1,522
2,274
(571)
(143)
(649)
(53)
2,380
92
(259)
(155)
(30)
(164)
(467)
(983)
59
172
(11)
5
(90)
(19)
116
1,673
2,187
(737)
(168)
(903)
(539)
1,513
^ Amounts recognised in equity include the deferred tax on IFRS2 share based payments and the equity element of foreign exchange differences taken to reserves
118
sluglineTrifast plc Annual Report 2017 16 Deferred tax assets and liabilities — Company
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Provisions/accruals
IFRS2 Share based payments
Tax (assets)/liabilities
Assets
Liabilities
Net
2017
£000
—
(1)
(684)
(685)
2016
£000
—
(39)
(797)
(836)
2017
£000
164
—
—
164
2016
£000
175
—
—
175
2017
£000
164
(1)
(684)
(521)
2016
£000
175
(39)
(797)
(661)
A potential £2.10m (2016: £1.62m) deferred tax asset relating to the Company’s trapped management losses was not recognised on the
grounds that recovery of these losses is uncertain.
Movement in deferred tax during the year
Property, plant and equipment
Provisions/accruals
IFRS2 Share based payments
Movement in deferred tax during the prior year
Property, plant and equipment
Provisions/accruals
IFRS2 Share based payments
17
Inventories — Group
Raw materials and consumables
Work in progress
Finished goods and goods for resale
1 April
2016
£000
Recognised in
income
£000
Recognised
in equity
£000
31 March
2017
£000
175
(39)
(797)
(661)
(11)
38
(24)
3
—
—
137
137
164
(1)
(684)
(521)
1 April
2015
£000
Recognised in
income
£000
Recognised
in equity
£000
31 March
2016
£000
217
(2)
(489)
(274)
(42)
(37)
(204)
(283)
—
—
(104)
(104)
2017
£000
4,903
1,972
35,051
41,926
175
(39)
(797)
(661)
2016
£000
4,067
1,458
33,913
39,438
In 2017, inventories of £115.5m (2016: £100.0m) were recognised as an expense during the year and included in cost of sales. Inventories
have been written down by £1.7m (2016: £1.2m) in line with the Group’s stock provisioning policy. Such write-downs were recognised as an
expense during 2017. No significant specific stock provisions have been reversed in the year.
No inventories are pledged as security for liabilities.
The carrying amount of inventories carried at fair value less costs to sell is £0.6m (2016: £1.0m).
119
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
18 Trade and other receivables
Trade receivables
Non trade receivables and prepayments
Amounts owed by subsidiary undertakings
Group
Company
2017
£000
47,497
1,863
—
49,360
2016
£000
41,931
1,455
—
43,386
2017
£000
—
183
31,199
31,382
2016
£000
—
41
33,572
33,613
An explanation of credit risk and details of the security held over receivables is provided in note 26.
19 Cash and cash equivalents/bank overdrafts
Cash and cash equivalents per Statements of financial position
Bank overdrafts per Statements of financial position
Cash and cash equivalents per Statements of cash flows
20 Other interest-bearing loans and borrowings
Group
Company
2017
£000
24,645
—
24,645
2016
£000
17,614
(33)
17,581
2017
£000
2,587
—
2,587
2016
£000
1,406
(2,273)
(867)
This note provides information about the Group and Company’s existing interest-bearing loans and borrowings. For more information about the
security provided by the Group and Company over loans or the Group and Company’s exposure to interest rate, foreign currency and liquidity
risk, see note 26.
Rate Maturity
Current
Non-current
2017
£000
2016
£000
2017
£000
2016
£000
Initial loan value
Group
Asset based lending
PSEP acquisition loan
VIC unsecured loan
Kuhlmann unsecured loan
Finance lease liabilities
Base + 1.49%
Fixed 3.14%
EURIBOR + 1.95%
EURIBOR + 1.55%
Various
—
2016
2020
2024
2017-19
Group and Company
Facility A VIC acquisition loan
EURIBOR + 1.50%
2021
Facility B Revolving Credit Facility
LIBOR/EURIBOR + 1.50% 2019/2021
Property Loan
Total Group
Total Company
21 Trade and other payables
LIBOR + 1.25%
2021
Trade payables
Amounts payable to subsidiary undertakings
Deferred consideration
Non-trade payables and accrued expenses
Other taxes and social security
120
3,280
—
513
—
2
3,208
7,869
—
14,872
11,077
2017
£000
19,302
—
—
15,322
2,521
37,145
3,144
1,170
476
18
2
2,091
10,000
—
16,901
12,091
—
—
1,283
—
8
12,830
—
2,100
16,221
14,930
—
—
1,665
132
12
14,866
—
—
16,675
14,866
Group
Company
2016
£000
17,164
—
1,348
13,149
1,369
33,030
2017
£000
—
954
—
2,073
1,335
4,362
2016
£000
—
2,630
1,348
1,623
119
5,720
sluglineTrifast plc Annual Report 2017 22 Employee benefits
Pension plans
Defined contribution plans
The Group operates a number of defined contribution pension plans, which include stakeholder pension plans whose assets are held separately
from those of the Group, in independently administered funds.
The total expense relating to these plans in the current year was £1.80m (2016: £1.61m) and represents contributions payable by the Group to
the funds.
At the end of the financial year, there were outstanding pension contributions of £0.12m (2016: £0.12m), which are included in creditors.
Share based payments
The Group Share Options (including SAYE plans) provide for an exercise price equal to the average quoted market price of the Group shares
on the date of grant. In the case of SAYE, this price is discounted in line with HMRC limits. The vesting period is generally three, five or seven
years. The options expire if they remain unexercised after the exercise period has lapsed. Furthermore, options are forfeited if the employee
leaves the Group before the options vest, unless for retirement, redundancy or health reasons. The options are equity settled.
The number and weighted average exercise prices of share options are as follows:
Outstanding at beginning of year
Granted during the year
Forfeited/lapsed during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
2017
2016
Weighted
average
exercise
price
0.35
1.07
0.47
0.14
1.00
—
Weighted
average
exercise price
0.26
1.05
0.91
0.33
0.35
0.09
Options
3,567,961
495,264
(32,068)
(544,451)
3,486,706
2,024,685
Options
3,486,706
438,175
(141,909)
(2,496,555)
1,286,417
—
The options outstanding at 31 March 2017 had a weighted average remaining contractual life of 1.7 years (2016: 2.8 years) and exercise prices
ranging from £0.25 to £1.07 (2016: £0.085 to £1.05).
The weighted average share price at the date of exercise for share options exercised in 2017 was 173.00p (2016: 114.30p).
The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. The
estimate of the fair value of the services received is measured based on Black Scholes, Binomial Lattice and Monte Carlo models.
The contractual life of the option is used as an input into this model.
Board deferred equity bonus shares
The Board deferred equity bonus shares have been discussed in more detail in the Remuneration report (pages 70 to 86).
The number of deferred equity bonus shares is as follows:
Outstanding at beginning of year
2017 deferred equity bonus shares awarded
2014, 2015, 2016 Accelerated deferred equity bonus shares exercised*
Outstanding at end of year
Deferred
equity bonus
shares
3,372,922
499,900
(1,050,044)
2,822,778
* The accelerated deferred equity bonus shares exercised were for J Barker and T Tan in line with their good leaver statuses on retirement
The above includes 95,354 shares for 2016, 144,943 for 2015 and 185,282 for 2014 for T Tan relating to his employment as TR Asia MD. He
did not sit on the main plc Board prior to retirement on 31 December 2015.
These nil cost options are subject to a three year service period and the fair value has been calculated using the Discounted Dividend model.
This is based on expected dividends over the three year term. They are equity settled shares.
The weighted average share price at the date of exercise for share options exercised in 2017 was £1.35 (2016: no shares exercised).
The options outstanding at 31 March 2017 had a weighted average remaining contractual life of 1.6 years (2016: 2.2 years).
121
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
22 Employee benefits (continued)
Senior manager deferred bonus shares
The number of deferred bonus shares is as follows:
Outstanding at beginning of year
Granted during the year
Outstanding at end of year
Deferred
bonus shares
—
1,744,094
1,744,094
This is a new nil-cost option scheme implemented in the year. The shares granted in the year are subject to a base award and a multiplier
award. The base award requires a three year service period to be achieved and is also subject to personal performance conditions being met
during the performance period. The multiplier award is determined by a non-market performance condition. This requires the Group’s underlying
organic profit before tax in the financial year 2019 to be £18.5m (representing a compound annual growth rate of 5.0% from 31 March 2016) for
the total payout to be 1.5x the base award. A maximum payout of 2.0x the base award can be achieved if this metric is £21.3m (representing
a compound annual growth rate of 10.0% from 31 March 2016). If it falls between £18.5m and £21.3m the multiplier applied is calculated on a
straight line basis to determine the number of awards. If it is below £18.5m the multiplier used is 1.0x.
The awards were granted on 30 December 2016 and are due to vest in December 2019. The method of settlement for these shares are a
mixture of equity and cash settled. The fair value has been calculated using the Discounted Dividend model. This was at grant date for the
equity settled awards. The fair value for the cash settled awards are remeasured at the reporting date.
In line with IFRS2 the amount recognised as an expense has been adjusted to reflect the number of awards for which the service and non-
market performance conditions are expected to be met.
Type of
instrument
Valuation
model
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Date of
grant
01/10/2010 SAYE 7 Year
01/10/2011 SAYE 7 Year
01/10/2012 SAYE 5 Year
01/10/2012 SAYE 7 Year
01/10/2013 SAYE 5 Year
01/10/2014 SAYE 3 Year
01/10/2014 SAYE 5 Year
01/10/2015 SAYE 3 Year
01/10/2015 SAYE 5 Year
01/10/2016 SAYE 3 Year
01/10/2016 SAYE 5 Year
Total Share Options
18/09/2014 Board deferred equity DDM^
09/09/2015 Board deferred equity DDM^
15/07/2016 Board deferred equity DDM^
31/03/2017* Board deferred equity DDM^
SM deferred bonus
equity
SM deferred bonus
cash
DDM^
DDM^
30/12/2016
30/12/2016
Total
^ Discounted Dividend model
* Final date of grant will be date of formal agreement
No. out-
standing
on
31 March
2017
6,490
7,920
47,139
5,280
21,000
204,120
111,201
336,304
120,562
366,580
59,821
1,286,417
820,989
740,098
761,791
499,900
Share
price on
date of
grant
(£)
0.370
0.410
0.460
0.460
0.680
1.050
1.050
1.140
1.140
1.720
1.720
1.050
1.160
1.350
2.140
1,641,732
2.050
102,362
5,853,289
2.050
Exercise
price
(£)
0.250
0.450
0.350
0.350
0.500
1.000
1.000
1.050
1.050
1.070
1.070
Expected
volatility
%
47.86
47.63
48.08
48.08
46.06
35.76
35.76
35.20
34.60
33.83
32.80
Vesting
period
(yrs)
7.00
7.00
5.00
7.00
5.00
3.00
5.00
3.00
5.00
3.00
5.00
Expected
life
(yrs)
7.00
7.00
5.00
7.00
5.00
3.00
5.00
3.00
5.00
3.00
5.00
Risk-
free
rate
%
2.43
0.56
1.37
1.93
1.55
1.23
1.73
0.77
1.17
0.40
0.70
Expected
annual
dividend
%
1.36
0.00
1.09
1.09
1.19
1.33
1.33
1.84
1.84
1.63
1.63
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2.79
3.79
4.00
4.00
2.79
3.79
4.00
4.00
n/a
n/a
n/a
n/a
1.33
1.81
2.07
1.40
n/a
3.00
3.00
n/a
1.46
1.96
n/a
3.00
3.00
n/a
1.40
2.05
Fair
value
(£)
0.20
0.19
0.21
0.24
0.31
0.26
0.33
0.28
0.33
0.68
0.71
1.02
1.11
1.28
2.05
Expected volatility was determined by calculating the historic volatility of the Group’s share price over one, two and three years back from
the date of grant. The expected life used in the model has been adjusted, based on management’s best estimate for the effects of non-
transferability, exercise restrictions and behavioural considerations.
The Group recognised total charges of £1.51m and £1.69m in relation to share based payment transactions in 2017 and 2016 respectively. Of
this, £16,412 (2016: £nil) relates to cash settled awards to which a liability is recognised on the balance sheet. The remaining amount relates to
equity settled awards.
122
sluglineTrifast plc Annual Report 2017 22 Employee benefits (continued)
As at 31 March 2017, outstanding options to subscribe for ordinary shares of 5p were as follows:
Grant date/employees entitled
01/10/10/SAYE
01/10/11/SAYE
01/10/12/SAYE
01/10/13/SAYE
01/10/14/SAYE
01/10/15/SAYE
01/10/16/SAYE
Total outstanding options
Board deferred equity bonus shares
Senior manager deferred bonus shares
Total
Number of
instruments
6,490
7,920
52,419
21,000
315,321
456,866
426,401
1,286,417
2,822,778
1,744,094
5,853,289
Contractual life of options
Oct 2017
Oct 2018
Oct 2017, 2019
Oct 2018
Oct 2017, 2019
Oct 2018, 2020
Oct 2019, 2021
Sep 2017, 2018, 2019, Jul 2020
Dec 2019
All options require continued employment from grant date to the later of vesting date or exercise date.
23 Provisions
Group
Balance at 31 March 2016
Provisions utilised during the year
Balance at 31 March 2017
Restructuring
costs
£000
76
—
76
Dilapidations
£000
1,117
(6)
1,111
Total
£000
1,193
(6)
1,187
The restructuring provision relates to onerous leases arising from the ‘right-sizing’ of our portfolio of properties within the UK. Dilapidations also
relate to properties. Both will be utilised by vacation.
In respect of onerous leases and dilapidation provisions, external advisors were used to provide estimates of potential costs and likelihood of
sub-letting. The future cash flows were then discounted using risk free rates over the length of the leases.
All amounts represent a best estimate of the expected cash outflows although actual amounts paid could be lower or higher.
Group
Non-current (greater than 1 year)
Current (less than 1 year)
Balance at 31 March
In respect of the Company there are £nil provisions (2016: £nil).
Restructuring
costs
£000
—
76
76
Dilapidations
£000
1,111
—
1,111
2017
Total
£000
1,111
76
1,187
2016
Total
£000
1,117
76
1,193
123
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
24 Capital and reserves
Capital and reserves — Group and Company
See Statements of changes in equity on pages 97 and 98.
Reserves
The translation reserve comprises all foreign exchange differences arising from the translation of foreign operations, as well as from the
translation of liabilities that hedge the Group’s net investment in foreign subsidiaries.
The merger reserve has arisen under Section 612 Companies Act 2006 and is a non-distributable reserve.
Share capital
In issue at 1 April
Shares issued
In issue at 31 March — fully paid
Number of ordinary shares
2016
2017
116,747,887
116,174,086
3,546,599
573,801
120,294,486
116,747,887
The total number of shares issued during the year was 3,546,599 for a consideration of £0.3m (2016: 573,801 shares for £0.2m). These were
settled in cash other than issues of 1,050,044 shares from the deferred equity award scheme due to the early retirement of Jim Barker and
Thomas Tan which were issued for nil cost.
In FY2016, all shares were issued for cash, excluding 29,350 shares for £0.3m as part of the consideration of the acquisition of Kuhlmann (see
note 32).
Allotted, called up and fully paid
Ordinary shares of 5p each
2017
£000
2016
£000
6,014
5,837
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings
of the Company.
Dividends
During the year the following dividends were recognised and paid by the Group:
Final paid 2016 — 2.00p (2015: 1.50p) per qualifying ordinary share
Interim paid 2016 — 0.80p (2015: 0.60p) per qualifying ordinary share
2017
£000
2,376
934
3,310
2016
£000
1,743
697
2,440
After the balance sheet date a final dividend of 2.50p per qualifying ordinary share (2016: 2.00p) was proposed by the Directors and an interim
dividend of 1.00p (2016: 0.80p) was paid in April 2017.
Final proposed 2017 — 2.50p (2016: 2.00p) per qualifying ordinary share
Interim paid 2017 — 1.00p (2016: 0.80p) per qualifying ordinary share
2017
£000
3,007
1,203
4,210
2016
£000
2,376
934
3,310
Subject to Shareholder approval at the Annual General Meeting which is to be held on 27 July 2017, the final dividend will be paid on
13 October 2017 to Members on the register at the close of business on 15 September 2017. The ordinary shares will become ex-dividend
on 14 September 2017.
124
sluglineTrifast plc Annual Report 2017
25 Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 March 2017 was based on the profit attributable to ordinary shareholders of £12.7m (2016:
£10.2m) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2017 of 118,493,886 (2016:
116,388,265), calculated as follows:
Weighted average number of ordinary shares
Issued ordinary shares at 1 April
Effect of shares issued
Weighted average number of ordinary shares at 31 March
2017
2016
116,747,887
116,174,086
1,745,999
214,179
118,493,886
116,388,265
Diluted earnings per share
The calculation of diluted earnings per share at 31 March 2017 was based on profit attributable to ordinary shareholders of £12.7m (2016:
£10.2m) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2017 of 122,143,769 (2016:
120,345,662), calculated as follows:
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at 31 March
Effect of share options on issue
Weighted average number of ordinary shares (diluted) at 31 March
2017
2016
118,493,886
116,388,265
3,649,883
3,957,397
122,143,769
120,345,662
The average market value of the Company’s shares for the purposes of calculating the dilutive effect of share options was based on quoted
market prices for the period that the options and deferred equity awards were outstanding.
Underlying earnings per share
EPS (total)
Profit after tax for the financial year
Separately disclosed items:
IFRS2 share based payment charge
Acquired intangible amortisation
Net acquisition costs
Costs on exercise of
executive share options
Profit on sale of fixed assets
Tax charge on adjusted items^
Underlying profit after tax
2017
EPS
Basic
10.72p
1.28p
1.07p
—
0.48p
(0.17p)
(0.16p)
13.22p
Earnings
£000
12,698
1,512
1,273
—
567
(195)
(193)
15,662
Diluted
10.40p
1.24p
1.04p
—
0.46p
(0.16p)
(0.16p)
12.82p
Earnings
£000
10,225
1,687
974
264
—
—
(1,132)
12,018
2016
EPS
Basic
8.78p
1.45p
0.84p
0.23p
—
—
(0.97p)
10.33p
Diluted
8.50p
1.40p
0.81p
0.22p
—
—
(0.94p)
9.99p
^ For the 2016 calculation this includes adjusting for the recognition of the deferred tax asset in TR Fastenings Inc
The ‘underlying diluted’ earnings per share is detailed in the above tables. In the Directors’ opinion, this best reflects the underlying performance
of the Group and assists in the comparison with the results of earlier years (see note 2).
125
sluglinewww.trifast.comOur Financials
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
26 Financial instruments
(a) Fair values of financial instruments
There is no significant difference between the fair values and the carrying values shown in the balance sheet.
(b) Financial instruments risks
Exposure to credit, interest rate and currency risks arises in the normal course of the Group’s business, and the Group continues to monitor
and reduce any exposure accordingly. Information has been disclosed relating to the individual Company, only where a material risk exists.
(i) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations,
and arises principally from the Group’s receivables from customers.
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.
Credit evaluations are performed on all customers requiring credit over a predetermined amount. Bad debt insurance is taken out on all key
accounts where the cost is appropriate given the risk covered. All overdue debts are monitored regularly and customers are put on credit
hold if payments are not received on time. The carrying amount of trade receivables represents the maximum credit exposure for the Group.
Therefore, the maximum exposure to credit risk at the balance sheet date was £47.50m (2016: £41.93m), being the total carrying amount of
trade receivables net of an allowance. Management does not consider there to be any significant unimpaired credit risk in the year-end balance
sheet (2016: £nil).
At the balance sheet date there were no significant geographic or sector specific concentrations of credit risk.
Amounts less than 90 days past due
Amounts more than 90 days past due
2017
£000
46,911
586
47,497
2016
£000
41,491
440
41,931
For balances neither past due nor impaired credit quality is considered good and no credit exposures have been identified (2016: nil).
When the Group is satisfied that no recovery of the amount owing is possible, at that point the amounts considered irrecoverable are written off
against the trade receivables directly.
Impairment losses
The movement in the allowance for impairment in respect of receivables during the year was as follows:
Balance at 1 April
Impairment movement
Balance at 31 March
2017
£000
(803)
(72)
(875)
2016
£000
(754)
(49)
(803)
There are no significant losses/bad debts provided for specific customers. Impairments are recognised where a credit exposure has been
identified whether amounts are past due or not.
(ii) Liquidity and interest risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group holds net debt and hence its main interest and liquidity risks are associated with the maturity of its loans against cash inflows from
around the Group. The Group’s objective is to maintain a balance of continuity of funding and flexibility through the use of loans and banking
facilities as applicable.
126
sluglineTrifast plc Annual Report 2017 26 Financial instruments (continued)
The Group banking facilities with HSBC comprise:
• a term loan facility of €25.0m (‘Facility A’) used to fund the acquisition of VIC (balance at 31 March 2017: €18.75m)
• a revolving multi-currency credit facility (‘RCF’) of up to £15.0m with an option to increase the facility by £20m (‘Facility B’) (balance at
31 March 2017: £7.9m)
• a property loan of £2.1m (balance at 31 March 2017: £2.1m)
The obligations of Trifast under Facility A and Facility B are guaranteed by the UK non-dormant subsidiaries of the Company.
Interest on facility A and B is charged at the aggregate rate of LIBOR/EURIBOR plus a margin of 1.50%, in accordance with a formula
incorporating the ratio of consolidated net debt against the consolidated underlying EBITDA of the Group. Interest on the property loan is
charged at LIBOR plus a margin of 1.25%.
Facilities A and B were restructured in October 2016. At the same time, the property loan was taken out, secured on the Group’s premises in
Uckfield.
In addition the Group has an Asset Based Lending (‘ABL’) facility providing up to a maximum of £15.0m secured over the receivables of TR
Fastenings Limited. This facility charges a marginal interest rate of 1.49% above base.
In June 2015, VIC took out a €3m repayment loan with MPS in Italy to part fund the de-factoring of their receivables. Interest is charged at
1.95% above EURIBOR until maturity in 2020.
Covenant headroom
The current and modified UK term facilities are subject to quarterly covenant testing as follows:
Interest cover:
Debt Service cover:
Net Debt cover:
Underlying EBITDA to net interest to exceed a ratio of three.
Underlying EBITDA to debt service to exceed a ratio of one.
Total net debt to underlying EBITDA not to exceed a ratio of 2.75.
These covenants currently provide significant headroom and forecasts indicate no breach is anticipated.
Liquidity tables
The following are the contractual maturities of the existing financial liabilities, excluding bank overdrafts and finance lease liabilities:
2017
Carrying
amount/
contractual
cash flows^
£000
Less than
1 year
£000
1 to 2
years
£000
2 to 5
years
£000
5 years
and over
£000
Non-derivative financial liabilities
Company
Facility A — VIC acquisition loan
Facility B — Revolving credit facility
Property loan
Total Company
Group
Asset based lending
VIC unsecured loan
Total Group
^ Excluding interest charges
16,038
7,869
2,100
26,007
3,280
1,796
31,083
3,208
7,869
—
11,077
3,280
513
14,870
4,276
—
—
4,276
—
513
4,789
8,554
—
2,100
10,654
—
770
11,424
—
—
—
—
—
—
—
127
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
26 Financial instruments (continued)
Finance lease liabilities at 31 March 2017 are £0.01m (2016: £0.01m). The Kuhlmann unsecured loan was paid off in full in October 2016.
2016
Carrying
amount/
contractual
cash flows^
£000
Less than
1 year
£000
1 to 2
years
£000
2 to 5
years
£000
5 years
and over
£000
16,957
10,000
26,957
3,144
1,170
2,141
150
2,091
10,000
12,091
3,144
1,170
476
18
3,964
—
3,964
—
—
476
18
10,902
—
10,902
—
—
1,189
54
33,562
16,899
4,458
12,145
—
—
—
—
—
—
60
60
Non-derivative financial liabilities
Company
Facility A — VIC acquisition loan
Facility B — Revolving credit facility
Total Company
Group
Asset based lending
PSEP acquisition loan
VIC unsecured loan
Kuhlmann unsecured loan
Total Group
^ Excluding interest charges
Liquidity headroom
Trading forecasts show that the current facilities provide sufficient liquidity headroom. The Group continues to maintain positive relationships
with a number of banks and the Directors believe that appropriate facilities will continue to be made available to the Group as and when they
are required.
Available existing facilities at 31 March 2017 (excluding bank overdrafts and finance lease liabilities):
Company
Facility A — VIC acquisition loan
Facility B — Revolving credit facility
Property loan
Total Company
Group
Asset based lending
PSEP acquisition loan
VIC unsecured loan
Kuhlmann unsecured loan
Total Group
Available
facilities
£000
2017
Utilised
facilities
£000
Un-utilised
facilities
£000
Available
facilities
£000
2016
Utilised
facilities
£000
Un-utilised
facilities
£000
16,038
15,000
2,100
33,138
15,000
—
1,796
—
49,934
16,038
7,869
2,100
26,007
3,280
—
1,796
—
31,083
—
7,131
—
7,131
11,720
—
—
—
18,851
16,957
10,000
—
26,957
17,000
1,170
2,141
150
47,418
16,957
10,000
—
26,957
3,144
1,170
2,141
150
33,562
—
—
—
—
13,856
—
—
—
13,856
In addition, an accordion facility of £20.0m as been written into the main HSBC RCF facility agreement, providing potential additional finance
under currently agreed terms subject to credit approval.
Interest risk
The Group monitors closely all loans outstanding which currently incur interest at floating rates. When interest rate exposure risk becomes
significant the Group makes use of derivative financial instruments, including interest rate swaps and caps. The only instrument held at the
balance sheet date relates to Facility A, where a cap of 1% EURIBOR is in place (2016: 1%). The Group will continue to review this position
going forward.
In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates the split between fixed and
variable interest rates at the balance sheet date.
128
sluglineTrifast plc Annual Report 2017 26 Financial instruments (continued)
Further details of the rates applicable on interest-bearing loans and borrowings is given in note 20.
All assets and liabilities in place at year end bear interest at a floating rate and therefore may change within one year.
Interest rate table (including bank overdraft and finance lease liabilities)
Fixed rate instruments
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities^
Group
Company
2017
£000
—
—
24,645
(31,093)
(6,448)
2016
£000
(1,170)
(1,170)
17,614
(32,439)
(14,825)
2017
£000
—
—
2016
£000
—
—
2,587
(26,007)
(23,420)
1,406
(29,230)
(27,824)
^ £16.0m of the variable rate financial liability balance in the Group and the Company relates to Facility A and has a 1% EURIBOR interest rate cap in place
Sensitivity analysis
A change of one point in interest rates at the balance sheet date would change equity and profit and loss by £0.3m (2016: £0.2m).
This calculation has been applied to risk exposures existing at the balance sheet date.
This analysis assumes that all other variables, in particular foreign currency rates, remain consistent and considers the effect of financial
instruments with variable interest rates. The analysis is performed on the same basis for the comparative period.
(iii) Foreign currency risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than local functional currency.
The Group faces additional currency risks arising from monetary financial instruments held in non-functional local currencies.
Operational foreign exchange exposure
Where possible the Group tries to invoice in the local currency at the respective entity. If this is not possible, then to mitigate any exposure, the
Group tries to buy from suppliers and sell to customers in the same currency.
Where possible the Group tries to hold the majority of its cash and cash equivalent balances in the local currency at the respective entity.
Monetary assets/liabilities
The Group continues to monitor exchange rates and buy or sell currencies in order to minimise open exposure to foreign exchange risk. The
Group does not speculate on exchange rates. No foreign exchange derivative financial instruments are held at the balance sheet date (2016: a
flexible forward contract to cover 50% ($3.0m) of the HY1 2017 €:$ transactional risk within VIC). The 2016 year end value of this contract was
not significant and therefore no disclosures have been provided below. The Group will continue to review this position going forward.
The €25m VIC acquisition loan and the RCF utilised facility of €9.2m (£7.9m) are net investment hedged against the net asset value of VIC and
TR Kuhlmann. Therefore all foreign exchange movements that are being hedged are taken to the translation reserve. All other loans are held in
the local currency of the relevant company and so are excluded from the analysis below.
The Group’s exposure to foreign currency risk is as follows (based on the carrying amount for cash and cash equivalents held in non-functional
currencies):
31 March 2017
Cash and cash equivalents exposure
31 March 2016
Cash and cash equivalents exposure
Sterling
£000
733
Sterling
£000
139
Euro
£000
3,213
Euro
£000
3,140
US Dollar
£000
5,895
US Dollar
£000
4,345
Singapore
Dollar
£000
290
Singapore
Dollar
£000
409
Total
£000
10,131
Total
£000
8,033
129
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
26 Financial instruments (continued)
Sensitivity analysis
Group
A 1% change in significant foreign currency balances against local functional currency at 31 March 2017 would have changed equity and profit
and loss by the amount shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to
risk exposures existing at that date.
This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant. The analysis is performed
on the same basis for the comparative period.
Foreign currency
Local currency
US Dollar
EURO
US Dollar
US Dollar
Sterling
Sterling
Singapore Dollar
Taiwanese Dollar
Equity & profit or loss
2016
£000
2017
£000
(2)
(19)
(31)
(20)
(2)
(21)
(21)
(14)
(c) Capital management
The Group’s objectives when managing capital are to ensure that all entities within the Group will be able to continue as going concerns, while
maximising the return to shareholders through the optimisation of the debt and equity balance. We regularly review and maintain or adjust the
capital structure as appropriate in order to achieve these objectives, consistent with the management of capital for previous periods. The Group
has various borrowings and available facilities (see section (b) (ii) Liquidity and interest risk) that contain certain external capital requirements
(‘covenants’) that are considered normal for these types of arrangements. As discussed above, we remain comfortably within all such
covenants.
Identification of the total funding requirement is achieved via a detailed cash flow forecast which is reviewed and updated on a monthly basis.
The capital structure of the Group is presented below:
Cash and cash equivalents (note 19)
Borrowings (note 20)
Net debt
Equity
Capital
27 Operating leases
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between two and five years
More than five years
Total
2017
£000
24,645
(31,093)
(6,448)
(101,698)
(108,146)
2016
£000
17,581
(33,576)
(15,995)
(83,750)
(99,745)
Group
Company
2017
£000
2,910
5,023
3,047
10,980
2016
£000
2,698
5,587
1,282
9,567
2017
£000
31
37
—
68
2016
£000
27
42
—
69
The Group leases a number of offices, warehouse and factory facilities under operating leases.
Group
During the year £2.53m was recognised as an expense (2016: £2.51m) in the income statement in respect of operating leases.
Company
During the year £0.04m (2016: £0.05m) was recognised as an expense in the income statement in respect of operating leases.
130
sluglineTrifast plc Annual Report 2017 28 Contingent liabilities
Company
The Company has cross guarantees on its UK banking facilities with its three UK subsidiaries. The amount outstanding at the end of the year
was £nil (2016: £2.34m).
29 Related parties
Group and Company
Compensation of key management personnel of the Group
Full details of the compensation of key management personnel are given in the Directors’ remuneration report on pages 70 to 86.
Transactions with Directors and Directors’ close family relatives
During 2017 a relative of the Chairman provided IT/Marketing consultancy services totalling £12,000 (2016: £12,000) on an arm’s length basis
and with terms similar to other third party suppliers. The outstanding balance at 31 March 2017 was £1,000 (2016: £1,000).
There were no other related party transactions with Directors, or Directors’ close family relatives in the year (2016: £nil).
Related party transactions
Details of principal subsidiary undertakings, country of registration and principal activities are included in note 33.
Company related party transactions with subsidiaries — income/expenditure 2017
TR Fastenings Ltd
TR Southern Fasteners Ltd
TR Norge AS
TR Fastenings AB
TR Miller BV
Lancaster Fastener Co Ltd
TR Hungary Kft
Viterie Italia Centrale SPA
TR Kuhlmann GmbH
TR Asia Investments Pte Ltd
TR Fastenings Inc
TR Fastenings España – Ingenieria
Industrial, S.L.
TR Fastenings Poland Sp Zoo
Rent
income
£000
290
—
—
—
—
—
—
—
—
—
—
—
—
290
Income
management
fees
£000
Loan
interest
£000
470
17
21
49
67
29
49
104
49
569
55
—
—
1,479
—
—
—
—
26
—
—
—
—
—
—
1
1
28
Total
income
£000
760
Expenditure
management
fees
£000
399
17
21
49
93
29
49
104
49
569
55
1
1
1,797
—
—
—
—
—
—
—
—
—
—
—
—
399
Company related party transactions with subsidiaries — income/expenditure 2016
TR Fastenings Ltd
TR Southern Fasteners Ltd
TR Norge AS
TR Fastenings AB
TR Miller BV
Lancaster Fastener Co Ltd
TR Hungary Kft
Viterie Italia Centrale SPA
TR Asia Investments Pte Ltd
TR Fastenings Inc
Income
management
fees
£000
Loan
interest
£000
405
25
31
49
75
28
35
97
498
56
1,299
—
—
—
—
31
—
—
—
—
—
31
Rent
£000
290
—
—
—
—
—
—
—
—
—
290
Loan
interest
£000
—
—
—
—
—
—
—
3
—
—
—
—
—
3
Total
expense
£000
399
—
—
—
—
—
—
3
—
—
—
—
—
402
Expenditure
management
fees
£000
314
Total
£000
695
25
31
49
106
28
35
97
498
56
—
—
—
—
—
—
—
—
—
1,620
314
131
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
29 Related parties (continued)
2017
2016
TR Fastenings Ltd
TR Southern Fasteners Ltd
TR Norge AS
TR Fastenings AB
TR Miller Holding B.V.
Lancaster Fastener Company Ltd
TR Hungary Kft
Viterie Italia Centrale SPA
TR Kuhlmann GmbH
TR Fastenings Inc
TR Asia Investments Holdings Pte Ltd
TR Formac Pte Ltd
TR Formac (Malaysia) SDN Bhd
TR Formac (Shanghai) Pte Ltd
Special Fasteners Engineering Co Ltd
Power Steel & Electro-Plating Works SDN Bhd
TR Fastenings España - Ingenieria Industrial, S.L.
TR Fastenings Poland Sp Zoo
Non-trading dormant subsidiaries
Trifast Overseas Holdings Ltd
Trifast Holdings B.V.
Balances
receivables
£000
812
4
6
16
408
26
6
23
16
14
472
26
8
8
10
15
350
30
—
28,496
453
31,199
Balances
payables
£000
—
—
—
—
—
—
—
687
—
—
—
—
—
—
—
—
—
—
267
—
—
954
Balances
receivables
£000
Balances
payables
£000
621
2
3
4
797
31
3
16
—
5
465
—
—
—
—
—
—
25
—
31,212
388
33,572
63
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
267
2,300
—
2,630
All related party transactions are on an arm’s length basis.
30 Subsequent events
There are no material adjusting or non-adjusting events subsequent to the balance sheet date.
31 Accounting estimates and judgements
The preparation of financial statements in conformity with Adopted IFRSs requires management to make judgements, estimates and
assumptions that affect the application of policies and reported annual amounts of assets and liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates, although, unless otherwise stated, management do not consider
that the range of possible outcomes for each estimate or judgement would result in a material adjustment to the relevant balance sheet carrying
value.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both
current and future periods.
The Group believes the principal accounting estimates, assumptions and uncertainties employed in the preparation of these financial
statements are:
• Recoverable amount of goodwill (note 12)
IAS36 Impairment of Assets seeks to ensure that the carrying amount of goodwill is not held at an amount greater than its recoverable amount.
The recoverable amount is determined as the higher of fair value less costs to sell and value in use. Management use the value in use model to
determine whether goodwill is recoverable. This involves estimating the future performance of a cash generating unit (CGU) that goodwill has
been allocated to. The key estimates used in determining the future performance of a CGU are: revenue growth rate, discount rate and terminal
EBIT margin. To determine the revenue growth rate and terminal EBIT margin management considers the historic performance of the business,
nominal GDP rates in the country of operation and any known or expected changes to occur to existing operations. To calculate an appropriate
discount rate, management consider external sources of data based on current market conditions. The assumptions used for each significant
CGU relating to these key estimates, including changes to the assumptions applied in previous years, are disclosed in note 12.
132
sluglineTrifast plc Annual Report 2017
31 Accounting estimates and judgements (continued)
Note 12 also discloses if a reasonable possible change in a key assumption would cause the carrying amount of goodwill to exceed its
recoverable amount for a CGU. From the impairment tests conducted on PSEP, management have identified that if the sales growth was not
achieved, it is possible an impairment of £0.3m would need to be recognised. Further details behind the assumptions to arrive at the £0.3m
impairment are disclosed in the note.
Inventory valuation (note 17)
•
Inventories are stated at the lower of cost and net realisable value with a provision being made for obsolete and slow moving items. Initially,
management makes a judgement on whether an item of inventory should be classified as standard or customer specific. This classification then
determines when a provision is recognised. Management then estimates the net realisable value of the stock for each individual classification.
A provision is made earlier for customer specific stock (compared to standard) because it carries a greater risk of becoming obsolete or slow
moving given the fastenings are designed specifically for an individual customer. The amount of write downs recognised as an expense in the
period relating to this estimate is detailed in note 17.
• Fair values for IFRS2 charge (note 22)
Accounting standards require fair values to be measured for each share based payment scheme and the cost is recognised in the financial
statements over the relevant vesting periods. IFRS2 Share-Based Payments is very prescriptive in determining whether an award is equity
or cash settled so there is little judgement for management to make here. Judgement is then used to determine which valuation model is
appropriate to calculate the fair value and then subsequently the estimates are determined based on the inputs required for each model. These
calculations are complex and therefore the Directors use external advisors to determine which is the most appropriate valuation model and
subsequently the estimates required. The valuation model used for the Board deferred equity bonus and senior management deferred bonus
schemes is the Discounted Dividend model which uses the expected annual dividend as its key estimate. The valuation model used for the
SAYE scheme is the Black Scholes model. The key estimates used in this model are: expected volatility, expected life and expected annual
dividend. The figures used for these key estimates are disclosed in note 22. Crossing both models there is also an estimate made for the lapse
rate to arrive at the number of awards expected to vest. The lapse rate for the Board deferred equity bonus shares is 0% and for the senior
management deferred bonus and SAYE schemes it is 3%. A higher lapse rate during the vesting period will reduce the IFRS2 expense - a lower
lapse rate will increase the expense.
Since the fair values for the equity settled awards are only calculated at the grant date, the estimates used in the calculation will not be updated
(except for the number of awards expected to vest). Also, they do not result in an asset or liability being recognised, instead the credit goes
direct to equity. The fair value for the cash settled awards are required to be re-measured at each reporting date and therefore the estimates will
be updated. The carrying amount of the liability at the period end was £16,412 (2016: £nil).
Income taxes (notes 9,15 and 16)
•
To arrive at the amounts recognised in the balance sheet the Directors are required to estimate certain decisions that are still pending from
tax authorities. The pending decisions relate to potential tax exposures from open enquiries. The Directors use external tax advisors to arrive
at their decisions regarding these estimates. The final position taken by a tax authority could differ from the estimates made by the Directors
which could impact the liability recognised on the balance sheet which is £1.2m (2016: £1.2m). As explained in note 9 the open enquiries are
expected to be settled within a year. The amount provided is at the upper end of the range of possible outcomes and we do not anticipate the
final settlement significantly exceeding the amount recognised.
133
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
32 Acquisition of Kuhlmann Befestigungselemente GmbH & Co. KG (‘Kuhlmann’)
Please note all figures below are as disclosed in the 31 March 2016 Annual Report. Therefore the figures in sterling are using applicate exchange rates relating to the
year ended 31 March 2016.
On 1 October 2015, the Group acquired Kuhlmann for a total consideration of €8.5m (£6.2m). The initial amount of €6.8m (£4.9m) was paid on
completion in cash and €0.04m (£0.03m) was satisfied by the allotment of 29,350 ordinary shares in the Company. Consideration of €1.7m (1
October 2015: £1.2m, 31 March 2016: £1.3m) was deferred for 12 months with payment made in September 2016. The cash consideration
was met from the Group’s existing bank facilities.
The Group is investing in Kuhlmann to further develop the opportunities in the German market and the acquisition of Kuhlmann was earnings
enhancing in the first full year of ownership.
Based in Verl, close to Bielefeld, Germany, Kuhlmann was founded in 1996 and employs 18 staff. It is a well-respected highly efficient distributor
of industrial fastenings within the domestic German market. Its emphasis is on delivering high quality products and services to its well-
established longstanding customer base in the principal sectors of machinery and plant engineering, sheet metal processing and industrial.
Kuhlmann’s management team and previous owners, Frank Niggebrügge, Eric Hütter and Peter Henning, continue to run the business with the
support of the operational management team and staff who will remain within the business.
For the year ended 31 December 2014, Kuhlmann reported revenue of €6.7m (£5.4m) and profit before tax of €1.7m (£1.4m). Gross assets at
the same date were €1.4m (£1.1m).
In the six months since acquiring Kuhlmann to 31 March 2016, the subsidiary contributed £0.5m to the consolidated underlying operating
profit for the year and £2.5m to the Group’s revenue. If the acquisition had occurred on 1 April 2015, Group revenue would have increased
by an estimated £2.4m and consolidated operating profit would have been increased by an estimated £0.6m. In determining these amounts
management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same as if the acquisition
had occurred on 1 April 2015.
The acquisition had the following effects on the Group’s assets and liabilities.
Property, plant and equipment
Intangible assets
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax liabilities
Net identifiable assets and liabilities
Consideration paid:
Initial cash price paid
Equity instruments issued
Deferred consideration at fair value
Total consideration
Goodwill on acquisition
Provisional
fair value
disclosed^
£000
176
3,651
463
420
583
(297)
(1,011)
3,985
Adjustments
to provisional
fair values
£000
(2)
—
(6)
3
—
(18)
1,011
988
Recognised
fair value
£000
174
3,651
457
423
583
(315)
—
4,973
4,897
31
1,232
6,160
2,175
—
—
—
—
(988)
4,897
31
1,232
6,160
1,187
^ These amounts were disclosed in the Half Yearly Financial Report for the six months ended 30 September 2015
134
sluglineTrifast plc Annual Report 2017 32 Acquisition of Kuhlmann Befestigungselemente GmbH & Co. KG (‘Kuhlmann’) (continued)
The fair value of trade receivables is £0.4m. The gross contractual cash flows to be collected are £0.4m. The best estimate at acquisition date
of the contractual cash flows not to be collected is £nil.
The values previously disclosed in the Half Yearly Financial Report were provisional and were given for information purposes only since
the acquisition was completed so close to 30 September 2015. An in-depth analysis has now been completed and led to adjustments to
provisional fair values as disclosed in the table above. As part of this analysis it was identified that a tax deduction can be obtained locally for
amortisation relating to acquired intangibles. Therefore on acquisition there was no temporary difference between the tax base and accounting
net book value of these assets and hence no deferred tax liability was recognised.
Intangible assets that arose on the acquisition include the following:
• £3.3m of customer relationships, with an amortisation period deemed to be 10 years
• £0.4m of other intangibles, with an amortisation period deemed to be under 1 year
Goodwill is the excess of the purchase price over the fair value of the net assets acquired. Locally a tax deduction is available for Goodwill
which is amortised over 15 years. It mostly represents potential synergies, e.g. cross-selling opportunities between Kuhlmann and the Group,
and Kuhlmann’s assembled workforce.
Effect of acquisition
The Group incurred costs of £0.26m in relation to the acquisition of Kuhlmann which have been included in administrative expenses in the
Group’s consolidated statement of comprehensive income and form part of separately disclosed items, see note 2. The foreign exchange
losses of £0.55m made on the €1.7m deferred consideration and €6.8m external loan are part of the Group’s net investment hedging and
therefore have been recognised in the exchange reserve.
135
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
33 Trifast plc subsidiaries
Name
Europe
Trifast Overseas Holdings Ltd
Trifast Holdings B.V.
TR Fastenings Ltd
TR Southern Fasteners Ltd
TR Norge AS
TR Miller Holding B.V.
Lancaster Fastener Company Ltd
TR Fastenings AB
TR Hungary Kft
TR Fastenings Poland Sp. Z o.o
Viterie Italia Centrale SPA
VIC Sp. Z o.o.
TR Kuhlmann GmbH
TR Fastenings España - Ingenieria Industrial, S.L.
Asia
TR Asia Investment Holdings Pte Ltd
TR Formac Pte Ltd
TR Formac (Malaysia) SDN Bhd
TR Formac (Shanghai) Pte Ltd
Special Fasteners Engineering Co Ltd
TR Formac Fastenings Private Ltd
Country of
incorporation
or
registration
Issued and fully
paid share
capital
Principal activity
Group Company
Office Address
Percentage of
ordinary
shares held
Holding Company
£112
€18,428
Holding Company
£10,200 Manufacture and distribution of fastenings
Norway
NOK 300,000
€254
€45,378
£40,000
SEK 1,500,000
HUF 68,257,300
PLN 50,000
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
United Kingdom
Netherlands
United Kingdom
Republic of Ireland
Netherlands
United Kingdom
Sweden
Hungary
Poland
Italy
Poland
Germany
Spain
Singapore
Singapore
€187,200 Manufacture and distribution of fastenings
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
PLN 50,000
€25,000
€3,085
S$4
Holding Company
S$315,000 Manufacture and distribution of fastenings
— 57 Senoko Road, Singapore 758121
— 57 Senoko Road, Singapore 758121
Malaysia
MYR 480,000 Manufacture and distribution of fastenings
— 1 & 3 Lorong lks Juru 11, Taman Industri Ringan Juru, 14100 Simpang Ampat, Seberang Perai (S), Pulau Pinang, Malaysia
China
US$200,000
Distribution of fastenings
Taiwan
TW$100,000,000 Manufacture and distribution of fastenings
India
INR 18,850,000
Distribution of fastenings
— No. 1222, JinHu Road, Pudong, Shanghai, PR China. 201206
— 9F.-3 No. 366, Bo Ai 2nd Rd., Kaohsiung 81358, Taiwan, R.O.C
— Plot No:180, Door No:2, 10th Cross Street, Mangala Nagar, Porur, Chennai-600 116, India
Power Steel & Electro-Plating Works SDN Bhd
Malaysia
MYR 4,586,523 Manufacture and distribution of fastenings
— Jalan Pengapit 15/19, Section 15, 40000 Shah Alam, Selangor Darul Ehsan, Malaysia
TR Formac Co. Ltd
Thailand
THB 20,000,000
Distribution of fastenings
— 29/1, Piya Place Langsuan, 6th Floor, Unit no.6H, Soi Langsuan, Ploenchit Rd., Lumpini, Patumwan, Bangkok 10330
Thailand
Americas
TR Fastenings Inc
Dormants
Trifast Systems Ltd
Ivor Green (Exports) Ltd
Charles Stringer’s Sons & Co.Limited
Fastech (Scotland) Ltd
Micro Screws & Tools Ltd
Trifast International Ltd
Rollthread International Ltd
TR Group Ltd
Fastener Techniques Ltd
Trifix Ltd
Serco Ryan Ltd
TR Europe Ltd
Trifast Qualifying Employee Share
Ownership Trustee Ltd
KNH Verwaltungs GmbH
USA
US$1,168,063
Distribution of fastenings
100%
— 11255 Windfern Road, Houston, TX. 77064
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
£100
£5,000
£18,000
£100
£1,000
£2
£10,000
£100
£73,939
£100
£3,000
£2,500
£2
Germany
€1
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100%
100%
Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100%
— Lerchenweg 99, 33415 Verl, Germany
The only changes in ownership during the year were due to the addition of TR Fastenings España - Ingenieria Industrial S.L. and the transfer in
ownership of TR Fastenings Inc to Trifast Overseas Holdings Ltd from Trifast Plc.
All of the above subsidiaries have been included in the Group’s financial statements.
100% International House, Stanley Boulevard, Hamilton Intnl Technology Park, Blantyre, Glasgow, Scotland, G72 0BN
136
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
— Prins Bernhardplein 200, 1097 JB Amsterdam, Netherlands
— Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
— Mallow Business & Technology Park, Mallow, Co. Cork, P51 HV12, Republic of Ireland
— Masteveien 8, NO-1481 Hagan, Norway
— Kelvinstraat 5, 7575 AS, Oldenzaal, Netherlands
— Stevant Way, Northgate, White Lund Industrial Estate, Morecambe, LA3 3PU, UK
— Box 4133, Smedjegatan 6, 7tr, SE-131 04 Nacka, Sweden
— Szigetszentmiklós, Leshegy út 8, 2310 Hungary
100% Al Jerozolimskie 56c, 00-803 Warszawa, Poland
— Via Industriale, 19, 06022 Fossato Di Vico (PG), Italy
— Wroclaw, ul Wiosenna 14/2, Poland
— Lerchenweg 99, 33415 Verl, Germany
— Calle De La CiIencia 43, Viladecans, Barcelona, CP 08840, Spain
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
sluglineTrifast plc Annual Report 2017 Country of
incorporation
Issued and fully
or
registration
paid share
capital
Norway
NOK 300,000
£112
€18,428
€254
€45,378
£40,000
SEK 1,500,000
HUF 68,257,300
PLN 50,000
PLN 50,000
€25,000
€3,085
United Kingdom
Netherlands
United Kingdom
Republic of Ireland
Netherlands
United Kingdom
Sweden
Hungary
Poland
Italy
Poland
Germany
Spain
Singapore
Singapore
£10,200 Manufacture and distribution of fastenings
Holding Company
Holding Company
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
Distribution of fastenings
€187,200 Manufacture and distribution of fastenings
TR Fastenings España - Ingenieria Industrial, S.L.
Asia
TR Asia Investment Holdings Pte Ltd
TR Formac Pte Ltd
TR Formac (Malaysia) SDN Bhd
TR Formac (Shanghai) Pte Ltd
Special Fasteners Engineering Co Ltd
TR Formac Fastenings Private Ltd
S$4
Holding Company
S$315,000 Manufacture and distribution of fastenings
Malaysia
MYR 480,000 Manufacture and distribution of fastenings
China
US$200,000
Distribution of fastenings
Taiwan
TW$100,000,000 Manufacture and distribution of fastenings
India
INR 18,850,000
Distribution of fastenings
Power Steel & Electro-Plating Works SDN Bhd
Malaysia
MYR 4,586,523 Manufacture and distribution of fastenings
Thailand
THB 20,000,000
Distribution of fastenings
33 Trifast plc subsidiaries
Name
Europe
Trifast Overseas Holdings Ltd
Trifast Holdings B.V.
TR Fastenings Ltd
TR Southern Fasteners Ltd
TR Norge AS
TR Miller Holding B.V.
Lancaster Fastener Company Ltd
TR Fastenings AB
TR Hungary Kft
TR Fastenings Poland Sp. Z o.o
Viterie Italia Centrale SPA
VIC Sp. Z o.o.
TR Kuhlmann GmbH
TR Formac Co. Ltd
Americas
TR Fastenings Inc
Dormants
Trifast Systems Ltd
Ivor Green (Exports) Ltd
Charles Stringer’s Sons & Co.Limited
Fastech (Scotland) Ltd
Micro Screws & Tools Ltd
Trifast International Ltd
Rollthread International Ltd
TR Group Ltd
Fastener Techniques Ltd
Trifix Ltd
Serco Ryan Ltd
TR Europe Ltd
Trifast Qualifying Employee Share
Ownership Trustee Ltd
KNH Verwaltungs GmbH
The only changes in ownership during the year were due to the addition of TR Fastenings España - Ingenieria Industrial S.L. and the transfer in
ownership of TR Fastenings Inc to Trifast Overseas Holdings Ltd from Trifast Plc.
All of the above subsidiaries have been included in the Group’s financial statements.
Principal activity
Group Company
Office Address
Percentage of
ordinary
shares held
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
— Prins Bernhardplein 200, 1097 JB Amsterdam, Netherlands
— Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
— Mallow Business & Technology Park, Mallow, Co. Cork, P51 HV12, Republic of Ireland
— Masteveien 8, NO-1481 Hagan, Norway
— Kelvinstraat 5, 7575 AS, Oldenzaal, Netherlands
— Stevant Way, Northgate, White Lund Industrial Estate, Morecambe, LA3 3PU, UK
— Box 4133, Smedjegatan 6, 7tr, SE-131 04 Nacka, Sweden
— Szigetszentmiklós, Leshegy út 8, 2310 Hungary
100% Al Jerozolimskie 56c, 00-803 Warszawa, Poland
— Via Industriale, 19, 06022 Fossato Di Vico (PG), Italy
— Wroclaw, ul Wiosenna 14/2, Poland
— Lerchenweg 99, 33415 Verl, Germany
— Calle De La CiIencia 43, Viladecans, Barcelona, CP 08840, Spain
— 57 Senoko Road, Singapore 758121
— 57 Senoko Road, Singapore 758121
— 1 & 3 Lorong lks Juru 11, Taman Industri Ringan Juru, 14100 Simpang Ampat, Seberang Perai (S), Pulau Pinang, Malaysia
— No. 1222, JinHu Road, Pudong, Shanghai, PR China. 201206
— 9F.-3 No. 366, Bo Ai 2nd Rd., Kaohsiung 81358, Taiwan, R.O.C
— Plot No:180, Door No:2, 10th Cross Street, Mangala Nagar, Porur, Chennai-600 116, India
— Jalan Pengapit 15/19, Section 15, 40000 Shah Alam, Selangor Darul Ehsan, Malaysia
— 29/1, Piya Place Langsuan, 6th Floor, Unit no.6H, Soi Langsuan, Ploenchit Rd., Lumpini, Patumwan, Bangkok 10330
Thailand
USA
US$1,168,063
Distribution of fastenings
100%
— 11255 Windfern Road, Houston, TX. 77064
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Germany
£100
£5,000
£18,000
£100
£1,000
£2
£10,000
£100
£73,939
£100
£3,000
£2,500
£2
€1
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% International House, Stanley Boulevard, Hamilton Intnl Technology Park, Blantyre, Glasgow, Scotland, G72 0BN
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100% Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100%
Trifast House, Bellbrook Park, Uckfield, East Sussex, TN22 1QW, UK
100%
100%
— Lerchenweg 99, 33415 Verl, Germany
137
sluglinewww.trifast.comOur Financials NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
34 Alternative Performance Measures
The Annual Report includes both GAAP measures and Alternative Performance Measures (APMs). The latter of which are considered by
management to better allow the readers of the accounts to understand the underlying performance of the Group. A number of these APMs are
used by management to measure the KPIs of the business (see pages 28 and 29 for Key Performance Indicators) and are therefore aligned to the
Group’s strategic aims. They are also used at Board level to monitor financial performance throughout the year.
The APMs used in the Annual Report (including the basis of calculation, assumptions, use and relevance) are detailed in note 2 (underlying profit
before tax, EBITDA and underlying EBITDA) and below.
• Constant Exchange Rate (CER) figures
These are used predominantly in the Business review and give the readers a better understanding of the performance of the Group, regions
and entities from a trading perspective. They have been calculated by translating the 2017 income statement results (of subsidiaries whose
presentational currency is not sterling) using FY2016 average annual exchange rates to provide a comparison which removes the foreign currency
translational impact. The impact of translational gains and losses made on non-functional currency net assets held around the Group have not
been removed.
• Underlying diluted EPS
A key measure for the Group as it is one of the measures used to set the Directors’ variable remuneration, as disclosed in the Directors’
remuneration report. The calculation has been disclosed in note 25.
• Return on capital employed (ROCE)
Return on capital employed is a key metric used by investors to understand how efficient the Group is with its capital employed. The calculation is
detailed in the Glossary on page 145. The numerator is underlying EBIT which has been reconciled to operating profit below. Note 2 explains why
the separately disclosed items have been removed to aid understanding of the underlying performance of the Group.
Underlying EBIT/Underlying operating profit
Separately disclosed items within administrative expenses
IFRS2 share based payment charge
Acquired intangible amortisation
Net acquisition costs
Profit on sale of fixed assets
Costs on exercise of executive share options
Operating profit
Note
22
32
2017
£000
21,018
(1,512)
(1,273)
—
195
(567)
17,861
2016
£000
16,793
(1,687)
(974)
(264)
—
—
13,868
• Normalised net debt
The calculation, assumptions, use and relevance are disclosed in the net debt section of the Business review on page 36.
• Underlying cash conversion as a percentage of underlying EBITDA
This is another key metric used by investors to understand how effective the Group were at converting profit into cash. Since the underlying cash
conversion is compared to underlying EBITDA, which has removed the impact of IFRS2 share based payment charges (see note 2), the impact
of these have also been removed from the underlying cash conversion. The adjustments made to arrive at underlying cash conversion from cash
generated from operations are detailed below. To reconcile operating profit to underlying EBITDA, see note 2.
Underlying cash conversion
Costs on exercise of executive share options
Movement in trade payables due to exercise of share options
Cash generated from operations
2017
£000
22,249
(567)
1,205
22,887
2016
£000
15,873
—
—
15,873
138
sluglineTrifast plc Annual Report 2017
34 Alternative performance measures (continued)
• Underlying effective tax rate
This is used in the underlying diluted EPS calculation. It removes the tax impact of separately disclosed items in the year to arrive at a tax rate
based on the underlying profit before tax.
One off tax adjustments have also been removed from the calculation as they are unlikely to repeat and therefore do not reflect recurring trading
performance. In FY2017 the one-off adjustment relates to a deferred tax asset not recognised for losses in the year due to significant tax
deductions available from the exercise of executive share options. In FY2016 the adjustment related to the recognition of deferred tax assets in
TR Fastenings Inc on the grounds that recovery was considered probable.
Profit before tax
Separately disclosed items
Underlying profit before tax
2017
Profit impact
£000
Tax impact
£000
17,340
3,157
20,497
(4,642)
(192)
(4,834)
ETR
%
26.8%
6.1%
23.6%
2016
Profit impact
£000
13,077
2,925
16,002
Tax impact
£000
(2,852)
(1,132)
(3,984)
ETR
%
21.8%
38.7%
24.9%
139
sluglinewww.trifast.comOur Financials 140
sluglineTrifast plc Annual Report 2017 SHAREHOLDER
INFORMATION
Investor perception study
Glossary of terms
Five year history
Company and advisers
Financial calendar
142
144
146
147
148
141
sluglinewww.trifast.comOur Financials INVESTOR
PERCEPTION STUDY
Ian Robinson
DuplexIR
DuplexIR investor perceptions report for Trifast plc
The results of the survey and the one to one conversations suggested
that the balance between manufacturing and distribution appears to
be well understood by both current investors and analysts. The role
of acquisitions within the company also appears to be appreciated.
Importantly, there was no evidence that Trifast is seen by investor or
analysts as simply an industry consolidator. Although current investors
and analysts generally expect further acquisitions at some point, the
impression was not given that anything was anticipated or demanded or
required in the short term. Even though they are not seen as a necessary
part of the business model, acquisitions are clearly seen as part of the
longer term investment case, and something that management are
good at.
With regard to how the investor and analysts assess the value of Trifast,
there was a clear bias towards distributors rather than manufacturers as
valuation comparators. Manufacturing business are typically more highly
valued by institutional investors than distributors and it appears some
aspects of Trifast’s value could well be being overlooked by the market
as a whole. The responses to questions regarding what extra information
investors and analysts require also suggest that some aspects of the
business, such as the strength of the relationships with customer and
value add of working at design stages, might be given greater value by
the market, if further supporting evidence was presented.
As part of its compliance with the UK Governance Code, Trifast
engaged DuplexIR to undertake an investor perceptions study. The
broader purpose of the study was to ensure that Trifast’s directors, both
executive and non-executive had a full and clear understanding of how
the investment community views and understands Trifast. At a more
detailed level the objectives were to:
• Examine how the equity market understands Trifast’s operations,
finances and strategy – considering in greater detail the mix between
manufacturing and distribution, and also the role that acquisitions
play
• Understand how the market views Trifast as an investment – to
understand whether all areas of value are being appreciated, that
broader expectations are not unrealistic, and that areas of risks and
uncertainty are not being ignored
• Review how investors and analysts regards management and their
performance
• Consider what can be done to improve investor communications and
shareholder engagement
The study was conducted over a period of four weeks, from
26 September to 21 October 2016, in two parts. The first part was
a web based survey of institutional investors and broking investment
analysts using the DuplexIR investor feedback platform. The second was
a number of one to one discussions with a selection of these investors
and analysts. The questions were set out by DuplexIR, in consultation
with the senior management of Trifast. Survey responses were obtained
from all but two of Trifast’s leading active institutional shareholders, seven
analysts, and four non-holding institutions. The one to one interviews
were conducted with three analysts and three institutional shareholders.
142
sluglineTrifast plc Annual Report 2017 Shareholder Information
“ All participants in the study were happy
with the amount of access to management
and there was a clear view that strategy,
operational objectives and guidance have
all been well set and communicated in
recent years”
As shown in the chart below, the survey responses showed that the
management are one of the main investment attractions of Trifast and
the one to one discussions reaffirmed this. Perhaps inevitably, given his
historical role in the growth and success of Trifast, Malcolm Diamond
was mentioned more often than the current management in on line
comments and one to one discussion. The overall message was that
investors and analysts alike were happy to see the baton passed, but a
number of participants expressed a wish for Malcolm to remain involved
in some way going forward.
Across the survey and interviews there were no significant issues
identified with the way that Trifast communicates with investors. Those
suggestions that there were for improvement in investor relations mainly
related to the potential benefits of a capital markets day or site visit, and
to the desire for some greater visibility into exactly where Trifast is adding
value for its customers.
All participants in the study were happy with the amount of access
to management and there was a clear view that strategy, operational
objectives and guidance have all been well set and communicated in
recent years.
Survey question – Which of the following (maximum 5 selections) are key investment attractions of Trifast?
20
18
16
14
12
10
8
6
4
2
0
Low
valuation
Growth
potential not
reflected in
market forecasts
Exposure to
attractive
industries
Market position/
proposition
Good returns
(ROIC, EVA,
ROCE or ROE)
Cash
generation
Anticipation
of corporate
action
Management
Dividend or
other cash
distribution
Source: DuplexIR survey
143
sluglinewww.trifast.com GLOSSARY OF TERMS
AER
Actual Exchange Rate.
Assets
Anything owned by the Company having a monetary value; e.g. fixed
assets such as buildings, plant and machinery, vehicles (these are not
assets if rented and not owned) and potentially including intangibles such
as trademarks and brand names, and current assets, such as inventory,
debtors and cash.
Average Capital Employed
Averaged using month-end balances and opening capital employed.
Capital employed is the sum of net assets and net debt.
Balance sheet (or Statements of financial position)
These provide a ‘snapshot’ at a particular date in time of who owns what
in the Company, and what assets and debts represent the value of the
Company.
The balance sheet is where to look for information about short-term and
long-term debts, gearing (the ratio of debt to equity), reserves, inventory
values (materials and finished goods), capital assets, cash, and the value
of shareholders’ funds. The balance sheet equation is:
Depreciation
The proportion of cost relating to a capital item, over an agreed period,
(based on the useful life of the asset), for example, a piece of equipment
costing £10,000 having a life of five years might be depreciated over five
years at a cost of £2,000 per year.
This would be shown in the income statement as a depreciation cost of
£2,000 per year; the balance sheet would show an asset value of £8,000
at the end of year one, reducing by £2,000 per year; and the cash flow
statement would show all £10,000 being used to pay for it in year one.
Dividend
A dividend is a payment made per share, to a company’s shareholders
and is based on the profits of the year, but not necessarily all of the
profits. Normally a half year dividend is recommended by a company
board whilst the final dividend for the year is proposed by the board
of directors and shareholders consider and vote on this at the Annual
General Meeting.
Dividend Cover
Underlying diluted earnings per share over proposed dividend per share
in the year.
Capital + Liabilities (where the money came from)
= Assets (where the money is now)
CAGR
Compounded Annual Growth Rate.
Cash flow
The movement of cash in and out of a business from day-to-day direct
trading and other non-trading effects, such as capital expenditure, tax
and dividend payments.
Category ‘C’ components
Low value components that are wrapped up into our supply proposition
for a customer.
CER
Constant Exchange Rate.
Current assets
Cash and anything that is expected to be converted into cash within 12
months of the balance sheet date. For example debtors or inventory.
Current liabilities
Money owed by the business that is generally due for payment within 12
months of balance sheet date. For example: creditors, bank overdrafts
or tax.
Earnings before
There are several ‘Earnings before…..’ ratios. The key ones being:
• PBT
• EBIT
• EBITDA
Profit/earnings before taxes
Earnings before interest and taxes
Earnings before interest, taxes, depreciation,
and amortisation
• Underlying
Profit before separately disclosed items
(see note 2)
Earnings relate to operating and non-operating profits (e.g. interest,
dividends received from other investments).
GAAP
Generally Accepted Accounting Practice.
Gearing
The ratio of debt to equity, usually the relationship between long-term
borrowings and shareholders’ funds.
Goodwill
Any surplus money paid to acquire a company that exceeds its net
assets fair value.
ICAEW
Institute of Chartered Accountants in England & Wales.
144
sluglineTrifast plc Annual Report 2017
Shareholder Information
Intellectual Property (‘IP’)
This is an intangible asset such as a copyright or patent.
Copyright is the exclusive right to produce copies and to control an
original work and is granted by law for a specified number of years.
A patent is a government grant to an inventor, assuring the inventor the
sole right to make, use and sell an invention for a limited period.
Multinational OEMs
We use this term to include all Original Equipment Manufacturers
(OEMs), Tier 1 suppliers in the automotive sector and relevant key sub-
contractors in the other sectors we service.
P/E ratio (price per earnings)
The P/E ratio is an important indicator as to how the investing market
views the health, performance, prospects and investment risk of a plc.
The P/E ratio is arrived at by dividing the share price by the underlying
diluted earnings per share.
Profit
The surplus remaining after total costs are deducted from total revenue.
Profit and loss account (P&L) (or income statement)
The P&L shows how well the company has performed in its trading
activities and would cover a trading account for a period.
The P&L shows profit performance and typically shows sales revenue,
cost of sales/cost of goods sold, generally a gross profit margin, fixed
overheads and/or operating expenses, and then a profit before tax figure
(‘PBT’).
Retained profit/earnings
Business profit which is after tax and dividend payments to shareholders;
retained by the business and used for reinvestment.
Reserves
The accumulated and retained difference between profits and losses
year-on-year since the company’s formation.
Return on capital employed (‘ROCE’)
A fundamental financial performance measure. A percentage figure
representing profit before interest and tax against the money that is
invested in the business.
Underlying EBIT ÷ average capital employed (net assets + net debt) ×
100 = ROCE
Statements of cash flow
The statements of cash flows show the movement and availability of
cash through and to the business over a given period. For any business
‘cash is king’ and essential to meet payments for example to suppliers,
staff and other creditors.
Share capital
The balance sheet nominal value paid into the company by shareholders
at the time(s) shares were issued.
Shareholders’ funds
A measure of the shareholders’ total interest in the company,
represented by the total share capital plus reserves.
Trademark
The name or a symbol used by a manufacturer or dealer to distinguish
its products from those of competitors. A registered trademark is one
that is officially registered and legally protected.
Working capital
Current assets less current liabilities, representing the required
investment, continually circulating, to finance inventory, debtors, and
work in progress.
145
sluglinewww.trifast.com FIVE YEAR HISTORY
Five year history - ‘A growth story’
Revenue
GP%
Underlying operating profit*
Underlying operating profit margin*
Operating profit
Operating profit margin
Underlying EBITDA*
Underlying PBT*
PBT
Underlying ROCE %*
Dividend per share
Dividend increase %
Dividend cover*
Underlying diluted EPS*
Diluted EPS
Net debt
Underlying cash conversion % of underlying EBITDA*
Share price at 31 March
* Before separately disclosed items, see note 2
2013
£121.5m
26.0%
£8.0m
6.6%
£7.2m
5.9%
£9.2m
£7.3m
£6.4m
12.1%
0.80p
60.0%
5.9×
4.73p
4.18p
£5.2m
85.3%
57p
2014
£129.8m
27.7%
£9.7m
7.5%
£9.4m
7.2%
£10.8m
£9.2m
£8.9m
16.3%
1.40p
75.0%
4.3×
5.95p
5.76p
(£2.0m)
109.5%
87p
2015
£154.7m
2016
£161.4m
2017
£186.5m
29.0%
£15.3m
9.9%
£12.8m
8.3%
£16.5m
£14.3m
£11.8m
18.6%
2.10p
50.0%
4.1×
8.68p
7.07p
£13.4m
50.2%
103p
29.7%
£16.8m
10.4%
£13.9m
8.6%
£18.2m
£16.0m
£13.1m
18.5%
2.80p
33.3%
3.6x
9.99p
8.50p
£16.0m
88.9%
127p
31.1%
£21.0m
11.3%
£17.9m
9.6%
£22.9m
£20.5m
£17.3m
19.9%
3.50p
25.0%
3.7x
12.82p
10.40p
£6.4m
97.3%
211p
146
sluglineTrifast plc Annual Report 2017 COMPANY AND ADVISERS
Shareholder Information
TRIFAST PLC
Incorporated in the United Kingdom
Registered number: 0191797
HEAD OFFICE AND
REGISTERED OFFICE
Trifast House, Bellbrook Park,
Uckfield, TN22 1QW
Telephone: +44 (0)1825 747366
AUDIT COMMITTEE
Neil Warner (Chairman)
Jonathan Shearman
Scott Mac Meekin
REMUNERATION COMMITTEE
Jonathan Shearman (Chairman)
Neil Warner
Scott Mac Meekin
NOMINATIONS COMMITTEE
Malcolm Diamond MBE (Chairman)
Jonathan Shearman
Neil Warner
Mark Belton
COMPANY SECRETARY
Lyndsey Case
ADVISERS
REGISTERED AUDITORS
KPMG LLP
1 Forest Gate, Brighton Road,
Crawley, RH11 9PT
CORPORATE STOCKBROKER
Peel Hunt LLP
Moor House, 120 London Wall
London, EC2Y 5ET
SOLICITORS
Charles Russell Speechlys, LLP
Compass House, Lypiatt Road, Cheltenham,
GL50 2QJ
REGISTRARS
Computershare Investor Services plc
The Pavilions, Bridgwater Road, Bristol,
BS13 8AE
FINANCIAL PR
TooleyStreet Communications
Regent Court, 68 Caroline Street,
Birmingham, B3 1UG
147
sluglinewww.trifast.com FINANCIAL CALENDAR
AGM
27 July 2017
Final dividend payment date
13 October 2017
Half-yearly results
November 2017
Trading update
February 2018
Financial year end
31 March 2018
Pre-close trading update
April 2018
Preliminary results
June 2018
148
sluglineTrifast plc Annual Report 2017 www.jonesandpalmer.co.uk
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Trifast plc
Trifast House,
Bellbrook Park,
Uckfield,
East Sussex,
TN22 1QW
Tel: +44 (0)1825 747366
Fax: +44 (0)1825 747368
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