8 June 2016

Tricorn Group plc

Final Results

For the year ended 31 March 2016

Tricorn Group plc ('Tricorn' or the 'Group'), (TCN.L) the AIM quoted tube manipulation specialist, announces its audited final results for the year ended 31 March 2016.

Highlights

·    Significant improvements in the USA - business is now performing well

·    Delivered circa £1m in efficiency gains, which coupled with new business wins, helped to mitigate the impact of weaker end markets

·    £1.2m of net cash from operating activities

·    Net debt reduced from previous year end

·    Restructuring of manufacturing operations in China progressing as planned

Financial Summary

* All references to operating profit, loss before tax and loss per share are for continuing operations and before restructuring costs, intangible asset amortisation and share based payment charges.

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

"We have made significant improvements in the USA and our operation there is now performing well. The Group has delivered circa £1m in efficiency gains in the year which, coupled with new business wins, have helped to mitigate the impact of weaker end markets. In China the restructuring of our manufacturing operations is progressing as planned and once complete we expect this business to contribute positively to overall profitability. The Board expects that whilst underlying demand will remain challenging we are well positioned to make further progress in the current year."

Enquiries:

Notes to Editors:

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

Headquartered in Malvern, UK, Tricorn employs around 300 employees and has five manufacturing facilities in the UK, USA and China. It operates through three brands: Malvern Tubular Components, Maxpower Automotive and Franklin Tubular Products. 

Chairman's and Chief Executive's statement

Performance in the year ended 31 March 2016

Revenue for the year at £18.016m was £3.170m lower than the previous year (2015: £21.186) as a result of further weakening in key end markets, particularly within the Energy division.  In response the Board acted decisively to reduce costs delivering circa £1m of efficiency gains, which coupled with the benefit of new business wins, helped to mitigate the impact of lower volumes. Underlying operating profit for the year at £0.033m was £0.143m lower than the previous year (2015:  £0.176m).

In the Transportation division, good progress continued to be made with the operations in both the USA and UK. The USA operation is now performing well and new business growth largely offset weaker end markets. In the UK revenue in the second half of the year was slightly ahead of the first half and, alongside the steps taken to reduce costs returned the operation to profit for the year. In China, the businesses were loss making and as market conditions in the region are less favourable than anticipated when we established these ventures, the Board has decided to combine the activities of its wholly owned facility and joint venture into a single operation.

The Energy division continued to make further improvements to operational performance but was challenged by the impact of significantly lower revenue levels as its customers experienced reduced demand from the majority of their key end markets.  

Business Review

The Group operates two main business divisions focused on the transportation and energy sectors.  From the Group's five manufacturing facilities, the businesses serve a global blue chip OEM customer base, many of whom have major facilities in the UK, USA, and China as well as elsewhere in the world.

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

Transportation

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

Revenue for the year ended 31 March 2016 was £12.538m (2015: £13.760m) and underlying operating profit increased to £0.043m (2015: underlying operating loss £0.250m).

In the USA Franklin Tubular Products made significant operational improvements with the business now profitable and performing well. Revenue for the year was broadly flat with new business growth offsetting weaker market demand. 

In the UK, Maxpower Automotive started to benefit from the impact of new business growth and revenue was slightly higher in the second half of the year than the first half. The higher revenue combined with the actions taken to lower costs returned the operation to profit in the second half of the year and for the year as a whole.

In China, both the Group's wholly owned facility and joint venture were loss making and with less favourable market conditions in the region than anticipated when we established these ventures the Board has decided to combine the activities of both businesses. This significantly reduces operational gearing and concentrates the Group's manufacturing and engineering resources into a single location in Nanjing. Once the transfer is complete, which is expected to be by July 2016, the Board expects the business to contribute positively to overall profitability.

Energy

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

Revenue for the year at £5.478m was substantially down on the previous year (2015: £7.426m) with customers experiencing significantly lower demand from their key markets. Additionally, a customer transferred production of an engine series from the UK to the USA. Whilst this impacted Malvern Tubular Components in the second half of the year, the Group was able to retain this business through its USA operation, once again underlining the value of its expanded manufacturing footprint. The Malvern business reduced its cost base in response to the lower demand but none the less saw a marked reduction in underlying operating profit to £0.098m (2015: £0.611m).

Financial Review

The financial year 2015/16 has been challenging, with reduced demand across key markets.  As a result the Group has focused on reducing its cost base and improving its cash generation.

With the actions taken during the year the Group was able to deliver an underlying operating profit of £0.033m (2015: £0.176m) on revenues which were down 15% on the prior year. 

Income Statement

Revenue for the year, at £18.016m was down £3.170m on the prior year of £21.186m.  The Group focused on labour efficiencies and reducing material costs but gross profit was down to £7.264m (2015: 7.634m) on the lower revenues.

After deducting administration and distribution costs, the Group delivered an underlying operating profit of £0.033m compared to the prior year's underlying operating profit of £0.176m.

Finance costs for the year were £0.207m (2015: net finance income £0.039m) and the Group made an underlying loss before tax for the year of £0.273m (2015: underlying loss before tax £0.055m).   

Following the recent announcement by the Group of the merger of its wholly owned and joint venture activities in China, a level of restructuring cost has been incurred in the year covering staff compensation costs and the run out of its property lease.  Total restructuring costs for the Group in the year were £0.270m (2015: 0.059m).  After deducting restructuring costs, intangible asset amortisation and share based payment charges, the loss before tax for the year was £0.760m (2015: loss before tax for continuing operations £0.036m). 

Basic loss per share (LPS) for continuing businesses was 1.64p (2015: LPS 0.46p) and after adjusting for one-off items, the underlying LPS was 0.19p (2015: LPS 0.50p).  The Group is not recommending the payment of a final dividend (2015: nil pence).

Cash Flow

The focus on cost control and working capital management resulted in the Group generating net cash from operating activities of £1.222m (2015: net cash outflow £0.742m).  Capital expenditure for the year was £0.781m (2015: £0.312m) as the Group invested, particularly in its UK facilities, on the back of recent contract wins.  As a result 65% of the Group's capital investment in the year related to new business.

At 31 March 2016 the Group had reduced net debt to £2.920m (2015: £3.125m).  Cash and cash equivalents were £0.855m (2015: £0.694m) and gearing was 48.5% (2015: 48.6%).

The Group uses short term borrowings to fund its operating activities, with selected capital additions and larger projects being financed by lease finance arrangements.  At the year end the Group did not have any term debt in place.

Balance Sheet

Total assets of the Group as at 31 March 2016 were £12.363m, which was a reduction of £1.006m on the prior year with net working capital in the year reducing to £3.374m (2015: £4.539m).

On translation of its overseas assets and liabilities the Group made an exchange gain of £0.052m (2015: gain £0.281m).  This is a non-cash movement which is not hedged and is treated as a movement in other comprehensive income.  As a result, the translation reserve in shareholders' funds now shows a £0.107m surplus (2015: surplus £0.55m).

Outlook 

We have made significant improvements in the USA and our operation there is now performing well. The Group has delivered circa £1m in efficiency gains in the year which, coupled with new business wins, have helped to mitigate the impact of weaker end markets. In China the restructuring of our manufacturing operations is progressing as planned and once complete we expect this business to contribute positively to overall profitability. The Board expects that whilst underlying demand will remain challenging we are well positioned to make further progress in the current year.

Andrew Moss                                                  Mike Welburn

Chairman                                                         Chief Executive

Group income statement

For year ended 31 March 2016

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

Group statement of comprehensive income

For year ended 31 March 2016

Group statement of changes in equity

For year ended 31 March 2016