7 June 2017

Tricorn Group plc

Final Results

For the year ended 31 March 2017

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 2017.

Highlights

·    Profits significantly ahead of market expectations

·    Successfully completed consolidation of China operations

·    Over £10m ($12.9m) of business secured in a long term agreement and new contract wins in the USA

·    Investment in manufacturing footprint aligned to a growing customer base

·    Improved trading through final quarter

·    Positive cash flow from operating activities

Financial Summary

* All references to operating profit, profit/(loss) before tax and earnings/(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:

"In a period in which market conditions have at times been challenging, we are pleased to report a significant improvement in our performance, with profits in the year to 31 March 2017 being significantly ahead of market expectations. During the year we successfully completed the consolidation of our manufacturing operations in China, which is now trading profitably.

The investment we have made in aligning our manufacturing footprint to the needs of our customers combined with our ongoing focus on operational performance is enabling us to win new business, grow market share and improve profitability.

We are encouraged by the improved trading in the final quarter of the year and expect 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 four manufacturing facilities in the UK, USA and China. It operates through four brands: Malvern Tubular Components, Maxpower Automotive, Franklin Tubular Products and Minguang-Tricorn Tubular Products. 

Chairman's and Chief Executive's statement

Performance in the year ended 31 March 2017

Revenue for the year at £18.519m was 2.8% higher than the previous year (2016: £18.016m) reflecting the impact of new business growth and improved trading across the Group towards the end of the period. Second half revenue was 8% up on the first 6 months and 21.5% higher than the corresponding period last year.  From July 2016, the Group's businesses in China were consolidated into an enlarged joint venture, which in line with Group policy, is reported on a profit or loss only basis. A favourable US dollar translation impact more than offset the resulting reduction in reported revenue.

Underlying operating profit at £0.497m was significantly up from the previous year (2016: £0.033) and with the joint venture in China operating profitably, following the consolidation, the underlying profit before tax for the year at £0.230m was up £0.503m on the previous year (2016: loss £0.273m).

In the Transportation division, good progress continued to be made on several fronts. In the USA over £10m ($12.9m) of business was secured from both existing and new customers reflecting the strengthening customer relationships being developed in the region. In the UK revenue continued to grow as a result of new business and the product application base was expanded to include braking systems for electric vehicles.

The Energy division expanded its reach into the power generation sector and with customer end markets starting to improve saw a notable increase in demand through the latter part of the year.  

Business Review

The Group operates two main business divisions focused on the transportation and energy sectors.  From the Group's four 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, transmission lubrication, fuel sender sub-systems and hydraulic actuation in a variety of on and off road applications including construction, trucks and agriculture.

External revenue for the year ended 31 March 2017 was £13.595m (2016: £12.538m) and underlying operating profit increased to £0.329m (2016: £0.043m).

In the USA Franklin Tubular Products continued to develop its relationships and secure market share with a growing customer base. Strong operational performance and early investment in innovative capabilities for the business has resulted in new contract wins and a long-term agreement with a combined estimated value of over £10m ($12.9m) for the supply of on-board heavy truck products as well as hydraulic fluid systems for off road machines.

In the UK, Maxpower Automotive benefited from the impact of new business growth following the prior year investment in rigid hydraulic tube manufacture. More recently the development of brake system products for electric vehicle applications provides further scope for expansion.  

In China, both the Group's wholly owned facility and joint venture were combined into an enlarged operation. This reduced operational gearing and concentrated resources into a single location in an enlarged joint venture in Nanjing. The business operated profitably over the latter part of the financial year and is now firmly established on a solid platform for growth.

Energy

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

External revenue for the year at £4.924m was down on the previous year (2016: £5.478m), however, second half revenue was up 39.5% on the previous 6 months. This was a result of the impact of new business secured, principally in the power generation sector, and improving end markets for its existing customer base.  Underlying operating profit at £0.280m was substantially up on the previous year (2016: £0.098m) as the business benefited from restructuring in the prior year.

People

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

Financial Review

The Group entered the financial year with a lower overhead base following the restructuring implemented in the previous financial year.  Costs were further reduced in July 2016 through the consolidation of the Group's operations in China.

As a result, and coupled with improving trading conditions, all of the Group's subsidiary businesses were profitable in the year and the China joint venture was profitable through the final quarter.  Financial results for the Group were much improved on the prior year with underlying operating profit for the year of £0.497m (2016: £0.033m) and after finance costs and the share of the full year loss from the joint venture, underlying profit before tax was £0.230m (2016 loss: £0.273m).

Income Statement

Revenue for the year, at £18.519m was up £0.503m on the prior year of £18.016m.  The improvement over the prior year reflected the impact of new business growth and the improved trading experienced towards the end of the financial year.  The impact of the strengthening US dollar during the year was largely offset by a reduction in revenues in China following the completion of the merger of the Group's China activities at the end of June 2016.  From that date and in line with Group policy the Group has reported its share of the profit or loss before tax whilst the revenue figure for the joint venture is not reported in the Group consolidated income statement.

Headline administration and distribution costs were down £0.211m over the previous financial year despite a stronger US dollar, which, on translation added £0.410m to these costs in the year.  Excluding the impact of the movement of the US dollar the Group has seen a £0.621m reduction in its distribution and administrative cost base over the previous financial year.  Underlying operating profit improved significantly to £0.497m when compared to the prior year's underlying operating profit of £0.033m.

Finance costs for the year were £0.218m (2016: £0.207m) and the Group delivered an underlying profit before tax for the year of £0.230m (2016: underlying loss before tax £0.273m).   

Total restructuring costs for the Group in the year were £0.303m (2016: 0.270m), of which £0.223m related to the consolidation of activities in China and of that figure £0.114m comprised non-cash asset write-downs.  After deducting restructuring costs, intangible asset amortisation and share based payment charges, the loss before tax for the year was £0.287m (2016: £0.552m). 

Basic loss per share (LPS) for continuing businesses was 0.81p (2016: LPS 1.64p) and after adjusting for one-off items, the underlying earnings per share was 0.72p (2016: LPS 0.19p).  The Board is not recommending the payment of a final dividend (2016: nil pence).

Cash Flow

The improved profit position of the Group and the management of working capital, as demand increased through the final quarter of the financial year, enabled it to generate net cash from operating activities of £0.614m (2016: £1.222m).  Capital expenditure for the year was £0.559m (2016: £0.629m).

At 31 March 2017, net debt was £3.497m (2016: £2.920m).  The stronger US dollar at the year end had a significant impact on the reported net debt figure, resulting in an increase in reported borrowings of £0.346m on translation at year end rates.  A large proportion of the US dollar debt is used for working capital purposes in the US and is secured against US assets.  Cash and cash equivalents were £0.642m (2016: £0.855m) and gearing was 57.9% (2016: 48.5%), which again was impacted by the stronger US dollar.

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 2017 were £13.788m, which was an increase of £1.425m on the prior year, with net working capital in the year also increasing to £3.890m (2016: £3.374m).

During the year, the Group assessed the useful lives of its plant and equipment.  As a result of this review, the Group increased the maximum life for this class of asset from 10 years to 15 years.  Assets were not revalued as a part of this exercise and the impact on the depreciation charge in the year was a reduction of £0.122m.

On translation of its overseas assets and liabilities, the Group made an exchange gain of £0.269m (2016: gain £0.052m).  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 £0.376m surplus (2016: surplus £0.107m).

Outlook 

In a period in which market conditions have at times been challenging, we are pleased to report a significant improvement in our performance, with profits in the year to 31 March 2017 being significantly ahead of market expectations. During the year we successfully completed the consolidation of our manufacturing operations in China, which is now trading profitably.

The investment we have made in aligning our manufacturing footprint to the needs of our customers combined with our ongoing focus on operational performance is enabling us to win new business, grow market share and improve profitability.

We are encouraged by the improved trading in the final quarter of the year and expect to make further progress in the current year.

Andrew Moss                                                  Mike Welburn

Chairman                                                         Chief Executive

Group income statement

For year ended 31 March 2017

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

Group statement of comprehensive income

For year ended 31 March 2017

Group statement of changes in equity

For year ended 31 March 2017