Trifast — Project Atlas helps map the future

Trifast — Project Atlas helps map the future

Trifast delivered another record financial performance. FY18 results were modestly ahead of market expectations, but significantly ahead of expectations at the start of the year. Management is now launching Project Atlas to integrate its management, customer-facing and manufacturing processes through a £15m investment over the next three years. By maintaining leading customer service and quality levels, the move is a clear support for the invest and grow strategy. Following the recent acquisition of Precision Technology Supplies (PTS) in the UK, the company retains adequate resources to pursue additional M&A should appropriate opportunities arise.

Andy Chambers

Written by

Andy Chambers

Director, Industrials

Trifast

Project Atlas helps map the future

FY18 results

Industrial support services

22 June 2018

Price

266p

Market cap

£323m

Net debt (£m) at 31 March 2018

7.4

Shares in issue

121.4m

Free float

91%

Code

TRI

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.7

1.5

19.2

Rel (local)

8.5

(5.0)

16.6

52-week high/low

276.0p

197.0p

Business description

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

Next events

AGM

July 2018

Analysts

Andy Chambers

+44 (0)20 3681 2525

Annabel Hewson

+44 (0)20 3077 5700

Trifast is a research client of Edison Investment Research Limited

Trifast delivered another record financial performance. FY18 results were modestly ahead of market expectations, but significantly ahead of expectations at the start of the year. Management is now launching Project Atlas to integrate its management, customer-facing and manufacturing processes through a £15m investment over the next three years. By maintaining leading customer service and quality levels, the move is a clear support for the invest and grow strategy. Following the recent acquisition of Precision Technology Supplies (PTS) in the UK, the company retains adequate resources to pursue additional M&A should appropriate opportunities arise.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/17

186.5

20.5

12.82

3.50

20.8

1.3

03/18

197.6

22.2

13.78

3.85

19.3

1.5

03/19e

209.9

23.2

14.36

4.00

18.5

1.5

03/20e

218.9

24.3

15.03

4.15

17.7

1.6

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

Delivering growth across all regions

FY18 saw Trifast deliver sales growth in all four of its regions, with 4% organic growth further enhanced by a favourable 2% FX move. Underlying PBT rose by 8.5% to £22.2m, a £1.7m increase at AER. The result was achieved despite adverse input cost pressures and increased overheads from new capacity to support growth. The gross margin of 30.5% once again exceeded the targeted 30% level for only the second time despite these pressures, and group underlying operating margins of 11.5% represented an historic high. The year ended with net debt just £1.0m higher despite several one-off factors at £7.4m, but before the £8.5m initial payment for PTS. The FY17 dividend increase of 10% to 3.85p per share, and is covered 3.6x by adjusted EPS, within targeted levels.

Project Atlas to underpin invest and grow strategy

Management has launched a major £15m investment programme in to Trifast’s IT infrastructure and business processes, spread over the next three years to integrate its processes, systems and platforms across the group. The four key drivers of the investment are to support the core growth strategy, achieve operational efficiencies and integration across the group, improve management information and data management, and build an adaptable, scalable, stable environment. The core strategy, to augment organic growth through appropriate M&A, is unchanged. Project Atlas should support these goals, while the balance sheet facilitates further organic capex and M&A.

Valuation: Re-rating likely to lag investment

Trifast’s one-year forward P/E rating is little changed from a year ago, and thus the stock continues to trade at a discount of around 7% to its peers. As the company continues to invest and enhance return on capital, we feel this should diminish.

Investment summary

Design, manufacture and distribution of industrial fasteners

Trifast is a leading specialist designer, manufacturer and distributor of industrial fasteners to major global assembly industries. From its origins in the UK, the group continues to build a global presence, with sizeable operations in Asia and continental Europe, and a smaller activity in the US. Trifast differentiates itself from its global competitors by operating its own manufacturing plants, principally across Asia and in Italy, which enable the group to offer specialist design support as part of a high-quality, comprehensive and tailor-made supply chain management service. Management is constantly strengthening the product range, as with the acquisition on 4 April 2018 of UK-based Precision Technology Supplies (PTS), a key supplier and distributor of stainless steel fasteners with one of the broadest product ranges in Europe.

Share re-rating largely complete for now

Trifast shares have outperformed the broader UK market over the last 12 months, rising by c 20%, or 5% year to date, as it continued to deliver consistent growth ahead of expectations. There is little change in the rating of the shares on a one-year forward P/E basis, and the 7% discount to its distributor peer group persists. A premium may be justified if the company delivers superior growth of earnings and free cash flow via Project Atlas, but this is likely to lag the initial investment phase.

Another record year, growth set to continue

In FY18, Trifast delivered another record year. Revenues rose 6.0% at actual exchange rates (AER) to £197.6m (FY17: £186.5m), or 4.0% at constant exchange rates (CER). Gross margin of 30.5% (FY17: 31.1%) remained above the 30% target rate despite anticipated input price inflation and the additional costs of investment in new manufacturing capacity. Underlying operating margins improved 20bps to an historic high of 11.5%, thanks to the increased sales and ongoing good cost control across the group. Underlying diluted EPS rose 7.5% to 13.78p (FY17: 12.82p). The full year dividend was increased 10% to 3.85p, with cover of 3.6x still within the target range of 3.0-4.0x. Net debt rose a modest £1.0m to £7.4m which, given the £1.2m tax payment last April that was deferred from FY17, essentially reflects a neutral net cash flow performance before the initial £8.5m purchase cost of PTS early in FY18. Trifast remains financially well positioned to pursue its invest and grow strategy.

Exhibit 1: Estimate changes

EPS (p)

PBT (£m)

EBITDA (£m)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2018

13.50

13.78

+2

21.8

22.3

+2

24.0

24.7

+3

2019e

14.18

14.36

+1

23.0

23.2

+1

25.4

25.9

+2

2020e

N/A

15.04

N/A

24.3

N/A

27.3

Source: Company reports, Edison Investment Research. Note: EPS are normalised and fully diluted.

Sensitivities

Distributors of industrial components bear the brunt of destocking and restocking, which tends to accentuate the impact of shifts in economic cycles. This is true for Trifast at extreme stages of the economic cycle, but the group’s operational flexibility and product development/design skills enable management to use strong relationships with its major customers to anticipate and respond early to these challenges. Similarly, management responds to the ongoing risks encountered by all distributors to the industrial sector, such as cost-down pressures, fluctuating raw material costs, exchange rate movements, stock obsolescence and the migration of global manufacturing capacity to lower-cost territories, as part of the day-to-day challenges of the business.

FY18 delivered another record performance

FY18 saw Trifast deliver another record year in terms of financial performance despite a moderation of growth in the second half of the year. Both the UK and Europe continued to make strong top-line progress, and overall the gross margin of 30.5% remained above the targeted level of 30% for the second year in succession. The Asian operations delivered a robust profit performance following a strong first half and the company continues to invest in the US, where profitability also experienced some one-time operational issues that should moderate this year.

As expected, the cash conversion rate from EBITDA to underlying operating cash fell to 68.1% (FY17: 97.3%). In addition to a £0.5m increase in capex to £3.6m, a £2.5m gross investment in stock levels was incurred during the year to normalise the abnormally low positions held at the prior year end. Excluding the inventory adjustment, the operating cash conversion would have been 78.2%. A number of one-off, non-operational factors also affected the net cash flow. These included the £1.2m tax and national insurance payment deferred from FY17 against the chairman’s exercise of share options on 17 February 2017, a £3.4m buyback of 1.5m shares by the Trifast EBT, property disposal proceeds of £1.6m in Malaysia and a £1.3m increase in net debt due to FX movements.

Underlying fully diluted EPS rose by 7.5% to 13.78p per share, which compares to our estimate following FY17 results of 12.56p, almost a 10% improvement. It has been achieved despite the anticipated input cost pressures and the one-off operational issues in the US.

Exhibit 2: Trifast underlying income statement half-year splits

Year to March

H117

H217

FY17

H118

H218

FY18

 

% change

 

£000s

H118 vs H117

H218 vs H217

FY18 vs FY17

Revenue

 

 

 

UK

32,612

34,213

66,825

34,037

36,249

70,286

4.4%

6.0%

5.2%

Europe

32,570

34,661

67,231

35,568

37,153

72,721

9.2%

7.2%

8.2%

US

2.917

2,983

5,900

3,185

3,086

6,271

9.2%

3.5%

6.3%

Asia

21,648

24,908

46,556

25,023

23,331

48,354

15.6%

-5.3%

3.9%

Group revenue

89,747

96,765

186,512

97,813

99,819

197,632

9.0%

3.2%

6.0%

Gross profit

28,400

29,617

58,017

29,502

30,744

60,246

3.9%

3.8%

3.8%

Underlying operating profit

 

 

 

 

UK

3,131

3,407

6,538

3,914

4,496

8,410

25.0%

32.0%

28.6%

Europe

5,349

4,469

9,818

3,940

5,145

9,085

-26.3%

15.1%

-7.5%

US

166

168

334

116

-64

52

-30.1%

-138.1%

-84.4%

Asia

3,302

4,703

8,005

4,368

4,058

8,426

32.3%

-13.7%

5.3%

Unallocated costs

-1,686

-1,991

-3,677

-1,207

-2,053

-3,260

-28.4%

3.1%

-11.3%

Group total

10,262

10,756

21,018

11,131

11,582

22,713

8.5%

7.7%

8.1%

Interest

-313

-208

-521

-222

-258

-480

-29.1%

24.0%

-7.9%

Underlying profit before tax

9,949

10,548

20,497

10,909

11,324

22,233

9.6%

7.4%

8.5%

Margins

 

 

Gross margin

31.6%

30.6%

31.1%

30.2%

30.8%

30.5%

Underlying operating margins

 

 

UK

9.6%

10.0%

9.8%

11.5%

12.4%

12.0%

Europe

16.4%

12.9%

14.6%

11.1%

13.8%

12.5%

US

8.7%

4.2%

5.7%

3.6%

-2.1%

0.8%

Asia

17.4%

17.0%

17.2%

17.5%

17.4%

17.4%

Group underlying operating margin

11.4%

11.1%

11.3%

11.4%

11.6%

11.5%

 

 

 

Underlying PBT margin

11.1%

10.9%

11.0%

11.2%

11.3%

11.2%

Source: Trifast results announcements. Note: Before amortisation of intangibles, share-based payments and exceptional items.

UK (36% of FY18 external revenue; 32% of underlying operating profit)

In FY18 the UK grew revenues (including intra company sales) 5.4% to £73.0m at AER. As in the previous year growth was driven by the European distribution business, which grew 23.4% to £10.0m, or 14% of UK sales. In addition, there was a more broadly based increase in sales to core multinational OEMs across various sectors. The operational leverage over a semi-fixed cost base combined with good cost control led to a 220bp improvement in margin to 12.0%. We would not anticipate a further increase in margins as materials cost pressures persist even if relatively modest to date, Brexit concerns remain and the Project Atlas investment will start to generate some initially unrecovered incremental costs across the group.

Europe (37% of FY18 external revenue; 35% of underlying operating profit)

Europe experienced a sharp contraction in operating margins split across three factors. As expected following the ending of a supply contract at the end of H117, there was a drop-through from gross profit of increased purchase costs, especially in the Italian operation. A similar impact on margin arose from higher fixed production costs from investment in additional manufacturing capacity. The third element was an overhead under absorption at the new TR Espana operation as it continues to build volumes. At the underlying operating level margins fell 210bp, although there was an improvement apparent during H218. The reported external revenue growth of 8.2% to £72.7m remained healthy despite the abnormally high domestic appliance sales volumes in Italy in FY17 due to a major global recall by a customer. The automotive sector in Holland (15.4% CER) and Sweden (13.6% CER) experienced the strongest growth.

Management expects the input cost levels to continue into FY19 as they have returned to more normal levels following the end of the favourable supply contract. We expect some improvement in overhead recovery in Spain as the new facility continues to grow.

Asia (24% of FY18 external revenue; 32% of operating profit)

Asia continued to perform well, with solid organic growth during the year across the key automotive and domestic appliance sectors. Although the growth moderated in Asia during the second half, this was expected. In part it was the result of management maintaining pricing discipline in the region, with some volume sacrificed as a result an e-bidding auction process. Trading nevertheless increased almost across the board in the full year, with China remaining the strongest region as the Shanghai-based operation grew by almost 10%, driven by strong automotive demand from domestic manufacturing operations and exports to Japan. The region broadly maintained its operating margin, with the benefit of higher volumes being largely offset by increased overhead expenses on newly opened facilities, as well as a higher balance sheet translation FX loss of $0.4m (FY17: £0.2m loss) incurred due to the weakening of the US$ later in H2.

We expect growth to continue in FY19 but at more muted levels.

US (3% of FY18 external revenue; 0% of operating profit)

The US broadly maintained sales volumes in the second half of the year compared to H118 using AER. However, in local currency terms, a soft first half with growth of 3.7% was followed by double-digit growth in the second half. Margins declined sharply due to product mix changes and the increasing focus on the lower-margin automotive sector, where temporary additional costs were incurred against a production start-up programme for a customer. As a result, underlying operating profit fell by £0.3m for the full year to close to break even. The decline was further exacerbated by the effects of Hurricane Harvey on electronics manufacturing customers. Trifast continues to invest in the region to stimulate future growth and, while some margin recovery is expected in the current year, additional overheads will be incurred as the operations moved into a new HQ in April.

Outlook

The UK macroeconomic situation has continued to be resilient despite some well-publicised concerns and persistent domestic uncertainty, notably around Brexit. However, the impact of FX rates on input costs has so far been more muted than expected and exchange rates appear more stable. Management anticipate increased input cost pressures in FY19. Performance in the UK in FY19 will be enhanced as PTS will also make its initial contribution, effectively for a full year. We expect PTS to contribute £6m to revenues with a mid-teen operating margin, above the UK regional average.

We expect Europe to broadly maintain margins at the more normal levels seen in FY18, compared to an exceptional FY17, with growth in Spain and in other new capacities helping to mitigate any residual input price pressures.

Asia should benefit from the manufacturing capacity expansion in Singapore, which should lift margins with better overhead absorption. The new warehouse in Shanghai should also support continued automotive sector growth in China and Japan.

Management expects to see double-digit revenue growth and some margin recovery in the US assuming no repeat of the weather events in FY18, especially for the automotive operations. However, Trifast continues to build the team and invest in new facilities to support growth, including the new facility in Houston in April 2018.

Project Atlas has been launched. It is scoped to integrate and develop the IT infrastructure across the group to support the continuing growth, while improving the interface with customers. The associated investment of £15m will be spread over the next three years with around £5-6m anticipated in FY19.

Augmenting the growth strategy

Trifast’s core strategy remains unchanged. The focus is on developing business, with over 100 multinational OEM customers spanning the end-market sectors of automotive (33% of FY18 sales), domestic appliances (22%), electronics (16%) and other. These customers contribute more than 65% of revenues and delivered 5.6% organic growth last year. Trifast continues to increase both the number of products being sold to these companies and their manufacturing plants it supplies. New OEMs continue to be added and investment should now be accelerated into an integrated Management Information System (MIS) via Project Atlas, aligning customer-facing processes and systems with manufacturing. This is further supported by the five additional strategic pillars:

Differentiation: Trifast is a solutions business, working with customers to enhance product reliability by offering tailor-made answers to problems. 75% of products, including branded parts, are made and supplied to specific customer or Trifast specifications, limiting exposure to commodity pricing.

Acquisitions: as an industry consolidator, Trifast is constantly looking at potential acquisitions that can add new products, technologies and/or customers. A global acquisition team has been formed to develop the pipeline of opportunities.

Investment: there is consistent investment to upgrade manufacturing and warehouse facilities to enable Trifast to offer the best possible service to customers. Additional investment in reducing bottlenecks and increasing capacity is also undertaken as required.

Efficiency: by constantly assessing operational efficiencies, Trifast can provide the service that can justify above-average margins. Leaning initiatives, sharing best practice and automation accompany systems investment to support manufacturing and customers.

People: Trifast invests consistently in the development of its team; new people are introduced and prepared ahead of initiatives, while there are numerous ongoing training programmes.

Project Atlas

As the business has grown, Trifast has invested in the manufacturing footprint. However, the company has recognised the need to invest in its IT infrastructure and redesign its business processes to support further growth. A thorough investigation has prompted the company to introduce a new strategy in Project Atlas. Management views timely and effective information systems as integral to the future of the business and outlines four key drivers for the Project Atlas investment:

Supporting core strategy – underpinning ongoing growth plans and differentiation in core markets.

Operational efficiencies and integration – driving efficiency gains, increased automation and lowering operational gearing to support the ongoing growth story.

Improving management information and data management – leading to better decision making, more globalised supplier management and a more proactive approach to opportunities and challenges.

Building an adaptable, scalable, stable environment – flexible, rapidly deployable and widely supported systems and processes that will form the backbone of the growing global business.

The direct costs incurred in FY18 were £0.4m, largely due to the project team and consultancy costs. While Project Atlas is a multi-year programme, the board has authorised a total budget of £15m, although this figure may evolve as the scope of the investment is refined. While the IT platform is expected to account for around a third of the budget, focus on improving business processes, including change management and training, will make up most of the investment. At the full point of benefit realisation (FY23), management estimates ROI on the project in excess of 25%, which is in turn above the company’s current ROCE of 20.1%.

Sensitivities

Cost-down pressures: equipment/machinery manufacturers operate in competitive markets, with pressure applied to all suppliers to keep prices down. These pressures are at their greatest in commodity-type products, especially in mass-production industries such as automotive. Fasteners are among the lowest-priced components in any product and Trifast’s ability to offer effective inventory management to customers can sometimes be used to counter these pressures. In addition, value-added engineering, quality and reliability of supply are differentiating factors that help to mitigate the pressures. Nevertheless the emergence of new procurement processes at customers such as e-auctions can at least temporarily adversely influence decision making until these factors reassert themselves.

Raw materials costs: fluctuating raw materials costs cannot always be passed on quickly in competitive markets. We believe the type of customer being targeted by Trifast will be more concerned about supply chain management than the price paid for crucial low-cost components, but only to a certain extent. Distributors can suffer short-term margin pressures when their own price increases lag cost rises. Input costs are currently facing upward pressure, which should depress margins, despite negotiations aimed at mitigating the impact.

Stock obsolescence: Trifast will often hold buffer stocks of specialist components on behalf of certain customers (short production runs are rarely economical). Stock levels are often contractually agreed, but Trifast will exceed these when appropriate. Trifast will usually be made aware ahead of changes to product specification, because of work carried out on the design of replacement products, enabling it often to manage much of the risk.

Exchange rates: Trifast has a hedging strategy. However, acquisitions substantially raised the exposure to the euro in recent years. With Asia representing about a quarter of external revenues and a third of profit, fluctuations in Asian currencies relative to the US dollar, the euro and sterling may have an impact on margins. The majority of Asian production is sold locally, mitigating the impact, although many large contracts are priced in US dollars.

Global shifts: there has been a shift of manufacturing capacity from developed countries to lower-cost territories in Eastern Europe, Central and South America and, more specifically, India and the Far East. However, contracts for the supply of fasteners are frequently negotiated direct with parent companies, which have often not changed domicile. Trifast has developed extensive sourcing and manufacturing facilities, mostly in lower-cost territories. Management sees these shifts as an opportunity rather than a problem, especially when supplying to locally based component and subassembly producers.

Project Atlas has execution risks: change management is always a tricky factor and when investment in cross-group IT occurs these risks can increase. Perfect execution is seldom achievable, but avoiding the worst efficiency and financial pitfalls is important. There are many examples of IT-related investments causing operational disruption. Trifast has a dedicated and experienced management team charged with the project delivery.

Acquisitions: as evidenced by the purchase of PTS in April 2018, acquisitions remain firmly on the agenda. Deals tend to fit well and are under negotiation for some time before completion. There is always execution risk with acquisitions, but the manner in which management has pursued its deals so far suggests that this is minimised.

Financials

We are once again modestly increasing our expectations for FY19 by around 1%. Margin pressures persist in some areas due to FX effects on input costs and additional fixed costs from capacity investment, and Project Atlas is likely to add further pressure in the near term, with its full enhancing benefits not expected until 2023. The acquisition of PTS further boosts current year performance, although our expectations for the business remain unaltered.

We introduce our FY20 estimates, with similar growth rates again reflecting the investments to be made under Project Atlas, and we expect to continue to look for appropriate opportunities to expand the business through additional M&A.

Exhibit 3: Financial summary

£m

2018e

2018

 

2019e

 

Prior

Actual

% change

Prior

New

% change

UK

69.2

70.3

1.6%

76.7

77.8

1.5%

Europe

70.6

72.7

3.0%

72.7

74.9

3.0%

US

6.4

6.3

-2.5%

7.1

6.9

-2.5%

Asia

50.7

48.4

-4.7%

53.3

50.3

-5.6%

Total group external revenues

196.9

197.6

0.4%

209.7

209.9

0.1%

 

 

 

 

 

 

EBITDA

24.0

24.7

2.9%

25.4

25.9

1.7%

 

 

 

 

 

 

UK

8.5

8.4

-1.1%

9.5

9.0

-5.0%

Europe

8.6

9.1

5.5%

8.7

9.0

3.0%

US

0.3

0.1

-83.8%

0.5

0.1

-72.1%

Asia

8.4

8.4

0.0%

8.5

8.8

3.5%

HQ Other and intersegment

(3.7)

(3.3)

-11.9%

(3.7)

(3.3)

-11.9%

Underlying operating profit

22.2

22.7

2.5%

23.5

23.8

1.2%

 

 

 

 

 

 

Underlying PTP

21.8

22.2

2.1%

23.0

23.2

1.0%

 

 

 

 

 

 

EPS - underlying continuing fully diluted (p)

13.50

13.78

2.1%

14.18

14.36

1.2%

DPS (p)

3.65

3.85

5.5%

3.80

4.00

5.3%

Net cash/(debt)

(7.3)

(7.4)

2.0%

(10.7)

(14.6)

36.6%

Source: Company reports, Edison Investment Research


Exhibit 4: Financial summary

£000s

2016

2017

2018

2019e

2020e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

161,370

186,512

197,632

209,901

218,938

Cost of Sales

(113,366)

(128,495)

(137,386)

(146,301)

(152,600)

Gross Profit

48,004

58,017

60,246

63,600

66,338

EBITDA

 

 

18,150

22,868

24,650

25,873

27,335

Operating Profit (before amort. and except.)

16,793

21,018

22,713

23,962

25,343

Intangible Amortisation

(974)

0

0

(150)

(300)

Exceptionals

(264)

(1,645)

(1,536)

(5,363)

(4,156)

Other

(1,687)

(1,512)

(2,194)

(2,200)

(1,000)

Operating Profit

13,868

17,861

18,983

20,229

20,229

Net Interest

(791)

(521)

(480)

(604)

(745)

Profit Before Tax (norm)

 

 

16,002

20,497

22,233

23,209

24,298

Profit Before Tax (FRS 3)

 

 

13,077

17,340

18,503

15,646

19,142

Tax

(3,984)

(4,835)

(5,186)

(5,454)

(5,710)

Profit After Tax (norm)

12,018

15,662

17,047

17,755

18,588

Profit After Tax (FRS 3)

10,225

12,698

15,086

11,969

14,644

Average Number of Shares Outstanding (m)

116.4

118.5

120.3

120.3

120.3

EPS - normalised (p)

 

 

9.99

12.82

13.78

14.36

15.03

EPS - (IFRS) (p)

 

 

8.79

10.72

12.54

9.95

12.17

Dividend per share (p)

2.80

3.50

3.85

4.00

4.15

Gross Margin (%)

29.7

31.1

30.5

30.3

30.3

EBITDA Margin (%)

11.2

12.3

12.5

12.3

12.5

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

10.4

11.3

11.5

11.4

11.6

BALANCE SHEET

Fixed Assets

 

 

55,430

58,940

58,414

68,639

71,476

Intangible Assets

38,259

39,682

38,401

45,388

46,932

Tangible Assets

17,171

19,258

20,013

23,251

24,543

Investments

0

0

0

0

0

Current Assets

 

 

102,603

118,290

130,242

140,876

155,730

Stocks

39,438

41,926

49,199

50,376

52,545

Debtors

43,386

49,360

52,466

57,723

60,208

Cash

17,614

24,645

26,222

30,222

40,222

Other

2,165

2,359

2,355

2,555

2,755

Current Liabilities

 

 

(52,813)

(54,564)

(52,456)

(46,824)

(40,456)

Creditors

(35,879)

(39,692)

(40,584)

(40,952)

(40,584)

Short term borrowings

(16,934)

(14,872)

(11,872)

(5,872)

128

Long Term Liabilities

 

 

(21,470)

(20,968)

(25,987)

(43,125)

(56,536)

Long term borrowings

(16,675)

(16,221)

(21,781)

(38,917)

(52,326)

Other long term liabilities

(4,795)

(4,747)

(4,206)

(4,209)

(4,210)

Net Assets

 

 

83,750

101,698

110,213

119,566

130,214

CASH FLOW

Operating Cash Flow

 

 

15,873

22,887

15,303

17,222

20,202

Net Interest

(804)

(521)

(480)

(604)

(745)

Tax

(3,080)

(5,136)

(5,186)

(5,454)

(5,710)

Capex

(2,323)

(2,948)

(3,566)

(5,149)

(6,284)

Acquisitions/disposals

(7,684)

(1,471)

0

0

0

Financing

(2,122)

46

(2,836)

(8,500)

0

Dividends

(2,440)

(3,310)

(4,218)

(4,652)

(4,872)

Net Cash Flow

(2,580)

9,547

(983)

(7,136)

2,591

Opening net debt/(cash)

 

 

13,415

15,995

6,448

7,431

14,567

HP finance leases initiated

0

0

0

0

0

Other

0

0

0

0

0

Closing net debt/(cash)

 

 

15,995

6,448

7,431

14,567

11,976

Source: Company reports, Edison Investment Research estimates

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Trifast and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Chemring — Ducks aligning

Chemring’s H118 report demonstrates improved operational performance and financial security. While FX headwinds persist, the operating margin improvements at Countermeasures and Sensors are visible, as is improved cash generation. End markets are evolving from the perceived threat to increasing budgets, which underpins Chemring’s market position. The FY18 outlook remains unchanged, underpinned by the H2 order book.

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