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(Alliance News) - Trifast PLC on Friday said it now predicts its annual profit will "be at the lower end of analysts' forecasts" following tough market conditions.
Shares in Trifast were down 2.2% at 169.24 pence in London in morning trading.
Fastenings maker and designer Trifast's 2020 financial year ends March 31. In its interim results for the six months to September 30, the firm said its financial year would be second-half weighted, in keeping with is "normal trading pattern".
Since then, however, "market conditions have become more challenging than had been anticipated", leading to a volatile third quarter and "slower than forecast start" to the fourth. This has been particularly troublesome for Trifast, as its fourth quarter is usually the strongest.
"The impact of this weakness has continued to constrain revenue growth across a number of our sectors. With a corresponding reduction in gross and operating margins against a semi-fixed cost base being further impacted by deferred start of production dates. As a result, following a review of our year-to-date results and an update to our Q4 forecasts, the board has concluded that the group's underlying profit before tax in FY2020 is now expected to be at the lower end of analysts' forecasts," said Trifast.
Trifast also commented on the coronavirus outbreak in China, saying the damage has been contained to the closure, for an extended period, of its Chinese sites, along with "a corresponding reduction in locally generated revenues".
The company said it was not yet possible to determined the extent of long-term damage to its performance as a result of the virus, though it is working with its supply base and customers - of which around 10% originate in China - "to minimise these risks as far as possible".
Financial 2021 and financial 2022 are intended to be "key investment years" for Trifast, being the timer in which it will conduct most of its "Project Atlas" global roll-out. Project Atlas is a three-year GBP15 million investment programme in Trifast's IT infrastructure and business processes aimed at integrating its systems, platforms, and processes group-wide.
The project it expected to produce a return on investment of "at least 25%".
However, Trifast said that: "Whilst the project timetable continues to be on track and on budget, in the current volatile macro-economic environment, the shorter-term phasing of that benefit realisation is likely to be slower than was originally anticipated."
In terms of outlook, Trifast said: "Notwithstanding the current high levels of uncertainty, we are pleased to report that our pipeline of new wins is strong and activity levels around the group continue to be encouraging. This means despite a challenging FY2020 the business remains well positioned in its markets and we are optimistic regarding prospects for revenue growth in FY2021 and beyond. We are encouraged and supported by the fact that we have lost neither business nor customers over this difficult period and continue to hold preferred supplier status at a wide range of large manufacturers across the globe."
In the medium-term, Trifast remains "optimistic". A further trading update is due in April before its annual results are released on June 23.
By Anna Farley; annafarley@alliancenews.com
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