TCN.L Regulatory News (TCN)

4 June 2013

Tricorn Group plc

Final Results

For the year ended 31 March 2013

Global footprint provides strong platform for substantial growth

Tricorn Group plc ('Tricorn', the 'Company' or the 'Group'), (TCN.L) the AIM quoted tube manipulation specialist, announces its audited final results for the year ended 31 March 2013.

Highlights

·; Significant progress in developing capability as a global tube solutions provider

·; First shipments made from China manufacturing facility

·; US acquisition provides strong platform for growth

·; Progressive dividend policy maintained

Financial Summary

* All references to operating profit, operating profit margin, profit before tax and EPS are before acquisition related costs, China start up costs, restructuring costs, intangible asset amortisation, share based payment charges, foreign exchange derivative valuation and interest collar gains.

Commenting on the results, Nick Paul CBE, Chairman of Tricorn, said:

"I am delighted to report significant progress for the Group. We now have five manufacturing facilities on three continents providing a strong platform for substantial growth. The recommended full year dividend is a 50% increase on the prior year and reflects the Board's confidence in the Group's future prospects."

Enquires:

Notes to Editors:

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

Headquartered in Malvern, UK, Tricorn employs around 400 employees and operates through five brands: MTC; Redman Fittings; Maxpower; RMDG Aerospace and Franklin Tubular Products.

Chairman's and Chief Executive's statement

Performance in the year ended 31 March 2013

The Group has made significant progress in the year in developing its capability as a global tube solutions provider. This has included the establishment of a new wholly-owned manufacturing facility in China and the acquisition of a tubular products manufacturing business in the USA; all developments being funded entirely from the Group's balance sheet. These strategic advances create a high quality global manufacturing and supply business capable of considerable growth in its niche markets worldwide.

The first product shipments have already been made from the Chinese facility less than 12 months from when the Group announced its intention to expand in the region. With nominations for supply now being received from a wider customer base, the Board is optimistic regarding future business development in this key market.

On 4 March 2013, the Group acquired the trade and certain assets of the former Whitley Products Inc for a total cash consideration of $2.99m (£1.98m). A new company was formed, Franklin Tubular Products Inc, comprising the facility in North Carolina and certain plant and equipment from the Indiana facility. The transfer of equipment from Indiana was completed as planned and the business is supplying key customers with product previously made there. A highly capable local management team is in place, a USA Vice President of Sales has been appointed and the Board is encouraged with the opportunities for growth in this important market.

The Group is pleased to report underlying PBT in line with the previous year at £1.614m (2012: £1.622m) despite generally softer markets through the second half of the year in Energy and Transportation.

Given the continued strong performance of the Group and its confidence in future prospects, the Board will be recommending the payment of a final dividend of 0.2p. The full year dividend of 0.3p represents a 50% increase on the previous year (2012: 0.2p) and continues to reinforce the Group's commitment to a longer term progressive dividend policy.

Operational Review

The Group operates three main business segments which are focused on the Energy & Utilities, Transportation and Aerospace sectors. The businesses serve a global blue chip OEM customer base, many of whom have major facilities in the UK and the rest of the world. Today the Group has five manufacturing facilities on three continents with around 90% of the final product ultimately destined for markets outside the UK.

Revenue for the year was £21.850m (2012: £24.706m). The underlying operating profit margin was 7.6%, up 6% over the previous year, and underlying PBT was in line with the previous year at £1.614m (2012: £1.622m).

Energy & Utilities

Malvern Tubular Components specialises in fabricated and manipulated tubular assemblies for large diesel engines and radiator sets used within the Energy sector, principally power generation, mining and oil and gas applications.

Revenue for the year was £9.071m compared to £10.691m for the previous year. The operating profit margin remained similar to the previous year at 8.9% (2012: 9.2%) with the efficiency gains from the investment in plant and equipment offsetting the impact of lower volumes.

Transportation

The Division is focused on nylon, rigid and hybrid tubular products for engines, braking systems and fuel sender sub-systems.

Revenue for the year was £7.011m compared to £8.681m for the previous year, which was a particularly strong comparative period having been driven by the impending introduction of new engine emissions legislation.

The underlying operating profit margin after excluding China start up costs was 8.2% (2012: 8.8%).

The UK business was awarded Supplier Quality Excellence Process (SQEP) certification by its largest customer in the year in recognition of its commitment to delivering world class operational performance.

Aerospace

RMDG Aerospace supplies rigid pipe assemblies used in a variety of applications within the Aerospace sector.

The Division had a strong year with revenue at £5.768m up 8.1% on the previous year. The operating profit margin at 5.3 % was also significantly up on the previous year.

Following the contract loss announced in November 2012, the Division has been working hard to secure additional business from existing and new customers. It has achieved some notable success in this area but will see revenue reduce through the current year. Whilst there will be some restructuring in response to the lower volume, the business remains well positioned to take advantage of growth opportunities from both within the aerospace sector and other specialist niche markets.

Expansion in China

China is a key strategic market for the Group and it is pleasing to report the significant progress that has been made since the Company announced its intention to establish a manufacturing facility in the region in March 2012.

The Group's wholly-owned facility in Wuxi is now operational with the first shipments made to its lead customer. With nominations for supply now being received from a wider customer base the outlook is encouraging.

Production lines continue to be developed and the latest addition will be an in-house painting facility which is currently being installed.

The Group is also in the advanced stages of establishing a joint venture in China which will further enhance its production capabilities in some of the larger diameter pipe sizes.

US Acquisition

The acquisition of the trade and certain assets of the former Whitley Products Inc and the subsequent formation of Franklin Tubular Products Inc mark a further key strategic development for the Group. The product transfers from the Plymouth facility have been completed and the integration of the business within the Transportation Division of the Group has proceeded to plan. The business has a strong management team, highly complementary production capabilities and positions the Group well to develop US market share. The response from both existing and new customers has been encouraging.

Financial Review

This financial year has seen the Group complete on some transformational transactions which enhance its capabilities and provide it with a strong global platform for growth. The financial performance and management of the last few years has enabled the Group to fund these opportunities directly from its balance sheet, with the latter acquisition of the trade and certain assets of the former Whitley Products Inc being paid from the Group's own cash resources.

The underlying business has performed strongly, delivering an underlying profit before tax in line with last year of £1.614m (2012: £1.622m) on turnover down 12% to £21.850m, as well as remaining highly cash generative at an operating level.

In line with the Company's progressive dividend policy, the Board is recommending the payment of a final dividend of 0.2p per share, giving a total dividend of 0.3p for the financial year ended 31 March 2013. The final dividend will be paid on 18 October 2013 to all shareholders on the register on 4 October 2013.

Income Statement

Some softening in markets during the second half saw revenue down 12% to £21.850m (2012: £24.706m), whilst continued improvements in operational performance saw gross margins improve to 36%.

After deducting administration and distribution costs, underlying operating profit margins improved 6% to 7.6% (2012: 7.2%). The transaction to acquire the trade and certain assets of the former Whitley Products Inc resulted in a net cost to profit of £0.219m. This included due diligence costs of £0.240m, post-acquisition costs of £0.810m and is then reported after offsetting the bargain purchase credit on acquisition of £0.831m.

Net finance charges for the year were down 31% to £0.054m (2012: £0.078m) following the repayment of the term loan last year. Unadjusted profit before tax for the financial year was £1.002m (2012: £1.526m). Basic EPS was 2.26p (2012: 3.49p) and, after adjusting for one-off costs, underlying EPS was 4.02p (2012: 3.78p).

Cash Flow

The Group's net cash flow from operating activities was £0.539m (2012: £1.296m) after incurring acquisition related costs and China start up costs in the year. Underlying trading continues to generate a strong profit to cashflow conversion.

Cash outflows from investing activities were £2.956m (2012: £0.451m) in the year, and represented a significant commitment to the future growth of the Group. Capital expenditure in the year represented £0.978m of this total amount, and included expenditure relating to the start up of the China manufacturing facility. The majority of the remainder was consideration of £1.984m for the acquisition of the trade and certain assets of the former Whitley Products Inc, now trading as Franklin Tubular Products Inc, in the US on 4 March 2013.

The investments made by the Group in both China and the US were supported by the Group's existing banking facilities and cash resources, with the Group's facilities at the year end consisting of short term borrowing and existing lease finance commitments.

Balance Sheet

At the year end, the total gross assets of the Group increased to £14.935m (2012: £13.997m), predominantly on the back of the investment in Franklin Tubular Products Inc and the increased capital expenditure in the year.

With the acquisition of the Franklin operations, working capital at the year end increased to £5.310m. Excluding Franklin, working capital was at £4.192m (2012: £4.172m).

In January 2013, the Group moved its banking relationship to HSBC Bank plc, securing arrangements for invoice discounting and working capital facilities. This new relationship enables the Group to benefit from a single banking source for all of its business activities as well as giving it access to RMB bank accounts and trading, which is crucial to the Group's future operational requirements.

Outlook 

The Group has made significant progress in the year in developing a global manufacturing platform aligned to its major OEM customers. With facilities now established in both China and the USA, the Group is well positioned for substantial growth.

Nick Paul CBE Mike Welburn

Chairman Chief Executive

Group statement of comprehensive income

For year ended 31 March 2013

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

Group statement of changes in equity

For year ended 31 March 2013

Group statement of financial position

At 31 March 2013

Group statement of cash flows

For year ended 31 March 2013

Notes :

1 General information

Tricorn Group plc and subsidiaries' (the 'Group') principal activities comprise high precision tube manipulation, systems engineering and specialist fittings.

The Group's customer base includes major blue chip companies with world-wide activities in key market sectors, including Power Generation, Aerospace, Off Highway, Commercial Vehicles, Agriculture and Automotive.

Tricorn Group plc is the Group's ultimate parent company. It is incorporated and domiciled in the United Kingdom. The address of Tricorn Group plc's registered office, which is also its principal place of business, is Spring Lane, Malvern, Worcestershire, WR14 1DA. Tricorn Group plc's shares are quoted on the Alternative Investment Market of the London Stock Exchange.

These consolidated financial statements have been approved for issue by the Board of Directors on 4 June 2013. Amendments to the financial statements are not permitted after they have been approved.

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The group statement of comprehensive income, the group statement of changes in equity, the group statement of financial position, the group statement of cash flows and the associated notes for the year ended 31 March 2013 have been extracted from the group's financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 498 of the Companies Act 2006. The statutory accounts for the year ended 31 March 2013 will be delivered to the Registrar of Companies following the Group's Annual General Meeting.

2 Accounting policies

Basis of preparation

These consolidated financial statements have been prepared under the required measurement bases specified under International Financial Reporting Standards (IFRS) and in accordance with applicable IFRS as adopted by the European Union and IFRS as issued by the International Accounting Standards Board.

3 Segmental reporting

The Group operates three main business segments:

§ Energy & Utilities: manipulated tubular assemblies for use in power generation, oil and gas and marine sectors, and innovative jointing systems for use typically within the utility industry.

§ Transportation: ferrous, non-ferrous and nylon material tubular assemblies for use in on and off-highway applications.

§ Aerospace: specialised rigid pipe assemblies for use the aerospace sector.

The financial information detailed below is frequently reviewed by the Chief Operating Decision maker.

The Group's revenue from external customers (by destination) and its geographic allocation of total assets may be summarised as follows:

4 Earnings per share

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.

The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post tax effect of dividends and/or interest, on the assumed conversion of all dilutive options and other dilutive potential ordinary shares.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

The Directors consider that the following adjusted earnings per share calculation is a more appropriate reflection of the Group performance.

5 Business combinations

As part of the strategic plan to grow the Group's global presence, the Group acquired the trade and certain assets of the former Whitley Products Inc, a company incorporated in the USA, via an intermediate subsidiary, Franklin Tubular Products Inc, for consideration of $2,994,000 on 4 March 2013. This acquisition increases the Group's foothold in the sector and also presents new and broader opportunities.

An adjustment was required to the book values of the assets and liabilities of the businesses acquired in order to present the net assets at fair values in accordance with Group accounting policies. The purchase was accounted for as an acquisition.

The Directors have also assessed the fair value of intangibles acquired. As a consequence of buying the business in a distressed state, they have concluded that no intangibles have been acquired. Subsequent to the acquisition, the Group has turned around the business, and Franklin Tubular Products Inc is now performing in line with expectations.

Consideration transferred

The acquisition was settled in cash amounting to $2,994,000 (£1,984,000).

Contribution to the Group results

The above acquisition contributed post acquisition revenues of £655,000 and profits totalling £1,000. The Group does not have sufficient information to be able to disclose the revenue and operating profit which would have been included in the results of the Group for the year, had the acquisition been made on 1 April 2012.

Bargain purchase on acquisition

The gain on the bargain purchase is recognised in profit or loss as part of acquisition related expenses.

Post-acquisition expenses

As a consequence of buying the business in a distressed state, the Group has agreed to make a number of payments to on-going suppliers in order to secure the relationship and continued supply of goods and services to Franklin Tubular Products Inc.

6 Dividends

As part of the Company's progressive dividend policy the Board is recommending the payment of a final dividend of 0.2p per share, giving a total dividend of 0.3p for the financial year ended 31 March 2013. The final dividend will be paid on 18 October 2013 to all shareholders on the register on 4 October 2013.

7 Availability

Copies of this announcement will be available from the Company's registered office, Spring Lane, Malvern, Worcestershire, WR14 1DA, and on its website, www.tricorn.uk.com.