TCN.L Regulatory News (TCN)

5 December 2018

Tricorn Group plc

("Tricorn" or the "Group")

Interim Results

For the six months ended 30 September 2018

Tricorn Group plc (AIM: TCN.L) the AIM listed tube manipulation specialist, announces its unaudited interim results for the six months ended 30 September 2018.

Highlights (comparable six months ended 30 September 2017)

· Earnings per share increased 52% to 1.52p· Profit up 49.5% to £0.553m· Gross margin up 0.5%· Improved profitability of the Transportation division· Continued growth in profits from the China Joint Venture

Financial Summary

*All references to EBITDA, operating profit, profit before tax and EPS are before intangible asset amortisation, share based payment charges and foreign exchange derivative valuation.

Andrew Moss, Chairman of Tricorn, commented:

"The Group has made good progress over the past six months with a focus on margins which contributed to a significant increase in profit before tax and a 52% increase in earnings per share compared to the first half of last year.  

This reflects the benefits of an efficient operational base spanning three key geographic regions, a global customer base and new business opportunities across both divisions, which are being implemented. The pipeline of new business opportunities remains encouraging.

Over the past two years, we have seen significant growth in our end markets. However, towards the end of the period, we witnessed signs of this growth slowing. Against this background, and after considering the impact of new business wins, the Board anticipates Group revenues in the second half to be similar to the first and full year underlying profit before tax to be in line with market expectations."

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 and Transportation sectors.

Headquartered in Malvern, UK, Tricorn employs around 300 employees and operates through four brands: MTC, Maxpower, Franklin Tubular Products and Minguang-Tricorn Tubular Products.

Chairman's and Chief Executive's statement

Performance in the six months ended 30 September 2018

Revenue for the Group at £11.415m was in line with the six months ended 30 September 2017 (the "Corresponding Period") (2017: £11.427m) and 6.2% ahead of the previous six months. Growth in the Transportation division offset the reduction in the Energy division where demand from the power generation rental sector was, as anticipated, lower than the Corresponding Period.

The improved profitability of the Transportation division and the further progress of our joint venture in China enabled the Group to deliver a significant improvement in profit before tax which at £0.553m (2017: £0.370m) was 49.5% ahead of the Corresponding Period.

Operational Review

The Group operates two main business divisions focused on the Transportation and Energy sectors and has four manufacturing facilities in the UK, USA and China. These locations make it ideally positioned to support its blue chip OEM customer base, many of whom are seeking to localise supply and technical support for their facilities in these key regions.

Transportation

The Transportation division is focused on rigid, nylon and hybrid tubular products for engines, hydraulic actuation, transmission lubrication and fuel sender sub-systems. Its customer base serves both the on and off road markets, including construction, truck and agriculture.

In the UK, Maxpower Automotive made excellent progress with the operation benefitting from ongoing investment. The rigid hydraulic tube business continued to grow and investment in a new in-house cutting cell towards the end of the period yielded further productivity gains. The business secured in the prior year with the London Electric Vehicle Company for brake pipe assemblies transitioned to the production phase towards the end of the period.

In the USA, Franklin Tubular Products increased profitability further and continued to expand its customer base. Market conditions remained favourable but the lower unemployment rates have provided some challenges in recruiting and retaining skilled employees as the business grows.

Overall externally reported segmental revenue was £8.495m (2017: £8.097m), up 4.9% compared to the Corresponding Period. Segmental profit before tax was up 149.3% at £0.389m (2017: £0.156m).

Energy

The Energy division specialises in the design and manufacture of larger tubular assemblies and fabrications for engine, cooling and generator set applications. Its customer base serves the power generation, oil and gas, mining and marine applications markets.

Malvern Tubular Components continued to make good progress in developing new business opportunities and in maintaining productivity through a period of lower demand. Revenue at £2.920m (2017: £3.330m) was, as anticipated, lower than the Corresponding Period due to the reduction in demand from the power generation rental sector. Segmental profit was £0.187m (2017: £0.278m). 

Joint Venture

Our Chinese joint venture, Minguang-Tricorn Tubular Products performed well, benefiting from a strong operational performance and favourable market conditions. The Group's share of profit before tax at £0.150m (2017: £0.099m) was substantially up on the Corresponding Period last year.

Financial Review

The Group has made good progress through the first six months of the financial year, with revenue increasing over the second half of the last financial year and underlying profitability increasing over both the first and second halves of the previous financial year.

The success that the Group has enjoyed in winning contracts with new and existing customers has required additional investment in the first half of the financial year and the short-term increase in net debt, from the year end position, will be offset by the longer term benefits that those contracts bring.

Income Statement

Revenue for the first half of the financial year at £11.415m was in line with the Corresponding Period (2017: £11.427m), with the Group benefitting from an increase in revenue from the power generation rental sector through the first half of last year. Against the preceding six months, revenue was up 6.2% (2017: £10.753m).

The Group was able to improve gross margins to 38.5% in the first half of the financial year, compared to 38.0% in the Corresponding Period. Coupled with a reduction in administration and distribution costs of 1.7%, the Group demonstrated its discipline on costs control despite external upward pressures. This resulted in an improved EBITDA of £0.944m (2017: £0.744m).

The Group's joint venture in China continued to perform well operationally and delivered a share of profit before tax for the Group in the first half of the financial year of £0.150m (2017: £0.099m). After finance charges the Group delivered a significant improvement in underlying profit before tax of £0.553m (2017: £0.370m), up 49.5% over the Corresponding Period.

After deducting intangible asset amortisation and share based payment charges, headline profit before tax was up 85.9% at £0.476m (2017: £0.256m).

The underlying earnings per share were 1.52p (2017: 1.00p) and after deducting non-underlying items the basic earnings per share were 1.29p (2017: 0.66p).

Cash Flow

The first half of the financial year traditionally sees the Groups cashflow performance deliver below its full year target for cash generated by operations to EBITDA of 1:1, with a number of annual payments falling in this first six months period. In addition, in the year to date the Group has supported a number of new customer contracts which have resulted in additional first half cash expenditure, but will benefit the Group over the life of those contracts. Specific areas of spend included the funding of tooling and the holding of finished goods. As a result the Group's net cash generated from operations of £0.320m (2017: £0.332m) was broadly in line with the Corresponding Period.

The Group's investment in capital expenditure in the first half was in excess of depreciation and higher than the Corresponding Period at £0.327m (2017: £0.281m). Intangible asset expenditure of £0.076m was also incurred in the first half of the financial year which related to costs associated with new product introduction.

Net debt was down at the half year end at £3.288m compared to the Corresponding Period of £3.470m, but up on the previous full year position of £2.982m. Gearing was down on the corresponding period to 48.3% (2017: 57.5%), but up marginally on the March 2018 year end position of 47.6%.

Balance Sheet

Total assets at 30 September 2018 were £14.884m, up £0.682m on 30 September 2017. As well as an increase in fixed assets and inventories, the improved trading position of the Group's Chinese joint venture saw the value of the investment increase to £1.066m.

Net working capital at 30 September 2018 was £4.012m, which was £0.040m lower than at 30 September 2017 and £0.537m higher than at 31 March 2018.

Outlook

The Group has made good progress over the past six months with a focus on margins which contributed to a significant increase in profit before tax and a 52% increase in earnings per share compared to the first half of last year.

This reflects the benefits of an efficient operational base spanning three key geographic regions, a global customer base and new business opportunities across both divisions, which are being implemented. The pipeline of new business opportunities remains encouraging.

Over the past two years, we have seen significant growth in our end markets. However, towards the end of the period, we witnessed signs of this growth slowing. Against this background, and after considering the impact of new business wins, the Board anticipates Group revenues in the second half to be similar to the first and full year underlying profit before tax to be in line with market expectations.

Andrew Moss Mike Welburn

Chairman Chief Executive

Group statement of comprehensive income

For period ended 30 September 2018

Group statement of changes in equity

For period ended 30 September 2018

Group statement of financial position

At 30 September 2018

Group statement of cash flows

For period ended 30 September 2018

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, Oil & Gas, 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. The Group's shares are admitted to trading on the Alternative Investment Market of the London Stock Exchange.

These consolidated interim financial statements have been approved for issue on 5 December 2018 by the Board of Directors. Amendments to the financial statements are not permitted after they have been approved. Copies of this announcement are available on the Company's website, www.tricorn.uk.com.

The financial information set out in this interim report does not constitute statutory accounts as defined in the Companies Act 2006. The Group's statutory financial statements for the year ended 31 March 2018 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

2 Accounting policies

Basis of preparation

These unaudited interim consolidated financial statements are for the six months ended 30 September 2018. They have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2018, which have been prepared in accordance with International Financial Reporting Standards.

The same accounting policies and methods of computation are followed in the interim financial statements as compared with the most recent annual financial statements.

3 Segmental reporting

The Group operates two main business segments:

§ Energy: manipulated tubular assemblies for use in power generation, oil and gas and marine sectors.

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

3 Segmental reporting (continued)

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

3 Segmental reporting (continued)

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.

4 Earnings/(Loss) per share (continued)

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