Trifast
Written by
Trifast |
Faster fasteners |
Trading update |
Industrial support services |
16 February 2017 |
Share price performance
Business description
Next events
Analysts
Trifast is a research client of Edison Investment Research Limited |
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In its Q317 trading update management confirmed that Trifast remains on track to achieve another record full year performance. The shares have continued to perform strongly, rising by 43% since the interim results in October. The progress appears warranted by the FX enhanced trading performance, which has enabled us to modestly increase our FY17 and FY18 forecasts. The shares are now trading on an FY18e P/E of 17.6x.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/15 |
154.7 |
14.3 |
8.68 |
2.10 |
25.7 |
0.9 |
03/16 |
161.4 |
16.0 |
9.99 |
2.80 |
22.3 |
1.3 |
03/17e |
182.0 |
19.2 |
12.40 |
3.00 |
18.0 |
1.3 |
03/18e |
186.0 |
19.7 |
12.68 |
3.20 |
17.6 |
1.4 |
Note: *PBT and EPS are normalised and diluted, excluding intangibles amortisation, exceptional items and share-based payments.
Improved trading in all regions
The continued strength of the US and UK operations has been augmented by the anticipated recovery in Asian trading during H2, for both domestic and export markets. European performance also remains solid with continued growth offset partially by a slightly less favourable mix. The new operation in Barcelona targeting tier one automotive suppliers has also been encouraging. The weakness of sterling is further enhancing Trifast’s performance with more than 70% of sales coming from overseas operations whose contributions are boosted on translation. Sterling has weakened by 15% against a business-weighted basket of currencies in 2016. If current rates are maintained, further near-term benefits will accrue, although management is wary of the inflationary impact on imported input costs for the UK operations. As a result of the combination of improved trading and FX translation gains that have improved management guidance, we are increasing our earnings expectations for FY17 by 6% (12.40p from 11.69p) and FY18 by 5% (12.68p from 12.06p) respectively. A further year-end trading update is expected in late April.
Strategy and balance sheet trump uncertainty
As with most companies at present, management is trying to garner a clearer view of the macroeconomic picture that should emerge from the new US administration’s trade policies, as well as the UK heading for the EU exit door. However, the strategy of building its share of business with its multinational global customer base continues to successfully deliver growth and increase opportunities for upselling. The increased competitiveness of the UK base is a further positive factor and all of this is supported by a strong balance sheet.
Valuation: Potential remains despite re-rating
The shares have risen strongly during 2016 and in our view this has been warranted by the much improved trading and business environment. The current update is in sharp contrast to the situation 12 months ago. The P/E rating of 17.6x for FY18e on our improved estimates has closed the discount to Trifast’s UK distribution group peers, but a discount of 12% remains against Bossard.
Exhibit 1: Financial summary
£'000s |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
121,544 |
129,775 |
154,741 |
161,370 |
182,000 |
186,000 |
Cost of Sales |
(89,969) |
(93,809) |
(109,866) |
(113,366) |
(126,859) |
(129,897) |
||
Gross Profit |
31,575 |
35,966 |
44,875 |
48,004 |
55,141 |
56,103 |
||
EBITDA |
|
|
9,226 |
10,798 |
16,491 |
18,150 |
21,850 |
22,300 |
Operating Profit (before GW and except.) |
|
|
7,971 |
9,696 |
15,274 |
16,793 |
20,100 |
20,500 |
Intangibles amortisation/impairments |
(331) |
(221) |
(551) |
(974) |
(1,400) |
(1,200) |
||
Exceptionals |
(389) |
0 |
(1,167) |
(264) |
0 |
0 |
||
Share based payments |
(91) |
(67) |
(741) |
(1,687) |
(1,200) |
(1,200) |
||
Operating Profit |
7,160 |
9,408 |
12,815 |
13,868 |
17,500 |
18,100 |
||
Net Interest |
(718) |
(534) |
(966) |
(791) |
(900) |
(800) |
||
Profit Before Tax (norm) |
|
|
7,253 |
9,162 |
14,308 |
16,002 |
19,200 |
19,700 |
Profit Before Tax (FRS 3) |
|
|
6,442 |
8,874 |
11,849 |
13,077 |
16,600 |
17,300 |
Tax |
(1,734) |
(2,276) |
(3,455) |
(2,852) |
(4,250) |
(4,350) |
||
Profit After Tax (norm) |
5,324 |
6,820 |
10,312 |
12,018 |
14,950 |
15,350 |
||
Profit After Tax (FRS 3) |
4,708 |
6,598 |
8,394 |
10,225 |
12,350 |
12,950 |
||
Average Number of Shares Outstanding (m) |
107.3 |
108.5 |
113.5 |
116.4 |
118.0 |
118.5 |
||
EPS - normalised (p) contg businesses |
|
|
4.96 |
6.28 |
9.08 |
10.33 |
12.67 |
12.95 |
EPS - normalised fully diluted (p) |
|
|
4.73 |
5.96 |
8.68 |
9.99 |
12.40 |
12.68 |
EPS - FRS 3 (p) |
|
|
4.39 |
6.08 |
7.39 |
8.79 |
10.47 |
10.93 |
Dividend per share (p) |
0.8 |
1.4 |
2.1 |
2.8 |
3.0 |
3.2 |
||
Gross Margin (%) |
26.0% |
27.7% |
29.0% |
29.7% |
30.3% |
30.2% |
||
EBITDA Margin (%) |
7.6% |
8.3% |
10.7% |
11.2% |
12.0% |
12.0% |
||
Operating Margin (before GW and except.) (%) |
6.6% |
7.5% |
9.9% |
10.4% |
11.0% |
11.0% |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
32,692 |
30,044 |
49,057 |
57,595 |
60,745 |
60,245 |
Intangible Assets |
18,366 |
16,959 |
32,162 |
38,259 |
39,859 |
38,659 |
||
Tangible Assets |
13,360 |
11,828 |
15,623 |
17,171 |
18,721 |
19,421 |
||
Investment in associates |
0 |
0 |
0 |
0 |
0 |
0 |
||
Deferred tax assets |
966 |
1,257 |
1,272 |
2,165 |
2,165 |
2,165 |
||
Current Assets |
|
|
68,437 |
73,774 |
92,735 |
100,438 |
110,026 |
114,079 |
Stocks |
30,439 |
30,574 |
37,418 |
39,438 |
44,480 |
47,457 |
||
Debtors |
27,248 |
27,665 |
39,864 |
43,386 |
48,933 |
51,008 |
||
Cash |
10,750 |
15,535 |
15,453 |
17,614 |
16,614 |
15,614 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(34,578) |
(37,903) |
(49,052) |
(52,813) |
(50,855) |
(43,957) |
Creditors |
(21,029) |
(24,678) |
(34,482) |
(33,030) |
(37,253) |
(38,071) |
||
Other creditors |
(2,020) |
(2,244) |
(2,225) |
(2,849) |
(3,123) |
(3,148) |
||
Short term borrowings |
(11,529) |
(10,981) |
(12,345) |
(16,934) |
(10,480) |
(2,739) |
||
Minority interests |
0 |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(6,129) |
(4,248) |
(21,060) |
(21,470) |
(23,170) |
(22,370) |
Long term borrowings |
(4,418) |
(2,524) |
(16,523) |
(16,675) |
(18,175) |
(17,175) |
||
Other long term liabilities |
(1,711) |
(1,724) |
(4,537) |
(4,795) |
(4,995) |
(5,195) |
||
Net Assets |
|
|
60,422 |
61,667 |
71,680 |
83,750 |
96,746 |
107,997 |
CASH FLOW |
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Operating Cash Flow |
|
|
7,872 |
11,825 |
6,767 |
15,873 |
16,527 |
19,109 |
Net Interest |
(718) |
(534) |
(966) |
(804) |
(900) |
(800) |
||
Tax |
(1,427) |
(1,809) |
(4,639) |
(3,080) |
(3,901) |
(4,325) |
||
Capex |
(851) |
(826) |
(1,389) |
(2,323) |
(2,800) |
(2,500) |
||
Acquisitions/disposals |
(1,389) |
0 |
(16,240) |
(7,684) |
(1,450) |
0 |
||
Financing |
233 |
84 |
494 |
181 |
0 |
0 |
||
Dividends |
(534) |
(867) |
(1,569) |
(2,440) |
(3,523) |
(3,742) |
||
Other |
27 |
(646) |
2,097 |
(2,303) |
0 |
0 |
||
Net Cash Flow |
3,213 |
7,227 |
(15,445) |
(2,580) |
3,954 |
7,742 |
||
Opening net debt/(cash) |
|
|
8,410 |
5,197 |
(2,030) |
13,415 |
15,995 |
12,041 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
5,197 |
(2,030) |
13,415 |
15,995 |
12,041 |
4,300 |
Source: Company reports, Edison Investment Research estimates
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