3 december 2012 tricorn group plc interim results

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3 December 2012

Tricorn Group plc Interim Results

For the six months ended 30 September 2012

Tricorn Group plc (‘Tricorn’ or the 'Group'), (TCN.L) the AIM quoted tube manipulation

specialist, announces its unaudited interim results for the six months ended 30 September 2012.

Highlights

Expansion in China progressing to plan

Capital investment made in 2011 delivering further improvements

Developing pipeline of new opportunities

Improved operating profit margin* of 7.6% up 21% (2011: 6.3%)

Continued strengthening of balance sheet with cash and cash equivalents at 30 September 2012 of £3.085m up 50% (2011: £2.061m)

Interim dividend declared of 0.1p, an increase of 43% (2011: 0.07p)

Adjusted EPS of 2.07p, up 25% (2011: 1.66p)

Financial Summary

Unaudited smonths

Unaudited Audited

six months to six months to Year ended

30 September 30 September 31 March

2012 2011 2012

£'000 £'000 £'000

Revenue 11,552 12,420 24,706

Operating profit*

882 785 1,771 Operating profit margin* 7.6% 6.3% 7.2%

Profit before tax* 855 722 1,622

Cash & equivalents 3,085 2,061 2,468

Net Funds 1,130 72 586

Adjusted earnings per share – basic* 2.07p 1.66p 3.78p

Dividend 0.1p 0.07p 0.2p

* All references to operating profit, operating profit margin, profit before tax and EPS are before intangible asset

amortisation, share based payment charges, interest rate swap and foreign exchange derivative valuation.

Commenting on the results, Nick Paul CBE, Chairman of Tricorn said: “We have delivered a strong set of half year results demonstrating continued improvements in operating margins, strong cash generation has led to a considerably strengthened balance sheet and we have made encouraging progress in establishing our manufacturing facility in China. This, alongside the pipeline of opportunities for new business positions us well for further growth. “In the shorter term, the softening global markets seen through the second quarter look set to continue into the second half.” Enquires:

Tricorn Group plc Tel +44 (0)1684 569956

Mike Welburn, Chief Executive www.tricorn.uk.com

Phil Lee, Group Finance Director [email protected]

mailto:[email protected]

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Westhouse Securities Limited Tel + 44 (0)20 7601 6101

Tom Griffiths/Henry Willcocks

Winningtons Tel + 44 (0) 20 3176 4722

Tom Cooper / Paul Vann Tel + 44 (0)797 122 1972

[email protected]

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 300 employees and operates through

four brands: MTC; Redman Fittings; Maxpower; and RMDG Aerospace.

Chairman’s and Chief Executive’s statement Performance in the six months ended 30 September 2012 The Group has made good progress in the six months to 30 September 2012 when compared to the corresponding period in 2011. Operating profit margin is up 21%, cash and equivalents up 50% and adjusted earnings per share up 25%. The plan to establish a manufacturing facility in China is on track and we expect to ship our first products from the facility later this month. Overall there is an increasing pipeline of new opportunities from both existing and new customers being developed. Based on the progress made and confidence in future prospects, the Board is declaring an interim dividend of 0.1p, an increase of 43% on last year, as part of its longer term progressive dividend policy. Operational Review The Group operates three main business segments focused on the Energy & Utilities, Transportation and Aerospace sectors. Revenue for the period was £11.552m, down £0.868m from a year ago, as a result of softening markets being experienced by some of the divisions through the second quarter. However, all three divisions delivered increases to underlying operating profit margins as they remained focused on continuous improvement and started to realise some of the benefits from the ongoing programme of investment in facilities. Earlier this year the Group announced its intention to establish a manufacturing facility in China as a key part of its strategic development in South-East Asia. The facility is a wholly-owned foreign enterprise (WOFE) and has now been granted its business licence. Installation of plant and equipment has progressed to plan and we expect to be in a position to make our first shipment of product later this month. Further manufacturing cells will be established through the balance of the current financial year with revenue planned to increase through the following year.

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Energy & Utilities Malvern Tubular Components specialises in fabricated and manipulated assemblies for large diesel engines and radiator sets used within the energy sector; principally power generation, mining and oil and gas applications. The investment made last year in extending bending capabilities within the facility is allowing productivity gains to be made, increasing quality levels and enabling new opportunities to be progressed. Painting facilities have also recently been upgraded and we anticipate further operational improvements as a result. Overall, the focus on continuous improvement delivered segmental profit before tax of £0.505m, up 14% on the previous year. Revenue at £5.213m was down 6% on the corresponding period in 2011 as customers reported some slowing in end markets. Transportation Maxpower Automotive is focused on nylon, rigid and hybrid tubular products for engines, braking systems and fuel sender sub-systems. The China manufacturing facility is a subsidiary of this division and consequently the start up costs associated with our expansion there are included in the segmental reporting for this division. Revenue at £3.483m was down £0.849m in comparison to the same period last year when demand driven by impending emissions legislation, as reported in our preliminary results announcement in June, had been particularly high. With weaker end markets through the second quarter, the business responded quickly to lower demand levels whilst maintaining its focus on operational improvements. As a result, despite lower revenue and after absorbing start up costs for the China facility, the division delivered segmental profit before tax of £0.258m, a reduction of only £0.105m on the previous year. Aerospace RMDG Aerospace supplies rigid pipe assemblies used in a variety of applications within the aerospace sector. The division has performed well in the period with revenue up 11% to £2.856m and the prior year segmental loss of £0.045m moving to a profit before tax of £0.121m. The business has built a strong reputation for responsiveness and quality excellence with its key customers and has secured new business on the back of this. The move by a major customer to rationalise its supplier base, and the associated contract loss announced in November, was clearly disappointing. However, this does not preclude operating as a second tier supplier to this same customer. It is anticipated that customer specific inventory associated with the contract loss will be run out over the early part of 2013 and this will minimise the impact in the current financial year. Given the ongoing demand within the sector and the healthy pipeline of opportunities that has been developed the division is working hard to replace this lost volume as quickly as possible.

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Financial Review

The Group’s results for the six months to 30 September 2012 demonstrated a further

improvement in Group operating profit margins to 7.6% (2011: 6.3%) and an 18% improvement

in profit before tax to £0.855m (2011: £0.722m). This improved profitability helped the Group

to increase its net cash position to £1.130m (2011: £0.072m).

In line with its progressive dividend policy the Board has declared an interim dividend of 0.1p

per share to shareholders on the register on 8 February 2013. The dividend will be paid on 22

February 2013.

Income Statement

Softer market conditions through the second quarter, particularly within the Transportation

segment, resulted in a 7% reduction in revenue for the period of £11.552m. However, the

Group continued to increase its gross profit margins on the back of improved operational

performance across all business segments.

Alongside flat distribution costs, administration costs at £2.791m were up 3% on the comparable

period in 2011 of £2.719m, after incurring start up costs associated with our new manufacturing

facility in Wuxi, China. Resultant operating profit increased 12% to £0.882m (2011: £0.785m),

with operating profit margins up to 7.6%. After deducting intangible asset amortisation, share

based payment charges and charges relating to foreign exchange derivative contracts, operating

profit was up 7% to £0.783m (2011: £0.731m).

Net finance charges were down 41% at £0.027m (2011: £0.046m) as a result of the settlement of

the interest rate cap and collar arrangement in March 2012.

Unadjusted profit before tax for the half year at £0.591m was up 16% on the 2011 half year

profit of £0.510m. Basic EPS was up 14% at 1.77p (2011: 1.55p) and, after adjusting for one-off

costs, EPS was up 25% at 2.07p (2011: 1.66p).

Cash Flow

Cash generation for the Group in the six months to 30 September 2012 was strong with cash

generated from operating activities up 175% to £0.884m compared to £0.321m for the six

months to 30 September 2011.

Capital expenditure increased to £0.345m, although the second half of the financial year will see

increased expenditure as the remaining investment associated with our manufacturing facility in

Wuxi, China, is incurred.

Cash and equivalents increased to £3.085m at 30 September 2012, a 50% increase over the figure

at 30 September 2011 of £2.061m, and a 25% increase on the 31 March 2012 year end position

of £2.468m. The net cash position of the Group improved to £1.130m (2011: £0.072m).

Balance Sheet The Group’s continued programme of targeted capital investment saw total fixed assets increase to £2.848m, and with the increase in cash and equivalents total assets were £13.987m (2011: £13.543m).

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With inventories flat year on year, a reduction in net debtors and creditors saw net working capital reduce to £4.259m (2011: £4.448m). Outlook Our strategy of alignment with major OEM’s and expansion of manufacturing facilities in China provides a strong platform for further growth. Alongside this we continue to look for acquisitions that complement our existing businesses. In the near term however we have seen some further softening in demand and now anticipate revenue in the second half to be around 10% lower than indicated at the time of our trading update on 3rd October 2012. Full year PBT excluding China start up costs is expected to be at similar levels to prior year.

Nick Paul CBE Mike Welburn Chairman Chief Executive

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Group statement of comprehensive income For period ended 30 September 2012

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

Note Unaudited Unaudited Audited

Six months to Six months to Year Ended

30 September 30 September 31 March

2012 2011 2012

£000 £'000 £'000

Revenue 3 11,552 12,420 24,706

Cost of sales (7,370) (8,400) (16,485)

Gross profit 4,182 4,020 8,221

Distribution costs (509) (516) (1,017)

Administration costs (2,791) (2,719) (5,433)

Operating profit before intangible amortisation, fair value adjustments for foreign exchange contracts and share based payment charge 882 785 1,771

Intangible asset amortisation (59) (59) (118) Share based payment charge (29) (26) (54) Fair value credit/(charge) relating to foreign exchange contracts

(11) 31 5

Operating profit 783 731 1,604

Finance income 4 2 4

Finance costs (31) (48) (82)

Profit before tax 3 756 685 1,526

Income tax expense (165) (175) (370)

Profit for the year and total comprehensive income

591 510 1,156

Attributable to:

Equity holders of the parent company 591 510 1,156

Earnings per share:

Basic earnings per share 4 1.77p 1.55p 3.49p

Diluted earnings per share 4 1.62p 1.51p 3.39p

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Group statement of changes in equity For period ended 30 September 2012

Share

capital Share

premium Merger reserve

Share based

payment reserve

Investment

in own shares

Profit and loss account Total

£'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 April 2011 3,304 1,448 1,388 237 (49) (817) 5,511 (audited)

Issue of new shares 35 15 - - - - 50

Dividends (33) (33)

Share based payment charge - - - 27 - - 27

Sale of shares 229 49 - 278

----------------------------------------- ------------------------------------------- ------------------------------------------- ------------------------------------------ -------------------------------------- ------------------------------------------- -------------------------------------

Total transactions with owners 35 244 - 27 - (33) 322

Comprehensive income 510 510

----------------------------------------- ------------------------------------------- ------------------------------------------- ------------------------------------------ -------------------------------------- ------------------------------------------- -------------------------------------

Balance at 30 September 2011 (unaudited)

3,339 1,692 1,388 264 - (340) 6,343

Share based payment charge - - - 27 - - 27

Share based payment reserve - - - (64) - 64 -

Dividends (23) (23)

----------------------------------------- ------------------------------------------- ------------------------------------------- ------------------------------------------ -------------------------------------- ------------------------------------------- ---------------------------------(----

Total transactions with owners - - - (37) - 41 4

Comprehensive income - - - - - 646 646

----------------------------------------- ------------------------------------------- ------------------------------------------- ------------------------------------------ -------------------------------------- ------------------------------------------- -------------------------------------

Balance at 31 March 2012 (audited)

3,339 1,692 1,388 227 - 347 6,993

Share based payment charge 29 29

Comprehensive income 591 591

----------------------------------------- ------------------------------------------- ------------------------------------------- ------------------------------------------ -------------------------------------- ------------------------------------------- -------------------------------------

Balance at 30 September 2012 (unaudited)

3,339 1,692 1,388 256 - 938 7,613

========================= ========================= =========================== ============================ =============================== ========================= =====================

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Group statement of financial position At 30 September 2012 Unaudited Unaudited Audited 30 September 30 September 31 March 2012 2011 2012 £’000 £’000 £’000 Assets Non current Goodwill 591 591 591 Intangible assets 499 618 558

Property, plant and equipment 1,758 1,366 1,628

2,848 2,575 2,777 Current

Inventories 3,072 3,020 2,929 Trade and other receivables 4,982 5,867 5,823 Financial assets at fair value through profit and loss - 20 -

Cash and cash equivalents 3,085 2,061 2,468

11,139 10,968 11,220

Total assets 13,987 13,543 13,997

Liabilities Current Trade and other payables (3,795) (4,439) (4,580) Financial liabilities at fair value through profit and loss (17) (54) (7) Borrowings (1,683) (1,825) (1,514) Corporation tax (399) (502) (310)

(5,894) (6,820) (6,411) Non-current Borrowings (272) (164) (368)

Deferred tax (208) (216) (225)

(480) (380) (593)

Total liabilities (6,374) (7,200) (7,004)

Net assets 7,613 6,343 6,993

Equity Share capital 3,339 3,339 3,339 Share premium account 1,692 1,463 1,692 Merger reserve 1,388 1,388 1,388 Share based payment reserve 256 263 227 Investment in own shares - - - Profit and loss account 938 (110) 347

Total equity 7,613 6,343 6,993

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Group statement of cash flows For period ended 30 September 2012

Unaudited Unaudited Audited Six months to Six months to Year Ended 30 September 30 September 31 March 2012 2011 2012 £’000 £’000 £’000

Cash flows from operating activities Profit after taxation 591 510 1,156 Adjustment for: Depreciation 176 153 301 Net finance costs in statement of comprehensive income 27 46 78 Amortisation charge 59 59 118 Share based payment charge 29 26 54 (Credit)/charge relating to foreign exchange derivative contracts 11 (31) (5) Taxation expense recognised in statement of comprehensive income 165 175 370 Decrease/(Increase) in trade and other receivables 840 (845) (807) (Decrease)/Increase in trade payables and other payables (721) 226 381

(Increase)/Decrease in inventories (143) 67 158

Cash generated from operations 1,034 386 1,804 Interest paid (56) (65) (130) Income taxes paid (94) - (378)

Net cash from operating activities 884 321 1,296

Cash flows from investing activities Purchase of plant and equipment (345) (309) (465) Proceeds from sale of plant and equipment - - 10 Interest received 4 2 4

Net cash used in investing activities (341) (307) (451)

Cash flows from financing activities Proceeds from sale of treasury shares - 278 278 Issue of ordinary share capital - 50 50 Dividends paid - (56) Drawdown of short term borrowings 122 270 195 Repayment of bank borrowings - (150) (400)

Payment of finance lease liabilities (48) (13) (56)

Net cash generated in financing activities 74 435 11

Net increase in cash and cash equivalents 617 449 856

Cash and cash equivalents at beginning of year 2,468 1,612 1,612

Cash and cash equivalents at end of year 3,085 2,061 2,468

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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 Pipefittings, Power Generation, Aerospace, Off Highway, 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 3 December 2012 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 2012 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 2012.

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 2012,

which have been prepared in accordance with International Financial Reporting Standards.

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 off-highway,

medical, and other such applications.

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

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3 Segmental reporting (continued)

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

6 months to 30 September 2012 (unaudited)

Energy & Utilities Transportation Aerospace Unallocated Total

£'000 £'000 £'000 £'000 £'000

Revenue 5,213 3,483 2,856 - 11,552

Segmental profit/(loss) before tax

505 258 121 - 884

Intangibles amortisation (59)

Share based payment charge (29)

Corporate recharges (29)

Fair value charge relating to Foreign exchange contracts

(11)

_________

Profit before tax 756

Segmental total assets 4,825 2,988 3,185 2,989 13,987

6 months to 30 September 2011 (unaudited)


£'000 £'000 £'000 £'000 £'000

Revenue 5,521 4,332 2,567 - 12,420

Segmental profit/(loss) before tax 442 363 (45) - 760





31

Fair value credit relating to interest rate swap

17

_________

Profit before tax 685


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3 Segmental reporting (continued)

Year ended 31 March 2012 (audited)


£'000 £'000 £'000 £'000 £'000

Revenue 10,691 8,681 5,334 - 24,706

Segmental profit/(loss) before tax 987 767 51 - 1,805





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_________

Profit before tax 1,604


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. 30 September 2012

Profit

Weighted average number of shares

Earnings per

share £'000 Number '000 Pence

Basic earnings per share 591 33,395 1.77p

Dilutive shares 3,120

Diluted earnings per share 591 36,515 1.62p

30 September 2011

Profit Weighted average number of shares

Earnings per share

£'000 Number '000 Pence

Basic earnings per share 510 32,932 1.55p

Dilutive shares 840

Diluted earnings per share 510 33,772 1.51p

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4 Earnings per share (continued)

31 March 2012


Earnings per share


Basic earnings per share 1,156 33,164 3.49p

Dilutive shares 951

Diluted earnings per share 1,156 34,115 3.39p

The directors consider that the following adjusted earnings per share calculation is a more appropriate reflection of the Group performance. 30 September 2012


Earnings per share

£'000 Number '000 Pence Basic earnings per share 591 33,395 1.77p

Amortisation 59 Share based payment charge 29 Charge relating to foreign exchange contracts 11 Adjusted earnings per share 690 33,395 2.07p

Dilutive shares 3,120 Diluted adjusted earnings per share 690 36,515 1.89p

30 September 2011


Earnings per share

£'000 Number '000 Pence Basic earnings per share 510 32,932 1.55p

Amortisation 59 Interest rate collar gain (17) Share based payment charge 26 Credit relating to foreign exchange contracts (31) Adjusted earnings per share 547 32,932 1.66p

Dilutive shares 840 Diluted adjusted earnings per share 547 33,772 1.62p

31 March 2012


Earnings per share


Basic earnings per share 1,156 33,164 3,49p

Amortisation 118 - Share based payment charge 54 Interest rate collar gain (71) Charge relating to foreign exchange contracts (5)

Adjusted earnings per share 1,252 33,164 3.78p

Dilutive shares 951

Diluted adjusted earnings per share 1,252 34,115 3.67p

5 Dividends

As part of our progressive dividend policy, the Group will be paying an interim dividend of 0.1p per share to all shareholders who are on the register on 8 February 2013. The dividend will be paid on 22 February 2013.

3 december 2012 tricorn group plc interim results

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