Two things you should know about contracting margins at fastenings specialist Trifast (TRI): first, this was to be expected following record gross margins of 31.6 per cent this time last year and the loss of a purchasing contract in Italy; and second, a gross margin higher than 30 per cent (30.2 per cent in this case) actually marks a good performance. That should help investors swallow the 140 basis point decline Trifast reported as part of its half-year results. According to chief financial officer Clare Foster, as long as the group finishes the year with margins in excess of 30 per cent, there’s no cause for alarm.
It seems that analysts agree. Citing better-than-expected top-line momentum and stand-out performances across various parts of Asia and the UK, broker Peel Hunt upgraded full-year forecasts. Analysts there now expect pre-tax profits of £21.4m for the year ending March 2018 (previously £20.8m), giving EPS of 13p, compared with £20.5m and 12.8p in FY2017.
As for future foreign-exchange-driven margin pressure, Ms Foster admits Trifast isn’t out of the woods just yet – especially in light of the cyclical nature of its longer-term fixed contracts. But operating margins are, in fact, stable, while the group continues to make investments for growth and the dividend is well covered by earnings.
| TRIFAST (TRI) | ||||
| ORD PRICE: | 238p | MARKET VALUE: | £289m | |
| TOUCH: | 236-239p | 12-MONTH HIGH: | 248p | LOW: 178p |
| DIVIDEND YIELD: | 1.5% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 86p* | NET DEBT: | 8% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 89.7 | 8.5 | 5.5 | 1.00 |
| 2017 | 97.8 | 9.1 | 6.7 | 1.10 |
| % change | +9 | +8 | +22 | +10 |
| Ex-div: | 15 Mar | |||
| Payment: | 12 Apr | |||
| *Includes intangible assets of £39.3m, or 32p a share | ||||
