Tricorn Group Plc Interim Results Presentation December 6 th 2010.

Tricorn Group Plc Interim Results Presentation

December 6th 2010

Agenda

• Introduction• Results Overview• Financial Review• Business Performance• Outlook

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Divisions Energy Transportation Aerospace Utilities

DivisionalBrand

Sales Revenue (H1 2010/11)

£4.01m £3.28m £2.46m £0.34m

Product Summary

Tubular components and assemblies for diesel power engines, generator sets and radiator manufacture

Manipulated tube and pipe assemblies in ferrous, non-ferrous and nylon

Rigid pipes and assemblies for aero engines

Worldwide patented technology for joining multi layer and polyethylene pipe systems

Markets Power generation, mining oil & gas

Off Highway and niche automotive manufacturers

Worldwide aviation market

Water and gas utilities

Clients Include

CAT (includes Perkins, FG Wilson, CAT)Cummins (includes Cummins Engines, Cummins Powergen)Bearward Engineering

CAT (Perkins, Turner Powertrain)JCBLand RoverEdwards Vacuum

Rolls RoyceAircelleAPPH

GPSRadius SystemsWestwood Pipelines

Competition Industrial and Tractor, Global Engineering, Dinex, Morton Welding

Industrial and Tractor, Norma Group, Hi-Flex, Hydrapower, Iracroft

ITA, PFW Aerospace, Sigma Engineering, Accles and Pollock

No direct competition.

Introduction - Group Overview

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Introduction - Market Drivers

Product Substitutes

Specialised products; limited substitutes readily availableConservative marketsAbility to source components at low cost acts as a deterrent

Industry Competitors

Limited number of competitorsLow batch sizes and high variety act as a deterrentGrowing markets reduce downward price pressure

Customers to Tricorn

Large customers so high resistance to price increasesCustomers profitable-low credit riskSwitching costs highHigh proportion of recurring incomeSpecialist nature of supply provides some resilience

Suppliers to Tricorn

LCC sourcingCommodity materialsAlternative sources Switching costs low

Potential Entrants

Close customer relationships make it difficult for a start up to gain tractionBarriers to entry due to product approval process and complexity of supply

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Introduction - Tricorn Strategy

• To acquire and grow engineering-based businesses which– supply blue chip OEM customers– are focused on attractive end markets– have potential to deliver EBITDA margins of +10%

• The key elements of this approach are to:-– find underperforming businesses– drive for operational excellence– improve margins through the implementation of lean manufacturing

and low cost country component sourcing– service niche markets which offer healthy margin opportunities

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Results Overview

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Results Overview

• Sales up 44.9% on H1 last year• Operating profit* margin up 82.2% on prior full year • Net debt down 34.5% from March 2010 to £551k• Continued recovery in Energy and Transportation

*Before intangible asset amortisation, share based payment charge and interest rate swap valuation

H1 2010/11

£’000

H1 2009/10

£’000

H2 2009/10

£’000

Sales revenue 10,090 6,965 8,066

Operating profit* 519 177 248

Profit before tax* 449 105 183

Cash and equiv 1,314 901 1,296

Net debt 551 1,049 841

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• Emerging from recession as a stronger leaner more resilient business

• Restructuring delivering improved operating margins• Inventory levels being broadly maintained despite

volume increase• Many of the key skills needed have been retained

enabling effective response to higher demand levels• Strong balance sheet enables investment for future

growth both organically and through acquisitions• Confident that full year results will be ahead of market

expectations

Results Overview

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Financial Review

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£’000 H12010/11

H12009/10

H1 Movement

Sales 10,090 6,965 3,125

Admin & distribution costs (2,695) (2,077) (618)

Operating profit* 519 177 342

Profit before tax* 449 105 344

Adjusted EPS* 1.06p 0.26p 0.80p

Net debt (551) (1,049) 498

Total headcount 293 228 65

Financial Review-Headlines

*Before intangible asset amortisation, shared based payment charges and interest rate swap valuation

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£’000 H12010/11

H12009/10

H2 2009/10

Turnover 10,090 6,965 8,066

Administration costs (2,235) (1,792)** (1,945)**

Administration costs/turnover % 22.2% 25.7% 24.1%

Operating profit* 519 177 248

Operating profit margin %* 5.1% 2.5% 3.1%

Financial Review-Profitability

* Before intangible asset amortisation, share based payment charges and interest rate swap valuation** Includes a period of reduced working hours and associated reduced payroll costs

• Improved operational gearing

• Admin costs show a 13.6% improvement as a proportion of turnover

• Operating profit margins* show a significant improvement over last year

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£’000 H12010/11

H12009/10

Total fixed assets 2,310 2,656

Net working capital 3,840 3,855

Taxation & other creditors (541) (740)

Cash & equivalents 1,314 901

Invoice discounting (1,303) (1,019)

Term loan (533) (824)

Lease creditors (29) (107)

Net debt (551) (1,049)

Net assets 5,058 4,722

Financial Review-Financial Position

• Net working capital largely unchanged, despite increased volumes. • Net debt now at 551k. Borrowing capacity enhanced to fund growth strategy

• £1m+ headroom on invoice discounting facility• Term loan multiple currently 0.7 times forecast EBITA

• Gearing at 10.8% compared to 22.2% last year

Business Review

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Energy Division

• Sales up 65.7% on H1 and 48.3% on H2 last year

• Strong recovery (includes some restocking)

• EBITDA margin significantly improved

• Additional investment through H2

£’000 H1 2010/11

H1 2009/10

Sales 4,006 2,417

EBITDA 390 65

EBITDA % 9.7 2.7

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Transportation Division

• Sales up 66.5% on H1 and 21.6% on H2 last year

• Increased engineering activity with over 50 new products introduced

• Next generation of fixtures developed for further step change in delivered quality

• New product volumes will impact through latter part of 2011

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£’000 H1 2010/11

H1 2009/10

Sales 3,282 1,971

EBITDA 313 60

EBITDA % 9.5 3.0

2 43 5

Aerospace Division

• Sales down 6.4% on H1 last year

• Margins impacted by supply chain constraints

• Changes made to divisional senior management team

• Improved performance through H2 although overall revenues expected to be similar

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£’000 H1 2010/11

H1 2009/10

Sales 2,457 2,625

EBITDA (128) 144

EBITDA % - 5.5

Utilities Division

• Underlying margins remain very strong

• Some signs of market recovery with sales up 55% and 25% on H1 and H2 last year

• OEM opportunities being progressed

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£’000 H1 2010/11

H1 2009/10

Sales 344 222

EBITDA 48 43

EBITDA % 14.0 19.4

Outlook

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Outlook• Encouraged by overall progress and speed of recovery• Some element of restocking in H1 • Expecting underlying demand to remain firm• Strengthened balance sheet positions the Group well

for growth• Increasing investment in plant and equipment• Confident that full year results will be ahead of market

expectations

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Appendices

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Board of Directors Nick Paul CBE - Non Executive Chairman

Appointed to the Board as non-executive Chairman in October 2001. Member of the Remuneration and Audit Committees, and Chairman of the Nomination Committee. He has a wealth of international business experience and had previously been deputy Chief Executive of IMI Plc.. Chairman of the Regional Development Agency, Advantage West Midlands and Chairman of Midlands Expressway Limited.  He has also been Chairman of the West Midlands CBI and non-executive Director of John Laing Homes plc and Sig Plc

Mike Welburn - Chief Executive

Joined Tricorn in April 2003, appointed to the Board in March 2004 and as Chief Executive in November 2007.He had previously been with IMI plc for 18 years where he had held a number of senior roles within the Fluid Power Division. This included responsibility for European Operations and Global OEM Strategy. 

Phil Lee - Group Finance Director

Joined Tricorn in January 2009 and appointed to the Board in February 2009.He had previously been at Rolls-Royce for 9 years working in a number of roles including Finance Director of Distributed Generation Systems (part of the Rolls-Royce Energy Business). Prior to Rolls-Royce he had been with National Grid Plc. 

Noel ("Nick") Silverthorne - Group Technical Director

Over 25 years of engineering experience with subsidiary companies MTC and Redman Fittings and had been Managing Director of MTC for over 20 years. He is leading the Group's development of material sourcing from low cost economies, a key element in the Board's strategy.

Roger Allsop - Non Executive Director

Purchased MTC in 1984 and Chief Executive of Tricorn up to 2002 after which he became a non-executive Director. Chairman of the Audit and Remuneration Committees and a member of the Nomination Committee. He was previously managing Director of Westwood Dawes plc and is currently a non-executive Director of Netcall plc.

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Shareholders

Major shareholders:-

%

R Allsop 34.9%

Hargreave Hale 21.2%

J Grimmond 7.3%

Est of J Rubins 4.7%

Rock Nominees 4.3%

Quilter Nominees 3.2%

21%

43%

36%

Shareholder Analysis

Institutions Private shareholders Directors

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