Trifast is still delivering to plan, despite the more challenging trading climate. Management reports that trading has not been unduly affected, while investment continues in response to new business opportunities both in Europe and South-East Asia. The shares remain attractively priced.
Despite the deteriorating global trading climate, the clear message from Trifast is that the group is on course to deliver market estimates. We understand from management that very few schedules have been cut, while the upward momentum of new business continues. The two recent acquisitions are reported to be trading well; the recent recovery in the euro has begun to restore margins at VIC (Italy), while Kuhlmann (Germany) is more than meeting management expectations. A further trading update from management can be expected as the group enters its closed season in early April; meanwhile we are leaving our estimates unchanged.
We remain optimistic about the medium term. The policy of building the group’s share of business with its major global customers continues to deliver, with Trifast reporting negotiations with multinational customers, increasing the number of manufacturing plants being supplied and widening the range of products being delivered to each plant. New investment planned for the group’s Italian factory is aimed at meeting increased cross-selling demand from elsewhere in the group and responding to customers seeking the greater flexibility that can emanate from using a local component supplier.
In our Outlook report last November we estimated March 2016 net debt of £17.5m to £18.0m (gearing 24%). The recent recovery of the euro will have an impact on year-end net borrowings, but our earlier target range remains realistic.
The share price has come back by 5% since November, much in line with most of Trifast’s peer group (Brammer is down 32% on fears about market estimates). The rating is in line with Bossard (a leading European competitor), but at a 30% discount to that of global electronic component distributors. The potential from recent acquisitions and contract gains is still not recognised in the share price.