The clear message in Trifast’s AGM statement is that the group is still firmly on course to deliver market estimates, despite the more challenging trading climate. We view the current management succession as positive and seamless; we remain optimistic about the medium-term potential.
There were contrasting pressures at Trifast during the six months to September. Trading conditions have become more challenging, under the influence of the uncertainties in China, which may affect operations in South-East Asia, while the continued weakness of the euro will have held back the performance of the group’s continental businesses in sterling terms. On the other hand, Trifast entered the period with record order books, following the securing of several key new contracts, while margins may be starting to benefit from the weakness of a number of commodity prices. Moreover, profits from last year’s major Italian acquisition will be consolidated for the full period, rather than four months in 2014. Yesterday’s AGM statement indicates trading in line with management expectations. On this basis, we look for minimum first half underlying pre-tax profits of £7.6m, some 15% above the £6.63m delivered during the corresponding period last year.
In our report following the June preliminary results announcement, we lifted our current year target by £1.0m to £15.2m. Despite the uncertain trading climate, we believe that margins will continue to be sustained; we are leaving our estimates unchanged at this stage, but continue to look ahead with confidence. Attention to detail in terms of product quality, procurement, warehousing and logistics skills still points to building the group share of business with its key top 40 customers and extending further the impressive recent growth record. Meanwhile, with banking facilities totalling some £45m and our estimates showing net borrowing falling from the £13.4m at March 2015 in each of the next two years, funds are already in place to supplement organic growth if further suitable acquisitions can be secured.
While Trifast’s share price has eased back by 11% since last June’s results announcement, the increasing uncertainties about global trading have had a similar impact on the share prices of other global distributors. The current prospective CY16 rating of 12.4x earnings is much in line with the peer group. We believe that the potential inherent in group strategy for organic and acquisition-based growth is not recognised in this rating.