Full-year results from the Human Screen

Having rescued Trifast, the dynamic duo running the company are now turning their attention on turning it into a consolidator in a fragmenting market.

Highlights

• Adjusted operating profit up 30%
• Return on tangible assets: 7%
• Adjusted net profit of ''3.5m compared to net cash flow of ''3.5 (''3.5m after net capital expenditure)
• Net debt up 18% at ''8.5m, 10% of tangible assets.
• First dividend payment since 2009

*All calculations exclude leases, which are not divulged in the preliminary results. In 2011, the company had total non-cancellable obligations of ''8m.

The Human Screen comments:

Under the brand TR Fastenings, Trifast manufactures and distributes industrial fasteners, also known as nuts, bolts, rivets and screws. It’s a recovering company the Human Screen identified and added to the Thrifty 30 portfolio two years ago, partly because of the return of two former chief executives as chairman and chief executive, to turn the company around.

They succeeded, and are now delegating operational control of TR Fastenings to its managers and focusing instead on acquisitions, starting with Power Steel and Electro-Plating Works Sdn. Bhd. in 2011, a Malaysian firm that manufactures fastenings for automotive assembly.

Now the duo see a "world of opportunity ahead", in particular to "grow the business… to be in a position of market strength," while simultaneously reviving its reputation for under-promising and over-delivering. If it seems like they’re setting themselves up for a fall to you, the Human Screen agrees.

The Human Screen is in two minds about Trifast. The chairman and chief executive returned and rescued the company but at a time when the economy was at its weakest so, in part, the company’s revival is down to an anaemic recovery in many of its markets.

The Human Screen wants to factor the approximate capitalised value of operating leases into his calculations before coming to a firm conclusion on Trifast’s valuation, which must wait until the annual report is published.

Tentatively then at just under 1.5 times tangible book the market valuation is too high to invest in a turnaround. If the company sustains the current level of profitability or improves on it, an unlevered post-tax earnings yield of 8% doesn’t betray obvious value either.

More on Trifast

LON:TRI

HS+ (worth watching for improvement in fundamentals/price)