This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

Tuesday, 19 November 2024

TRIFAST PLC

(Trifast, Group or Company)

Leading international specialist in the design, engineering, manufacture, and distribution

of high-quality industrial fastenings and Category 'C' components principally to major global assembly industries

HALF-YEARLY FINANCIAL REPORT

Unaudited results for the six months ended 30 September 2024

"Self-help benefits of "Recover, Rebuild and Resilience" strategy driving improved margins and cash generation against a challenging market backdrop"

Iain Percival, Chief Executive Officer

1. Before separately disclosed items (see notes 2, 6 and 7)

2. "CER" being Constant Exchange Rate, calculated by translating the HY2025 figures by the average HY2024 exchange rate and "AER" being Actual Exchange Rate

3. Adjusted net debt is presented excluding the impact of IFRS16 Leases as this is how the calculation is performed for the purposes of the Group's banking facilities. Including right-of-use liabilities, net debt would increase by £(18.5)m to £(33.9)m (HY2024: net debt would increase by £(20.0)m to £(47.8)m).

TRIFAST PLC

HALF-YEARLY FINANCIAL REPORT (HY2025)

Unaudited results for the six months ended 30 September 2024

BUSINESS REVIEW

Unless stated otherwise, current year comparisons with prior year are calculated at constant currency (CER) and where we refer to 'underlying,' this is defined as being before separately disclosed items (see note 2). CER calculations have been calculated by translating the HY2025 figures by the average HY2024 exchange rate.

1. Before separately disclosed items (see notes 2, 6 and 7)

2. "CER" being Constant Exchange Rate, calculated by translating the HY2025 figures by the average HY2024 exchange rate and "AER" being Actual Exchange Rate

Group performance

Revenue reduced year-on-year 1.4% to £116m, with persistent market headwinds in a number of sectors leading to reductions in Europe and UK & Ireland. North America and Asia however reported revenue growth, ahead of expectations, reflecting more supportive local market conditions and benefitting from the contribution from the Group's refreshed commercial focus.

We are pleased to report an improvement in gross profit margin of 169 bps and the highest margin at 27.4% reported since 2020 as we drive pricing and sourcing improvements as part of our journey to recover, rebuild and become resilient.

The £1.0m improvement in gross profit, £0.9m overhead savings offset by exchange loss movement of £1.3m (exchange loss of £0.5m in HY2025 as compared to exchange gain of £0.8m in HY2024) resulted in a £0.6m improvement in underlying operating profit to £7.2m (HY2024: £6.6m). Overhead costs have been actively managed, with productivity savings in part mitigating ongoing inflation and strategic capability investments.

We remain on track to achieve the phased cost savings in FY25 of c.£3m from our operational improvement programme which included 10% reduction on non-operating headcount and the consolidation of the UK facilities in the National distribution centre in the West Midlands.

Underlying profit before tax has also increased to £5.0m (HY2024: £3.9m) due to the improvement in underlying Operating profit and also a c.£0.5m reduction in net finance costs as a result of lower average borrowings.

We continue to reduce our net debt, with pre IFRS 16 net debt of c.£15.4m at 30 September 2024 (HY2024: £27.8m). This represents a reduction of £12.4m in the past year, leaving an unutilised £78.1m on the Group's £120.0m banking facilities and leverage of c. 0.9x (HY2024: 1.6x), providing the Group with strengthened financial position and capacity to invest in support of its strategic objectives.

Our working capital focus contributing to the reduction in net debt included a material reduction in overdue debt and overall receivables balance. Our inventory balance increased compared to last year primarily due to increase in inventory in Asia to support regional increase in business, while reductions in other regions aligned with our inventory reduction targets to improve working capital management.

Capital expenditure reduced to £1.1m (HY2024: £2.2m) mainly due to the completion of the Atlas project.

Profit before tax decreased by £0.4m to £1.6m primarily due to higher one-off separately disclosed items and includes: acquired intangible amortisation £0.9m, impairment of a customer receivable on administration £1.0m, restructuring costs and transformation costs £1.4m.

Regional performance

Note 1 - Regional sales include intercompany

Note 2 - Central sales relate to intercompany eliminations

UK & Ireland

Revenue declined 6.7% to £36.7m (HY2025: £39.3m), with reduced demand mainly in the Automotive sector contrasted with growth in Smart Infrastructure revenue as a result of data centre roll outs, driven by global investment in Artificial Intelligence (AI). Distribution demand reduced further in the period with continued overstocking in customers' supply chain. During the half year, we concluded the transfer of our UK distribution business to Germany and handed back some under-performing business which has also reduced our revenue although it has enabled us to maintain our UOP / EBIT margin at 4.1% (HY2024: 4.0%).

Europe

Revenue decreased 9.0% to 40.8m (HY2025: 44.8m), primarily due to challenges in the distribution and Automotive sectors. Master distributors, particularly in Germany, also faced reduced OEM demand and aggressive pricing competition. The Automotive sector experienced delays with new programmes and reduced demand, driven by uncertainties surrounding the transition to hybrid and full EV from traditional powertrains. There are signs of recovery in the Smart Infrastructure sector, especially in Hungary, along with promising new business opportunities supported by a strong pipeline. Investment in our European manufacturing facility in Italy continues to support our 'Europe for Europe' strategy. UOP/EBIT margins improved by 60 bps to 8.6% (HY2024: 8.0%) as a result of enhanced margin management.

North America

North America revenue increased to £16.7m (HY205: £14.0m) with Smart Infrastructure emerging as the fastest-growing sector at 26.3%. This growth is driven by new business wins and strong demand for specialised engineering products from our Asian operations, underscoring the importance of engineering and manufacturing in our value proposition. The Automotive sector also performed well, with a 13.6% increase in revenue, largely attributed to significant growth from a key vehicle programme. Overall, UOP/EBIT margins improved materially to 10.3%, up from 4.1%, reflecting our effective margin management and strategic market positioning.

Asia

Revenue increased to £28.0m (HY2024: £26.5m), largely driven by gains in the home appliances sector, although this was partially offset by lower demand from distribution customers selling into European and North American markets. Automotive also saw some reduction due to weakened consumer confidence particularly in China and Malaysia. UOP margins were 16.8% compared to 16.3% in HY2024, thanks to targeted margin management initiatives across key sectors.

Central costs

Central reported a UOP/EBIT loss of £4.2m (HY2024: £3.5m), driven by higher accruals as we incentivise staff to achieve our strategic initiatives.

Net financing costs (AER)

Net financing costs have reduced to £2.2m (HY2024: £2.8m) mostly due to lower interest rates applied to our Revolving credit facility (RCF) and UKEF - Export Development Guarantee facility (EDG) drawdowns and our reduction of net debt through working capital and cash management initiatives.

Taxation (AER)

The decrease in the underlying effective tax rate (UETR) to 14.5% (HY2024: 23.7%) and the effective tax rate (ETR) to 14.5% (HY2024: 21.5%) was principally due to the utilisation of brought forward losses in the UK region that have not previously been provided for.

Earnings per share (AER)

The increase in underlying profit before tax and the decrease in our UETR, has increased the underlying diluted EPS by 34.9% to 2.94p (HY2024: 2.18p). The diluted earnings per share reduced 0.99p (HY2024: 1.15p) due to higher one-off separately disclosed items resulting in lower profit before tax as compared to HY2024 offset by the impact of reduced ETR.

Dividend

The Company has declared an interim dividend of 0.60p (HY2024: 0.60p) which will be paid on 10 April 2025 to members on the register as at 7 March 2025. We continue to consider that an appropriate level of dividend cover is in the range of 3.0x to 4.0x.

Return on Capital Employed (AER)

As at 30 September 2024, the Group's shareholders' equity decreased to £121.8m (FY2024: £124.2m). The £2.4m reduction reflects the impact of the profit for the period of £1.3m, a dividend charge of £(2.4)m, a net movement in share-based payments of £(0.4)m and a foreign exchange reserve loss of £(0.9)m (most notably sterling strengthening against Singapore Dollar, Taiwan Dollar, Renminbi, United States Dollar and Euro).

Over this lower asset base and higher underlying EBIT during the period, our ROCE has increased to 6.3% (FY2024: 5.6%).

Adjusted net debt (AER)

The Group's adjusted net debt has decreased by £5.6m to £15.4m (FY2024: £21.0m). 

Working capital management continues to be a focus, with a £3.8m reduction in receivables in HY2025. Capital expenditure in the period amounted to £1.1m. Interest paid was £2.0m (excluding IFRS16 interest) due to lower interest rates and average loan balance during the period. 

Including the impact of IFRS16 Leases, the Group's net debt position decreased by £5.5m to £33.9m (FY2024: £39.4m). IFRS16 Leases were £18.5m (FY2024: £18.4m).

Other key balance sheet movements

Right-of-use assets, Property, plant and equipment and intangibles have decreased to £69.4m (FY2024: £71.8m) as a result of the depreciation and amortisation charge during the period, off set by additions and the effects of movement on foreign exchange during the period.

Trade and other receivables decreased by £3.8m to £55.2m (FY2024: £59.0m) due to lower sales and improved collections. This, combined with the increase in our trade and other creditors has seen working capital as a % of sales decrease to 39.4% (FY2024: 40.8%).

Other interest-bearing loans and borrowings reduced £1.4m to £40.4m (FY2024: £41.8m), net of unamortised loan arrangement fees.

Trade and other payables increased £3.8m to £40.0m (FY2024: £36.2m), principally due to higher accruals for bonus and supplier accruals for goods received prior to the period end.

Provisions reduced by £1.0m to £3.0m (FY2024: £4.0m) principally on account of the utilisation of the restructuring and related charges provisions during HY2025.

People

The Board would like to acknowledge and thank the teams around the globe who, in challenging times, continue to work in partnership with commitment and focus to deliver the quality of service and supply that our customers expect.

Outlook

Global macro-economic and geopolitical uncertainties remain volatile, resulting in trading conditions being variable across sectors and visibility limited at this stage. It is encouraging to report that our self-help plans are mitigating some of this risk and we are also seeing benefits feeding through from our "Recover, Rebuild and Resilience strategy.

As we progress through the remainder of this financial year, we expect our 'RRR' strategy to continue to make an incremental contribution to our performance, whilst productivity and cost saving actions and additional operational and commercial initiatives being implemented in H2 in line with strategic roadmap are all expected to deliver further margin benefits as we move forward.

In summary:

•       Trifast is making good progress with its strategic operational roadmap

•       We have a strong business, backed by a solid balance sheet and cash generation

•       H2 inventory reduction historically better than H1 and we are committed to our plans to further reduce inventory levels while maintaining customer service and response and our focus on debt reduction

•       We remain on track to deliver results for the year ending 31 March 2025 in line with expectations, and

•       We remain confident in the delivery of our mid-term margin and returns ambitions.

RISKS AND UNCERTAINTIES

The Directors do not consider that the principal risks and uncertainties of the Group have changed since the publication in July 2024 of the Group's Annual Report for the year ended 31 March 2024. No system can fully eliminate risk and therefore the understanding of operational risk is central to the management process within the Group. We continue to review and analyse both existing and emerging risks and work with our business teams to understand the impact of internal and external changes, and the risks and opportunities that they present. This work is supported by the development of our internal audit function and reviewed by the Audit & Risk Committee meetings chaired by our Senior Independent Non-Executive Director.

A copy of the Group's Annual Report for the year ended 31 March 2024 can be found on the website www.trifast.com

As with all businesses, the Group faces risks, with some not wholly within its control, which could have a material impact on the Group, and may affect its performance with actual results becoming materially different from both forecast and historic results. The macroeconomic climate is still under pressure, and we continue to remain vigilant for any indications that could adversely impact expected results going forward.

The long-term success of the Group depends on the ongoing review, assessment, and management of the key business risks it faces.

Trifast plc - responsibility statement

We confirm that to the best of our knowledge:

Condensed consolidated interim income statement

Unaudited results for the six months ended 30 September 2024

Condensed consolidated interim statement of comprehensive income
Unaudited results for the six months ended 30 September 2024

Condensed consolidated interim statement of changes in equity
Unaudited results for the six months ended 30 September 2024

Condensed consolidated interim statement of financial position

Unaudited results for the six months ended 30 September 2024

Condensed consolidated interim statement of cash flows

Unaudited results for the six months ended 30 September 2024

NOTES TO THE 2024 HALF-YEARLY FINANCIAL REPORT
Unaudited results for the six months ended 30 September 2024

1. Basis of preparation

These condensed consolidated interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Conduct Authority and UK-adopted International Accounting Standard ("IAS") 34: Interim Financial Reporting. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at, and for, the year ended 31 March 2024. The annual financial statements of the Group are prepared in accordance with UK adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

This statement does not comprise full financial statements within the meaning of Section 495 and 496 of the Companies Act 2006. The statement is unaudited.

The comparative figures for the financial year ended 31 March 2024 are not the Company's statutory accounts for that financial year and have been extracted from the full Annual Report and Accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The Report of the Auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their Report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

These condensed consolidated interim financial statements have been prepared on the basis of accounting policies set out in the full Annual Report and Accounts for the year ended 31 March 2024, except the following amendments which apply for the first time in HY2025, but, they do not have a material impact on these condensed consolidated interim financial statements.

The following amendments are effective for accounting periods beginning on or after 1 January 2024:

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the accompanying Business Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are also described in the same report. In addition, note 26 to the Group's previously published financial statements for the year ended 31 March 2024 includes the Group's objectives, policies, and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

Current trading and forecasts show that the Group will continue to generate positive EBITDA and generate cash. The banking facilities and covenants (leverage and interest cover) that are in place provide appropriate headroom against forecasts based on the current outlook. There are some headwinds in the global economic environment including the elevated interest rate environment, however should there be adverse factors beyond expectation including further increases in interest rates, the Directors are confident given the low levels of leverage within the business and the expectation that this will reduce further that these would be mitigated. As such the Directors do not consider there to be material uncertainties relating to events or conditions that may be relevant to the next 12 months from signing of the half-yearly financial report, which cast doubt on the going concern status. This is also the case after performing sensitivity analysis, reverse stress testing scenarios to break point for the covenants and understanding what this would equate to either increasing net debt or reducing EBITDA. Thus, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and hence they continue to adopt the going concern basis of accounting in preparing the half-yearly financial report.

Estimates and judgements

The preparation of financial statements in conformity with IFRSs requires management to make estimates, judgements and assumptions that affect the application of policies and reported amounts of assets and liabilities, income, and expenses. The estimates and associated assumptions take account of the circumstances and facts at the period end, historical experience of similar situations and other factors that are believed to be reasonable and relevant, the results which form the basis of making the judgements about carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty include those disclosed in the consolidated financial statements for the year ended 31 March 2024.

A key judgement made by management in the previous year's relates to Project Atlas costs meeting the capitalisation criteria under IAS 38 Intangible Assets, also considering the March 2021 IFRS IC agenda decision update on 'Configuration and customisation costs in a cloud computing arrangement', allowing directly attributable costs to be capitalised. No significant judgment applied in the current period as Project Atlas is now complete.

No other key judgements have been made, other than those involving estimations. The key sources of estimation uncertainty are inventory valuation and recoverability of goodwill.

The methodology for calculating the inventory provision has remained consistent with year end. Inventories are stated at the lower of cost and net realisable value with a provision being made for obsolete and slow-moving items. Initially, management makes a judgement on whether an item of inventory should be classified as standard or customer specific. This classification then largely determines when a provision is recognised. Management then estimates the net realisable value of the stock for each individual classification. In most circumstances, a provision is made earlier for customer specific stock (compared to standard) because it generally carries a greater risk of becoming obsolete or slow moving given the fastenings are designed specifically for an individual customer.

The key sensitivity to the carrying amount of customer-specific inventory relates to the future demand levels for specific products stocked for individual customers. In the event that an individual customer's demand for products specific to them unexpectedly reduced, the Company might be required to increase the inventory provision. Although one customer taking such action is unlikely to result in a material adjustment, multiple customers taking such action over a short timescale could result in a material adjustment. The range of outcomes includes a write-off of the carrying amount at 30 September 2024, to a write back of the customer-specific inventory provision at period end (HY2025: £6.2m; HY2024: £6.2m; FY2024: £6.9m).

The carrying amount of goodwill as at 30 September 2024, was £22.3m (HY2024: £22.8m; FY2024: £22.5m). In the 31 March 2024 consolidated financial statements, an impairment of the non-current assets of £1.9m was identified for TR Hungary CGU. For the remaining CGUs, an impairment assessment was conducted, and no indicators of impairment were identified as of 30 September 2024.

2. Underlying profit before tax and separately disclosed items

Consistent with prior periods, management feel it is appropriate to remove separately disclosed items as included above to allow the reader of the accounts to understand the underlying trading performance of the Group. Management use judgement in assessing which items, due to their size or incidence, should be disclosed as separately disclosed items. This is consistent with the way financial information

is presented to the Board. Further reconciliations of underlying measures to IFRS measures and the cash flow impact of separately disclosed items can be found in note 7.

Event driven items

Project Atlas is now complete and hence, no charge in the current period. Project Atlas was a multi-year investment into our IT infrastructure and underlying business processes. We had excluded these costs (primarily relating to training and project team costs) in the previous years from our underlying results, to reflect the unusual scale and one-off nature of this project.

Restructuring and transformation costs of £1.4m are charges incurred in relation the Key strategic initiatives (margin management, operational efficiencies, focussed growth and organisation effectiveness) initiated at the beginning of the year in line with the new strategy. Includes primarily costs for transformation activities, redundancies, and other costs related to the key strategic initiatives. The charges of £0.5m in HY2024 relates to professional fees and other related costs incurred for setting up the National distribution centre (NDC) in the Midlands. We have excluded these costs from our underlying results, to reflect the size and one-off nature of these costs consistent with the Group's policy on separately disclosed items.

On 27 June 2024, one of our customers entered into bankruptcy proceedings. Given the administration status of the customer, the debtor balance of £1.0m as on the date the customer went into administration was impaired. The management is closely monitoring the situation and will take appropriate actions to mitigate any potential financial impact on the Group. The amount has been disclosed as separately disclosed due to it being material in size and one-off in nature.

Profit on disposal of subsidiary of £0.2m is for the sale of TR Norge AS to Otto Olsen on 3 April 2024. Otto Olsen will provide a solid and stable base for the TR Norge A/S team and enable customers to continue to be supported by a locally aligned business. The subsidiary was disposed for a sales consideration (net of direct costs) of £0.7m which adjusted for net assets of TR Norge AS of £0.4m and recycling the cumulative translation reserve loss of £0.1m resulted in profit of £0.2m.

Recurring items

Acquired intangible amortisation has remained in line with HY2024. Intangible amortisation relating to acquisitions has been separately disclosed so as to present the trading performance of the respective entities with a charge on a comparable basis.

3. Geographical operating segments

The Group is comprised of the following main geographical operating segments:

In presenting information on the basis of geographical operating segments, segment revenue, segment underlying operating profit and segment assets are based on the geographical location of our entities across the world and are consolidated into the four distinct geographical regions, which the Executive Leadership Team (the 'ELT') uses to monitor and assess the Group. Interest is reported on a net basis rather than gross as this is how it is presented to the Chief Operating Decision Maker (the ELT).

Ireland, for HY2024, was reported and reviewed as part of Europe. However, for HY2025 it is now reported and reviewed as part of UK & Ireland segment. Hence, for the disclosure for HY2025 below, Ireland is reported as part of the UK segment and HY2024 numbers are restated to include Ireland within the UK.

Segment revenue and results under the primary reporting format for the six months ended 30 September 2024 and 2023 are disclosed in the table below:

* Revenue is derived from the manufacture and logistical supply of industrial fasteners and category 'C' components.

^ Non-current assets exclude financial instruments and deferred tax.

4. Taxation

The decrease in the underlying effective tax rate (UETR) to 14.5% (HY2024: 23.7%) and the effective tax rate (ETR) to 14.5% (HY2024: 21.5%) was mainly due to the utilisation of brought forward losses in the UK region that have not been previously provided for.

Remaining in line with FY2024, the Deferred tax asset was £4.2m (FY2024: £4.3m) and Deferred tax liability £2.1m (FY2024: £2.1m).

5. Dividends

The dividend payable of £1.6m represents the final dividend for the year ended 31 March 2024 which was approved by Shareholders at the AGM on 10 September 2024 and paid on 11 October 2024 to members on the Register on 13 September 2024. The Company paid an HY2024 interim dividend of 0.60p (HY2023: 0.75p) on 11 April 2024 totalling £0.8m to Shareholders on the register as at 15 March 2024. The Company has declared an HY2024 interim dividend of 0.60p (HY2024: 0.60p) which will be paid on 10 April 2025 to Shareholders on the Register as at 7 March 2025.

6. Earnings per share

The calculation of earnings per 5 pence ordinary share is based on profit for the period after taxation and the weighted average number of shares in the period of 134,967,813 (net of own shares held) (HY2024: 134,930,615, FY2024: 134,959,632).

The calculation of the fully diluted earnings per 5 pence ordinary share is based on profit for the period after taxation. In accordance with IAS 33 the weighted average number of shares in the period has been adjusted to take account of the effects of all dilutive potential ordinary shares (net of own shares held). The number of shares used in the calculation amount to 134,967,813 (HY2024: 134,930,615 FY2023: 134,959,632). There is no potential dilutive effect of share options as the share options have not yet vested and conditions have not been met at the balance sheet.

The underlying diluted earnings per share, which in the Directors' opinion best reflects the underlying performance of the Group, is detailed below:

7. Alternative performance measure (APM)

The half-yearly financial report includes both IFRS measures and APM's, the latter of which are considered by management to better allow the readers of the accounts to understand the underlying performance of the Group. A number of these APM's are used by management to measure the KPI's of the business (see the Business Review) and are therefore aligned to the Group's strategic aims. They are also used at Board level to monitor financial performance throughout the year.

The APM's used in the half-yearly financial report (including the basis of calculation, assumptions, use and relevance) are detailed in note 2 (underlying profit before tax, EBITDA, and underlying EBITDA) and below.

·      Underlying figures

The Group believes that underlying measures provide additional guidance to statutory measures to help understand the underlying trading performance of the business during the financial period. The term 'underlying' is not defined under Adopted IFRS. It is a measure that is used by management to assess the underlying performance of the business internally and is not intended to be a substitute measure for Adopted IFRSs' GAAP measures.

It should be noted that the definitions of underlying items being used in these financial statements are those used by the Group and may not be comparable with the term 'underlying' as defined by other companies within the same sector or elsewhere.

Explanations for the items removed from the underlying figures are provided in note 2.

·      Constant exchange rate (CER) figures

These are used in the Business Review and give the readers a better understanding of the performance of the Group, regions, and entities from a trading perspective. They have been calculated by translating the HY2025 income statement results (of subsidiaries whose presentation currency is not sterling) using HY2024 average exchange rates to provide a comparison which removes the

foreign currency translational impact. The impact of translational gains and losses made on non-functional currency net assets held around the Group have not been removed.

·      Underlying diluted EPS

A key measure for the Group to understand the underlying earnings per share. The calculation is disclosed in note 6.

·      Underlying profit before tax

A key measure for the Group, as it is one of the measures used to set the Directors' variable remuneration, as disclosed in the Directors' remuneration report. The calculation has been disclosed in note 2.

·      Underlying operating margin/EBIT margin

Underlying operating margin is used in the financial review to give the reader an understanding of the performance of the Group and regions. It is calculated by dividing underlying operating profit (see return on capital employed (ROCE) section for reconciliation to operating profit) by revenue in the year.

·      Return on capital employed (ROCE)

ROCE employed is a key metric used by investors to understand how efficient the Group is with its capital employed. The calculation is a rolling 12-month underlying EBIT divided by average capital employed (net assets + gross debt) over this period, multiplied by 100%. Underlying EBIT has been reconciled to operating profit below.

·      Underlying cash conversion as a percentage of underlying EBITDA

This is another key metric used by investors to understand how effective the Group was at converting profit into cash. Since the underlying cash conversion is compared to underlying EBITDA, which has removed the impact of separately disclosed items (see note 2), the impact of these have also been removed from the underlying cash conversion. The adjustments made to arrive at underlying cash conversion from cash generated from operations are detailed below. To reconcile operating profit to underlying EBITDA, see note 2.

·      Underlying effective tax rate

This is used in the underlying diluted EPS calculation. It removes the tax impact of separately disclosed items in the year to arrive at a tax rate based on the underlying profit before tax.

·      Adjusted net debt and adjusted net debt to Underlying EBITDA ratio

This removes the impact of IFRS16 from both net debt and Underlying EBITDA and IFRS 2 Share-based Payments from underlying EBITDA to better reflect the banking facility covenant calculations. Other adjustments are made to meet the calculations specified in the facility agreement. Underlying EBITDA is reconciled to operating profit in note 2.

·      Adjusted interest cover

This is adjusted EBITDA to adjusted net interest to better reflect the banking facility covenant calculations, removing the impact of IFRS 16 Leases. Underlying EBITDA has IFRS 16 Leases and IFRS 2 Share-based payments removed above and is reconciled to operating profit in note 2.

·      Working capital as a percentage of revenue

This is calculated as current assets excluding cash, less current liabilities excluding debt like items as a percentage of Group revenue. It is a KPI for the Group as it remains a key focus to ensure efficient allocation of capital on the balance sheet to improve quality of earnings and reduce the additional investment needed to support organic growth.

8. Own shares held

The own shares held reserve comprises the cost of the Company's shares held by the Group. At 30 September 2024, the Group held 1,275,237 of the Company's shares (HY2024: 1,452,696; FY2024: 1,373,663).

9. Financial instruments

There is no significant difference between the fair values and the carrying values shown in the balance sheet.

10. IFRS2 Share-based payments

During the period, a gain of £0.4m (HY2024: gain of £0.6m) was recognised in relation to IFRS2 Share-based payments due to the reversal of the cumulative charge relating to the 2022 Board, Executive Committee and Senior Manager LTIP shares as the non-market performance conditions are unlikely to be met.

11. Related parties

Transactions between subsidiaries of the Group, are not disclosed in this note as they have been eliminated on consolidation.

For the Executive Directors and the remaining key management personnel in the period, there is no significant change in the components of the compensation that would materially affect that disclosed in the Director's remuneration report and note 28 of the consolidated financial statements for the year ended 31 March 2024. Kate Ferguson (Chief Financial Officer) was appointed to the Board with effect from 10 September 2024.

In the period, there were share options granted to key management personnel totalling 9,430,800 (HY2024: Nil). There were lapses related to key management personnel LTIP share options totalling 230,808 (HY2024: 132,407).

12. Other interest-bearing loans and borrowings

On 2 May 2024, the Group agreed to amend the interest cover covenant in the Revolving Credit Facility (RCF) and UK Export Finance (UKEF) Export Development Guarantee (EDG) term loan facilities agreements. This applies from the 30 June 2024 quarterly covenant calculation as follows:

1. Each relevant period from 30 June 2024, ending on 30 September 2025: 3.25x

2. Each relevant period from 31 December 2025, ending on 30 September 2026: 3.50x

3. Each relevant period from 31 December 2026, thereafter: 4.00x

On 3 July 2024, KBC Bank NV (KBC) became a lender to the RCF agreement following a transfer of a commitment from an existing lender. The facility commitment remained at £70.0m. This commitment will support the Group's treasury strategy and plans in Eastern Europe.

Further details can be found in notes 26 and 29 of the Group's Annual report for the year ended 31 March 2024.