(a) Fair values of financial instruments

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

(b) Financial instruments risks

Exposure to credit, interest rate and currency risks arises in the normal course of the Group's business, and the Group continues to monitor and reduce any exposure accordingly. Information has been disclosed relating to the individual Company only where a material risk exists.

(i) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

Credit evaluations are performed on all customers requiring credit over a predetermined amount. Bad debt insurance is taken out on all key accounts where the cost is appropriate given the risk covered. All overdue debts are monitored regularly and customers are put on credit hold if payments are not received on time. The carrying amount of trade receivables represents the maximum credit exposure for the Group. Therefore, the maximum exposure to credit risk at the balance sheet date was £41.93m (2015: £37.88m), being the total carrying amount of trade receivables net of an allowance. Management does not consider there to be any significant unimpaired credit risk in the year-end balance sheet (2015: £nil).

At the balance sheet date there were no significant geographic or sector specific concentrations of credit risk.

2016
£000
2015
£000
Amounts less than 90 days past due41,49137,457
Amounts more than 90 days past due440419
41,93137,876

For balances neither past due nor impaired credit quality is considered good and no credit exposures have been identified (2015: nil).

When the Group is satisfied that no recovery of the amount owing is possible, at that point the amounts considered irrecoverable are written off against the trade receivables directly.

Impairment losses

The movement in the allowance for impairment in respect of loans and receivables during the year was as follows:

2016
£000
2015
£000
Balance at 1 April(754)(553)
Impairment movement(49)(201)
Balance at 31 March(803)(754)

There are no significant losses/bad debts provided for specific customers. Impairments are recognised where a credit exposure has been identified whether amounts are past due or not.

(ii) Liquidity and interest risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The Group holds net debt and hence its main interest and liquidity risks are associated with the maturity of its loans against cash inflows from around the Group. The Group's objective is to maintain a balance of continuity of funding and flexibility through the use of loans and banking facilities as applicable.

The Group banking facilities with HSBC comprise:

  • a term loan facility of €25.00m ('Facility A') used to fund the acquisition of VIC (balance at 31 March 2016: €21.25m)
  • a revolving multi-currency credit facility ('RCF') of up to £10.00m ('Facility B') (balance at 31 March 2016: £10.0m)

The obligations of Trifast under Facility A and Facility B are guaranteed by the UK non-dormant subsidiaries of the Company.

Interest on facility A and B is charged at the aggregate rate of LIBOR/EURIBOR plus a margin of 1.65%, in accordance with a formula incorporating the ratio of consolidated net debt against the consolidated underlying EBITDA of the enlarged Group.

Facility A and B are secured by way of a charge over the Group's premises at Uckfield; a first fixed and floating charge over all other UK assets of the enlarged Group; a share charge over TR Asia Investment Holdings Pte Ltd (Singapore); and a quota charge over VIC.

In addition the Group has an Asset Based Lending ('ABL') facility providing up to a maximum of £17.0m secured over the receivables and inventory of TR Fastenings Limited. This facility charges a marginal interest rate of 1.89% to 2.25% above base.

In December 2011, to part fund the Power Steel & Electro-Plating Works SDN Bhd acquisition, TR Asia Investment Holdings Pte Ltd took out a five year term loan with the Singaporean bank DBS at a fixed rate of 3.14% which is secured by Corporate Guarantees from the Company and TR Formac Pte Ltd. This will be fully repaid in 2016.

In June 2015, VIC took out a €3m repayment loan with MPS in Italy to part fund the de-factoring of their receivables. Interest is charged at 1.95% above base until maturity in 2020.

Covenant headroom

The current and modified UK term facilities are subject to quarterly covenant testing as follows:

Interest cover:Underlying EBITDA to net interest to exceed a ratio of three.
Debt Service cover:Underlying EBITDA to debt service to exceed a ratio of one.
Net Debt cover:Total net debt to underlying EBITDA not to exceed a ratio of 2.75.

These covenants currently provide sufficient headroom and forecasts indicate no breach is anticipated.

Liquidity tables

The following are the contractual maturities of the existing financial liabilities, excluding bank overdrafts and finance lease liabilities:

2016
Carrying
amount/
contractual
cash flows^
£000
Less than
1 year
£000
1 to 2
years
£000
2 to 5
years
£000
5 years
and over
£000
Non-derivative financial liabilities
Company
Facility A — VIC acquisition loan (€25m)16,9572,0913,96410,902
Facility B — Revolving credit facility (£10m)10,00010,000
Total Company26,95712,0913,96410,902
Group
Asset based lending3,1443,144
PSEP acquisition loan (S$15.11m)1,1701,170
VIC unsecured loan2,1414764761,189
Kuhlmann unsecured loan15018185460
Total Group33,56216,8994,45812,14560

^ Excluding interest charges.

Finance lease liabilities at 31 March 2016 are £0.01m (2015: £0.04m).

2015
Carrying
amount/
contractual
cash flows^
£000
Less than
1 year
£000
1 to 2
years
£000
2 to 5
years
£000
5 years
and over
£000
Non-derivative financial liabilities
Company
Facility A — VIC acquisition loan (€25m)17,1831,8091,80913,565
Facility B — Revolving credit facility (£10m)
Total Company17,1831,8091,80913,565
Group
Asset based lending8,6058,605
PSEP acquisition loan (S$15.11m)2,5971,4841,113
Total Group28,38511,8982,92213,565

^ Excluding interest charges.

Liquidity headroom

Trading forecasts show that the current facilities provide sufficient liquidity headroom. The Group continues to maintain positive relationships with a number of banks and the Directors believe that appropriate facilities will continue to be made available to the Group as and when they are required.

Available existing facilities at 31 March 2016 (excluding bank overdrafts and finance lease liabilities):

20162015
Available
facilities
£000
Utilised
facilities
£000
Un-utilised
facilities
£000
Available
facilities
£000
Utilised
facilities
£000
Un-utilised
facilities
£000
Company
Facility A — VIC acquisition loan (€25m)16,95716,95717,18317,183
Facility B — Revolving credit facility (£10m)10,00010,00010,00010,000
Total Company26,95726,95727,18317,18310,000
Group
Asset based lending17,0003,14413,85617,1758,6058,570
PSEP acquisition loan (S$15.11m)1,1701,1702,5972,597
VIC unsecured loan2,1412,141
Kuhlmann unsecured loan150150
Total Group47,41833,56213,85646,95528,38518,570

Interest risk

The Group monitors closely all loans outstanding which currently incur interest at floating rates. When interest rate exposure risk becomes significant the Group makes use of derivative financial instruments, including interest rate swaps and caps. The only instrument held at the balance sheet date relates to Facility A, where a cap of 1% EURIBOR is in place (2015: 1%). The Group will continue to review this position going forward.

In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date.

With the exception of the loan taken out by TR Asia Investment Holdings Ltd, which bears a fixed interest rate of 3.14%, all other assets and liabilities bear interest at a floating rate and therefore may change within one year.

Interest rate table (including bank overdraft and finance lease liabilities)

GroupCompany
2016
£000
2015
£000
2016
£000
2015
£000
Fixed rate instruments
Financial liabilities(1,170)(2,597)
(1,170)(2,597)
Variable rate instruments
Financial assets17,61415,4531,4061,292
Financial liabilities^(32,439)(26,271)(29,230)(21,921)
(14,825)(10,818)(27,824)(20,629)

^ £16.96m of the variable rate financial liability balance in the Group and the Company relates to Facility A and has a 1% EURIBOR interest rate cap in place.

Sensitivity analysis

A change of 1 point in interest rates at the balance sheet date would change equity and profit and loss by £0.20m (2015: £0.25m). This calculation has been applied to risk exposures existing at the balance sheet date.

This analysis assumes that all other variables, in particular foreign currency rates, remain consistent and considers the effect of financial instruments with variable interest rates. The analysis is performed on the same basis for the comparative period.

(iii) Foreign currency risk

The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than local functional currency. The Group faces additional currency risks arising from monetary financial instruments held in non-functional local currencies.

Operational foreign exchange exposure

Where possible the Group tries to invoice in the local currency at the respective entity. If this is not possible, then to mitigate any exposure, the Group tries to buy from suppliers and sell to customers in the same currency.

Where possible the Group tries to hold the majority of its cash and cash equivalent balances in the local currency at the respective entity.

Monetary assets/liabilities

The Group continues to monitor exchange rates and buy or sell currencies in order to minimise open exposure to foreign exchange risk. The Group does not speculate on exchange rates. At year end, the Group held a flexible forward contract to cover 50% ($3.0m) of the HY1 2017 €:$ transactional risk within VIC (2015: $nil). No other foreign exchange derivative financial instruments are held at the balance sheet date (2015: £nil). The year end value of this contract is not significant and therefore no disclosures have been provided below. The Group will continue to review this position going forward. The €25m VIC acquisition loan and the RCF utilised facility of €12.6m (£10.0m) are net investment hedged against the net asset value or VIC and TR Kuhlmann. Therefore all foreign exchange movements are taken to the translation reserve. All other loans are held in the local currency of the relevant company and so are excluded from the analysis below.

The Group's exposure to foreign currency risk is as follows (based on the carrying amount for cash and cash equivalents held in non-functional currencies):

31 March 2016Sterling
£000
Euro
£000
US Dollar
£000
Singapore
Dollar
£000
Total
£000
Cash and cash equivalents exposure1393,1404,3454098,033
31 March 2015Sterling
£000
Euro
£000
US Dollar
£000
Singapore
Dollar
£000
Total
£000
Cash and cash equivalents exposure1,4912,4352,2374956,658

Sensitivity analysis

Group

A 1% change in the following currencies against local functional currency at 31 March would have changed equity and profit and loss by the amount shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date.

This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant. The analysis is performed on the same basis for the comparative period.

Equity & profit or loss
Foreign currencyLocal currency2016
£000
2015
£000
US DollarSterling(2)3
EuroSterling(21)(18)
SterlingSingapore Dollar(12)
US DollarSingapore Dollar(21)(8)
US DollarTaiwanese Dollar(14)(12)

(c) Capital management

The Group's objectives when managing capital are to ensure that all entities within the Group will be able to continue as going concerns, while maximising the return to shareholders through the optimisation of the debt and equity balance. We regularly review and maintain or adjust the capital structure as appropriate in order to achieve these objectives, consistent with the management of capital for previous periods.

The Group has various borrowings and available facilities (see section (b)(ii) Liquidity and interest risk) that contain certain external capital requirements ('covenants') that are considered normal for these types of arrangements. As discussed above, we remain comfortably within all such covenants.

Identification of the total funding requirement is achieved via a detailed cash flow forecast which is reviewed and updated on a monthly basis.

The capital structure of the Group is presented below:

2016
£000
2015
£000
Cash and cash equivalents (note 19)17,58115,014
Borrowings (note 20)(33,576)(28,429)
Net debt(15,995)(13,415)
Equity(83,750)(71,680)
Capital(99,745)(85,095)