(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 £47.50m (2016: £41.93m), 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 (2016: £nil).

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

2017
£000
2016
£000
Amounts less than 90 days past due46,91141,491
Amounts more than 90 days past due586440
47,49741,931

For balances neither past due nor impaired credit quality is considered good and no credit exposures have been identified (2016: 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 receivables during the year was as follows:

2017
£000
2016
£000
Balance at 1 April(803)(754)
Impairment movement(72)(49)
Balance at 31 March(875)(803)

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 €25.0m ('Facility A') used to fund the acquisition of VIC (balance at 31 March 2017: €18.75m)
  • a revolving multi-currency credit facility ('RCF') of up to £15.0m with an option to increase the facility by £20m ('Facility B') (balance at 31 March 2017: £7.9m)
  • a property loan of £2.1m (balance at 31 March 2017: £2.1m)

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 1.50%, in accordance with a formula incorporating the ratio of consolidated net debt against the consolidated underlying EBITDA of the Group. Interest on the property loan is charged at LIBOR plus a margin of 1.25%.

Facilities A and B were restructured in October 2016. At the same time, the property loan was taken out, secured on the Group's premises in Uckfield.

In addition the Group has an Asset Based Lending ('ABL') facility providing up to a maximum of £15.0m secured over the receivables of TR Fastenings Limited. This facility charges a marginal interest rate of 1.49% above base.

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 EURIBOR 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 significant 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:

2017
Carrying amount/ contractual cash flows^ £000Less 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 loan16,0383,2084,2768,554
Facility B — Revolving credit facility7,8697,869
Property loan2,1002,100
Total Company26,00711,0774,27610,654
Group
Asset based lending3,2803,280
VIC unsecured loan1,796513513770
Total Group31,08314,8704,78911,424

^ Excluding interest charges

Finance lease liabilities at 31 March 2017 are £0.01m (2016: £0.01m). The Kuhlmann unsecured loan was paid off in full in October 2016.

2016
Carrying amount/ contractual cash flows^ £000Less 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 loan16,9572,0913,96410,902
Facility B — Revolving credit facility10,00010,000
Total Company26,95712,0913,96410,902
Group
Asset based lending3,1443,144
PSEP acquisition loan1,1701,170
VIC unsecured loan2,1414764761,189
Kuhlmann unsecured loan15018185460
Total Group33,56216,8994,45812,14560

^ 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 2017 (excluding bank overdrafts and finance lease liabilities):

20172016
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 loan16,03816,03816,95716,957
Facility B — Revolving credit facility15,0007,8697,13110,00010,000
Property loan2,1002,100
Total Company33,13826,0077,13126,95726,957
Group
Asset based lending15,0003,28011,72017,0003,14413,856
PSEP acquisition loan1,1701,170
VIC unsecured loan1,7961,7962,1412,141
Kuhlmann unsecured loan150150
Total Group49,93431,08318,85147,41833,56213,856

In addition, an accordion facility of £20.0m as been written into the main HSBC RCF facility agreement, providing potential additional finance under currently agreed terms subject to credit approval.

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 (2016: 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 the split between fixed and variable interest rates at the balance sheet date.

Further details of the rates applicable on interest-bearing loans and borrowings is given in note 20.

All assets and liabilities in place at year end bear interest at a floating rate and therefore may change within one year.

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

GroupCompany
2017
£000
2016
£000
2017
£000
2016
£000
Fixed rate instruments
Financial liabilities(1,170)
(1,170)
Variable rate instruments
Financial assets24,64517,6142,5871,406
Financial liabilities^(31,093)(32,439)(26,007)(29,230)
(6,448)(14,825)(23,420)(27,824)

^ £16.0m 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 one point in interest rates at the balance sheet date would change equity and profit and loss by £0.3m (2016: £0.2m). 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. No foreign exchange derivative financial instruments are held at the balance sheet date (2016: a flexible forward contract to cover 50% ($3.0m) of the HY1 2017 €:$ transactional risk within VIC). The 2016 year end value of this contract was 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 €9.2m (£7.9m) are net investment hedged against the net asset value of VIC and TR Kuhlmann. Therefore all foreign exchange movements that are being hedged 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 2017Sterling
£000
Euro
£000
US Dollar
£000
Singapore
Dollar
£000
Total
£000
Cash and cash equivalents exposure7333,2135,89529010,131
31 March 2016Sterling
£000
Euro
£000
US Dollar
£000
Singapore
Dollar
£000
Total
£000
Cash and cash equivalents exposure1393,1404,3454098,033

Sensitivity analysis

Group

A 1% change in significant foreign currency balances against local functional currency at 31 March 2017 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 currency2017
£000
2016
£000
US DollarSterling(2)(2)
EUROSterling(19)(21)
US DollarSingapore Dollar(31)(21)
US DollarTaiwanese Dollar(20)(14)

(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:

2017
£000
2016
£000
Cash and cash equivalents (note 19)24,64517,581
Borrowings (note 20)(31,093)(33,576)
Net debt(6,448)(15,995)
Equity(101,698)(83,750)
Capital(108,146)(99,745)