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THORPE (F.W) Plc NEX:TFW.GB NEX Ordinary Share GB00BC9ZLX92
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Thorpe(F.W.) PLC Preliminary Results

20/09/2018 7:00am

UK Regulatory (RNS & others)


THORPE (F.W) (NEX:TFW.GB)
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1 Year : From Jun 2018 to Jun 2019

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RNS Number : 3262B

Thorpe(F.W.) PLC

20 September 2018

Preliminary Results

for the year ended 30 June 2018 (Unaudited)

FW Thorpe Plc, designers, manufacturers and suppliers of professional lighting systems for the specification market, is pleased to announce its preliminary results for the year ended 30 June 2018.

Key points:

 
                             2018       2017                    Exc. Famostar 
Continuing operations                                            acquisition 
-------------------------  ---------  ---------  -------------  ------------- 
Revenue                    GBP109.6m  GBP105.4m  4.0% increase  0.4% increase 
Operating profit           GBP19.5m   GBP18.4m   5.7% increase  1.8% increase 
Profit before tax          GBP19.6m   GBP18.4m   6.6% increase  2.7% increase 
                                                     10.9% 
Basic earnings per share    13.91p     12.54p       increase    7.8% increase 
-------------------------  ---------  ---------  -------------  ------------- 
 
   --      Total interim and final dividend of 5.40p (2017: 4.90p) - an increase of 10.2% 

-- Revenue and operating profit growth driven by the acquisition of Famostar B.V. and a strong performance from existing overseas sales offices

-- Continued investment in the Group - development of high technology lighting, purchase of the Lightronics facility in the Netherlands and a new printed circuit board line at TRT Lighting

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (MAR).

For further information please contact:

 
FW Thorpe Plc 
Mike Allcock - Chairman, Joint Chief Executive   01527 583200 
Craig Muncaster - Joint Chief Executive, Group 
 Financial Director                              01527 583200 
 
  N+1 Singer - Nominated Adviser 
Richard Lindley / James Moat                     020 7496 3000 
 

Chairman's statement

FW Thorpe Plc achieved record revenue and profit levels in the 2017/18 financial year, even superseding last year's big stride forward in performance. This result was supported by growth from our operations overseas, including the addition of Famostar B.V.

GROUP RESULTS

In 2017/18, our revenue reached GBP109.6m, an increase of 4.0%, and operating profit was GBP19.5m, up 5.7%. This result is very credible, particularly against the backdrop of softer market conditions reported by some of our mainstream competitors.

Over the last few years, we have actively divested and re-organised those parts of the Group that have not contributed for many years, either financially or technically, and which we felt had no long-term future within the Group. We have also endeavoured to add businesses that give us access to new territories and the potential to share technology to develop market-leading products for our customers. I am pleased to report the continued success and profitability of all our remaining businesses, and especially our acquisitions.

I would like to make special mention of our colleagues at Lightronics, in the Netherlands, who have had another successful year, I would also like to welcome Famostar to our group; the company has certainly joined us in 'top gear' and has made a healthy contribution to this year's result.

General market conditions in the Netherlands seem good, and it is not an accident that we are enjoying some of that growth and helping to balance our risk in various markets. We have been actively working on this strategy over recent years, and this year saw some excellent growth in and a contribution from, various export markets, but with particularly good achievements by the UAE office and Australia.

There is a detailed summary of each company's performance later in our Annual Report and Accounts.

Performance as a whole for the year to 30 June 2018 allows your board to recommend a final dividend of 4.00p per share (2017: 3.55p), which gives a total for the year of 5.40p (2017: 4.90p).

This year saw our products move further forwards into the high technology lighting arena, bringing to market further wireless and software systems making our products capable of providing enhanced services beyond our traditional main selling point of saving energy. Latest developments, using the SmartScan platform, provide users with a building's occupancy statistics by area and even provide data that analyses people movement, helping to improve a business's efficiency, for example in a warehouse picking application to optimise product locations. Our emergency lights now provide exact test records, even indicating the day and date when tests were completed and producing their own downloadable test certificates. Certain emergency lights are now capable of providing statistical data regarding their local environment, such as humidity, air temperature and CO(2) concentration levels; this is potentially going to save one local hospital hundreds of pounds per day in manual test and measurement costs. We can now also change the colour temperature of our lights (warmer to cooler white), which is claimed to alter our hormone levels, to provide customers with options regarding health and wellbeing - and, quite amazingly, this is achieved wirelessly, in addition to all the other benefits our Smart luminaire technology provides. No wonder sales of these high technology systems rocketed this year with new customers found and others switching to this new technology. In the field of lighting controls I genuinely believe we are inventive and leading the way, but more importantly we do not just talk about what is possible - we deliver it!

Each year I sit down and think about what is next. I wonder which products we will find to differentiate ourselves from the cheaper competition. In the last few years, all our companies switched to almost 100% LED technology, and most now offer wireless solutions.

There seems no end to our ideas and innovation, and I am really looking forward to the launch of a completely new range of luminaires this autumn, which will reinvigorate the workplace through lighting and make the work environment a place where people want to be. Importantly, these luminaires will find applications in all our main market segments and give our sales engineers creative ways to light spaces. We have applied for several patents to protect our ideas. It is an exciting, albeit challenging, time to be running a group of lighting companies. If we can bring these new products to market quickly, I am confident it will give us a much needed boost to UK orders.

There is a general malaise in the UK market caused by a reduction in business confidence to invest in the construction sector and elsewhere as the country awaits Brexit and the return of political stability. We have enjoyed ongoing buoyancy throughout the government austerity drive, mainly due to the introduction of the new technologies mentioned above, but we believe that the boost has peaked.

Every company in the Group has a set of objectives, each of which is chosen to see the Group successfully through turbulent times. At each board meeting, these objectives are monitored and progressed. The Group's philosophy has not changed, and the board continues to invest for the long term and work hard to ensure the businesses operate a professional and low risk ethos. However, there is an inevitable focus on costs and, to that end, the board took the decision, in August, to close the production plant in Portsmouth, where demand has not been as high as originally anticipated.

Over the last 12 months, the previous Compact Lighting entity has been successfully integrated into the Thorlux Lighting UK operations, and all products have now been transferred to the Thorlux manufacturing systems. A small number of staff are likely to transfer to Thorlux headquarters in Redditch. I wish those seeking employment elsewhere success, and I would like to thank all employees affected for their understanding.

We continue to invest in the better performing areas of the Group and, in January, purchased the Lightronics building and adjoining buildings in Waalwijk in the Netherlands for EUR3.4m. A further GBP1.6m investment is being made in a new factory for Portland Lighting, close to its current rented accommodation in Walsall. Investments have also been made in electronic printed circuit board assembly equipment at TRT, to serve TRT's products locally and to provide risk mitigation for the Thorlux plant.

PERSONNEL

I would like to thank my whole team for their continued support and diligence. The long service records of many in management positions and in our lower ranks are proving invaluable as we steer our ship through economically and technologically changing times.

OUTLOOK

Whilst we have strengthened the position of the Group by restructuring loss making operations, diversifying the business through acquisitions and investing in product innovation, this year's excellent performance will be difficult to replicate as we contend with ongoing economic uncertainty, government instability and exchange rate volatility.

Whereas in recent years, we have worked hard to balance our risk by growing into new market sectors and territorial markets, the majority of our sales are still within the UK.

We are planning for the future uncertainty, and we have a strategy in place. We have great financial strength and excellent products that are in line with or ahead of latest trends, and we have a great team of focused people.

We are, however, to some extent, reliant on market conditions.

We intend to continue on the same path of steady, sustainable long-term growth.

M Allcock - Chairman

20 September 2018

Consolidated results (unaudited)

Consolidated income statement

For the year ended 30 June 2018

 
                                                   2018          2017 
                                    Notes       GBP'000       GBP'000 
----------------------------------  -----  ------------  ------------ 
Continuing operations 
Revenue                                 2       109,614       105,448 
Cost of sales                                  (58,305)      (59,025) 
----------------------------------  -----  ------------  ------------ 
Gross profit                                     51,309        46,423 
Distribution costs                             (11,823)      (10,598) 
Administrative expenses                        (20,261)      (17,636) 
Other operating income                              241           233 
----------------------------------  -----  ------------  ------------ 
Operating profit                        2        19,466        18,422 
Finance income                                      819           535 
Finance costs                                     (718)         (784) 
Share of profit of joint ventures                     -           178 
----------------------------------  -----  ------------  ------------ 
 
Profit before income tax                         19,567        18,351 
Income tax expense                      3       (3,457)       (3,851) 
----------------------------------  -----  ------------  ------------ 
 
Profit for the year                              16,110        14,500 
----------------------------------  -----  ------------  ------------ 
 

Earnings per share from continuing operations attributable to the equity holders of the company during the year (expressed in pence per share).

 
 
                                                        2018    2017 
Basic and diluted earnings per share           Notes   Pence   pence 
-------------------------------------  ------  -----  ------  ------ 
- Basic                                 Total      8   13.91   12.54 
- Diluted                               Total      8   13.81   12.47 
-------------------------------------  ------  -----  ------  ------ 
 

Consolidated statement of comprehensive income

For the year ended 30 June 2018

 
 
                                                            2018        2017 
                                                         GBP'000     GBP'000 
-----------------------------------------------------   --------  ---------- 
Profit for the year:                                      16,110      14,500 
------------------------------------------------------  --------  ---------- 
Other comprehensive income/(expenses) 
Items that may be reclassified to profit or loss 
Revaluation of available-for-sale financial assets 
- Arising in year                                            189         287 
- Reclassified in year                                         -           - 
Exchange differences on translation of foreign 
 operations 
- Arising in year                                            119         657 
- Reclassified in year                                         -           - 
Taxation                                                    (32)          18 
------------------------------------------------------  --------  ---------- 
                                                             276         962 
 -----------------------------------------------------  --------  ---------- 
Items that will not be reclassified to profit or 
 loss 
-----------------------------------------------------   --------  ---------- 
Actuarial gain/(loss) on pension scheme                    1,459     (1,211) 
Movement on unrecognised pension scheme surplus          (1,615)       1,071 
------------------------------------------------------  --------  ---------- 
                                                           (156)       (140) 
 -----------------------------------------------------  --------  ---------- 
 
Other comprehensive income for the year, net of 
 tax                                                         120         822 
------------------------------------------------------  --------  ---------- 
 
Total comprehensive income for the year attributable 
 to equity shareholders                                   16,230      15,322 
------------------------------------------------------  --------  ---------- 
 

Consolidated STATEMENT OF financial position

As at 30 June 2018

 
                                                      Group 
                                                ------------------ 
                                                    2018      2017 
                                         Notes   GBP'000   GBP'000 
---------------------------------------  -----  --------  -------- 
Assets 
Non-current assets 
Property, plant and equipment                5    22,679    18,837 
Intangible assets                            6    21,596    15,927 
Investment property                                2,076     2,163 
Loans and receivables                              6,139     3,058 
Investment in associates                             936       936 
Available-for-sale financial assets                3,820     3,630 
Deferred tax assets                                    8        19 
---------------------------------------  -----  --------  -------- 
                                                  57,254    44,570 
Current assets 
Inventories                                       21,489    22,592 
Trade and other receivables                       23,416    18,995 
Other financial assets at fair value 
 through profit or loss                              389       389 
Loans and receivables                                  -       750 
Short-term financial assets                  7    15,290    16,981 
Cash and cash equivalents                         28,668    24,678 
---------------------------------------  -----  --------  -------- 
Total current assets                              89,252    84,385 
---------------------------------------  -----  --------  -------- 
Total assets                                     146,506   128,955 
---------------------------------------  -----  --------  -------- 
Liabilities 
Current liabilities 
Trade and other payables                        (19,253)  (17,826) 
Current income tax liabilities                   (1,853)   (1,606) 
---------------------------------------  -----  --------  -------- 
Total current liabilities                       (21,106)  (19,432) 
---------------------------------------  -----  --------  -------- 
Net current assets                                68,146    64,953 
---------------------------------------  -----  --------  -------- 
Non-current liabilities 
Retirement benefit deficit                             -         - 
Other payables                                  (10,329)   (5,774) 
Provisions for liabilities and charges           (2,164)   (1,537) 
Deferred income tax liabilities                    (655)     (920) 
---------------------------------------  -----  --------  -------- 
Total non-current liabilities                   (13,148)   (8,231) 
---------------------------------------  -----  --------  -------- 
Total liabilities                               (34,254)  (27,663) 
---------------------------------------  -----  --------  -------- 
Net assets                                       112,252   101,292 
---------------------------------------  -----  --------  -------- 
Equity 
Share capital                                      1,189     1,189 
Share premium account                              1,017       656 
Capital redemption reserve                           137       137 
Foreign currency translation reserve               2,382     2,263 
Retained earnings                                107,527    97,047 
---------------------------------------  -----  --------  -------- 
Total equity                                     112,252   101,292 
---------------------------------------  -----  --------  -------- 
 

Consolidated statement of changes in equity

For the year ended 30 June 2018

 
                                                  Share      Capital 
                                        Share   premium   redemption                                Retained     Total 
                                      capital   account      reserve             Foreign currency   earnings    equity 
                              Notes   GBP'000   GBP'000      GBP'000  translation reserve GBP'000    GBP'000   GBP'000 
----------------------------  -----  --------  --------  -----------  ---------------------------  ---------  -------- 
Balance at 1 July 2016                  1,189       656          137                        1,606     87,119    90,707 
----------------------------  -----  --------  --------  -----------  ---------------------------  ---------  -------- 
Comprehensive income 
Profit for the year to 30 
 June 2017                                  -         -            -                            -     14,500    14,500 
Actuarial loss on pension 
 scheme                                     -         -            -                            -    (1,211)   (1,211) 
Movement on unrecognised 
 pension scheme surplus                     -         -            -                            -      1,071     1,071 
Revaluation of 
 available-for-sale 
 financial assets                           -         -            -                            -        287       287 
Movement on associated 
 deferred tax                               -         -            -                            -       (50)      (50) 
Impact of deferred tax rate 
 change                                     -         -            -                            -         68        68 
Exchange differences on 
 translation of foreign 
 operations                                 -         -            -                          657          -       657 
Total comprehensive income                  -         -            -                          657     14,665    15,322 
Transactions with owners 
Dividends paid to 
 shareholders                     4         -         -            -                            -    (4,858)   (4,858) 
Share based payment charge                  -         -            -                            -        121       121 
----------------------------  -----  --------  --------  -----------  ---------------------------  ---------  -------- 
Total transactions with 
 owners                                     -         -            -                            -    (4,737)   (4,737) 
----------------------------  -----  --------  --------  -----------  ---------------------------  ---------  -------- 
Balance at 30 June 2017                 1,189       656          137                        2,263     97,047   101,292 
----------------------------  -----  --------  --------  -----------  ---------------------------  ---------  -------- 
Comprehensive income 
Profit for the year to 30 
 June 2018                                  -         -            -                            -     16,110    16,110 
Actuarial gain on pension 
 scheme                                     -         -            -                            -      1,459     1,459 
Movement on unrecognised 
 pension scheme surplus                     -         -            -                            -    (1,615)   (1,615) 
Revaluation of 
 available-for-sale 
 financial assets                           -         -            -                            -        189       189 
Movement on associated 
 deferred tax                               -         -            -                            -       (32)      (32) 
Exchange differences on 
 translation of foreign 
 operations                                 -         -            -                          119          -       119 
----------------------------  -----  --------  --------  -----------  ---------------------------  ---------  -------- 
Total comprehensive income                  -         -            -                          119     16,111    16,230 
Transactions with owners 
Shares issued from exercised 
 options                                    -       361            -                            -          -       361 
Dividends paid to 
 shareholders                     4         -         -            -                            -    (5,737)   (5,737) 
Share based payment charge                  -         -            -                            -        106       106 
----------------------------  -----  --------  --------  -----------  ---------------------------  ---------  -------- 
Total transactions with 
 owners                                     -       361            -                            -    (5,631)   (5,270) 
----------------------------  -----  --------  --------  -----------  ---------------------------  ---------  -------- 
Balance at 30 June 2018                 1,189     1,017          137                        2,382    107,527   112,252 
----------------------------  -----  --------  --------  -----------  ---------------------------  ---------  -------- 
 

Consolidated statement of cash flows

For the year ended 30 June 2018

 
                                                        Group 
                                                  ------------------ 
                                                      2018      2017 
                                           Notes   GBP'000   GBP'000 
-----------------------------------------  -----  --------  -------- 
Cash flows from operating activities 
Cash generated from operations                 9    23,998    22,380 
Tax paid                                           (3,291)   (3,840) 
-----------------------------------------  -----  --------  -------- 
Net cash generated from operating 
 activities                                         20,707    18,540 
-----------------------------------------  -----  --------  -------- 
 
Cash flows from investing activities 
Purchases of property, plant and 
 equipment                                         (6,049)   (5,400) 
Proceeds from sale of property, plant 
 and equipment                                         197       262 
Purchase of intangibles                            (1,967)   (2,148) 
Purchase of subsidiary (inclusive 
 of cash acquired)                                 (6,313)       240 
Sale/(purchase) of investment property                  67     (100) 
Sale of available-for-sale financial 
 assets                                                  -         5 
Property rental and similar income                     190        31 
Dividend income                                        190       210 
Net withdrawal/(deposit) of short-term 
 financial assets                                    1,691   (2,071) 
Interest received                                      388       393 
Net (issue)/receipt of loan notes                  (2,022)     1,090 
-----------------------------------------  -----  --------  -------- 
Net cash used in investing activities             (13,628)   (7,488) 
-----------------------------------------  -----  --------  -------- 
 
Cash flows from financing activities 
Net proceeds from the issuance of 
 ordinary shares                                       361         - 
Proceeds from loans                                  2,337         - 
Dividends paid to company's shareholders       4   (5,737)   (4,858) 
Net cash used in financing activities              (3,039)   (4,858) 
-----------------------------------------  -----  --------  -------- 
Effects of exchange rate changes 
 on cash                                              (50)       189 
Net increase /(decrease) in cash 
 in the year                                         3,990     6,383 
Cash and cash equivalents at beginning 
 of year                                            24,678    18,295 
-----------------------------------------  -----  --------  -------- 
Cash and cash equivalents at end 
 of year                                            28,668    24,678 
-----------------------------------------  -----  --------  -------- 
 

Notes (unaudited)

1 Basis of preparation

The financial information set out above has been prepared in accordance with International Financial Reporting Standards adopted by the European Union and the IFRS interpretations committee (IFRS IC) though does not constitute the Group's statutory accounts for the year ended 30 June 2018. The financial information has been prepared on a going concern basis, under the historical cost convention, as modified by available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through the profit and loss.

The Company and Group has adopted all IAS and IFRS adopted in the EU except for IAS 34, as AIM-listed companies are not required to adopt IAS 34. The Company and Group has not early adopted any other standards or interpretations not yet endorsed by the EU.

New or amended standards adopted for the year ending 30 June 2018 are:

Amendment to IAS 7, "Statement of cash flows" on disclosure initiative (effective 1 January 2017)

Amendment to IAS 12, "Income taxes" on recognition of deferred tax assets for unrealised losses (effective 1 January 2017)

The above new and amended standards had an immaterial impact on the financial statements and as such, the impact of adoption has not been separately disclosed.

The Group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have been published but are only effective for our accounting periods beginning on or after 1 January 2018 or later periods. The new pronouncements that may have an effect on the Group are listed below:

IFRS 9 "Financial Instruments" (effective 1 January 2018)

IFRS 15 "Revenue from contracts with customers" (effective 1 January 2018)

Amendments to IFRS 2, 'Share based payments' - Classification and measurement (effective 1 January 2018)

Amendments to IFRS 4, Amendments regarding implementation of IFRS 9 (effective 1 January 2018)

Amendment to IFRS 9, 'Financial instruments', on general hedge accounting (effective date 1 Jan 2018)

IFRS 16 "Leases" (effective 1 January 2019)

IFRS 9 'Financial Instruments' is effective for accounting periods beginning on or after 1 January 2018, and will be adopted by the Group for the accounting period beginning 1 July 2018. The new standard replaces IAS 39 'Financial Instruments: Recognition & Measurement' and the changes introduced by the new standard can be grouped into the following three categories - Classification & Measurement, Impairment and Hedging. The Group are performing an impact assessment of the new standard and notes the following:

-- Classification and measurement: IFRS 9 contains three principal classification categories for financial assets which are amortised cost, fair value through other comprehensive income ("FVOCI") and fair value through profit or loss ("FVTPL"). The standard eliminates the existing IAS 39 categories of held-to-maturity, loans and receivables and available-for-sale financial assets. No material changes to net assets are expected from changes in the measurement basis of financial assets.

-- Impairment: IFRS 9 introduces an expected credit loss model which requires expected credit losses and changes to expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. Financial assets measured at amortised cost or FVOCI will be subject to the impairment provisions of IFRS 9. The Group has a low level of write-offs and strong credit control policies, and does not anticipate any material changes in the level of provision for financial assets.

-- Hedging: IFRS 9 introduces new hedge accounting requirements of IFRS 9 will align hedge accounting relationships with the Group's risk management objectives and strategy. The Group does not apply hedge accounting, therefore no changes are anticipated arising from the new standard.

IFRS15 is effective for accounting periods beginning on or after 1 January 2018, and will be adopted by the Group for the accounting period beginning 1 July 2018. The standard requires entities to apportion revenue earned from contracts to individual performance obligations based on a five-step model. An impact assessment has been carried out and the following areas of potential differences were identified:

-- Determination of performance obligations and the timing of revenue recognition for supply and install arrangements;

   --      Warranty arrangements 

Subsequent to the impact assessment the directors do not expect IFRS15 to have a material impact on reported profits.

The directors are currently evaluating the impact of the adoption of the other standards, amendments and interpretations in future periods, although it is anticipated that these will have an immaterial impact on reported profits.

1 Basis of preparation (CONTINUED)

The results and financial information for the year ended 30 June 2018 is unaudited but the statutory accounts for the year then ended will be delivered to the Registrar of Companies in due course, and expect the auditors' report to be unqualified and did not contain a statement under section 498(2) and (3) of the Companies Act 2006.

The financial statements are presented in Pounds Sterling, rounded to the nearest thousand.

2 Segmental analysis

(a) Business segments

The segmental analysis is presented on the same basis as that used for internal reporting purposes. For internal reporting FW Thorpe is organised into ten operating segments, based on the products and customer base in the lighting market - the largest business is Thorlux, which manufactures professional lighting systems for the industrial, commercial and controls markets. During the period, Compact Lighting Limited has been incorporated into the Thorlux segment further to previous announcements. The Lightronics business is a material subsidiary and therefore disclosed separately.

The eight remaining continuing operating segments have been aggregated into the 'other companies' segment based on their size, comprising the entities Philip Payne Limited, Solite Europe Limited, Portland Lighting Limited, TRT Lighting Limited, Thorlux Lighting LLC, Thorlux Australasia PTY Limited, Thorlux Lighting GmbH and Famostar B.V.

FW Thorpe's chief operating decision-maker (CODM) is the Group board. The Group board reviews the Group's internal reporting in order to monitor and assess the performance of the operating segments for the purpose of making decisions about resources to be allocated. Performance is evaluated based on a combination of revenue and operating profit. Assets and liabilities have not been segmented which is consistent with the Group's internal reporting.

 
                                                                            Inter-        Total 
                                                               Other       segment   continuing 
                                    Thorlux  Lightronics   companies   adjustments   operations 
                                    GBP'000      GBP'000     GBP'000       GBP'000      GBP'000 
---------------------------------  --------  -----------  ----------  ------------  ----------- 
Year to 30 June 2018 
Revenue to external customers        64,645       20,860      24,109             -      109,614 
Revenue to other group companies      3,930          196       2,956       (7,082)            - 
---------------------------------  --------  -----------  ----------  ------------  ----------- 
Total revenue                        68,575       21,056      27,065       (7,082)      109,614 
---------------------------------  --------  -----------  ----------  ------------  ----------- 
Operating profit                     13,611        2,050       3,407           398       19,466 
---------------------------------  --------  -----------  ----------  ------------  ----------- 
Net finance income                                                                          101 
Share of profit of joint venture                                                              - 
---------------------------------  --------  -----------  ----------  ------------  ----------- 
Profit before income tax                                                                 19,567 
---------------------------------  --------  -----------  ----------  ------------  ----------- 
 
Year to 30 June 2017 
Revenue to external customers        65,323       19,243      20,882             -      105,448 
Revenue to other group companies      3,794          304       4,364       (8,462)            - 
---------------------------------  --------  -----------  ----------  ------------  ----------- 
Total revenue                        69,117       19,547      25,246       (8,462)      105,448 
---------------------------------  --------  -----------  ----------  ------------  ----------- 
Operating profit                     14,162        2,372       2,163         (275)       18,422 
---------------------------------  --------  -----------  ----------  ------------  ----------- 
Net finance income                                                                        (249) 
Share of profit of joint venture                                                            178 
---------------------------------  --------  -----------  ----------  ------------  ----------- 
Profit before income tax                                                                 18,351 
---------------------------------  --------  -----------  ----------  ------------  ----------- 
 

Inter segment adjustments to operating profit consist of property rentals on premises owned by FW Thorpe Plc and adjustments to profit related to stocks held within the Group that were supplied by another segment.

b) Geographical analysis

The Group's business segments operate in four main areas, the UK, the Netherlands, the rest of Europe and the rest of the World. The home country of the company, which is also the main operating company, is the UK.

 
                      2018      2017 
                   GBP'000   GBP'000 
----------------  --------  -------- 
UK                  70,652    71,547 
Netherlands         22,713    17,243 
Europe              10,726    12,348 
Other countries      5,523     4,310 
----------------  --------  -------- 
                   109,614   105,448 
----------------  --------  -------- 
 

The vast majority of assets and capital expenditure are in the UK, and cannot be split geographically in relation to the Group's revenues.

3 Income tax expense

Analysis of income tax expense in the year:

 
                                                        2018       2017 
                                                     GBP'000    GBP'000 
--------------------------------------------------  --------  --------- 
Current tax 
Current tax on profits for the year                    3,930      4,374 
Adjustments in respect of prior years                  (170)      (662) 
--------------------------------------------------  --------  --------- 
Total current tax                                      3,760      3,712 
--------------------------------------------------  --------  --------- 
Deferred tax 
Origination and reversal of temporary differences      (303)        139 
--------------------------------------------------  --------  --------- 
Total deferred tax                                     (303)        139 
--------------------------------------------------  --------  --------- 
Income tax expense                                     3,457      3,851 
--------------------------------------------------  --------  --------- 
 

The tax assessed for the year is lower (2017: higher) than the standard rate of corporation tax in the UK of 19.00% (2017: 19.75%). The differences are explained below:

 
                                                               2018       2017 
                                                            GBP'000    GBP'000 
---------------------------------------------------------  --------  --------- 
Profit before income tax                                     19,567     18,351 
---------------------------------------------------------  --------  --------- 
Profit on ordinary activities multiplied by the standard 
 rate in the UK of 19.00% (2017: 19.75%)                      3,718      3,624 
Effects of: 
Expenses not deductible for tax purposes                        648        498 
Accelerated tax allowances and other timing differences       (383)        241 
Adjustments in respect of prior years                         (170)      (662) 
Foreign profit taxed at higher rate                             285        150 
Patent box relief                                             (641)          - 
Tax charge                                                    3,457      3,851 
---------------------------------------------------------  --------  --------- 
 

The effective tax rate was 17.67% (2017: 20.99%).

The change to the UK corporation tax rate from 19% to 17% from 1 April 2020 was substantively enacted on 6 September 2016 with the appropriate rate reflected within these financial statements.

4 Dividends

Dividends paid during the year are outlined in the tables below:

 
Dividends paid (pence per share)   2018  2017 
---------------------------------  ----  ---- 
Final dividend                     3.55  2.85 
Interim dividend                   1.40  1.35 
---------------------------------  ----  ---- 
Total                              4.95  4.20 
---------------------------------  ----  ---- 
 

A final dividend in respect of the year ended 30 June 2018 of 4.00p per share, amounting to GBP4,639,000 is to be proposed at the Annual General Meeting on 22 November 2018 and, if approved, will be paid on 29 November 2018 to shareholders on the register on 2 November 2018. The ex-dividend date is 1 November 2018. These financial statements do not reflect this dividend payable.

 
Dividends proposed (pence per share)   2018  2017 
-------------------------------------  ----  ---- 
Final dividend                         4.00  3.55 
-------------------------------------  ----  ---- 
 
 
                       2018      2017 
Dividends paid      GBP'000   GBP'000 
-----------------  --------  -------- 
Final dividend        4,114     3,297 
Interim dividend      1,623     1,561 
-----------------  --------  -------- 
Total                 5,737     4,858 
-----------------  --------  -------- 
 
 
                         2018      2017 
Dividends proposed    GBP'000   GBP'000 
-------------------  --------  -------- 
Final dividend          4,639     4,106 
-------------------  --------  -------- 
 

5 Property, plant and equipment

 
                                             Group 
                              ------------------------------------ 
                                    Freehold       Plant 
                                        land         and 
                               and buildings   equipment     Total 
                                     GBP'000     GBP'000   GBP'000 
----------------------------  --------------  ----------  -------- 
Cost 
At 1 July 2017                        14,556      18,990    33,546 
Acquisition of a subsidiary              528       1,323     1,851 
Additions                              3,301       2,558     5,859 
Disposals                                  -     (1,247)   (1,247) 
Transfers                                294       (294)         - 
Currency translation                     (3)         (2)       (5) 
At 30 June 2018                       18,676      21,328    40,004 
----------------------------  --------------  ----------  -------- 
Accumulated depreciation 
At 1 July 2017                         2,789      11,920    14,709 
Acquisition of a subsidiary              435       1,188     1,623 
Charge for the year                      464       1,672     2,136 
Disposals                                  -     (1,139)   (1,139) 
Transfers                                141       (141)         - 
Currency translation                       -         (4)       (4) 
At 30 June 2018                        3,829      13,496    17,325 
----------------------------  --------------  ----------  -------- 
Net book amount 
----------------------------  --------------  ----------  -------- 
At 30 June 2018                       14,847       7,832    22,679 
----------------------------  --------------  ----------  -------- 
 
 
                                             Group 
                              ------------------------------------ 
                                    Freehold       Plant 
                                        land         and 
                               and buildings   equipment     Total 
                                     GBP'000     GBP'000   GBP'000 
----------------------------  --------------  ----------  -------- 
Cost 
At 1 July 2016                        11,541      18,410    29,951 
Acquisition of a subsidiary                -          44        44 
Additions                              2,935       2,715     5,650 
Disposals                                  -     (2,131)   (2,131) 
Transfers                                 80        (80)         - 
Currency translation                       -          32        32 
----------------------------  --------------  ----------  -------- 
At 30 June 2017                       14,556      18,990    33,546 
----------------------------  --------------  ----------  -------- 
Accumulated depreciation 
At 1 July 2016                         2,567      12,484    15,051 
Acquisition of a subsidiary                -           9         9 
Charge for the year                      222       1,407     1,629 
Disposals                                  -     (1,988)   (1,988) 
Currency translation                       -           8         8 
----------------------------  --------------  ----------  -------- 
At 30 June 2017                        2,789      11,920    14,709 
----------------------------  --------------  ----------  -------- 
Net book amount 
----------------------------  --------------  ----------  -------- 
At 30 June 2017                       11,767       7,070    18,837 
----------------------------  --------------  ----------  -------- 
 

6 Intangible assets

 
                                     Development                 Brand                       Fishing 
                           Goodwill        costs  Technology      name  Software   Patents    rights     Total 
Group 2018                  GBP'000      GBP'000     GBP'000   GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
-------------------------  --------  -----------  ----------  --------  --------  --------  --------  -------- 
Cost 
At 1 July 2017               10,282        6,448       1,875       768     1,528       150       182    21,233 
Acquisition of 
 a subsidiary                 4,490            -       1,040       520         -         -         -     6,050 
Additions                         -        1,605           -         -       376         -         -     1,981 
Write-offs and 
 transfers                        -      (1,281)           -         -     (116)         -         -   (1,397) 
Currency translation             14            7           9         3         1         -         -        34 
At 30 June 2018              14,786        6,779       2,924     1,291     1,789       150       182    27,901 
-------------------------  --------  -----------  ----------  --------  --------  --------  --------  -------- 
Accumulated amortisation 
At 1 July 2017                  262        2,588         814       442     1,050       150         -     5,306 
Charge for the 
 year                             -        1,753         299       157       191         -         -     2,400 
Write-offs and 
 transfers                        -      (1,281)           -         -     (113)         -         -   (1,394) 
Currency translation           (13)            2           4         -         -         -         -       (7) 
At 30 June 2018                 249        3,062       1,117       599     1,128       150         -     6,305 
-------------------------  --------  -----------  ----------  --------  --------  --------  --------  -------- 
Net book amount 
-------------------------  --------  -----------  ----------  --------  --------  --------  --------  -------- 
At 30 June 2018              14,537        3,717       1,807       692       661         -       182    21,596 
-------------------------  --------  -----------  ----------  --------  --------  --------  --------  -------- 
 

Write-offs relate to development assets where no further economic benefits are expected obtained.

 
                                     Development                 Brand                       Fishing 
                           Goodwill        costs  Technology      name  Software   Patents    rights     Total 
Group 2017                  GBP'000      GBP'000     GBP'000   GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
-------------------------  --------  -----------  ----------  --------  --------  --------  --------  -------- 
Cost 
At 1 July 2016                9,972        6,454       1,791       736     1,195       150       182    20,480 
Acquisition of 
 a subsidiary                   524            -           -         -         -         -         -       524 
Additions                         -        1,715           -         -       306         -         -     2,021 
Write-offs and 
 transfers                    (600)      (1,757)           -         -        23         -         -   (2,334) 
Currency translation            386           36          84        32         4         -         -       542 
-------------------------  --------  -----------  ----------  --------  --------  --------  --------  -------- 
At 30 June 2017              10,282        6,448       1,875       768     1,528       150       182    21,233 
-------------------------  --------  -----------  ----------  --------  --------  --------  --------  -------- 
Accumulated amortisation 
At 1 July 2016                  600        2,778         575       315       879       150         -     5,297 
Charge for the 
 year                             -        1,560         218       116       146         -         -     2,040 
Impairment for 
 the year                       262            -           -         -         -         -         -       262 
Write-offs and 
 transfers                    (600)      (1,757)           -         -        23         -         -   (2,334) 
Currency translation              -            7          21        11         2         -         -        41 
-------------------------  --------  -----------  ----------  --------  --------  --------  --------  -------- 
At 30 June 2017                 262        2,588         814       442     1,050       150         -     5,306 
-------------------------  --------  -----------  ----------  --------  --------  --------  --------  -------- 
Net book amount 
-------------------------  --------  -----------  ----------  --------  --------  --------  --------  -------- 
At 30 June 2017              10,020        3,860       1,061       326       478         -       182    15,927 
-------------------------  --------  -----------  ----------  --------  --------  --------  --------  -------- 
 

7 Short-term financial assets

 
                                 2018      2017 
                              GBP'000   GBP'000 
---------------------------  --------  -------- 
Beginning of year              16,981    14,910 
Net (withdrawals)/deposits    (1,691)     2,071 
---------------------------  --------  -------- 
End of year                    15,290    16,981 
---------------------------  --------  -------- 
 

The short-term financial assets consist of term cash deposits in sterling with an original term in excess of three months.

8 Earnings per share

Basic and diluted earnings per share for profit attributable to equity holders of the company

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the company and held as treasury shares.

 
 
 
Basic                                                                   2018         2017 
---------------------------------------------------------------  -----------  ----------- 
Weighted average number of ordinary shares in issue              115,834,897  115,675,590 
---------------------------------------------------------------  -----------  ----------- 
Profit attributable to equity holders of the company (GBP'000)        16,110       14,500 
---------------------------------------------------------------  -----------  ----------- 
Basic earnings per share (pence per share) total                       13.91        12.54 
---------------------------------------------------------------  -----------  ----------- 
 
 
Diluted                                                                 2018         2017 
---------------------------------------------------------------  -----------  ----------- 
Weighted average number of ordinary shares in issue (diluted)    116,692,591  116,303,503 
---------------------------------------------------------------  -----------  ----------- 
Profit attributable to equity holders of the company (GBP'000)        16,110       14,500 
---------------------------------------------------------------  -----------  ----------- 
Diluted earnings per share (pence per share) total                     13.81        12.47 
---------------------------------------------------------------  -----------  ----------- 
 

9 Cash generated from operations

 
                                                      Group 
                                                   2018       2017 
Cash generated from continuing operations       GBP'000    GBP'000 
--------------------------------------------   --------  --------- 
Profit before income tax                         19,567     18,351 
Depreciation charge                               2,195      1,697 
Amortisation/impairment of intangibles            2,400      2,302 
Profit on disposal of property, plant and 
 equipment                                        (125)      (119) 
Net finance (income)/expense                      (101)        249 
Retirement benefit contributions in excess 
 of current and past service charge               (156)      (140) 
Share of profit from joint venture                    -      (178) 
Share based payment charge                          533        337 
Research and development expenditure credit       (237)      (233) 
Effects of exchange rate movements                  163        113 
Changes in working capital 
- Inventories                                     1,954    (3,646) 
- Trade and other receivables                   (3,610)      2,156 
- Payables and provisions                         1,415      1,491 
Cash generated from continuing operations        23,998     22,380 
---------------------------------------------  --------  --------- 
 

10 ACQUISITION OF SUBSIDIARY

In December 2017, the Group acquired 100% of the share capital of Famostar B.V., an emergency lighting specialist in the Netherlands. The company was acquired by Lightronics Participaties B.V. for initial consideration of EUR7.5m (GBP6.7m) with an estimated additional EUR0.5m (GBP0.4m) payable, subject to performance conditions relating to EBITDA in 2017 and 2018.

Share appreciation rights were granted for 35% of the share capital to the holders of share appreciation rights in Lightronics Participaties B.V. This equated to an investment of EUR2.7m (GBP2.4m) by the holders of these rights. Of this EUR2.7m, EUR1.7m (GBP1.5m) was provided in the form of a loan from FW Thorpe and a EUR1m (GBP0.9m) loan from the rights holders themselves. The loan notes are repayable on or before the end the 30 June 2021 and attract an interest rate of 5%.

The share appreciation rights are subject to future performance conditions linked to an increase in EBITDA over the next three years. This has been calculated by a pre-determined earnings multiple used to value the initial investment. An assessment has been made on the future increase in value of the 35% shareholding and EUR0.7m (GBP0.7m) is included as contingent consideration and disclosed in Other payables in the Consolidated Financial Position.

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out below:

 
                                                      GBP'000 
Intangible assets                                       1,560 
Property, plant and equipment                             228 
Inventories                                               851 
Trade and other receivables                             1,125 
Cash                                                      827 
Trade and other payables                                (736) 
Provisions                                              (543) 
----------------------------------------------------  ------- 
Total identifiable assets                               3,312 
Goodwill                                                4,490 
----------------------------------------------------  ------- 
Total purchase consideration                            7,802 
----------------------------------------------------  ------- 
 
Total purchase consideration satisfied by: 
Cash                                                    6,696 
Contingent consideration: Famostar                        444 
Contingent consideration: Share appreciation rights       662 
----------------------------------------------------  ------- 
Total consideration                                     7,802 
----------------------------------------------------  ------- 
 
Net cash flow arising on acquisition 
Cash consideration                                      7,140 
Less cash in subsidiary acquired                        (827) 
----------------------------------------------------  ------- 
Cash outflow on acquisition                             6,313 
----------------------------------------------------  ------- 
 

A fair value exercise has been performed; the book value of all assets and liabilities except for inventories and warranties are considered to represent fair value. For inventories and provisions for warranties reductions of EUR0.1m (GBP0.1m) and EUR0.6m (GBP0.5m) were applied to reflect slow moving stock lines and potential customer claims, respectively.

Fair value of intangible assets was assessed and determined on the basis of the technology and brand name acquired. Both the technology and brand name elements were determined using an industry typical royalty rate over a seven year period, discounted to the present day.

10 ACQUISITION OF SUBSIDIARY (continued)

The goodwill relates to the ongoing level of profitability of the business model, opportunity to sell existing Group products into the Dutch market and potential sourcing benefits for other Group companies.

Results for the year ended 31st December 2017 showed revenues of EUR7.7m, and profit before tax of EUR1.3m. For the six months to 30 June 2018, Famostar contributed EUR0.7m to Group profit before tax for the current financial year.

11 Cautionary statement

Sections of this report contain forward looking statements that are subject to risk factors including the economic and business circumstances occurring from time to time in countries and markets in which the Group operates. By their nature, forward looking statements involve a number of risks, uncertainties and future assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future and could cause actual results and outcomes to differ materially from those expressed in or implied by the forward looking statements. No assurance can be given that the forward looking statements in this preliminary announcement will be realised. Statements about the Chairman's expectations, beliefs, hopes, plans, intentions and strategies are inherently subject to change and they are based on expectations and assumptions as to future events, circumstances and other factors which are in some cases outside the Company's control. Actual results could differ materially from the Company's current expectations. It is believed that the expectations set out in these forward looking statements are reasonable but they may be affected by a wide range of variables which could cause actual results or trends to differ materially, including but not limited to, changes in risks associated with the Company's growth strategy, fluctuations in product pricing and changes in exchange and interest rates.

12 Annual report and accounts

The annual report and accounts will be sent to shareholders on 25 October 2018 and will be available, along with this announcement, on the Group's website (www.fwthorpe.co.uk) from that time. The Group will hold its AGM on 22 November 2018.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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