Thorpe Regulatory News (TFW)

Preliminary Results

for the year ended 30 June 2014 (Unaudited)

F W 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 2014.

Key points:

Restated 2013 - Finance income reduced by £0.05m due to amendments to IAS 19 "Employee Benefits" (see note 1)

· Total interim and final dividend 3.25p (2013: 3.00p)

· LED product sales currently represent in excess of 50% of total revenue

· Improved operating performance at Compact, Sugg and TRT

· Joint venture established in the United Arab Emirates

· Special dividend 1.50p (2013: nil)

For further information please contact:

Chairman's statement

Group revenue for the financial year ended 30 June 2014 reached a record £62.9m, being an increase of 13.8% compared to the previous year. Operating profit similarly rose to £11.6m, being an increase of 8.2%. Investment income, however, declined inconcert with general interest rates providing a resultant profit before tax of £12.4m, giving a pleasing growth resumption of 7.8% above last year's figure.

All companies within the group gave a much improved performance compared to the year ended 30 June 2013 and I will give more detailed individual company information later in this report.

Our results have been assisted by an improved national economic climate but this should not overshadow the work done within to offer our existing customers greater choices in market leading lighting products and systems and the instigation of new and improved marketing techniques to root-out more new customers both within our normal market areas and beyond who have not previously been fortunate enough to use F W Thorpe Plc products.

Group LED sales continue to rise being currently in excess of 50% of output and still rising. Restraints on a faster LED sales growth pattern should not be presumed to be a fault of the company. Its LED range is wide and sophisticated, however, many customers still request "traditional" fluorescent or high intensity discharge lighting solutions. Reasons may include budget restraints as LED is more expensive initially, limited forward lifespan of buildings to be lit or simply "mature" engineers sticking to what they know. LED solutions continue to become more competitive and so the technology will prevail further.

Export sales represented 13% of group turnover, an increase in value of 3% over last year, with more of the smaller group companies "dipping their toes in" for the first time. Reflecting on Thorlux again as the largest exporter, new marketing techniques have been instigated during the year to enhance export performance. Agents abroad are still very important but to a greater extent the company's own presence in a market is proving to provide higher and more dependable dividends.

Thorlux offices in the Republic of Ireland, Australia and Germany have all performed well and at the time of writing I can advise of the very recent opening of an F W Thorpe Plc group sales office in Abu Dhabi. Entitled Thorlux Lighting LLC from its inception, this office is to market all group products. The name "Thorlux" has been used due to it already being a well-known lighting brand in the area. Thorlux Lighting LLC has a UAE Local Manager, a similarly located Sales Engineer and an eminent UAE National as a local business partner.

Investment continues at a rapid pace in regard to product development, virtually all of which is now LED orientated. TRT, the group's road and tunnel lighting start-up company has only required half the financial support of the previous year and is now moving into profit. The Solite factory lease in Denton, Manchester is shortly to expire and a new brown field site in that area was purchased during the year and a new factory build commissioned. The cost is approximately £1.4m and the new factory should be finished in November 2014. The new printed circuit board (PCB) manufacturing centre at the Thorlux factory, mentioned in the interim report, has now been "proved", and is supplying PCBs complete with LEDs group-wide. This facility has been designed so that a further minimum 100% capacity is inherent within its layout.

The performance of your company for the 2013/14 year moves the Board to recommend a final dividend of 2.20p per share (2013: 2.00p) which when added to the interim paid in May 2014 gives a resultant dividend for the 2013/14 year of 3.25p (2013: 3.00p), an increase of 8.3%. Given the level of cash retained in the business, the Board also recommends a special dividend of 1.50p per share (2013: nil) to be paid with the final dividend in November.

Thorlux Lighting

The group's maker of industrial and commercial lighting systems improved monthly order input throughout the year apart from the odd "blip" month. Output also showed regular monthly improvements by and large. Profit, however, struggled to outperform the improved revenue in the same way that has normally been evident in pre-LED days. This suggests that Thorlux, whilst pleasingly increasing sales revenue from LED products, needs to improve LED profitability. Work is in hand in this area.

Whilst the new finished goods warehouse completed during the previous year created a deal of floor space earmarked for increasing production capacity, the company has, to date, not been able to take full advantage due to continued pressure on the current manufacturing facilities. It is a "chicken and egg" situation which is be addressed in the coming year.

The new LED printed circuit board cleanroom facility surmounted initial teething problems and is now supplying excellent PCBs complete with LEDs throughout the group in quantities for which it was designed. This cleanroom area has space to well over double its current capacity as time progresses.

Overseas agents are still a very important element in the company's export effort but the pursuit of greater export sales volumes in the future is most likely to be served by Thorlux employed staff in overseas territories. Current overseas offices in Dublin, Brisbane and Dusseldorf made significant progress overall. Dublin, now with three staff, managed to restrain revenue decline brought on by the Republic's economic problems and matched last year's sales value. The German office recently relocated from Munich to Dusseldorf and currently with five staff, made the step change requested in last year's final Chairman's statement increasing invoiced revenue by 92% on a sound profit basis. The Australian joint venture, with two staff soon moving to three, similarly had a successful year increasing invoiced sales some 100%+, again profitably.

At this time and as mentioned previously in this report, the group UAE joint venture based in Abu Dhabi is just commencing trading and Thorlux will, of course, have a major influence on events there.

Compact Lighting

Business at retail and display lighting company, Compact, is still a little frustrating.

Whilst having transformed itself from a "metal basher" with products made very much from sheet metal to a company with an excellent range of highly tooled track, spot and display lighting products, they have struggled to achieve the breakthrough desired.

I mentioned last year in regard to trial installations being installed at two "household" names even now only one or two small store refurbishments have emanated from these trials and not the hoped for roll-outs showing, perhaps, a continued reluctance to invest by the middle to smaller size store groups, Compact's target market.

Overall, Compact gave a much improved performance compared to last year, breaking even on revenue up 12%.

Philip Payne

Maker of high quality specification exit signage, Philip Payne maintained their stoic performance with a year seeing revenue of over £2m for the first time with a correspondingly increased profit.

An uneventful year in regards to investment has seen Paynes assimilate, to their advantage, the extra space taken on last year.

One of the newcomers to exporting, they have followed Middle Eastern export opportunities to find that recent rule changes in countries such as Qatar mean that exit signage and general emergency light fittings are now required to have a major third party certification such as the BSI kitemark or similar and be marketed through a local certified emergency lighting outlet. The Philip Payne pursuit of these requirements will, no doubt, pay off in the future as this regime will tend to exclude low cost poor quality competition.

To continue the regular format I would name a few "new homes" for Philip Payne exit signage as including The Globe Theatre, Hugo Boss in Sloane Square, Eton College, and topically the Scottish Parliament Building at Holyrood.

Sugg Lighting

My previous statement on Sugg Lighting, the group's heritage lantern maker and refurbisher, advised that top management was changed at the tail end of the 2012/2013 financial year, and that the company had entered the new year profitably. Such a turn-round was probably too good to hope for but overall during the financial year just past Sugg reduced its operating loss by 71%.

Over the last year, involvement of directors from Head Office has increased, other changes to its business have been made and a much clearer picture of operations at Sugg has emerged.

Sugg Lighting projects completed during the year include new Grosvenor LED lanterns for St Katherine's Dock and green and gold "KP" lanterns to refurbish Portobello Market.

I sincerely hope that this old and valued British heritage company will pay its way this year.

Solite Europe

Solite, manufacturer of cleanroom lighting systems has been widening its customer base since the appointment of a new Sales Director some 18 months ago. Progress has also been made during the year in introducing LED technology throughout their product portfolio.

I mentioned earlier that a new factory is being built for Solite, however, notwithstanding this; the company has entertained a year of quiet consolidation, improving products, pursuing possible new customers and preparing for a company move. The new factory location is within easy reach of most current employees and there should be little disruption in regard to staff, therefore.

Results for the year have shown an increase in revenue of some 43% and a significantly increased profit.

Portland Lighting

Portland Lighting, maker of sign lights, continues to excel and has again won the group highest profit to sales ratio cup by a good length.

Revenue improved by 28% with an LED light source content of around 60%, the highest in the group. Notable projects this year include new sign lighting roll-outs for Nationwide Building Society and Bargain Booze.

At this time I would like to take this opportunity to thank Mr Andy Truelove, who retired from the post of Managing Director in June 2013, for his work in building Portland Lighting, he being a founding director. I wish him well on his boat in Menorca.

I would, therefore, like to welcome to the Managing Director role Mr David Harrison who has previously been steering the company's sales for numerous years as Sales Director, and whom I would wish every success for the future.

TRT Lighting

The group street and road tunnel lighting systems provider, as previously reported, required a full £0.5m of group funding in the 2012/13 financial year and I reported last time that we expected funding requirements to drop imminently. I am pleased to say that in the 2013/14 year only half that amount was required, lessening by the month, and with funding requirements quite small at the time of writing.

Road tunnel lighting has been the lead product range and a number of good projects have been won in the UK, with numerous others in the quotation stage.

TRT has now gained all the necessary certifications etc. to be able to supply their street lighting lanterns countrywide and whilst there have been some successes and numerous trial installations put in place, it is noticeable that, for some reason, some authorities are very reluctant to specify an alternative to their incumbent suppliers, often from far away shores.

Meanwhile, with the success to date TRT is confident enough to be increasing its sales capability and we are backing the profitability horse this year.

Carbon Offsetting Project

The Devauden, Monmouthshire "Woodland Carbon Code" accredited carbon offsetting project continues to grow, needless to say in more ways than one! 

At the time of the last statement 43,000 trees had been planted. This has now risen to 53,898 trees, and with each year that passes our woodland locks up more tonnes of carbon.

The continuing reluctance of our customers to participate is not surprising considering continuing pressure on budgets and this fact does lend credence to the hypothesis that governments alone can force carbon reduction policies.

F W Thorpe Plc for one, however, maintains its carbon neutral stance voluntarily.

People

I must thank all our people once again for their sterling performance throughout the year, both permanent employees and the many "temps" that join us for our most busy summer period.

May I once again thank all at FWT for their diligence.

The Future

Our aim as a company is to always try and do substantially better than the last year. We have achieved this aim this year although not as successfully as some, including ourselves, would have liked.

The pace is gruelling at present as the status quo continues in requiring your company to make around twice the product variations as in times past with both LED and "traditional" products still in volume demand. How long this will continue must be a matter of conjecture but it does make life hard, and tends to soak up energies that could be more fruitfully spent looking forwards.

Bright points remain, however, with all subsidiaries moving forward and even last year's two laggards making good progress.

Two new "financial" year resolutions must be to improve returns from LED products and put more FWT sales people abroad.

We will press on with our carbon neutral work in hand.

A B Thorpe - Chairman

18 September 2014

CONSOLIDATED RESULTS (UNAUDITED)

Consolidated Income Statement

For the year ended 30 June 2014

All income derives from continuing operations.

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

All share calculations have been rebased and/or restated following the sub-division of shares (10 for 1) which became effective on 19 August 2013 and for the impact of adopting IAS 19 revised (see note 1).

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2014

All comprehensive income is attributable to the owners of the company, and derives from continuing operations.

Consolidated Balance Sheet

As at 30 June 2014

Consolidated Statement of Changes in Equity

For the year ended 30 June 2014

Consolidated Statement of Cash Flows

For the year ended 30 June 2014

Notes (unaudited)

1 Basis of preparation

F W Thorpe Plc's preliminary results for the year ended 30 June 2014 have been approved by the board of Directors on 18 September 2014 and are unaudited. The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 30 June 2014 or 30 June 2013.

The consolidated financial statements of F W Thorpe Plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC interpretations and the Companies Act 2006 applicable to Companies reporting under IFRS. The financial statements have 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 unaudited preliminary information above has been prepared on the basis of the accounting policies set out in the annual financial statements for the year ended 30 June 2013 on a consistent basis.

The company has adopted the following new and amended standards as of 1 July 2013.

Amendments to IAS 12 "Income Taxes" on Deferred Tax - Recovery of Underlying Assets" (EU endorsed 1 January 2013)

Amendments to IAS 19 "Employee Benefits" (effective 1 January 2013)

The group adopted IAS 19 (revised) "Employee Benefits" on 1 July 2013 consistent with the standard's effective date. The group has applied the standard retrospectively in accordance with the transition provisions. The impact on the group has been in the following area:

The new standard replaces the interest cost of post-employment obligations and the expected return on post-employment scheme assets with a net interest cost based on the net post-employment obligation and the discount rate, measured at the beginning of the year. This has decreased the "net interest on pension scheme assets and liabilities" in the consolidated income statement. This has had no effect on total comprehensive income as the increased charge in the income statement is offset by a credit in "actuarial gain on pension scheme" in the consolidated statement of comprehensive income. The 2013 consolidated income statement has been restated accordingly to reflect the charge of £47,000.

There has been no impact of the change in accounting policy on the consolidated balance sheet or consolidated cash flow statement as a result of reflecting the above changes

IFRS 10 "Consolidated Financial Statements" (effective 1 January 2013)

IFRS 11 "Joint Arrangements" (effective 1 January 2013)

IFRS 12 "Disclosure of Interests in Other Entities" (effective 1 January 2013)

Amendments to IFRS 10, 11 and 12 on transition guidance (effective 1 January 2013)

IFRS 13 "Fair Value Measurement" (effective 1 January 2013)

Amendment to IAS 27 "Separate Financial Statements" (effective 1 January 2013)

Amendment to IAS 28 "Investments in Associates and Joint Ventures" (effective 1 January 2013)

Amendment to IFRS 7 "Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities" (effective 1 January 2013)

Annual Improvements 2011 (effective 1 January 2013)

The adoption of these accounting standards did not have a material impact on the company's financial statements.

The accounts for the year ended 30 June 2013 have been delivered to the Registrar of Companies, and the auditors' report was 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 F W Thorpe is organised into seven operating segments based on the products and customer base in the lighting market - the largest business is Thorlux, which manufactures professional lighting systems for industrial, commercial and controls markets. The six remaining operating segments have been aggregated into the "other companies" reportable segment based upon their size, comprising the entities Compact Lighting Limited, Philip Payne Limited, Sugg Lighting Limited, Solite Europe Limited, Portland Lighting Limited, and TRT Lighting Limited.

F W 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 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 segment adjustments to operating profit consist of property rentals on premises owned by F W Thorpe Plc, adjustments to profit related to stocks held within the group that were supplied by another segment and adjustments to investment provisions relating to group companies.

(b) Geographical analysis

The group's business segments operate in three main areas, the UK, 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.

The group's revenue is generated mainly within the UK.

All assets and consequently 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:

The tax assessed for the year is lower (2013: lower) than the standard rate of corporation tax in the UK of 22.50% (2013: 23.75%). The differences are explained below:

The weighted average applicable tax rate was 18.0% (2013: 17.4%).

4 Dividends

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

The dividend per share is based on the rebased number of shares issues following the share split of 10 for 1 on 19 August 2013.

A final dividend in respect of the year ended 30 June 2014 of 2.20p per share, amounting to £2,545,000, and a special dividend of 1.50p per share amounting to £1,735,000, is to be proposed at the Annual General Meeting on 13 November 2014 and, if approved, will be paid together on 20 November 2014 to shareholders on the register on 24 October 2014. The ex-dividend date is 23 October 2014. These financial statements do not reflect these dividends payable.

5 Intangible assets

6 Property, plant and equipment

7 Short-term financial assets

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. There was an increase in the number of treasury shares held during the year following the purchase of 1,300,000 shares by the company in May 2014.

The company does not have any dilutive potential ordinary shares; hence there is no difference between basic and diluted earnings per share.

All share calculations have been rebased and/or restated following the sub-division of shares (10 for 1) which became effective on 19 August 2013 and for the impact of adopting IAS 19 revised (see note 1).

9 Cash generated from operations

10. 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.

11 Annual report and accounts

The annual report and accounts will be sent to shareholders on 17 October 2014 and will be available on the group's website (www.fwthorpe.co.uk) from that time. The group will hold its AGM on 13 November 2014.