Thorpe Regulatory News (TFW)

Preliminary Results

for the year ended 30 June 2017 (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 2017.

Key points:

· Total interim and final dividend of 4.90p (2016: 4.05p) - an increase of 21.0%

· Revenue and operating profit driven by strong performance across the Group

· Significant revenue and operating profit growth at Thorlux, supported by the success of SmartScan wireless lighting controls

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Chairman's statement

F W Thorpe Plc performed very well during the 2016/17 financial year and saw the handover of the chairman role to me from 1 July. It gives me pleasure to report on such an excellent year's trading. This is an opportune moment to thank Andrew Thorpe for his long service as Chairman and Joint Chief Executive in a period that has seen your company transition successfully through the LED revolution as well as achieve numerous other significant milestones. The whole board welcomes Andrew's continued support and guidance as he remains an executive on a part-time basis.

Craig Muncaster's financial capabilities, now supplemented by his operational experience, with him having served on the boards of all of our companies for the past seven years, make him the ideal and natural Joint Chief Executive. Craig's skills are complementary to mine and put us in a strong position to share the management of the day-to-day complexities of F W Thorpe's growing group of companies.

I joined the company as a technical apprentice in 1984. I have been a director since 1997, starting with a non-executive role on the board of one of our subsidiaries. During my career at F W Thorpe Plc I have served under four chairmen, and I hope to continue with a similar philosophy to my predecessors. That does not mean the business will remain the same - after all, we have changed so much in recent years - it just means that the core values will remain unchanged.

GROUP RESULTS

In the financial year 2016/17, our revenue exceeded the £100m milestone for the first time, reaching £105.4m, an 18.6% increase, and operating profit was £18.4m, up 13.8%.

All companies in the Group showed improved trading performances, with excellent results at Thorlux Lighting and Lightronics in the Netherlands in particular. It is also pleasing to recognise the increasing contribution to Group profits from the other subsidiary companies this year. A good proportion of revenue is now generated from overseas operations, reducing our reliance on the UK economy and helping to offset one of our business risks.

Performance as a whole for the year to 30 June 2017 allows your board to recommend a final dividend of 3.55p per share (2016: 2.85p), which gives a total for the year of 4.90p (2016: 4.05p excluding special dividend). This is an increase of 21.0%.

AROUND THE GROUP

Thorlux is our largest company, producing the most extensive range of lighting products for the widest market sectors. It is a product-led business offering solutions with key features and benefits. Thorlux never targets being the lowest capital cost supplier, instead it targets the lowest cost to the end user through the lifetime of a project after energy and maintenance costs are taken into consideration.

2016/17 was a busy year, with Thorlux generating £69.1m in revenue and increasing profits by 21.1%. Following its successful transition through the LED lighting revolution, and in its subsequent strengthened position, Thorlux has now entered the wireless lighting controls arena, having fully launched its SmartScan system. Developed in-house and on sale since September 2016, SmartScan delivered sales that grew rapidly and became a significant part of the year's success. SmartScan's features have found favour with existing and new clients. Understanding and reacting to these technological times, Thorlux continues to invest in research and development. Having launched phase 1 of SmartScan last year, Thorlux will launch phases 2 and 3 in this new financial year, with exciting and desirable new features.

The factory floor re-organisation, mentioned in the last annual report, is now complete and has been enhanced with anti-static floor protection to further protect electronic devices during the handling and assembly process. A total of 50 test and assembly stations are now operational, providing a significant boost in capacity for the foreseeable future.

The Thorlux SMT (surface mount technology) electronics assembly lines are in the process of being upgraded, which will vastly increase their speed and resultant capacity, and further investments are being made to duplicate the facility at the TRT Lighting site to add further capacity and disaster recovery capability. The board considers risks on a regular basis.

Group product development is centred around Thorlux; however, there has been noticeable cooperation and input this year from Luxintec in Spain, primarily for lens technology, and Lightronics in the Netherlands, for outdoor products. Sharing resources and intellectual property and the benefits that result is a trend that I would like to see continue.

UK, Ireland and export markets all performed well, with sales into Australasia and the UAE increasing substantially and making valuable contributions to the overall result.

Compact Lighting has traded for 26 years, servicing the retail and display markets. The company has never quite made the breakthrough that was expected of it, and after due consideration the board has decided to rebrand Compact as Thorlux during this new financial year.

Thorlux Lighting will now also address the retail and display markets, previously largely left to the efforts of Compact. The Thorlux and Compact sales forces have been merged, and Compact's latest highly tooled, high quality products have now been added to the Thorlux portfolio. The Compact Lighting factory, in Portsmouth, UK, will become a further manufacturing location for Thorlux Lighting, operated using Thorlux manufacturing IT and quality systems.

Compact customers are now ordering from Thorlux, and a renewed sales effort combining the general Thorlux range, including lighting controls, and display-lighting-specific Compact products has already found favour with certain large retail brands.

We are confident that the new arrangement will realise better potential in the future than Compact has realised alone in the past. This is the last time I shall report on Compact Lighting as an entity within our group. I would like to thank the management and staff at Compact Lighting for their continued support during this transitional process, and I hope that increased orders will keep them busy in the future.

Philip Payne products find favour with architects who wish to select products that enhance a building's appearance rather than spoil it. Philip Payne continues to be a very stable business providing consistently good returns.

In 2016/17, Payne's trading in the UK and in the UAE has been very good, with record profit levels achieved. UAE revenues have been derived from emergency lighting products that have undergone rigorous local approval and testing, and therefore this return on investment is pleasing. Further investment has now commenced to develop these same emergency lighting products to encompass SmartScan technology for wireless reporting of emergency lighting test status, which is important for compliance with local regulations.

Solite manufactures from its factory in Stockport. The company's products have been exclusively centred on the clean area market, for example pharmaceutical and microchip production areas. In recent months, Solite has started developing into new market segments, to include specialist healthcare and custodial lighting. These niche areas will fit Solite's manufacturing processes and provide increased opportunities beyond clean area projects.

Solite has had an extremely busy year and produced record results. The new factory and investments in new machinery in recent years have enabled Solite to cope with increased demands, albeit with increased lead times on occasion.

One notable success of Solite has been in Ireland, together with the Thorlux Dublin office. Solite has provided the specialist clean area knowledge for projects, whilst Thorlux has offered general lighting and controls expertise - an example of further Group collaboration going well. In 2016, we purchased an office in Dublin to further cement roots in Ireland and support ongoing success there.

We acquired Portland Lighting in 2011, anticipating that external lighting would adapt quite quickly to the reduced maintenance and energy usage of LED technology. We were right, and in recent years Portland Lighting has flourished.

Portland Lighting remains, by the measure of operating profit margin, our highest achiever. Orders plateaued in the last year, and whilst we do not expect great strides forward, we are looking for further growth abroad into mainland Europe over the next few years.

TRT Lighting manufactures exclusively LED street and tunnel lighting. Founded in 2013, it now employs 60 people and has seen rapid growth.

With such expansion has come challenges, and this year saw the purchase of a new factory, not far from TRT's existing site and that of Thorlux Lighting in Redditch, UK. TRT moved in during June and is now fully operational. TRT will be managing a new second clean room and SMT line shortly, and further investments are underway to extend the factory to provide an onsite powder-coating facility which will also act as part of a disaster recovery plan for other members of the Group. TRT's existing factory will remain unused for now and will offer further Group expansion possibilities should the need arise in the future.

TRT faces ongoing challenges from pressure in the market to reduce selling prices, and it is important that, like other Group companies, it finds features and benefits that customers will select and pay more for. Creating new product innovations is a high priority, together with tackling other growing pains. TRT's revenue increased 4.8% in 2016/17, but profits were slightly lower. The new year has started with an excellent order book.

Lightronics BV, based in the Netherlands, focuses on three market sectors: street lighting, bulkhead lighting for housing establishments, and highly vandal-resistant lighting. Orders, revenue and profits were all substantially up in the year. It has been a pleasure to welcome Lightronics to the Group and, as I mentioned to the workforce on the day that we acquired our majority stake, I see our relationship as a partnership.

We acquired Lightronics to obtain a stronger foothold in mainland Europe, via their own operations but also, importantly, to grow Thorlux sales abroad too. On this point we have faltered, and a renewed effort will commence this year. Whilst we have seen some small successes through Lightronics' routes to market, we are confident that with the right sales engineers we can find customers with similar needs to those in the UK. We have been here before several times, and we recognise that in the early days in new regions it can take some time to find the right sales people.

Our investment in Luxintec in Spain during 2016 gives us the opportunity to share product developments and the potential to grow our revenues in the Spanish market. The focus for 2016/17 has been the development of new products, the building of a new factory and lens development for the Group. Trading has not improved significantly since we invested, but we are laying the foundations for a successful future.

PERSONNEL

We were proud to host the visit of HRH the Duke of Kent to officially open our new assembly area designed, developed and completed in the large by former apprentices. It was very pleasing for our apprentices past and present to be recognised with such a prestigious occasion, an acknowledgement of our continued efforts to invest in developing our people for the future.

During the next few years, we will continue to invest in our selling presence and conduct further training to improve the operational management of the business and develop the leadership for the future.

The results for this year have been achieved by the combined efforts of all our personnel. It has been challenging at times for all of us, but I would like to express my gratitude to all staff and I will rely on their continued support as we endeavour to grow the business in the future.

OUTLOOK

This year's excellent performance will be difficult to replicate, as we will have to contend with ongoing economic uncertainty from Brexit, government instability and exchange rate variations.

We see ourselves better placed to respond to these issues nowadays, with manufacturing facilities in the UK and in mainland Europe, as well as revenue generated in a number of different countries from our own local sales offices.

We continue to review options for further acquisitions. We have the financial capacity, so it could be said that it is easy to acquire, and there are indeed frequent options for us to review. To find the right acquisition - one that meets our criteria and does not become a future liability - is not as easy as it might seem.

The general management team remains the same experienced group, and our intention is to continue on the same path of steady, sustainable growth.

M Allcock - Chairman

21 September 2017

Consolidated results (unaudited)

Consolidated income statement

For the year ended 30 June 2017

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

Consolidated statement of comprehensive income

For the year ended 30 June 2017

Consolidated financial position

As at 30 June 2017

Consolidated statement of changes in equity

For the year ended 30 June 2017

Consolidated statement of cash flows

For the year ended 30 June 2017

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 2017. 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 2017 are:

Amendment to IAS 1, "Presentation of financial statements" on the disclosure initiative" (effective 1 January 2016)

Amendment to IFRS 10 and IAS 28 on investment entities applying the consolidation exemption (effective 1 January 2016)

Amendment to IFRS 10 and IAS 28 on sale or contribution of assets (effective 1 January 2016)

Amendments to IAS 27, "Separate financial statements" on the equity method (effective 1 January 2016)

Amendments to IAS 16, "Property, plant and equipment", and IAS 41, 'Agriculture', regarding bearer plants (effective 1 January 2016)

Amendment to IAS 16, "Property, plant and equipment" and IAS 38,'Intangible assets', on depreciation and amortisation (effective 1 January 2016)

Amendments to IFRS 11 " 'Joint Arrangements' on acquisition of an interest in a joint operation" (effective 1 January 2016)

Annual improvements 2014 (effective 1 January 2016)

IFRS 14, "Regulatory deferral accounts" (effective 1 January 2016)

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 2017 or later periods. These new pronouncements are listed below:

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)

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

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

IFRIC 22, 'Foreign currency transactions and advance consideration' (effective 1 January 2018)

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

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

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

Amendments to IAS 40, 'Investment property' transfer of property (effective 1 January 2018) (subject to EU endorsement)

Annual improvements 2014-2016 cycle (effective 1 January 2018) (subject to EU endorsement)

IFRS 16 "Leases" (effective 1 January 2019)

FRIC 23,'Uncertainty over income tax' (effective 1 January 2019)

IFRS 17 "Insurance Contracts" (effective 1 January 2021)

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

The results and financial information for the year ended 30 June 2017 is unaudited but the statutory accounts for the year then ended will be delivered to the Registrar of Companies in due course, 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 nine 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 acquired Lightronics business is a material subsidiary, and is therefore disclosed separately. The seven 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, Solite Europe Limited, Portland Lighting Limited, TRT Lighting Limited, Thorlux Lighting LLC and Thorlux Australasia Pty Ltd.

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 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.

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:

The tax assessed for the year is higher (2016: higher) than the standard rate of corporation tax in the UK of 19.75% (2016: 20.00%). The differences are explained below:

The effective tax rate was 20.99% (2016: 20.10%).

The change to the UK corporation tax rate from 19% to 17% from 1 April 2020 was substantively enacted on 6 September 2016 with deferred tax balances being re-calculated to reflect this change.

4 Dividends

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

A final dividend in respect of the year ended 30 June 2017 of 3.55p per share, amounting to £4,106,000 is to be proposed at the Annual General Meeting on 23 November 2017 and, if approved, will be paid on 30 November 2017 to shareholders on the register on 27 October 2017. The ex-dividend date is 26 October 2017. These financial statements do not reflect this dividend payable.

5 Intangible assets

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

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.

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 23 October 2017 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 23 November 2017.