FW Thorpe Plc – a group of companies that design, manufacture and supply professional lighting systems – is pleased to announce its preliminary results for the year ended 30 June 2023.
Key points:
| Continuing operations | 2023 | 2022 | Exc. SchalLED/ Zemper acquisition | |
| Revenue | £176.7m | £143.7m | 23.0% increase | 10.7% increase |
| Operating profit (before acquisition adjustments)* | £29.8m | £25.8m | 15.6% increase | 7.9% increase |
| Operating profit | £27.8m | £24.7m | 12.6% increase | 8.8% increase |
| Profit before tax | £26.9m | £24.1m | 11.7% increase | 10.2% increase |
| Basic earnings per share | 18.72p | 17.16p | 9.1% increase | 9.2% increase |
* Acquisition adjustments are amortisation of acquisition related intangible assets
· Total interim and final dividend of 6.46p (2022: 6.15p) – an increase of 5.0%
· Final dividend of 4.84p (2022: 4.61p) – an increase of 5.0%
· Strong revenue growth across the Group, both organically with service levels returning to normal and from the contributions of acquisitions
· Solid operating profit growth despite inflationary cost pressures
· Expanded our presence in Germany with the addition of SchahlLED in September 2022
· Net cash generated from operating activities remained strong – £31.9m (2022: £19.7m)
· Solid start to 2023/24, with operating performance in line with the start of the prior year
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (MAR) as supplemented by The Market Abuse (Amendment) (EU Exit) Regulations (SI 2019/310) (“UK 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 |
| Singer Capital Markets – Nominated Adviser | |
| James Moat / Sam Butcher | 020 7496 3000 |
Chairman’s statement
Financial year 2022/23 was to a large extent less turbulent than the previous few years, notwithstanding some special challenges to deal with upon occasion. It has been the intention of the Board to make no further acquisitions whilst the Group builds its cash reserves and fully integrates recent acquisitions, in order to formulate more efficient Group activities whilst not losing the ability for individual companies to be autonomous and flourish.
Financial performance overall was strong, with significant organic revenue increases for most companies, primarily due to much improved material availability and the consequential fulfilment of the previous year’s order backlog. All companies wrestled with inflationary effects on material and labour costs, and some were better able than others to adjust selling prices to maintain margins.
Group companies’ service levels have returned to being good, and the order book and forecast situation is generally fine. Whilst material inflation is showing signs of slowing or even reversing, wage and salary inflation remains high.
The Annual Report and Accounts contains a more detailed appraisal of each company’s individual achievements and challenges.
Group results
Group revenue increased by 23% to £176.7m (an organic 11% increase excluding the SchalLED and Zemper acquisitions) whilst operating profit increased by 13% to £27.8m. Operating profit before acquisition adjustments, removing the impact of amortisation of intangible assets established at purchase, grew 16% to £29.8m.
Revenue and operating profits were supported by the recent acquisitions of Zemper and SchahlLED. Last year’s report included only nine months of Zemper’s figures, with nine months of SchahlLED’s figures included this year. Excluding Zemper and SchahlLED acquisition effects, for comparison’s sake, like-for-like revenue increased by 11% to £159.1m and operating profit by 9% to £26.9m.
General overview
The Group’s stand-out performer this year was Thorlux Lighting, which benefitted from its ability to deliver its order backlog, which had previously been caused by component shortages, especially microchips and electronic components.
The Dutch operations made a wonderful contribution overall, although their recent growth trajectory took a bit of a breather this year, with the companies struggling to grow revenue, whilst Lightronics also saw its margins squeezed by inflationary pressures.
Portland Lighting’s profit reduced significantly because the company lacked a typical large roll-out project for outdoor retail sign lighting and because business costs increased as the company built its product range and operations to diversify into road sign lighting – namely with the Portland Traffic division. This new division has developed well, won some successful small orders and will make a more significant contribution to 2023/24 figures.
TRT Lighting increased its profit but, at only a 3% profit-to-sales ratio, profit remains significantly below Group expectations and must improve. In recent months the TRT Board structure has been altered and strengthened, with a new operations director and new sales director, and the sales team has been refreshed. TRT is also developing some interesting technical innovations to enhance its product portfolio. These changes have started well and will result in further improved performance in the current financial year.
The Group welcomed Zemper for its first full year – a year of getting to know each other better and a year for strategy and future planning. Zemper’s facility in Spain is a credit to its founding family’s professionalism. The company is very self-sufficient, with ownership of all its intellectual property, and with its own laboratory test facilities and state-of-the-art manufacturing equipment. In the year there were several exchange visits between Group company engineers and executives, and some significant technological projects are underway to harness Zemper’s design, technical and manufacturing know-how. These projects will support the Group’s electronic operations and its aspirations for premium connected technology in the emergency lighting sector.
Zemper’s profit contribution to the Group in 2022/23 was marginally lower than forecast, with orders down in the first half year; however, various new products and marketing supported growth in the second half to recover the full year’s numbers to be in line with the prior year’s numbers. There was notable growth in both the French and Belgian markets – which, prior to Zemper’s acquisition, were largely untapped by the Group – whilst the local Spanish market was tighter than in the previous year.
SchahlLED, since joining the Group this financial year, has continued to grow its customer base, primarily in the German market, for high technology SmartScan industrial luminaires. It is a pleasure to welcome the SchahlLED team, which excels at rooting out discerning industrial customers willing to pay for high quality luminaires with the latest Thorlux energy saving and controls technology. In the year, SchahlLED added nine months of revenue to the consolidated figures of £16.9m and operating profit of £2.3m before acquisition adjustments.
The Group’s joint venture with Ratio Electric BV commenced with the opening of a UK operation close to the Group HQ in Redditch, headed by a young Thorlux design engineer. Investments in the year have already resulted in the UK operation’s own sales and marketing team, a website, preliminary manufacturing capabilities, and a new pillar standalone-style twin 22kW electric vehicle (EV) charger – the Ratio io7 – available for sale by all Group companies. The charger, developed with common components from a Thorlux outdoor luminaire, is widely recognised as an innovative and stylish product; it is suitable for many applications but is mainly targeted at workplace charging, which matches the Group’s core market of professional users. Availability of the new EV charging pillar has been limited due to production capacity restraints, but Ratio hopes to be able to better satisfy the Group’s sales teams in coming months, who are chomping at the bit to get going. In the Netherlands, at the Ratio HQ, operations have been adjusting to the fast moving EV marketplace, and investments in smart charging technology and connectivity have dented returns.
For many years some shareholders have questioned the rationale behind the Group holding large cash reserves. The Board chooses to maintain a large reserve as one never knows what is around the corner, as proven recently by the COVID lockdown. The Board remains prudent, with no plans to move away from this philosophy, and will not fund further growth unless it can do so from cash reserves. Although reserves have reduced with recent acquisitions activity and with stock control complexities, even with future earn-out provisions and commitments the Board remains confident that the current £35.0m at the year end, which remains well above its desirable minimum target, will more than suffice.
There are targets around the Group to reduce stock – of components, in particular. The easing of the recent supply shortage situation has now inevitably created an overstock in most Group companies and elsewhere throughout the extensive supply chain. Stock levels are being actively managed, in particular to ensure agility in Group businesses and to reduce possible obsolescence. Whilst stock increased last year from £32.8m to £33.4m, the number reduced from an interim high of £37.9m and will fall further.
On the capital investment front, I am pleased to report that investment at Famostar has completed, with a new substantial factory/warehouse extension (£1.9m) setting up Famostar for growth for some years to come. The extension was almost entirely funded by savings from closing external rented accommodation that had been used for storing stock. The new facility has solar PV, in keeping with the Group’s sustainability targets, the investment having an excellent payback period due to recent increases in energy costs.
At Zemper, the Group has invested in a new and dedicated injection moulding shop (£0.7m) next to the current electronics factory in Ciudad Real, moving plant from an older facility some distance away. Opened in July 2023, this new factory has already started to produce some critical parts for the Thorlux SmartScan wireless transmitter housing and has capacity to take on more if this idea of insourcing becomes attractive. The new plant has the capacity to increase Zemper’s productivity by 50%, and having local production cuts costs and CO2 emissions. The factory also has its own solar PV array, which is particularly powerful, of course, in Spain. Finally, Zemper has purchased a new electronic production line to improve its capacity.
Sustainability is one of the key pillars for the Group, one that interests many of its shareholders and will continue to be a focus. All Group companies are now certified independently to ISO 14001, an international standard for providing a systematic framework for the continuous improvement of a company’s environmental performance. Due to the Group’s renowned carbon offsetting programme on its own land in Devauden, Wales, the Group is now independently certified as carbon neutral for Scope 1 and 2 emissions (those emissions produced by companies’ own activities such as use of electricity, gas and diesel). To date, since the programme’s inception in 2009, the Group has planted an amazing 179,412 trees and has now run out of land. Therefore, in July 2023, the Group purchased a further 195 acres of land, in Longtown, Hereford, which should satisfy its carbon offsetting plans for the next decade or more.
Beyond carbon offsetting, the Group continually looks to lower its carbon footprint; this is good news for the environment but also, in most cases, lowers Group operating costs. All companies within the Group have specific KPIs that focus on general carbon reduction objectives and increasingly move towards the circularity of products, the impacts of the materials selected, and reducing waste.
Early in September 2023 the Group showed its commitment to achieving net-zero, by signing a Science Based Targets initiative (SBTi) letter of commitment and therefore commencing the process. The Group’s own emissions data has been well accounted for many years as part of its carbon offsetting programme, but net-zero takes a large step forward by also measuring the impact of the Group’s international supply chain and the impacts of the Group’s products when installed and in use at customers’ premises. The Group has been supported throughout the process by third party consultants, but nevertheless, to calculate the required emissions for all Group activities, upstream and downstream, has been an enormous task.
Now that emissions have been calculated, the SBTi commitment letter defines both the Group’s near term (2030) targets and net-zero date. By 2030 the Group has set a target, relative to the baseline year 2020/21, to reduce Scope 1 and 2 emissions by 42%, and Scope 3 emissions by 51.6% per £m revenue. This will be done in a variety of ways but, in particular, by decarbonisation of Group resources and energy supplies – for example reducing gas use and switching to greener sources such as solar PV supplied electricity, using electric vehicles and making Group products even more efficient – together with increasing the use of SmartScan energy saving technology. The ultimate objective is to achieve net-zero, and the Group’s target date is 2040 (ten years ahead of the UK Government’s commitment); by this date the Group needs to have reduced its emissions by 90% (allowing for offsetting the remaining 10%). Watch this space.
To finish on a high, Thorlux is very proud to have successfully illuminated the famous Big Ben – or, more correctly, the Elizabeth Tower – in the City of London. Big Ben is one of the most photographed and most iconic buildings in the world. Thorlux developed special products between 2016 and 2022 which provide colour-tuneable illumination of all four clock faces and the balconies above, a new Ayrton Light (a special lighthouse style lamp used to indicate when Parliament is sitting), illumination of the clock mechanism, the bells, including floodlighting the Big Ben bell itself, all internal rooms, and the 340 steps, and all emergency lighting. SmartScan features heavily in the controls for ancillary areas. The project has been kept secret until now, even during the 2023 New Year celebrations. This year’s Annual Report and Accounts is therefore adorned with some iconic Thorlux installation photographs.
Personnel
I would like to thank all Group employees for their dedication and commitment throughout the financial year. I would also like to thank, again, David Taylor and Tony Cooper, who, as retiring directors, have spent a total of over 65 years serving the Group; I wish them a long and happy retirement.
Dividend
Performance as a whole for the year to 30 June 2023 allows the Board to recommend an increased final dividend of 4.84p per share (2022: 4.61p), which gives a total for the year of 6.46p (2022: 6.15p excluding special dividend).
Outlook
All Group companies are forecasting some sales growth and all are charged with keeping costs under control and a close eye on sales margins. The Board would like to see further improvements in profitability – especially at the lower performing companies in the Group, which need to step up and do their bit. As the Group becomes larger, costs of managing non-value-added activities become larger too; this means Group companies need to work harder to achieve a good return on sales.
The Group nowadays has excellent resilience to changing conditions, having a firm footprint in numerous geographical territories and across many market sectors.
As a whole, the outlook from the sales teams is positive. At the start of this new financial year, orders are slightly lower than in the same time period last year, and there is some evidence of projects slowing. Costs are under control and some margin improvements have been made, which will provide an improved return on sales. Revenues, however, are expected to see slower growth than in the recent few years.
Mike Allcock
Chairman and Joint Chief Executive
12 October 2023
Consolidated Results
Consolidated Income Statement
For the year ended 30 June 2023
| Notes | 2023£’000 | 2022£’000 | |
| Continuing operations | |||
| Revenue | 2 | 176,749 | 143,715 |
| Cost of sales | (98,891) | (80,440) | |
| Gross profit | 77,858 | 63,275 | |
| Distribution costs | (19,214) | (15,501) | |
| Administrative expenses | (31,292) | (23,482) | |
| Other operating income | 480 | 423 | |
| Operating profit | 27,832 | 24,715 | |
| Finance income | 716 | 527 | |
| Finance expense | (1,094) | (1,367) | |
| Share of (loss)/profit of joint ventures | (520) | 228 | |
| Profit before income tax | 26,934 | 24,103 | |
| Income tax expense | 3 | (5,000) | (4,030) |
| Profit for the year | 21,934 | 20,073 |
Earnings per share from continuing operations attributable to the equity holders of the Company during the year (expressed in pence per share).
| Basic and diluted earnings per share | Notes | 2023pence | 2022pence |
| – Basic | 8 | 18.72 | 17.16 |
| – Diluted | 8 | 18.70 | 17.13 |