REG - Thorpe(F.W.) PLC - Final Results <Origin Href="QuoteRef">TFW.L</Origin> - Part 1

FW ThorpeAnnouncement

17/09/2015 07:00

RNS Number : 3057Z
Thorpe(F.W.) PLC
17 September 2015
Preliminary Results
for the year ended 30 June 2015 (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 2015.
Key points:
Continuing operations
2015
Restated*
2014
Excluding Lightronics acquisition
Revenue
73.5m
61.4m
19.9% increase
14.5% increase
Operating profit
13.7m
11.8m
16.7% increase
12.6% increase
Profit before tax
14.4m
12.6m
14.7% increase
10.8% increase
Basic earnings per share - continuing
10.12p
8.83p
14.6% increase
-
Basic earnings per share - total
9.90p
8.72p
13.5% increase
-
*Restated 2014 - Sugg Lighting figures removed and included in discontinued operations
 Total interim and final dividend of 3.65p (2014: 3.25p)
 Thorlux achieves new highs; continued investment in products and manufacturing
 Lightronics acquisition in April - first few months of trading are ahead of expectation 
 Compact returns to profit, TRT achieves profitability, full year of costs for UAE operation
For further information please contact: 
F W Thorpe Plc
Andrew Thorpe - Chairman
01527 583200
Craig Muncaster - Group Financial Director
01527 583200
N+1 Singer -Nominated Adviser
Richard Lindley
020 7496 3000

Chairman's statement
In the financial year to June 30 2015 Group revenue reached a new peak of 73.5m, an increase of 19.9%. Operating profit similarly increased to 13.7m, a 16.7% uplift compared to the 2013/2014 financial year. Regrettably investment income again declined reflecting the continued fall in general bank interest rates. Resultant profit before tax, however, pleased at a figure of 14.4m, a 14.7% increase.
Virtually all companies within the Group improved their performance not only in regard to revenue but also in profit terms. More detail will be given later in this report but special mention must be given to TRT Lighting, producing road tunnel and street lighting which has risen from commencement of trading on 1July 2013 to a profitable 4m revenue organisation in a little over two years.
Generally, our market has again been buoyed by an improving economy but one must be respectful in the knowledge that our Government is introducing further spending cuts and as this "potential customer" still spends some 43% of GDP some effect will be felt somewhere. Alongside our own situation we also have, as we speak, a faltering China, now the second largest economy in the world, an uncertain US and a Europe where many countries are teetering again on the brink of recession. Britain is not an island!
The percentage of LED products produced by the Group has increased marginally since my last report probably because of the same reasons cited then. This percentage varies widely from subsidiary to subsidiary with the highest LED performer producing some 100% of products in LED format to the lowest at 38%. There are, therefore, a plethora of efficiencies to be made as the demise of "traditional" lighting technologies draws nearer. 
Including Lightronics, Group sales overseas have increased by 64% compared to the previous financial year. On a like for like basis export revenues are up 21% with, again, Thorlux being the largest contributor. More details will be given in the Thorlux section but only limited progress has been made by other subsidiaries despite good intentions. More focus will be given in the coming year as if we are not there, then we cannot sell.
Our Group UAE joint venture is now established with an office in Abu Dhabi, a General Manager and two Sales Engineers. Only limited sales progress has been made so far but the gaining of numerous specifications for the use of our lighting in future projects bodes well for the future.
Generally 2014/2015 has been an eventful financial year with the disposal of Sugg Lighting, the doubling of Group LED circuit board manufacturing capacity at Thorlux and Solite Europe moving into its 1.4m new factory in Stockport, Manchester. These events have already been mentioned in my interim report but further, your company made its largest single investment to date purchasing Lightronics BV, a highly successful Netherlands lighting company, the purchase of which will amount to some 14m over time.
To make these things happen companies such as F W Thorpe Plc need good people and your company has, for decades, taken on and trained a number of apprentices every year and many of the firm's ex-apprentices are now in important positions throughout the Group right up to Managing Director level. In this regard, I would like to commend our current Government for considering a training levy designed, hopefully, so that those who train get recompensed and those who don't, pay anyway.
Group performance for the financial year to 30 June 2015 allows your Board to recommend a 2.55p per share final dividend (2.20p: 2013/14) which together with the interim dividend paid in April 2015 gives a total dividend for the year of 3.65p (3.25p: 2013/14). This is an increase of 12.3%.
Finally and on a sad note the year saw the passing of Ernest George Thorpe, aged 97 years, ex-Chairman and 55 years servant of your company; an obituary for "EGT" or "Mister Ernest" as he was known can be read in the annual report. 
Thorlux Lighting
Commercial and industrial lighting systems manufacturer Thorlux performed very well throughout the year despite the continuing but necessary mix of new and "old" technology products to be made, and the start of a major factory layout overhaul. The latter has been made possible by the new finished goods warehouse built in 2013 and more recently the 0.3m purchase and installation of seven vertical storage units allowing a high proportion of component stock to be stored vertically. Having cleared as much floor space as practicable the re-laying out has now begun in earnest. 
Apart from the purchase of these vertical storage units, investment in buildings, plant and machinery this year has been limited to the installation of a second 0.5m PCB manufacturing line and the purchase of three new press-brake sheet metal bending machines at a cost of some 0.3m. Much work has been completed, however, on preparation for the major factory re-laying out as mentioned above. 
Home (UK) performance was pleasing throughout the year as was export, which although increasing by 16% over the previous year was patchy in nature. Some agents abroad improved their business with us but others reduced. So often with agents abroad, the leaving or starting of just one person can swing their performance one way or the other. This situation reinforces your company's continuing efforts to put its own offices in place overseas. 
The Australian joint venture has disappointed this year and a review of strategy will take place. The UAE office, as mentioned in the Group report, is gaining specifications for future business. The Dublin office of now three people, has greatly improved its level of business over last year as has the German office. The German office maintained its level of five people and discussions are taking place as to how we can not only increase our coverage in Germany but also use our German expertise, gained so far, to extend a reach into other German speaking countries in the area.
Compact Lighting
Having explained our frustration with Compact Lighting, the Group maker of display and retail lighting systems, last year, I am pleased to say that Compact has displayed a change of fortunes in the second half of the financial year. The final results show an increase in sales of 25% over the previous year with a 5% profit to sales ratio.
The metrics show a healthier mix of new and existing customers with the total being higher in number. Hopefully this is the result of Compact now having an extensive range of tooled display lighting products. Compact's improved product range and a new strategic sales direction put in place some three years ago seems to be demonstrating positive momentum.
We are confident that Compact will build on this new found strength. 
Philip Payne
Specification exit signage manufacturer Philip Payne produced a very pleasing year's result with record input, output and profit. This is a commendable achievement considering the narrowness of this market.
The year has not seen any large expenditure on buildings, plant and machinery but has been one of quiet consolidation and the servicing of a growing order book. Payne has been one subsidiary notably working to increase exports in the Middle East via our Group UAE operation where it has seen much interest in its products.
This interest has come at a cost, however, due to third party certifications required for emergency lighting products to be used in many Middle East countries. Payne's, with its limited resource has managed to gain numerous of these required certifications absorbing many man hours' worth of work and some 0.1m. 
Pleasing to say, though, that orders about to be received, partly due to this work, should recoup this investment and hopefully a major part of the sales platform has been laid for further success in that area.
Not wishing to break with tradition: naming one or two of Philip Payne's projects throughout the year one can include exit sign installations at Claridges, Winchester Cathedral and the Royal Albert Hall, amongst others. 
Solite Europe
Solite, the Group's manufacturer of high IP clean room lighting moved to its new 1.4m factory in Stockport, Manchester during the year and despite the disruption, staff at Solite managed the move with little or no customer disruption. The Group's thanks go out to them for their much appreciated efforts.
The new factory allows Solite to look to the future as the old 1960's leased premises were not ideal and had become too small for their purposes. 
Despite the interruption Solite managed a 26% increase in revenue with a corresponding increase in profit of some 40%.
Portland Lighting
Lighting for signs maker Portland Lighting has maintained its position within the Group for the highest profit to sales ratio, again beating Thorlux to the trophy.
That said and not forgetting the very pleasing growth of the company since it joined the Group in 2012, Portland has taken a rest period with revenue virtually on a par with the last financial year. 
It has been recognised as with some other subsidiaries that a certain level of sales capability can only produce so much in sales and so Portland has invested in a new full time Sales Engineer who should improve market penetration. 
Investment in upgrading products, bringing in new LED lines has continued and, to note, the firm now has some solar powered test systems out in the field illuminating billboards.
TRT Lighting
Street lighting and road tunnel lighting specialists TRT, which stands for Thorlux Road and Tunnel incidentally, has as mentioned earlier, quickly grown to a 4m revenue plus profitable entity. 
Success selling British made streetlights to numerous local authorities has not come easily but the swift uplift in demand has brought its own problems of sourcing sufficient components. Further tooling investments are currently being made to ease these problems and allow further growth in this area.
Road tunnel projects have also met some success, although by the very nature of these projects their revenue input tends to be "lumpy". Road tunnel lighting is mainly now in LED format and whilst there are a number of competitors in the field the sheer technology involved in luminaire and system designs of this nature keeps newcomers to the market at a minimum. 
Finally, in regard to TRT, it is with great pleasure, at this time, that I can congratulate Mr Ross Evans, Sales Director and General Manager of TRT on his promotion to Managing Director.
Lightronics BV
During the year your company purchased Lightronics BV in an arrangement whereby F W Thorpe Plc purchased the shareholding held by a Netherlands private equity company. The remaining shareholding is partly held by people already involved in high level management within the business, each being instrumental in building Lightronics to the company it is today.
The product range is mainly outdoor and pole top luminaires with a lesser range of industrial products. Whilst styles differ in different countries there is a definite agreement that transference of products should add revenue in each direction. 
F W Thorpe Plc 2014/2015 financial figures includes just three months contribution from Lightronics.
All parties involved look forward to the future.
Carbon Offsetting Project
We have now planted 70,324 trees in Monmouthshire including 10,000 ash trees. Regrettably, 3,000 of these have had to be destroyed due to Chalara Fraxinea (ash die-back) and a watch is being kept on the remainder.
The top management at Lightronics has expressed great interest in the project and see it as an excellent selling aid for them. It seems that carbon offsetting has more customer traction in the Netherlands than in the UK currently.
This financial year will see a rest in planting as we are ahead of schedule in our carbon offsetting due to the vagaries of the tree planting grant system.
People
We have many stalwarts at F W Thorpe Plc who have supported the company through thick and thin. A number have been with us well over 40 years, numerous over 25 years: 15 years being very relative "newcomers". To all of them I would like to give special thanks this year for their continuing efforts. Notwithstanding this, however I would like to thank all those others both permanent and "temp" who have helped make this year a most satisfactory one.
The Future
Britain is, of course, an island but we must be cognisant of the potential macro-economic headwinds.
The future is still definitely LED especially with a possible upstart contender in OLEDs or Organic LEDs apparently dropping away: it seems due to technical problems of realising sufficient efficiency in translating power consumed into useful light. 
Traditional light sources remain in demand and it can be reported that your company has been surprised at the level of such products requested during this summer period. 
The problem this causes in the number of variants required to be manufactured therefore remains and, I think, this is a problem that will be with us for longer than we assumed and for some years to come.
On the bright side, however, F W Thorpe Plc has numerous new and innovative luminaires and systems which will be brought to the market in coming months. Further, of the two laggards mentioned last year, one has gone and the other appears to be catching up! 
This year your company has improved margins on LED products, mentioned as one of our aims last year and we are now almost on a continual basis looking to expand our sales platform.
We will, as always, "try and do better than last year".
Consolidated results (unaudited)
Consolidated income statement
For the year ended 30 June 2015
Notes
2015
'000
Restated
2014
'000
Continuing operations
Revenue
2
73,544
61,352
Cost of sales
(41,314)
(34,321)
Gross profit
32,230
27,031
Distribution costs
(6,181)
(5,052)
Administrative expenses
(12,331)
(10,227)
Operating profit
2
13,718
11,752
Finance income
727
763
Share of (loss)/profit of joint ventures
(50)
37
Profit before income tax
14,395
12,552
Income tax expense
3
(2,691)
(2,233)
Profit for the year from continuing operations
11,704
10,319
Loss for the year from discontinued operations*
(253)
(130)
Profit for the year
11,451
10,189
The restatement for 2014 is to take account of the discontinued operations of Sugg Lighting Limited.
* Loss for the year from discontinued operations in 2015 is made up of the trading loss, loss on disposal of assets and profit on the sale of building.
Earnings per share from continuing operations attributable to the equity holders of the company during the year (expressedin pence per share).
Basic and diluted earnings per share
Notes
2015
pence
Restated
2014
pence
- Basic
Continuing operations
8
10.12
8.83
- Diluted
Continuing operations
8
10.11
8.83
- Basic
Discontinued operations
8
(0.22)
(0.11)
- Diluted
Discontinued operations
8
(0.22)
(0.11)
- Basic
Total
8
9.90
8.72
- Diluted
Total
8
9.89
8.72
Consolidated statement of comprehensive income
For the year ended 30 June 2015
Notes
2015
'000

2014
'000
Profit for the year:
11,451
10,189
Other comprehensive income/(expenses)
Items that may be reclassified to profit or loss
Revaluation of available-for-sale financial assets
- Arising in year
(152)
276
- Reclassified in year
-
-
Exchange differences on translation of foreign operations
- Arising in year
(21)
(2)
- Reclassified in year
-
-
Taxation
30
72
(143)
346
Items that will not be reclassified to profit or loss
Actuarial (loss)/gain on pension scheme
(247)
624
Movement on unrecognised pension scheme surplus
18
(1,216)
(229)
(592)
Other comprehensive expense for the year, net of tax
(372)
(246)
Total comprehensive income for the year attributable to equity shareholders
11,079
9,943
Consolidated financial position
As at 30 June 2015
Group
Notes
2015
'000
2014
'000
Assets
Non-current assets
Property, plant and equipment
6
13,834
13,088
Intangible assets
5
14,349
6,722
Investment property
2,171
2,135
Loans and receivables
4,760
1,340
Investment in joint ventures
-
57
Available-for-sale financial assets
3,018
3,441
Deferred tax assets
17
36
38,149
26,819
Current assets
Inventories
17,762
14,404
Trade and other receivables
19,698
14,882
Other financial assets at fair value through profit or loss
389
388
Short-term financial assets
7
9,358
15,638
Cash and cash equivalents
19,176
17,911
Total current assets
66,383
63,223
Total assets
104,532
90,042
Liabilities
Current liabilities
Trade and other payables
(14,656)
(11,012)
Current income tax liabilities
(2,051)
(718)
Total current liabilities
(16,707)
(11,730)
Net current assets
49,676
51,493
Non-current liabilities
Retirement benefit deficit
-
-
Other payables
10
(3,838)
-
Provisions for liabilities and charges
(102)
(102)
Deferred income tax liabilities
(1,021)
(923)
Total liabilities
(21,668)
(12,755)
Net assets
82,864
77,287
Equity
Share capital
1,189
1,189
Share premium account
656
656
Capital redemption reserve
137
137
Retained earnings
80,882
75,305
Total equity
82,864
77,287
Consolidated statement ofchanges in equity
For the year ended 30 June 2015
Notes
Share
capital
'000
Share
premium
account
'000
Capital
redemption
reserve
'000
Retained
earnings
'000
Total
equity
'000
Balance at 1 July 2013
1,189
656
137
70,558
72,540
Comprehensive income
Profit for the year to 30 June 2014
-
-
-
10,189
10,189
Actuarial gain on pension scheme
-
-
-
624
624
Movement on unrecognised pension scheme surplus
-
-
-
(1,216)
(1,216)
Revaluation of available-for-sale financial assets
-
-
-
276
276
Movement on associated deferred tax
-
-
-
(47)
(47)
Impact of deferred tax rate change
-
-
-
119
119
Exchange rate movement on joint venture
-
-
-
(2)
(2)
Total comprehensive income
-
-
-
9,943
9,943
Transactions with owners
Dividends paid to shareholders
4
-
-
-
(3,568)
(3,568)
Purchase of shares
-
-
-
(1,628)
(1,628)
Total transactions with owners
-
-
-
(5,196)
(5,196)
Balance at 30 June 2014
1,189
656
137
75,305
77,287
Comprehensive income
Profit for the year to 30 June 2015
-
-
-
11,451
11,451
Actuarial loss on pension scheme
-
-
-
(247)
(247)
Movement on unrecognised pension scheme surplus
-
-
-
18
18
Revaluation of available-for-sale financial assets
-
-
-
(152)
(152)
Movement on associated deferred tax
-
-
-
30
30
Exchange differences on translation of foreign operations
-
-
-
(21)
(21)
Total comprehensive income
-
-
-
11,079
11,079
Transactions with owners
Dividends paid to shareholders
4
-
-
-
(5,552)
(5,552)
Purchase of shares
-
-
-
-
-
Share based payment charge
-
-
-
50
50
Total transactions with owners
-
-
-
(5,502)
(5,502)
Balance at 30 June 2015
1,189
656
137
80,882
82,864
Consolidated statement of cashflows
For the year ended 30 June 2015
Group
Notes
2015
'000
2014
'000
Cash flows from operating activities
Cash generated from operations
9
13,315
10,762
Tax paid
(1,280)
(2,009)
Net cash generated from operating activities
12,035
8,753
Cash flows from investing activities
Purchases of property, plant and equipment
(3,271)
(2,087)
Proceeds from sale of property, plant and equipment
167
153
Purchase of intangibles
(1,621)
(1,473)
Purchase of subsidiary (net of cash acquired)
10
(6,392)
(390)
Disposal of subsidiary
(561)
-
Purchase of investment property
(36)
(33)
Purchase of available-for-sale financial assets
(100)
(707)
Sale of available-for-sale financial assets
371
-
Property rental and similar income
154
157
Dividend income
149
169
Net sale of deposits
6,280
4,510
Interest received
301
365
Receipt of loan notes
1,261
450
Net cash (used in)/generated from investing activities
(3,298)
1,114
Cash flows from financing activities
Repayment of borrowings
10
(1,920)
-
Dividends paid to company's shareholders
4
(5,552)
(3,568)
Purchase of own shares
-
(1,628)
Net cash used in financing activities
(7,472)
(5,196)
Net increase in cash in the year
1,265
4,671
Cash and cash equivalents at beginning of year
17,911
13,240
Cash and cash equivalents at end of year
19,176
17,911
Notes (unaudited)
1 Basis of preparation
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 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.
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 2015 or later periods. These new pronouncements are listed below:
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)
IFRS 15 "Revenue from contracts with customers" (effective 1 January 2017)
IFRS 9 "Financial Instruments" (effective 1 January 2018)
The directors are currently evaluating the impact of the adoption of these standards, amendments and interpretations in future periods, although it is anticipated that the impact will be immaterial.
The company has adopted the following new and amended standards as of 1 July 2014.
Amendments to IAS 32 "Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities" (effective 1 January 2014) Amendments to IAS 36 "Impairment of asset' on recoverable amount disclosures" (effective 1 January 2014)
Amendments to IAS 39 "Financial instruments: Recognition and measurement" (effective 1 January 2014)
Amendments to IFRS 10 "Consolidated financial statements", IFRS 12 and IAS 27 for investment entities (effective date 1 January 2014)
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 2014 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.
Where applicable, the 2014 comparative results have been restated to remove the effect of discontinued operations.
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 eight 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 newly acquired Lightronics business will be a material subsidiary, and is therefore disclosed separately. 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, Solite Europe Limited, Portland Lighting Limited, TRT Lighting Limited and Thorlux LLC.
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.
Thorlux
'000
Lightronics
'000
Other
companies
'000
Inter-
segment
adjustments
'000
Total
continuing
operations
'000
Year to 30 June 2015
Revenue to external customers
54,192
3,275
16,077
-
73,544
Revenue to other group companies
2,329
-
1,781
(4,110)
-
Total revenue
56,521
3,275
17,858
(4,110)
73,544
Operating profit
11,267
481
1,944
26
13,718
Net finance income
727
Share of loss of joint venture
(50)
Profit before income tax
14,395
Year to 30 June 2014 (restated)
Revenue to external customers
49,657
-
11,695
-
61,352
Revenue to other group companies
650
-
1,146
(1,796)
-
Total revenue
50,307
-
12,841
(1,796)
61,352
Operating profit
10,593
-
961
198
11,752
Net finance income (restated)
763
Share of profit of joint venture
37
Profit before income tax
12,552
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.
2015
'000
Restated
2014
'000
UK
61,317
53,769
Europe
10,138
5,319
Other countries
2,089
2,264
73,544
61,352
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:
2015
'000
Restated
2014
'000
Current tax
Current tax on profits for the year
2,807
2,162
Adjustments in respect of prior years
(184)
25
Total current tax
2,623
2,187
Deferred tax
Origination and reversal of temporary differences
68
46
Total deferred tax
68
46
Income tax expense
2,691
2,233
The tax assessed for the year is lower (2014: lower) than the standard rate of corporation tax in the UK of 20.75% (2014:22.5%). The differences are explained below:
2015
'000
Restated
2014
'000
Profit before income tax
14,395
12,552
Profit on ordinary activities multiplied by the standard rate in the UK of 20.75% (2014: 22.5%)
2,987
2,824
Effects of:
Expenses not deductible for tax purposes
72
12
Accelerated tax allowances and other timing differences
(181)
(445)
Adjustments in respect of prior years
(184)
25
Foreign profit taxed at higher rate
21
-
Profits taxed at small companies rate
-
(2)
Other
(24)
(181)
Tax charge
2,691
2,233
The weighted average applicable tax rate was 18.7% (2014: 17.8%).
The standard rate of corporation tax in the UK changed from 21.0% to 20.0% with effect from 1 April 2015. Accordingly the Group's profit for this accounting year is taxed at an effective rate of 20.75%. Changes to the UK corporation tax rates were announced in the Chancellor's Budget on 8 July 2015. These include reductions to the main rate to reduce the rate to 19.0% from 1 April 2017 and to 18.0% from 1 April 2020.
4 Dividends
Dividends paid during the year are outlined in the tables below:
Dividends paid (pence per share)
2015
2014
Final dividend
2.20
2.00
Special dividend
1.50
-
Interim dividend
1.10
1.05
Total
4.80
3.05
A final dividend in respect of the year ended 30 June 2015 of 2.55p per share, amounting to 2,950,000 is to be proposed at the Annual General Meeting on 12 November 2015 and, if approved, will be paid together on 19 November 2015 to shareholders on the register on 23 October 2015. The ex-dividend date is 22 October 2015. These financial statements do not reflect this dividend payable.
Dividends proposed (pence per share)
2015
2014
Final dividend
2.55
2.20
Special dividend
-
1.50
Dividends paid
2015
'000
2014
'000
Final dividend
2,545
2,340
Special dividend
1,735
-
Interim dividend
1,272
1,228
Total
5,552
3,568
Dividends proposed
2015
'000
2014
'000
Final dividend
2,950
2,545
Special dividend
-
1,735
5 Intangible assets
Group 2015
Goodwill
'000
Development
costs
'000
Technology
'000
Brand name
'000
Software
'000
Patents
'000
Fishing rights
'000
Total
'000
Cost
At 1 July 2014
3,503
4,961
311
174
907
150
182
10,188
Additions
-
1,542
-
-
60
-
-
1,602
Acquisition of a subsidiary (note 10)
5,560
122
1,272
483
72
-
-
7,509
Write-offs
-
(828)
-
-
-
-
(828)
At 30 June 2015
9,063
5,797
1,583
657
1,039
150
182
18,471
Accumulated amortisation
At 1 July 2014
600
1,491
311
174
800
90
-
3,466
Charge for the year
-
1,284
45
24
101
30
-
1,484
Impairment
-
-
-
-
-
-
-
-
Write-offs
-
(828)
-
-
-
-
-
(828)
At 30 June 2015
600
1,947
356
198
901
120
-
4,122
Net book amount
At 30 June 2015
8,463
3,850
1,227
459
138
30
182
14,349
Write-offs relate to development assets where no further economic benefits will be obtained.
Group 2014
Goodwill
'000
Development
costs
'000
Technology
'000
Brand name
'000
Software
'000
Patents
'000
Fishing rights
'000
Total
'000
Cost
At 1 July 2013
3,503
4,364
311
174
860
150
182
9,544
Additions
-
1,428
-
-
47
-
-
1,475
Write-offs
-
(831)
-
-
-
-
-
(831)
At 30 June 2014
3,503
4,961
311
174
907
150
182
10,188
Accumulated amortisation
At 1 July 2013
600
1,282
124
116
676
60
-
2,858
Charge for the year
-
1,040
62
58
124
30
-
1,314
Impairment
-
-
125
-
-
-
-
125
Write-offs
-
(831)
-
-
-
-
-
(831)
At 30 June 2014
600
1,491
311
174
800
90
-
3,466
Net book amount
At 30 June 2014
2,903
3,470
-
-
107
60
182
6,722
6 Property, plant and equipment
Group
Freehold land
and buildings
'000
Plant and
equipment
'000
Total
'000
Cost
At 1 July 2014
10,910
15,979
26,889
Additions
1,438
1,760
3,198
Acquisition of a subsidiary (note 10)
-
100
100
Disposals
(1,269)
(1,254)
(2,523)
At 30 June 2015
11,079
16,585
27,664
Accumulated depreciation
At 1 July 2014
2,306
11,495
13,801
Charge for the year
203
1,097
1,300
Disposals
(151)
(1,120)
(1,271)
At 30 June 2015
2,358
11,472
13,830
Net book amount
At 30 June 2015
8,721
5,113
13,834
Group
Freehold land
and buildings
'000
Plant and
equipment
'000
Total
'000
Cost
At 1 July 2013
10,491
14,711
25,202
Additions
419
1,636
2,055
Disposals
-
(368)
(368)
At 30 June 2014
10,910
15,979
26,889
Accumulated depreciation
At 1 July 2013
2,113
10,709
12,822
Charge for the year
193
1,076
1,269
Disposals
-
(290)
(290)
At 30 June 2014
2,306
11,495
13,801
Net book amount
At 30 June 2014
8,604
4,484
13,088
7 Short-term financial assets
2015
'000
2014
'000
Beginning of year
15,638
20,148
Net disposals
(6,280)
(4,510)
End of year
9,358
15,638
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 from continuing operations
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.
Continuing operations
Basic
2015
Restated
2014
Weighted average number of ordinary shares in issue
115,675,590
116,792,165
Profit attributable to equity holders of the company ('000)
11,704
10,319
Basic earnings per share (pence per share) continuing operations
10.12
8.83
Basic earnings per share (pence per share) discontinued operations
(0.22)
(0.11)
Basic earnings per share (pence per share) total
9.90
8.72
Continuing operations
Diluted
2015
Restated
2014
Weighted average number of ordinary shares in issue (fully diluted)
115,706,334
116,792,165
Profit attributable to equity holders of the company ('000)
11,704
10,319
Diluted earnings per share (pence per share) continuing operations
10.11
8.83
Diluted earnings per share (pence per share) discontinued operations
(0.22)
(0.11)
Diluted earnings per share (pence per share) total
9.89
8.72
9 Cash generated from operations
Group
Cash generated from continuing operations
2015
'000
Restated
2014
'000
Profit before income tax
14,395
12,552
Depreciation charge
1,288
1,255
Amortisation/impairment of intangibles
1,484
1,439
Profit on disposal of property, plant and equipment
(104)
(70)
Finance income
(727)
(763)
Retirement benefit contributions in excess of current and past service charge
(229)
(403)
Share of loss/(profit) from joint venture
50
(37)
Adjustment for share based payments
76
-
Effects of exchange rate movements
(28)
-
Changes in working capital
- Inventories
(1,707)
(2,481)
- Trade and other receivables
(3,659)
(2,640)
- Trade and other payables
2,215
1,881
Cash generated from continuing operations
13,054
10,733
The cash generation from discontinued operations is as follows:
Cash generated from discontinued operations
2015
Restated
2014
Profit before income tax
(233)
(129)
Depreciation charge
12
14
Profit on disposal of property, plant and equipment
-
(5)
Finance income - net
7
10
Changes in working capital
- Inventories
84
19
- Trade and other receivables
189
(143)
- Trade and other payables
202
263
Cash generated from discontinued operations
261
29
Total cash generated from operations
2015
'000
2014
'000
Continuing operations
13,054
10,733
Discontinued operations
261
29
Total cash generated from operations
13,315
10,762
10 Acquisition of subsidiary
On 1 April 2015 the Group acquired 100% of the share capital of Lightronics Participaties BV with share appreciation rights granted for 35% of the share capital with a fixed commitment to be determined between the third and sixth year anniversaries of the acquisition 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. 3,838,000 is included as contingent consideration and disclosed in Other payables in the Consolidated Financial Position. This includes 3,000,000 based on the initial valuation and 838,000 based on the estimated increase in future value.
As part of the transaction, the 35% held by existing shareholders and management has been partially funded by F W Thorpe by the issue of a loan. At the date of the financial statements, the loan notes balance was 3,200,000 equating
to 2,267,000 at the end of year exchange rate. The loan notes are repayable on or before the sixth anniversary (1 April 2021) and attract an interest rate of 4%.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out below.
'000
Cash
386
Intangible assets
1,949
Property, plant and equipment
100
Inventories
1,855
Trade and other receivables
1,439
Borrowings
(1,920)
Trade and other payables
(1,747)
Total identifiable assets
2,062
Goodwill
5,560
Total purchase consideration
7,622
Total purchase consideration satisfied by:

'000
Cash
6,778
Contingent consideration
844
Total consideration
7,622
Net cash outflow arising on acquisition

'000
Cash consideration
6,778
Less cash in subsidiary acquired
(386)
Cash outflow on acquisition
6,392
A fair value exercise has been performed on the assets and liabilities, the results were that property, plant and equipment, trade and other receivables and trade and other payables were assessed and book value was considered fair value. Inventories were also assessed and a reduction of 262,000 applied to reflect slow moving stock lines.
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 and five year period respectively, discounted to the present day.
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.
The Borrowings of 1,920,000 were fully repaid on 1 April 2015 post-acquisition.
Lightronics Participaties BV contributed 3,275,000 in revenue, and 481,000 to the group's operating profit for the period between the date of acquisition and the balance sheet date. On an annualised basis based on the 2014/15 accounting period, revenue would have been 10,900,000 and an operating profit of 1,200,000.
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 16 October 2015 and will be available on the Group's website (www.fwthorpe.co.uk) from that time. The group will hold its AGM on 12 November 2015.

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