Annual Report and Accounts
2017
Annual Report and Accounts
For the year ended 30 June 2017
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Who We Are
We specialise in designing
and manufacturing
professional lighting systems.
We currently employ over
600 people and although each
company works autonomously,
our skills and markets are
complementary.
Investment Case
•
A well positioned portfolio of companies
over seven different countries
Read about our portfolio on pages 4 to 5
• Innovative products with market leading
technology
Read about our Redditch Station Case Study on
pages 18 to 21
• Strong profit margins and robust balance sheet
Read about our Operational Performance on
pages 22 to 29
Operational Highlights
Revenue and operating profit
driven by strong performance
across the Group
Successful first year
for SmartScan wireless
lighting controls
Lightronics continues to
perform well
Now have 150,000 trees
planted as part of our carbon
offsetting project
VISIT US ONLINE
To access further information please visit:
www.fwthorpe.co.uk
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Financial Highlights
Revenue
(£m)
61.4
55.3
105.4
88.9
73.5
Operating Profit
(£m)
13.7
11.8
10.8
18.4
16.2
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
Basic Earnings per Share
(Pence)
12.54
Diluted Earnings per Share
(Pence)
12.47
11.24
10.12
8.12
8.83
11.21
10.11
8.83
8.12
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
Dividend per Share
(Pence)
(excluding special dividend)
3.65
3.25
3.00
4.90
4.05
2013
2014
2015
2016
2017
Read more about Our Strategy and Operational
Performance on pages 16 and 22
Business Overview
Contents
Business Overview
Financial Highlights
FW Thorpe at a Glance
Strategic Report
Chairman’s Statement
Marketplace
Business Model
Strategy
Strategy in Action - Redditch Station
Operational Performance
Strategy in Action - New Luminaire
Assembly Area
Principal Risks and Uncertainties
Governance
Board of Directors
Directors’ Report
Statement of Directors’ Responsibilities
Directors’ Remuneration Report
Independent Auditors’ Report
to the Members of FW Thorpe
Financial Statements
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated and Company
Statement of Financial Position
Consolidated Statement of
Changes in Equity
Company Statement of Changes
in Equity
Consolidated and Company
Statement of Cash Flows
Notes to the Financial Statements
Notice of Meeting
Financial Calendar
1
2
8
12
14
16
18
22
30
32
36
38
42
43
46
52
53
54
55
56
57
58
92
94
1
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Annual Report and Accounts for the year ended 30 June 2017
FW Thorpe at a Glance
3
1
Our Global Footprint
1
2
3
4
5
6
7
United Kingdom
Thorlux Lighting, Compact Lighting,
Philip Payne, Solite Europe, Portland
Lighting, TRT Lighting
Netherlands
Lightronics
Ireland
Thorlux Lighting
Germany
Thorlux Lighting
United Arab Emirates
Thorlux Lighting
Australia
Thorlux Lighting Australasia
Spain
Luxintec
FW Thorpe Timeline
1936
1940
1960
1965
1989
1990
1992
1996
Established by
Frederick William
Thorpe and his
son Ernest Thorpe.
Spinning circular
reflectors
Moved to
larger
premises to
produce linear
fluorescent
luminaires
Moved again to
be able to cope
with expansion
in to the exterior
and hazardous
markets
Floated
on the London
Stock Exchange
Moved to
our Redditch
headquarters
First acquisition
– Mackwell
Electronics
Start up in retail
and display
lighting
Acquired
Philip Payne
emergency
exit signs
2
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Stock Code: TFW
www. fwthorpe.co.uk
Business Overview
2
4
6
5
7
2005
2009
2011
2013
2014
2015
2016
2017
Transferred
to AIM
Acquired
Solite Europe
Lighting for
clean rooms
Acquisition
of Portland
Lighting
Mackwell
Electronics
disposal
Start-up company
TRT Lighting
Entered the street
lighting market
Creation of an in-
house LED printed
circuit board
production line
Ability to
place 400,000
components
per day
Acquisition
of Lightronics
– Netherlands
Investment
in Luxintec
– Spain
Develop European
market
Sugg Lighting
disposal
Target Spanish
market and
acquire lens
specialism
Acquired
remaining share
capital in Thorlux
Australasia
Target Australian
market, improve
performance
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3
FW Thorpe at a Glance
Our Brand Portfolio
Thorlux Lighting
Description
The Thorlux range of luminaires is designed,
manufactured and distributed by Thorlux
Lighting, a division of FW Thorpe Plc.
Thorlux luminaires have been manufactured
continuously since 1936, the year Frederick
William Thorpe founded the company.
The company now operates from the
Group’s modern 16,882m2 self-contained
factory in Redditch, Worcestershire, central
England.
Thorlux is well known throughout the world
and provides a comprehensive range of
professional lighting and control systems for
a wide variety of applications.
Read more on page 23
systems
Key products
• Recessed, surface and
suspended luminaires
• Emergency lighting
• Hazardous area lighting
• High and low bay
luminaires
• Lighting controls
• Exterior lighting
Market sectors
• Commercial
•
Industrial
• Education
• Healthcare
• Manufacturing
• Retail, Display and
Hospitality
Philip Payne
Description
Philip Payne recognises that most trade
emergency exit signage products are
generally designed with the functional
in mind.
Philip Payne offers a backbone range
of quality standard products but more
importantly encourages direct dialogue
with architects and designers to ensure,
via product variation or bespoke work,
aesthetic aspirations and requirements
are fully met.
Key products
• Emergency exit
signage
• Emergency lighting
systems
Market sectors
• Commercial
• Hospitality
• Healthcare
Solite
Description
Solite Europe is a leading manufacturer
and supplier of clean room lighting
equipment and luminaires within the UK
and Europe.
They provide luminaires for laboratories,
pharmaceutical and semi-conductor
manufacturing areas including
hospitals, kitchens and food preparation
applications.
Key products
• Clean room luminaires
Market sectors
• Pharmaceutical
• Healthcare
• Education/Research
Read more on page 25
Read more on page 26
4
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Annual Report and Accounts for the year ended 30 June 2017 Business Overview
Portland Lighting
Description
Portland Lighting designs, manufactures
and supplies innovative lighting products
to the advertising, brewery, retail and sign
lighting industries.
The company operates from a modern
1,300m2 facility in Walsall, which was
purposely designed to enable the fast
turnaround of customer orders.
Established in 1994, the product range has
continually evolved to ensure that Portland
remains one of the leading companies in
its sector.
Key products
• Lighting for signs
Market sectors
• Retail
• Hospitality
• Advertising
TRT Lighting
Description
TRT (Thorlux Road and Tunnel) Lighting, is
an independent specialist division which
has evolved from Thorlux Lighting.
Building on years of lighting experience, TRT
is dedicated to the design, manufacture and
supply of LED road and tunnel luminaires.
The target of TRT is to produce quality,
efficient, stylish, high performance LED
products that are manufactured in the UK.
Key products
• Road and tunnel
lighting
• Amenity lighting
Market sectors
•
Infrastructure
• Facilities – car parking
Read more on page 27
Read more on page 28
Key products
• Road lighting
• Amenity lighting
• Outdoor wall and
ceiling luminaires
• Lighting controls
Market sectors
•
Infrastructure
• Facilities – car parking
• Housing
Lightronics
Description
Based in Waalwijk, Netherlands,
Lightronics specialises in the development,
manufacture and supply of external and
impact resistant lighting, which includes
street lighting, outdoor wall and ceiling
luminaires as well as control systems. The
majority of its revenue is derived from the
Netherlands but there is also an export
presence in other European locations.
Lightronics was originally established in
1946 and has a strong tradition of solid,
reliable products as well as being known for
its innovation. Products are environmentally
friendly in terms of energy use as well as in
the prevention of light pollution.
Read more on page 29
Luxintec
Description
Based in Valladolid, in north-west Spain,
Luxintec specialises in the design,
development and manufacture of
innovative and high performance LED
luminaires and lighting systems.
Alongside its range of luminaires for a
variety of market sectors, Luxintec designs
and produces custom LED lighting solutions
for emergency vehicles, general automotive
and other customer applications.
Key products
• LED industrial
luminaires
• LED retail and display
luminaires
• Customised LED
solutions
• LED optics
Market sectors
• Architectural
• Retail
•
Industrial
• Automotive
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5
www. fwthorpe.co.ukStock Code: TFW Strategic
Report
Chairman’s Statement
Marketplace
Business Model
Strategy
Strategy in Action - Redditch Station
Operational Performance
Strategy in Action - New Luminaire Assembly Area
Principal Risks and Uncertainties
8
12
14
16
18
22
30
32
Network Rail Maintenance Depot, Wimbledon
6
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Annual Report and Accounts for the year ended 30 June 2017
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7
www. fwthorpe.co.ukStock Code: TFW Chairman’s Statement
Mike Allcock
Chairman &
Joint Group Chief Executive
“ Our revenue exceeded
the £100m milestone
for the first time,
reaching £105.4m, an
18.6% increase.”
FW 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 FW 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 FW 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.
8
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Annual Report and Accounts for the year ended 30 June 2017 21%
Dividend Increase
(excluding special dividends)
Total for the year of 4.90p
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.
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.
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9
www. fwthorpe.co.ukStock Code: TFWStrategic Report Chairman’s Statement continued
“ 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.”
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 B.V., 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.
10
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Annual Report and Accounts for the year ended 30 June 2017 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.
Mike Allcock
Chairman
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11
www. fwthorpe.co.ukStock Code: TFWStrategic Report Marketplace
Across the Group we work in a number of different sectors and various
geographical territories. This diversified market ensures we have mitigation
against any sudden fluctuations in a particular sector or region. Below is an
outline of some of the over-arching trends that affect us as a Group.
Commercial
Housing
Industrial
Facilities
Education
Infrastructure
Healthcare
Advertising
Manufacturing
Research &
Development
Retail
Pharmaceutical
Display
Hospitality
12
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Annual Report and Accounts for the year ended 30 June 2017 Strategic Report
Increase in demand
for technology
Adoption of LED technology and
the decline of fluorescent lighting
Globalisation
What this means:
• Evolution of controls technology – wireless
• Connectivity with the internet and other
devices – the internet of things
What this means:
• During the last few years there has been
a technology shift in the lighting industry
toward LED solutions which has seen the
decline of traditional solutions
• The Group has seen a shift in LED sales,
moving from 3% to 80% of total revenue
in recent years
What this means:
• Responding to the demands of our
traditional customers who are developing a
global footprint
• Harmonisation of technology from the
adoption of LED brings the threat of increased
competition from both Far Eastern and
Western economies
Opportunity it provides:
•
Improves ability to hold specification business
with our own controls offering
• Potential to supply retrofit projects with
wireless controls where wired controls were
cost prohibitive
Opportunity it provides:
• Demand for retrofit installations replacing
fluorescent lighting for LED – for example
street lighting or education sector
• Continue to offer fluorescent solutions to
customers where other competitors have
discontinued
Opportunity it provides:
• Chance to establish ourselves in new
territories with established customers in the
countries we currently supply into
• New sourcing opportunities – pricing, quality,
technology
How we are responding:
• Well placed with introduction of
SmartScan in 2016
How we are responding:
• All new product developments are
LED based
• Further development of the SmartScan
• Continual review of LED technology
platform
• Phases 2 and 3 to be launched during
2018
offerings to take advantage of the latest
advances and ensure we are offering the
best solutions to our customers
How we are responding:
• Working with global customers
• Continual development of the supply
chain outside of Europe
• Potential to establish new offices in
chosen locations to support both
customer and supply chain development
in the future
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13
www. fwthorpe.co.ukStock Code: TFWStrategic Report Business Model
Customers come to us for peace of mind. They want the correct technical solution,
professional service, sustainability of products/services and the ability to support the
customer during its warrantable life and beyond.
Our business model is focused on the needs of our customers and the marketplace,
with a robust capital structure that underpins our ability to deliver sustainable growth,
innovative products and excellent customer service.
Market
Commercial
Industrial
Education
Healthcare
Manufacturing
Retail
Display
Hospitality
Pharmaceutical
Research &
Development
Advertising
Infrastructure
Facilities
Housing
Customers
Target Customers
Those responsible for the whole life cycle cost of
the products/services we supply
14
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Annual Report and Accounts for the year ended 30 June 2017 Read about our New Luminaire Assembly Area case study on pages 30 to 31
Design & Development
Manufacturing
Commissioning
Our Key Resources
Design & Innovation
Products, software, lighting design
Continuous product development
Talented People
Continual development
Manufacturing Facilities
UK – multiple sites, Europe – Netherlands, Spain
Continual investment
Financial & Environmental Sustainability
Financial stability, Carbon Offset Scheme
25548.04 – 17 October 2017 9:16 AM – Proof 12
15
www. fwthorpe.co.ukStock Code: TFWStrategic Report Strategy
Our products are sold throughout the world. The Group management team is passionate about developing the
business for the benefit of the shareholders, employees and customers. With the energy and ability of our staff
we look forward to the future with enthusiasm. Our aim is to create shareholder value through market leadership
in the design, manufacture and supply of professional lighting systems.
Our focus is for long term growth and stability, achieved through the following priorities:
Priority
Progress to date
Future opportunities
Associated risks
1
2
3
4
Focus on high quality products and
good leadership in technology
Customers continually require new and innovative ways
in which to reduce the operating costs of their lighting
installations. There is also the requirement to reduce their
environmental impacts.
Continue to grow the customer
base for Group companies
With the continued investment in the product portfolio and
the broad range of sectors we can service, the focus will be on
expanding our customer base in new markets and territories.
• Further development of features for the SmartScan wireless
system
•
•
Introduction of new LED product ranges and existing ranges
further enhanced
Integration of lens and optical technology into certain outdoor
ranges using Luxintec
• Targeted approach in the Netherlands with Thorlux industrial
product portfolio
• Luxintec adoption of Smart and SmartScan technology in
existing product portfolio
Focus on manufacturing excellence
Along with continued product development, the need to
innovate the production process is essential.
• New assembly section at Thorlux
• New TRT facility to improve capacity and disaster recovery for
PCB and painting process at Thorlux
• Continued investment in
manufacturing facilities
New Thorlux Assembly Section
Continue to develop high quality people
One of our main sources of competitive advantage, it is
imperative we continually develop and retain talent within
the business.
• Training and development
• Apprentice scheme continues
•
Investment in management training in association with Warwick
Business School
• Continued investment in training
and personnel development
Visit of HRH Duke of Kent
• Further development of SmartScan
• Continuous research and development
• Targeted acquisition
• Consider further sales offices overseas
• Potential business development investment
•
Investment in sales personnel in the
UK and overseas
• Targeted acquisition
Strategy in Action
Redditch Station
• Product acceptance
•
Initial product introduction
Read more on pages 18 to 21
• Short term cost increase without
Doetinchem - Netherlands
immediate return
• Prolonged time required to
establish FW Thorpe brands in
new territories
C
A
D
G
E
C
C
I
• Reduced productivity while
changes are implemented
• Learning curve on introduction of
new products and processes
Read more on pages 30 to 31
• Ability to retain staff in
competitive local job markets
• Potential loss of UK personnel from
the EU due to Brexit uncertainty
Read more on page 31
Measuring strategic performance (KPIs) for our shareholders
Revenue
(£m)
105.4
88.9
73.5
61.4
55.3
Operating Profit
(£m)
18.4
16.2
13.7
11.8
10.8
Basic Earnings per Share
(pence)
12.54
11.24
10.12
8.83
8.12
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
16
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017
Focus on high quality products and
good leadership in technology
Customers continually require new and innovative ways
in which to reduce the operating costs of their lighting
installations. There is also the requirement to reduce their
environmental impacts.
• Further development of features for the SmartScan wireless
Introduction of new LED product ranges and existing ranges
Progress to date
system
•
•
further enhanced
ranges using Luxintec
Integration of lens and optical technology into certain outdoor
Continue to grow the customer
base for Group companies
• Targeted approach in the Netherlands with Thorlux industrial
product portfolio
With the continued investment in the product portfolio and
• Luxintec adoption of Smart and SmartScan technology in
the broad range of sectors we can service, the focus will be on
existing product portfolio
expanding our customer base in new markets and territories.
1
2
3
4
Priority
Future opportunities
Associated risks
• Further development of SmartScan
• Continuous research and development
• Targeted acquisition
• Consider further sales offices overseas
• Potential business development investment
•
Investment in sales personnel in the
UK and overseas
• Targeted acquisition
Focus on manufacturing excellence
Along with continued product development, the need to
innovate the production process is essential.
• New assembly section at Thorlux
• New TRT facility to improve capacity and disaster recovery for
PCB and painting process at Thorlux
• Continued investment in
manufacturing facilities
Continue to develop high quality people
One of our main sources of competitive advantage, it is
imperative we continually develop and retain talent within
the business.
• Training and development
• Apprentice scheme continues
•
Business School
Investment in management training in association with Warwick
• Continued investment in training
and personnel development
C
A
D
G
E
C
C
I
Strategy in Action
Redditch Station
• Product acceptance
•
Initial product introduction
Read more on pages 18 to 21
• Short term cost increase without
Doetinchem - Netherlands
immediate return
• Prolonged time required to
establish FW Thorpe brands in
new territories
New Thorlux Assembly Section
Visit of HRH Duke of Kent
• Reduced productivity while
changes are implemented
• Learning curve on introduction of
new products and processes
Read more on pages 30 to 31
• Ability to retain staff in
competitive local job markets
• Potential loss of UK personnel from
the EU due to Brexit uncertainty
Read more on page 31
For more information read our Chairman’s Statement on pages 8 to 11
Read more about our Operational Performance on pages 22 to 29
25548.04 – 17 October 2017 9:16 AM – Proof 12
17
www. fwthorpe.co.ukStock Code: TFWStrategic Report
Strategy in Action
Redditch Station
75%
Comparative
energy saving
Significant increase
in lighting levels
and quality
Increase in security
and comfort
18
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 Client Background
London Midland operates train services throughout the heart of England
from London to Birmingham, managing 150 stations, operating 1,300
services per day and 70 million passenger journeys a year.
London Midland is embracing new energy efficient lighting technology
to drive a reduction in both energy and maintenance costs, improving the
customer environment and reducing its carbon footprint.
Redditch Station is the southern terminus of the Cross-City Line. The
manned station consists of one platform, ticket office, waiting area and large
car park. High pressure sodium, metal halide and fluorescent luminaires
were previously installed throughout the station.
The Challenge
The primary objectives of the new lighting scheme were to increase the
light levels, reduce energy usage and to provide a safe and comfortable
environment thus increasing security and passenger confidence. Further
to this, London Midland was keen to reduce its routine maintenance and
emergency testing costs.
The platforms presented a particular challenge as they require specific
lighting levels and uniformity in order to comply with current rail standards.
The standards also require that the ticket office has a higher than average
lighting level to meet the needs of the visually impaired and to ensure that
both staff and customers can communicate clearly.
Before
After
Pictured: Platform, Redditch Station
25548.04 – 17 October 2017 9:16 AM – Proof 12
19
www. fwthorpe.co.ukStock Code: TFWStrategic Report Strategy in Action
Redditch Station continued
The Solution
Thorlux proposed the use of high efficiency LED luminaires combined with
SmartScan energy saving controls. Projects utilising the Thorlux SmartScan
system can frequently benefit from energy savings in excess of 70% when
compared with conventional technology.
The factory-fitted addition of a SmartScan transceiver to a Thorlux Smart
luminaire introduces the latest wireless mesh network technology and
replaces the wired Motionline communication signals between luminaires
with sophisticated, trouble-free wireless transmissions.
Each transceiver can be individually programmed with a SmartScan
Programmer, during commissioning, and assigned to work exclusively
within a particular building, or group created within that building. Energy
performance data and operational status can be retrieved using the
SmartScan Programmer.
SmartScan uses 868MHz secure radio communication, chosen for its
excellent transmission distance and object penetration, especially useful
within buildings. Each luminaire acts as a wireless node, repeating each
command received onto the next luminaire, providing a robust system that
will always find a communication path.
Wireless grouping was deemed an important requirement to enhance the
safety of London Midland’s staff and customers and to ensure that essential
lighting can respond across all key areas of the site in the event of single
occupancy. A further benefit of the SmartScan system is the ability to record
and report all faults in real time, test and remotely monitor all emergency
lighting and collect energy performance data. This information can then
be uploaded using a SmartScan Gateway via GSM, without a need for LAN
connection, to a secure web-based server that can be accessed remotely by
London Midland authorised users by either computer or smartphone.
High performance LED luminaires were selected for both the internal and
external applications. The combination of highly efficient LEDs with superb
optical control from the luminaire - putting the light where it is needed most,
with efficacies of up to 149 luminaire lumens per circuit watt, double that of
conventional luminaires - has dramatically reduced the installed energy load.
The luminaires also benefit from lifetimes of up to 100,000 hours, providing
many years of reliable lighting.
Innovation in Redditch
Redditch MP, Rachel Maclean, and
the Mayor of Redditch, Jenny Wheeler
joined representatives from London
Midland and Thorlux Lighting at the
unveiling of the new Redditch Station
SmartScan lighting installation.
20
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 Before
After
Pictured: Car park, Redditch Station
Key Benefits
Operational:
• Energy savings of 75% whilst increasing lighting levels to current
rail safety standards.
• Presence detection providing full illumination only when areas are
occupied, dimming to 10% security lighting level or switching off
when vacated.
• Flexible switching zones, selectable dim levels and time delays
improving safety, visual appearance upon approach and site
security.
• Reduced anti-social element as the lighting is now monitoring
presence after normal operational hours.
•
Improved visual recognition on CCTV.
Operational Savings:
• The installation cost has been reduced substantially by using
existing luminaire mounting points without requiring any
additional data cabling for the control system.
• Monthly and annual emergency testing responsibility eliminated.
• Remote monitoring of all energy usage and luminaire status
allowing fast, proactive maintenance, reducing future maintenance
costs significantly.
• Extensive re-lamping programme has been cancelled due to
100,000 hour expected LED lifetime.
• Reduced energy costs despite increased lighting levels and longer
running hours.
“ This is another example of London
Midland’s commitment to using
innovation to create simply better
journeys for our customers. The
partnership with Thorlux means we
have a brighter, lighter, safer station
that is also better for the environment.”
Rob Hornsey
Head of Route for Cross-City services at London Midland
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21
www. fwthorpe.co.ukStock Code: TFWStrategic Report Operational Performance
FW Thorpe – Group Performance
Group total revenue (£m)
exc. Intercompany
65.3
19.2
20.9
2017 Group Company Overview
FW Thorpe Plc is a group of individual companies that concentrate on particular
market sectors and, in recent years, certain geographical locations.
The companies within the Group face different challenges within their respective markets, but all share
product and technical expertise, which is particularly beneficial with the continuing development and
market adoption of LED and lighting controls technology.
The Group has continued to progress in many areas, with a number of new product introductions,
investment in manufacturing facilities and penetration into new markets. This progress is
underpinned by the development of market-leading lighting equipment and the delivery of excellent
customer service.
The following is an overview of the year for each company.
Thorlux
Lightronics
Other companies
Sales by region (£m)
12.3
4.3
71.6
17.2
UK
Netherlands
Other
Europe
Other
Countries
Pictured: Bentley Showroom, Leicester
22
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 Thorlux Lighting – Revenue £69.1m, +22%
“ Orders received
reached a record high,
with an improvement
in operating profit
driven by the increase
in revenue.”
Pictured: Network Rail Maintenance Depot, Wimbledon
Performance
was strong
this year, with
growth being delivered from a variety
of different sectors and the successful
launch of SmartScan. Orders received
reached a record high, with an
improvement in operating profit driven
by the increase in revenue.
Thorlux supplies the broadest product range of
the FW Thorpe Plc companies, covering multiple
markets in both the public and private sectors.
Thorlux continues to be the driving force behind
product development for the rest of the Group,
pushing the business forwards.
Product developments this year include
the following. Further enhancements of the
SmartScan platform now offer customers both
the ability to review data on how their lighting
installation is performing via a web portal, and
the ability to change the colour temperature
of the lighting, which can be useful in certain
educational or healthcare scenarios. In addition,
Thorlux has co-ordinated the development of a
range of exterior pole-mounted luminaires with
high-performance lenses for the retail sector,
predominantly used for car park lighting. This
collaborative development used lens design skills
from Luxintec, an investment in 2016, and utilised
parts developed at Lightronics, the Group’s
business in the Netherlands.
From a sales and orders perspective, 2016/17 has
been a successful year. Revenues derived from
SmartScan exceeded £7.0m in the product’s first
year. Projects included the new Special Vehicle
Operations Centre at Jaguar Land Rover, London
Midland railway stations (see pages 18 to 21 for
further details), as well as some notable projects
in Europe. As well as success with SmartScan,
growth also came from the industrial, automotive
and education sectors, with Thorlux’s sales offices
in Ireland, UAE and Australia all outperforming
the revenue achieved in the previous year.
Business in Germany was steady and is expected
to push on in 2017/18, with further investment in
personnel starting to pay off.
Capital investment in the manufacturing process
continued. The focus this year was on utilising
the space created from recent projects such as
the additional vertical storage units last year and
the warehouse extension a few years ago. The
re-organisation of the assembly area has now
been completed, which includes new assembly
benches, test stations and the installation of
a new electrostatic discharge floor coating to
further protect electronic components during
handling in the assembly process (see pages 30 to
31 for further details). These developments have
enabled the company to achieve the increased
levels of revenue seen this year and have laid the
foundations to support growth in the future.
With continual focus on product development
and on increasing business in all sectors and
geographical locations, Thorlux will develop
further opportunities to grow the business
during the next financial year and beyond.
Finding additional opportunities to expand the
global footprint of the Group will be especially
important, to counteract any impact of the
uncertain economic climate as a result of the
fragility of the current UK Government and the
ongoing negotiation of trade deals with both
Europe and beyond. With the building blocks of
innovation and outstanding customer service,
Thorlux will continue to aim for growth over the
next few years.
25548.04 – 17 October 2017 9:16 AM – Proof 12
23
www. fwthorpe.co.ukStock Code: TFWStrategic Report Operational Performance continued
Compact Lighting – Revenue £4.0m, +2%
Compact operates
in the retail,
display and hospitality sectors. With
challenging delivery schedules and
competitive pricing, these markets can
be particularly demanding. Revenue has
not improved significantly in 2016/17,
resulting in the business delivering a
similar result to that of last year.
Projects continued with existing customers, with
smaller initial orders secured with new customers
but no further roll-out work forthcoming. There
has been further success with the car showroom
sector, with Compact becoming one of a select
number of suppliers for Jaguar Land Rover car
showrooms, with some initial orders this year and
further orders expected in 2017/18. During this
time, Compact’s product portfolio has supported
Thorlux to develop relationships with a few major
brands in the UK retail sector and win some initial
business.
Product development continued, with Compact
developing LED products to broaden its portfolio
to both compete with the high-end retail and
display lighting companies and to differentiate
the company from the competition.
Last year, the annual report commented on
Compact’s new relationships and its investment
in both the sales organisation as well as new
product tooling. Compact has not managed to
improve on the results of last year, and has not
managed to build on some of the new customer
relationships acquired in the last few years.
At the start of 2017/18 it was decided to merge
the Compact business with Thorlux. This will
enable Thorlux to take advantage of Compact’s
wider portfolio of products and its sales presence
in the retail, hospitality and display sectors. The
existing Compact facility in Portsmouth will
become an extension of the manufacturing
capabilities of Thorlux. The result will be a
focused approach to the retail, hospitality
and display sector, building on the existing
relationships of both companies but under the
strength of the Thorlux brand.
“ At the start of 2017/18
it was decided to
merge the Compact
business with Thorlux.
The result will be a
focused approach to
the retail, hospitality
and display sector,
building on the existing
relationships of both
companies but under
the strength of the
Thorlux brand.”
Pictured: Clarks Showroom, Manchester
24
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 Philip Payne – Revenue £3.0m, +19%
+19%
Increased revenue
Delivering a corresponding
increase in operating profit
The company continues to focus on new product
development to accommodate advancing
technologies such as wireless communication
and to meet the demands from export markets
where requirements often differ from those in
the UK. Investments have continued throughout
the year, with new CNC machinery improving
productivity and profitability.
The challenge for the new financial year will be to
replicate the success of 2016/17.
Pictured: National Army Museum, London
Amongst its emergency
lighting peers, Philip Payne
continues to be the “go to”
brand for prestigious projects, and it
has enjoyed another solid year both in
the UK and overseas. Results for 2016/17
were impressive, with the increased
revenue delivering a corresponding
increase in operating profit.
Philip Payne’s ability to modify standard designs
to meet architectural requirements differentiates
its range from those of competitors, which
are generally produced in high volume and
often imported. Philip Payne’s clients are quite
discerning and often require more than the
typical trade offerings, leading to unique market
opportunities.
The strategy to increase export focus, adopted
a few years ago, has proved successful, with
continuing growth in the UAE. Sales in this market
have a similar project profile to those enjoyed in
the UK, resulting in increased revenue for 2016/17.
Projects varied in scale from small fit-outs for
top retail brands to large new builds like the
new Midfield Terminal building at Abu Dhabi
International Airport, which is being introduced
to handle an extra 30 million passengers per year.
In the UK, Philip Payne added more prestigious
clients to its reference list, enjoying successes in
retail, for example at Selfridges, Ralph Lauren,
Gucci and Chanel, and in the sporting sector, with
the Warner Stand redevelopment at Lord’s Cricket
Ground, Wimbledon No 1 Court and the Queen
Elizabeth Stadium, along with heritage work at
the Royal Opera House and Freemasons’ Hall.
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25
www. fwthorpe.co.ukStock Code: TFWStrategic Report Operational Performance continued
Solite – Revenue £3.5m, +33%
Since the
Group
invested in
the Solite Stockport facility back in 2015,
Solite has enjoyed rapid growth, with
2016/17 having the sharpest increase
in its history. Growth of this nature
has been a challenge to deal with at
times, but Solite has responded well,
delivering a dramatic improvement in
operating profit for the year.
Group investment in plant and machinery, both
during the year and previously, has provided
the extra capacity required to meet increased
customer demand. Solite offers a comprehensive
range of clean area products and, like other
subsidiaries, has the manufacturing flexibility to
offer bespoke products too. The combination
of this and, more recently, the incorporation
of Thorlux-designed lighting control systems,
provides Solite with a market-leading product
range.
Solite enjoys strong demand from the Republic
of Ireland. In a close working relationship
between Solite and the Thorlux office in Dublin,
the companies collaborate on projects in the
pharmaceutical sector to provide a total lighting
solution. On a single project, this approach
provides complementary products for both the
clean and general areas.
This year has seen the launch of additional
new products designed for use in the custodial
sector. The new range has been approved by
the UK Ministry of Justice and, with government
investment expected in this sector, should
provide growth opportunities in the future.
The task will be to maintain the 2016/17 figures in
2017/18. Solite starts the year with a strong order
book and a number of opportunities to achieve
continued success.
+33%
Revenue increased
Sharpest increase in its history
Pictured: Belfast City Hospital, Belfast
26
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 Portland Lighting – Revenue £3.4m, –2%
“ The anticipated launch
of a third-generation
Ecolux luminaire with
its unique features will
provide further market
differential.”
Pictured: Greggs Bakery, Manchester
Portland Lighting
remains quite different
in its route to market
from the other Group companies, who
immerse themselves in the process of
building design and specifications. The
focus of Portland remains on external
shop-front sign lighting.
The company has continued its success in
the brewery trade and retail sector, and with
advertising billboard companies. This year has
seen successful projects at high street stores for
Thomas Cook, Thomson, Enterprise car hire and
Co-operative, along with brewery projects for
Greene King and Punch Taverns and advertising
work for J C Deceaux.
Since the Group acquired Portland Lighting in
2011, the company has consistently delivered
excellent operating profit returns. Sales of solar
luminaires and new “super lens” optics continue
to supplement those of mainstream products;
however, increased competition resulted in
revenue reducing slightly in the final quarter of
the year.
With installers expecting same or next-day
delivery, service remains at the core of Portland’s
ethos.
Investment in product development has
continued this year, and the anticipated launch
of a third-generation Ecolux luminaire with its
unique features will provide further market
differential.
Work continues to establish relationships
overseas to increase sales into mainland Europe.
25548.04 – 17 October 2017 9:16 AM – Proof 12
27
www. fwthorpe.co.ukStock Code: TFWStrategic Report Operational Performance continued
TRT Lighting – Revenue £8.8m, +5%
year, establishing TRT as a self-sufficient business,
and will give the capacity to deliver increased
revenue in the future.
Whilst the volume of tunnel lighting projects
was less than in the previous year, the projects
have been no less impressive. TRT secured
its first tunnel order in Australia, for the Ivory
Street Tunnel in Brisbane. The project involved
relighting a 193-metre tunnel in central Brisbane
with Verso, TRT’s LED tunnel luminaire. A bespoke
solution was required that had lens optics
arranged in a special configuration. The LED
lenses were designed and developed by Group
company Luxintec.
TRT starts 2017/18 with a good order book from
a street lighting perspective, but margins will
continue to come under pressure due to the
weakening pound against both the US dollar and
the euro. Continued product development and
improved manufacturing efficiency continue to
be the priority.
Growth has
continued at
TRT, and, whilst
at a slower rate, there have been some
large scale orders in street lighting,
supported by smaller tunnel projects.
Street lighting projects are competitive,
and, with reduced volumes in tunnel
lighting, operating profits were lower
than in 2015/16.
TRT has secured new street lighting projects
in Telford and Redbridge, as well as continued
business in Warwickshire, Worcestershire and a
number of London boroughs. Projects for general
amenity lighting, including in the rail sector, have
been secured during the year, with TRT working
alongside Thorlux. TRT street lights also formed
part of a significant project in the UAE secured by
the Thorlux sales office in the region, lighting the
road complex within a large aluminium smelter in
Abu Dhabi.
A new home for TRT was acquired, fitted out and
moved into during the first half of 2017. Printed
circuit board placement machinery and painting
facilities will be installed throughout the coming
“ TRT starts 2017/18 with
a good order book.”
Pictured: Ivory Street Tunnel, Australia
28
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 Lightronics – Revenue £19.5m, +25% (constant currency +9%)
This year (2016/17)
has been another
excellent year for Lightronics. Since
joining the Group in April 2015, the
business has outperformed the Group’s
original expectations. Lightronics has
managed to build on a successful
2015/16 and deliver another increase in
orders, revenue and profitability.
Growth this year can be attributed to the
impact-proof lighting segment of the business,
with a good proportion of this growth resulting
from a project to relight a number of social
housing facilities. Lightronics also focuses on
the street and amenity lighting segments in the
Netherlands and northern Europe.
The improvement in revenue continues to
demonstrate key characteristics of Lightronics’
business: production flexibility, supply
chain management and speed of product
development.
When integrating Lightronics into the Group
one of the strategic objectives was to enter the
industrial and emergency lighting segments of
the Netherlands, utilising the existing product
portfolio of the Group. Unfortunately, progress
has not been as expected, given the demands
placed on the business during the last two
years while delivering the growth in revenues
and profitability it has enjoyed. Lightronics has
secured some small industrial projects for Group
products, and, in an effort to increase orders, the
strategy will be re-energised during the coming
year.
Product development is a fundamental part of
the business for all FW Thorpe companies, and
Lightronics is no different. This year the focus
was on its street lighting range, and in particular
on updating the existing product portfolio.
Lightronics continues to develop its wireless
control software and hardware for street lighting,
enabling users to control street lighting and
retrieve operational data remotely.
In line with the other Group companies who
have experienced significant growth this year,
the challenge for Lightronics in 2017/18 will be to
achieve a similar result. Making a breakthrough
in the industrial and emergency segments by
promoting Thorlux products in the Netherlands
will be key to building on the successful results of
this year.
+25%
Business has
outperformed the
Group’s original
expectations
Pictured: Loon op Zand, Netherlands
25548.04 – 17 October 2017 9:16 AM – Proof 12
29
www. fwthorpe.co.ukStock Code: TFWStrategic Report Strategy in Action
New Luminaire Assembly Area
Following the construction of the new distribution warehouse in 2013, it was
clear that the next stage in the development of the Redditch manufacturing
facility should be the re-layout of the luminaire assembly area. The
continuing growth in Thorlux revenue had created a need to increase the
total manufacturing capacity and also improve the overall efficiency of
luminaire manufacture. In previous years, additional assembly cells had
been created to satisfy demand, but had not necessarily been constructed in
an optimised layout, so a target was set to increase the number of assembly
cells by 50% while improving the flow of materials.
While these changes were being planned, it was decided that a number
of other improvements could be incorporated into the design of the
luminaire assembly area. These include creating an enhanced customer
experience that demonstrates the latest luminaires in a live operational
factory, and a better working environment for the assembly operators.
The overall goal was to create a “visual” workplace with well-lit, clearly
defined areas for assembly cells, kits of parts and finished goods. Ease of
access for general maintenance, and areas for manufacturing aids such as
quality documentation, assembly jigs and product drawings, were further
important considerations. The new layout also enables the more efficient
processing of materials such as waste cardboard, through the use of
designated recycling points.
The manufacturing team became fully engaged in the design of the cells
and the factory layout. The layout incorporates the new in-house-designed
electrical test benches that had been installed across the whole of the Group
in order to test an ever increasing portfolio of controllable LED products.
The arrival of the electrical test benches provides a common test platform
and the benefits of a centralised management system for maintenance
schedules and software updates.
The introduction of wireless technology for the new SmartScan products
had generated many new printed circuit board designs that incorporate
components susceptible to electrostatic discharge. To overcome any
possible damage to these components and eliminate potential failures in
the field, a new floor coating incorporating a large copper grid was laid in
the assembly area to prevent the build-up of static charge.
30
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 Other areas of the factory have also benefited from these layout changes.
These include the component part stores area, where new pallet racking
was purchased to increase the number of sheet metal sub-assembly
locations, and two further vertical storage units for small parts.
All these enhancements have produced a new clean working environment
that is already beginning to show the envisaged productivity gains.
However, in this ever changing world, further improvements are
already being initiated. In forthcoming months, shop floor wireless
communication will enable the bar-coding and scanning of materials,
to track their movements, and give electronic access to engineering
information such as product drawings and process information.
Royal Visit
HRH The Duke of Kent KG visited Thorlux
Lighting on 25 May 2017 to open the
new luminaire assembly area. The Duke
received a tour of the factory, met
apprentices old and new, and unveiled a
plaque to commemorate the occasion.
25548.04 – 17 October 2017 9:16 AM – Proof 12
31
www. fwthorpe.co.ukStock Code: TFWStrategic Report Principal Risks and Uncertainties
The Board is responsible for the identification and effective management of risks posed
to the Group. Due to the impact certain risks could pose, the Board regularly reviews the
likelihood of risks occurring and the potential impact they could have on the business.
Detailed below is a list of the principal risks facing the business, and the
corresponding actions the Board are currently taking in order to manage them.
Area of risk
A Adverse economic conditions
Type of risk
Strategic
Description of risk
• Deferred or reduced capital investment plans in market sectors, which our
products are supplied into and are key sources of revenue for the Group
B Changes in government legislation
or policy
Strategic
• Reduction in public sector expenditure and changing policy increases risk to
our order book
• Uncertainty of free access to EU markets
C Competitive environment
Strategic
• Existing competitors, powerful new entrants and continued evolution of
technologies in the lighting industry eroding our revenue and profitability
D Price changes
E Business continuity
F Credit risk
Operational
• Erosion of revenue and profitability
Operational
• The majority of the Group’s revenues are from products manufactured in the
Redditch facility
Financial
• The Group offers credit terms which carry risk of slow payment and default
G Movements in currency exchange
rates
Financial
• The Group is exposed to transaction and translation risks. With some natural
hedging in EUR this risk is primarily with changes in the GBP:USD rates
• The Group has increased its sourcing of materials to maintain a natural hedge to offset its currency
risk from EUR receivables, whilst at the same time buying EUR and USD when the exchange rate is
Low
favourable, compared to our operational rates, to minimise the risk
H Cyber security
Operational
• A breach of IT security could result in the inability to operate systems
effectively and efficiently or the release of inappropriate information
I Exit from the European Union
Strategic
• Significant uncertainty remains over how the economic landscape might be
affected in the next few years
• New Group IT Manager recruited to strengthen our internal team
• Anti-malware implemented
• Disaster recovery capabilities are under review with a view to further investment
• With the Group having a manufacturing presence in two EU countries, the Netherlands and Spain,
this leaves us ideally placed to react to any negative trade barriers that may be imposed on the UK
• Continue to develop closer working relationship with these entities, sharing product development,
market knowledge and operational expertise to ensure we have the flexibility to adapt to any
changes in the future
• As more details emerge we will assess the impact, in the short term the Group will review the
implications based on potential outcomes
Low
Medium
1
4
2
4
32
25548.04 – 17 October 2017 9:16 AM – Proof 12
Mitigation of risk
• Broad range of customers in differing sectors
• High quality, technically advanced products to differentiate the Group from competitors
• Actively seek to identify new opportunities to ensure we maximise our potential of winning
new business
• Continue to seek to diversify our customer portfolio to ensure we have an appropriate spread,
mitigating the risk of any industry or specific sector spending issues
Medium
• Develop sales in new markets
• Offering innovative products and service solutions that are technologically advanced products to
Medium
enable us to differentiate ourselves from our competitors
•
•
Investing in research and development activities to produce new and evolving product ranges
Investing in new production equipment to ensure we can keep costs low and maintain barriers to
new market entrants
• Management reviews prices, at least annually, to take into account fluctuations in costs, in
order to minimise the risk of reduction in gross margin, or the loss of market share from a lack of
Medium
competitiveness
• High level of importance attached to environmental management systems, health and safety and
High
preventative maintenance
Insurance cover is maintained to provide financial protection where appropriate
Increased production flexibility with the ability to build products in more than one manufacturing
•
•
facility
• Credit policy includes an assessment of the bad debt risk and management of higher risk customers
• The Group maintains a credit insurance policy for a significant proportion of its debtors
Low
Possible impact on
Strategic priorities
performance
impacted upon
Change in
period
High
1
2
4
=
=
=
=
2
1
3
1
2
4
2
4
2
3
2
2
3
Annual Report and Accounts for the year ended 30 June 2017 Area of risk
Type of risk
Description of risk
A Adverse economic conditions
Strategic
• Deferred or reduced capital investment plans in market sectors, which our
products are supplied into and are key sources of revenue for the Group
B Changes in government legislation
or policy
Strategic
• Reduction in public sector expenditure and changing policy increases risk to
our order book
• Uncertainty of free access to EU markets
C Competitive environment
Strategic
• Existing competitors, powerful new entrants and continued evolution of
technologies in the lighting industry eroding our revenue and profitability
D Price changes
E Business continuity
F Credit risk
Operational
• Erosion of revenue and profitability
Operational
• The majority of the Group’s revenues are from products manufactured in the
Redditch facility
Financial
• The Group offers credit terms which carry risk of slow payment and default
H Cyber security
Operational
• A breach of IT security could result in the inability to operate systems
effectively and efficiently or the release of inappropriate information
I Exit from the European Union
Strategic
• Significant uncertainty remains over how the economic landscape might be
affected in the next few years
Key
Increase in risk
=
No change in risk
Decrease in risk
Mitigation of risk
• Broad range of customers in differing sectors
• High quality, technically advanced products to differentiate the Group from competitors
• Actively seek to identify new opportunities to ensure we maximise our potential of winning
new business
Possible impact on
performance
Strategic priorities
impacted upon
Change in
period
High
1
2
4
• Continue to seek to diversify our customer portfolio to ensure we have an appropriate spread,
mitigating the risk of any industry or specific sector spending issues
Medium
• Develop sales in new markets
• Offering innovative products and service solutions that are technologically advanced products to
enable us to differentiate ourselves from our competitors
Medium
•
•
Investing in research and development activities to produce new and evolving product ranges
Investing in new production equipment to ensure we can keep costs low and maintain barriers to
new market entrants
• Management reviews prices, at least annually, to take into account fluctuations in costs, in
order to minimise the risk of reduction in gross margin, or the loss of market share from a lack of
competitiveness
Medium
• High level of importance attached to environmental management systems, health and safety and
preventative maintenance
High
•
•
Insurance cover is maintained to provide financial protection where appropriate
Increased production flexibility with the ability to build products in more than one manufacturing
facility
• Credit policy includes an assessment of the bad debt risk and management of higher risk customers
• The Group maintains a credit insurance policy for a significant proportion of its debtors
Low
G Movements in currency exchange
rates
Financial
• The Group is exposed to transaction and translation risks. With some natural
hedging in EUR this risk is primarily with changes in the GBP:USD rates
• The Group has increased its sourcing of materials to maintain a natural hedge to offset its currency
risk from EUR receivables, whilst at the same time buying EUR and USD when the exchange rate is
favourable, compared to our operational rates, to minimise the risk
• New Group IT Manager recruited to strengthen our internal team
• Anti-malware implemented
• Disaster recovery capabilities are under review with a view to further investment
• With the Group having a manufacturing presence in two EU countries, the Netherlands and Spain,
this leaves us ideally placed to react to any negative trade barriers that may be imposed on the UK
• Continue to develop closer working relationship with these entities, sharing product development,
market knowledge and operational expertise to ensure we have the flexibility to adapt to any
changes in the future
• As more details emerge we will assess the impact, in the short term the Group will review the
implications based on potential outcomes
Low
Low
Medium
25548.04 – 17 October 2017 9:16 AM – Proof 12
2
1
3
1
2
4
2
4
2
3
2
2
3
1
4
2
4
=
=
=
=
33
www. fwthorpe.co.ukStock Code: TFWStrategic Report
Governance
Board of Directors
Directors’ Report
Statement of Directors’ Responsibilities
Directors’ Remuneration Report
Independent Auditors’ Report to the
Members of FW Thorpe Plc
36
38
42
43
46
Clarks Showroom, London
34
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017
25548.04 – 17 October 2017 9:16 AM – Proof 12
35
www. fwthorpe.co.ukStock Code: TFW Board of Directors
Mike Allcock
Chairman, Joint Group Chief Executive and Managing Director, Thorlux Lighting
Mike joined FW Thorpe Plc in 1984 as an apprentice working his way to Technical Director for Thorlux Lighting
in 1998, taking responsibility for the company’s design programme. He was appointed Group Technical
Director in 2001 and became Managing Director of Thorlux Lighting in 2003. Mike is a Chartered Electrical
Engineer and a Fellow of the Institution of Engineering and Technology. He is passionate about developing
innovative, high technology, market leading products. He became Joint Group Chief Executive of FW Thorpe
in 2010 and Chairman in July 2017.
Craig Muncaster
Joint Group Chief Executive, Group Financial Director and Company Secretary
After graduating in Business Administration, Craig qualified as a Chartered Management Accountant in 2000.
He has spent time in the manufacturing and engineering sectors, more recently as UK Financial Director for
Durr, which included a number of overseas ventures and projects for the wider group. He joined FW Thorpe
in 2010 and was appointed Joint Group Chief Executive in July 2017.
Andrew Thorpe
Executive Director
Andrew is the grandson of the company founder, Frederick William Thorpe. After serving an apprenticeship
with the company, he has worked in various parts of the business, leading to the positions of Export Sales
Director, Manufacturing Director and then Managing Director of Thorlux Lighting. In 2000, he became Joint
Group Chief Executive and in 2003 Group Chairman, positions he held until July 2017.
Tony Cooper
Manufacturing Director, Thorlux Lighting
Tony graduated from Loughborough University with a B.Tech in Production Engineering and Management
in 1984 and became a Chartered Engineer in 1988. He worked in various manufacturing industries, including
Mars Electronics and Thomas & Betts, before joining Thorlux Lighting as Manufacturing Director in 1998.
David Taylor
Managing Director, Philip Payne
David joined FW Thorpe in 1978 and on completion of a commercial apprenticeship leading to an HNC in
Business Studies he worked in various roles at Thorlux Lighting and elsewhere within the Group. In 1996, he
became Managing Director of Philip Payne Limited.
36
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 James Thorpe
Business Development Director, Thorlux Lighting
James graduated from Swansea University with a BSc in 2000. He spent 13 years in the IT industry, involved in
a variety of public and private sector contracts before joining FW Thorpe in 2013. During his time as Business
Development Manager at Thorlux, he has been responsible for securing a number of high profile projects
which have contributed to the growth of revenue derived from the healthcare sector. James is the great
grandson of the company founder and was appointed as a director in July 2017.
Peter Mason
Non-Executive Director
After studying Electrical Engineering at Aberdeen University, Peter qualified as a Chartered Accountant with
Price Waterhouse in 1976. He spent time with Planet Group and TI Group before joining FW Thorpe in 1987
as Finance Director. He became Joint Chief Executive in July 2000. In June 2010 he became a non-executive
director and Chairman of the remuneration committee following the appointment of his successor.
Ian Thorpe
Non-Executive Director
Ian, grandson of the company founder, was Manufacturing Director of Thorlux Lighting from 1978 until
1993 when he became Personnel Director. He became a non-executive director on 1 October 1997 and is a
member of the remuneration committee.
Auditors
PricewaterhouseCoopers LLP
Cornwall Court
19 Cornwall Street
Birmingham
B3 2DT
Bankers
Lloyds
Church Green East
Redditch
Worcestershire
B98 8BZ
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
BN99 6DA
Registered Office
Merse Road
North Moons Moat
Redditch
Worcestershire
B98 9HH
Nominated Adviser
N+1 Singer
12 Smithfield Street
London
EC1A 9BD
Solicitors
Keystone Law
48 Chancery Lane
London
WC2A 1JF
Pinsent Masons LLP
19 Cornwall Street
Birmingham
B3 2FF
Registered No
FW Thorpe Plc is registered in
England and Wales No. 317886
25548.04 – 17 October 2017 9:16 AM – Proof 12
37
www. fwthorpe.co.ukStock Code: TFWGovernance Directors’ Report
Principal Activity
The main activity of the Group continues to be the design, manufacture and
supply of professional lighting equipment. Each company within the Group
operates in a different market of the lighting sector.
Business Review
The trading results for the year are set out in the Consolidated Income
Statement on page 52 and the Group’s financial position at the end of the
year is set out in the Consolidated and Company Statement of Financial
Position on page 54. A review of the performance of the business during
the financial year and expected future developments are contained in the
Chairman’s Statement and the Operational Performance section which form
part of the Strategic Report.
Key Performance Indicators
The directors consider the main financial key performance indicators
(KPIs) to be those disclosed on page 1 (financial highlights). The two most
important KPIs to the business are revenue and operating profit.
The directors monitor non-financial areas of the business relating to energy
saving and environmental responsibility, market and product development,
customer service and product support on a regular basis.
Objectives are set for each company within the Group incorporating
financial and non-financial targets which have appropriate measurements
that reflect their nature. These are monitored regularly at local and Group
Board level. During the year the majority of objectives were achieved or
substantially achieved.
Principal Risks and Uncertainties
The table on pages 32 and 33 details what we consider to be the principal
risks and uncertainties to the business, and how we seek to manage and
mitigate these risks.
The Group has financial risks and seeks to minimise and manage these by
incorporating controls into key functions as part of the normal business
operation.
Details of other risk management procedures are included within the
internal control section of this report and in the financial risk section within
the accounting policies (note 1).
Internal Control
The Board of directors has overall responsibility for the system of internal
control and for reviewing its effectiveness throughout the Group. The
internal control systems are designed to meet the Group’s particular needs
and the risks to which it is exposed, and by their nature can only provide
reasonable but not absolute assurance against misstatement or loss.
The directors have responsibility for maintaining a system of internal
control which provides reasonable assurance of the effective and efficient
operations, internal financial control and compliance with laws and
regulations.
Internal Financial Control
During the year, a member of the Group finance department has visited all
operating sites to assess their compliance with a selection of key control
procedures and any non-compliance reported to the Group Board. Any
areas of non-compliance noted as part of this process have been addressed.
In addition, the executive directors regularly visit all operating sites and
review with local management financial and commercial issues affecting
the Group’s operations. Regular financial reporting includes rolling forecasts
and monthly financial reports comparing performance against plan. These
reports are reviewed locally with a Group representative and monitored by
the Group Board. Accordingly, the directors do not consider that an internal
audit department is required.
Other Areas of Control
During the year and continuing after the year end, the Board has operated
a formal risk identification and evaluation process as part of a continuous
review of the Group’s internal controls. This process considers financial,
operational and compliance risks and includes participation from senior
executives from all operating subsidiaries. The results of this process to date
have been utilised by the Board to focus the ongoing process for identifying,
evaluating and managing the Group’s significant risks. The programme is
utilised to monitor the potential impact of the risks identified and, where
appropriate, actions are taken to ensure they are effectively controlled. This
process is extended to include a detailed review of risk, as assessed by local
senior executives, and procedures have been established to ensure that the
Group Board is made aware of any additional significant risks identified and
to consider appropriate action. This process culminated in the provision
of a certificate, by senior executives at the operating sites, confirming that
they have identified and addressed the risks arising in their business and
reported them to the Group Board accordingly.
Financial Review
The directors have pleasure in submitting their annual report and the
audited consolidated financial statements of the Group and the company
for the year ended 30 June 2017.
Results and dividends
Revenue increased by 18.6% to £105.4m. Operating profit also showed an
improvement of 13.8% to £18.4m, benefiting from the improved profitability
in the Thorlux and Lightronics businesses.
Net finance income became an expense of £0.3m (2016: income of
£0.1m) during the year primarily due to payments made in relation to an
impairment charge for loan notes and continuing low interest rates.
The taxation charge reflects an effective tax rate of 20.99% (2016: 20.10%).
This is higher than the rate in the previous year due to increased profits in
the Netherlands, which has a higher tax rate.
On 6 April 2017, the company paid an interim dividend of 1.35p per share
(2016: 1.20p) amounting to £1,561,000 (2016: £1,387,000). A final dividend
of 3.55p (2016: 2.85p) per ordinary share is proposed amounting
to £4,106,000 (2016: £3,297,000) and, if approved, will be paid on
30 November 2017. Total dividends paid during the year amounted to
£4,858,000 in aggregate (2016: £6,651,000). The final dividend for 2016 was
paid on 24 November 2016.
38
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 Corporate Responsibility
The Group has the responsibility for managing the challenges that affect the
business on a daily basis; this also includes our impact on the environment,
our workforce, and the community.
Environment
The Group is committed to minimising the environmental impact of both
its manufacturing processes and its products. However, even with the most
responsible approach, some carbon dioxide (CO2) will be released into
the atmosphere as an indirect result of factory and selling activities and
customers’ use of luminaires.
In 2009, FW Thorpe designed an ambitious carbon offsetting scheme to
help compensate for these emissions. The scheme is now accredited under
the Woodland Carbon Code and now has 149,849 trees planted. The Group
requires some 8,000 or so plantings per annum to offset the CO2 produced
by our operations.
Cash and liquidity management
The Group’s cash is managed in accordance with the treasury policy. Cash
is managed centrally on a daily basis to ensure that the Group has sufficient
funds available to meet its needs and invests the remainder. The majority
of cash is placed with approved counterparties either on overnight deposit
or time deposit. There are a series of time deposits which are maturing on a
rolling cycle in order to meet regular business payments, with a margin for
larger regular and one-off payments as well as seasonal variation in cash
requirements.
The Group primarily trades in sterling. There is an exposure to foreign
currency as the Group buys and sells in foreign currencies and maintains
currency bank accounts in US dollars, Australian dollars, UAE dirhams and
euros. The activities of buying and selling in foreign currency are broadly
matched with currencies bought and sold as required in order to minimise
currency exposures. Larger exposures would be hedged in order to reduce
the risk of adverse exchange rate movement. There were no currency
hedging derivatives in place at 30 June 2017 or 30 June 2016.
Pension scheme position and funding
The latest triennial actuarial valuation was completed as at 30 June 2015.
This valuation showed that the pension scheme position remains in surplus
and a funding level for the future has been agreed between the trustees
of the scheme and the directors of the company. The directors consider
it unlikely that any changes to the present funding levels will have any
significant effect on the strength of the company’s statement of financial
position.
Group research and development activities
The Group is committed to research and development activities in order
to maintain its market share in the industrial and commercial lighting
market. These activities encompass constant development of both new and
existing products to ensure that a leading position in the lighting market is
maintained.
During the year the Group spent £1,715,000 (2016: £1,681,000) on capitalised
development costs, which includes internal labour.
Property, plant and equipment
The directors are of the opinion that the market value of the freehold land
and buildings is in excess of their net book value. While it is considered that
the market value is significantly greater than the net book value for many
of the Group’s properties as a result of being acquired between one and
over 20 years ago, management consider that undertaking formal valuation
exercises would be costly for limited value and consequently no formal
exercise has been undertaken.
Creditor payment policy
The Group’s policy concerning the payment of its trade creditors is to accept
and follow the normal terms of payment among suppliers to the lighting
industry. Payments are made when they fall due, which is usually on the day
after the end of the calendar month following the month in which delivery of
goods or services is made. Where reasonable settlement discount terms are
offered for early payment, these terms are usually taken up. The number of
days represented by the company’s year end trade payables is 48 (2016: 45).
25548.04 – 17 October 2017 9:16 AM – Proof 12
39
www. fwthorpe.co.ukStock Code: TFWGovernance Directors’ Report continued
Employee policies
Employees are kept informed of matters of concern to them as employees
by publication and distribution of a company newsletter and other notices,
or by specially convened meetings.
Committees representing the different groups of employees meet regularly
to ensure the views of employees are taken into account in making decisions
that are likely to affect their interests.
The involvement of employees in the Group’s performance is encouraged by
various incentive schemes including a profit related bonus scheme.
Board Constitution
The company continues to be proprietorial in nature and the directors act
as a unitary Board and as a consequence are unable to see the benefits of
splitting the Board into sub-committees and in particular of constituting
audit and nomination committees as matters that would normally be
considered by an audit or nomination committee are addressed by the full
Board with the non-executive directors present and the auditors attending
as appropriate.
A remuneration committee has been established with the following people
serving on it:
P D Mason
Non-executive director and Chairman of the committee.
I A Thorpe
Non-executive director.
Terms and conditions for the operation of this committee are in place and it
meets as and when required. The committee’s report is presented on pages
43 to 45.
Where there is a requirement for a senior personnel or subsidiary board
appointment a sub-committee is formed. Any appointment to the Group
Board would involve all Board members in the selection process.
The Board meets regularly during the year and has a schedule of matters
reserved for its approval, which only the Board may change.
Substantial Shareholdings
At 16 October 2017, the company had received notification of the following
interests in 3% or more of the issued share capital, excluding holdings of
directors:
Liontrust Investment Partners LLP 6,776,095 (5.7%)
Estate of Mrs B Thorpe 4,759,389 (4.0%)
Relations with Shareholders
Directors are kept informed of the views of shareholders by face-to-face
contact at the company’s premises on the day of the Annual General
Meeting and, if appropriate, by meeting with major shareholders at other
times during the year.
Directors’ Authority to Issue Shares
In previous years, at the Annual General Meeting, shareholders have been
asked to pass resolutions to authorise the directors to allot shares for cash
or to grant rights to subscribe for, or to convert any security into, shares in
the company and to allow them to do so (and also to sell treasury shares)
in certain circumstances without first offering the shares in question to
existing shareholders.
Information on the financial and economic factors affecting the
performance of the Group is made available twice yearly at the time of
publication of the interim and annual statements to shareholders.
The Group is committed to developing a safe and healthy working
environment for all employees consistent with the requirements of the
Health and Safety at Work Act. Within the constraints of health and safety,
disabled people are given full and fair consideration for job vacancies.
Depending on their skills and abilities, disabled people enjoy the same
career prospects as other employees, and if employees become disabled
every effort is made to ensure their continued employment, with
appropriate training where necessary.
Policies for recruiting employees are designed to ensure equal opportunities
irrespective of colour, ethnic or national origin, nationality, sex or marital
status.
Modern slavery
Our Modern Slavery Act disclosure is published on our corporate website
(www.fwthorpe.co.uk) in the company documents section.
Charitable gifts
During the year the Group gave £11,437 (2016: £5,563) for charitable
purposes. This is made up of donations to UK charities for children’s welfare
of £150, cancer care of £789, healthcare of £300, educational schemes of
£2,500, and local causes of £7,698.
Directors
The directors of the company during the year and at the date of this report
are set out on pages 36 and 37.
J E Thorpe was appointed to the Board on 3 July 2017. In accordance with
the Articles of Association he will retire from office at the Annual General
Meeting, but offers himself for election at that meeting.
The directors retiring by rotation are M Allcock and P D Mason who, being
eligible, offer themselves for re-election. The contract for M Allcock is
terminable on 24 months’ notice. P D Mason does not have a service
contract with the company.
Directors’ Share Interests
The details of the directors’ share interests are set out in the directors’
remuneration report on page 45.
Directors’ Indemnities
As permitted by the Articles of Association, the directors have the benefit
of an indemnity which is a qualifying third party indemnity provision as
defined by section 234 of the Companies Act 2006. The indemnity was
in force throughout the last financial year and is currently in force. The
company also purchased and maintained throughout the financial year
directors’ and officers’ liability insurance in respect of itself and its directors.
40
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 As the directors have no intention of exercising these authorities, there will
be no resolution to grant these powers at the forthcoming Annual General
Meeting.
This will not, however, prevent shares from being allotted or treasury shares
being sold to individuals who exercise options under any share option
scheme of the company.
Purchase of Own Shares
Resolution number 8 set out in the notice of the Annual General Meeting
will, if it is approved, allow the company to exercise the authority contained
in the Articles of Association to purchase its own shares. The Board has no
firm intention that the company should make purchases of its own shares if
the proposed authority becomes effective, but would like to be able to act
quickly if circumstances arise in which such a purchase would be desirable.
Purchases will only be made on the Alternative Investment Market and
only in circumstances where the directors believe that they are in the best
interests of the shareholders generally. Furthermore, purchases will only
be made if the directors believe that they would result in an increase in
earnings per share.
The proposed authority will be limited by the terms of the special resolution
to the purchase of 11,893,559 ordinary shares representing 10% of the
company’s issued ordinary share capital at 16 October 2017 and a nominal
value of £118,936.
The minimum price per ordinary share payable by the company (exclusive of
expenses) will be 1p. The maximum to be paid will be an amount not more
than 5% above the average of the middle market quotations for ordinary
shares of the company as derived from the Alternative Investment Market
on the five business days immediately preceding the date of each purchase.
The company may either cancel any shares which it purchases under this
authority or transfer them into treasury, and subsequently sell or transfer
them out of treasury or cancel them. The maximum number of shares and
the permitted price range are stated in order to comply with statutory and
Stock Exchange requirements and should not be taken as representative of
the number of shares (if any) which may be purchased, or the terms of such
a purchase.
The authority will lapse on the date of the Annual General Meeting of the
company in 2018. However, in order to maintain the Board’s flexibility
of action it is envisaged that it will be renewed at future Annual General
Meetings.
Corporate Governance
As a company whose shares are traded on the Alternative Investment Market
of the London Stock Exchange Plc, the company is not required to comply
with the Principles of Good Governance and Code of Best Practice (“The UK
Corporate Governance Code”, or the “Code”). However, the Board considers
the Quoted Companies Alliance’s “Corporate Governance Guidelines for
Smaller Quoted Companies” (the QCA Guidelines) relevant due to the size
and complexity of the company. The QCA Guidelines apply key elements
from the Code and other relevant guidance to the needs of small and mid-
size quoted companies for which the Code may not be entirely or directly
relevant.
The directors consider that the company applies the principles of best
practice with the exception of the matters listed below:
• There are no independent Board members.
• The Board does not have an independent audit committee.
The directors believe that the exceptions, which are more fully explained
in the sections relating to the Board constitution and the directors’
remuneration report, are appropriate for the size and context of the Group’s
business.
Statement on the Provision
of Information to Auditors
Each of the directors confirms that, as far as he is aware, there is no relevant
audit information of which the company’s auditors are unaware, and that he
has taken all the steps he ought to have as a director to make himself aware
of any relevant audit information, and to establish that the auditors are
aware of that information. The above is in accordance with the provisions of
section 418 of the Companies Act 2006. The auditors have direct access to all
members of the Board and attend and present their reports at appropriate
Board meetings. The Board considers, at least annually, the relationships and
fees in place with the auditors to confirm their independence is maintained.
Independent Auditors
The auditors, PricewaterhouseCoopers LLP, have expressed their willingness
to continue in office and a resolution for their re-appointment will be
proposed at the next Annual General Meeting.
Going Concern
The directors confirm that they are satisfied that the Group and company
have adequate resources, with £24.7m cash and £17.0m short-term deposits,
to continue in business for the foreseeable future, and for this reason, they
continue to adopt the going concern basis in preparing the accounts.
Approval of Strategic and Directors’ Report
The directors confirm that the information contained within the Strategic
Report on pages 6 to 33 and the Directors’ Report on pages 38 to 41 is an
accurate representation of the Group’s strategy and performance.
By order of the Board
Craig Muncaster
Director
16 October 2017
Registered Office:
Merse Road
North Moons Moat
Redditch
Worcestershire
B98 9HH
Company Registration Number: 317886
25548.04 – 17 October 2017 9:16 AM – Proof 12
41
www. fwthorpe.co.ukStock Code: TFWGovernance Statement of Directors’ Responsibilities
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for
each financial year. Under that law the directors have prepared the Group
financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and company financial
statements in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. Under company law the directors
must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the and company and of the
profit or loss of the Group and company for that period. In preparing the
financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable IFRSs as adopted by the European Union have
been followed for the Group financial statements and IFRSs as adopted
by the European Union have been followed for the company financial
statements, subject to any material departures disclosed and explained
in the financial statements;
• make judgements and accounting estimates that are reasonable and
prudent; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and company will continue in
business.
The directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Group and company’s transactions
and disclose with reasonable accuracy at any time the financial position
of the Group and company and enable them to ensure that the financial
statements comply with the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
The directors are also responsible for safeguarding the assets of the Group
and company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the
company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
The directors consider that the annual report and accounts, taken as a
whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group and company’s performance,
business model and strategy.
Each of the directors, whose names and functions are listed in Governance
section confirm that, to the best of their knowledge:
• the company financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and profit of the
company;
• the Group financial statements, which have been prepared in accordance
with IFRSs as adopted by the European Union, give a true and fair view of
the assets, liabilities, financial position and profit of the Group; and
• the Directors’ Report includes a fair review of the development
and performance of the business and the position of the Group
and company, together with a description of the principal risks and
uncertainties that it faces.
By order of the Board
Craig Muncaster
Director
16 October 2017
42
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 Directors’ Remuneration Report
The Board has prepared this report to the shareholders, taking into account
sections 420 to 422 of the Companies Act 2006 and AIM Rule 19.
The Board has delegated the responsibility for the executive directors’
remuneration to the remuneration committee. The scope of their
responsibilities includes the executive directors’ service contracts,
salaries and other benefits, which comprise their terms and conditions of
employment.
Remuneration Committee
The current members of the remuneration committee are the non-executive
directors P D Mason (Chairman of the committee) and I A Thorpe.
The committee has met as and when required during the financial year. No
member of the committee has any personal financial interest in the matters
to be decided other than as shareholders. There are no conflicts of interest
arising from cross-directorships or day-to-day involvement in running the
business. The committee has access to market data when considering the
remuneration of the executive directors.
Remuneration Policy – Executive Directors
The aim of the committee is to ensure that the executive directors are fairly
rewarded for their responsibilities and contribution to the performance
of the Group. The committee seeks to achieve this with a combination of
performance and non-performance related remuneration designed to
attract, retain and motivate the directors.
In establishing the salaries of the directors, the committee takes into account
the responsibilities and performance of the individual together with data
from comparable organisations and indicative trends for the business and its
economic sector.
The remuneration package consists of the following elements:
1. Basic salary, benefits in kind and other benefits. The salary is determined
in August each year, unless there has been a change in responsibilities,
where an adjustment will be made at the same time. The benefits in kind
mainly consist of the provision of a car and health insurance. A director
may choose to take a cash allowance instead of a car. Other benefits
consist of pension arrangements and life assurance.
2. Annual bonus. The bonus is made up of two elements. The first element
relates to the operating profit of the business unit for which the director
has specific performance responsibilities. The second element relates
to the operating profit of the Group as a whole. The bonuses are paid in
September and relate to the period ending on 30 June in the same year.
Remuneration Policy –
Non-Executive Directors
The Board as a whole determines the remuneration of the non-executive
directors. The Board takes into account the contribution made and the
relative time spent on the company’s affairs. The non-executive directors do
not receive bonuses. Their benefits in kind consist of the provision of health
insurance.
Directors’ Service Contracts
A B Thorpe and M Allcock have service contracts terminable on two years’
notice. C Muncaster, A M Cooper, D Taylor and J E Thorpe have service
contracts terminable on one year’s notice. P D Mason and I A Thorpe do not
have formal service contracts with the company.
Performance Graph
The graph below shows the comparative data for the FTSE AIM share index
and the FTSE Fledgling share index, rebased to 100, as these are considered
to be the most appropriate comparative indices for the company’s business.
650
550
450
350
250
150
50
30-06-2012
30-06-2013
30-06-2014
30-06-2015
30-06-2016
30-06-2017
FW Thorpe
AIM All Share
FTSE Fledgling
25548.04 – 17 October 2017 9:16 AM – Proof 12
43
www. fwthorpe.co.ukStock Code: TFWGovernance Directors’ Remuneration Report continued
Directors’ Emoluments (Audited)
Executive directors
A B Thorpe
M Allcock
D Taylor
A M Cooper
C Muncaster
J E Thorpe - appointed 3 July 2017
Non-executive directors
C M Brangwin - resigned 2 December 2016
I A Thorpe
P D Mason
2017
Salary/fees
£’000
215
226
117
130
154
–
13
27
27
909
2017
Bonus
£’000
176
196
90
121
124
–
–
–
–
2017
Benefits
£’000
28
14
16
12
13
–
11
14
4
2017
Total
£’000
419
436
223
263
291
–
24
41
31
2016
Total
£’000
384
384
196
227
254
–
37
40
30
707
112
1,728
1,552
The directors’ emoluments exclude contributions to the pension scheme.
Directors’ Pension Arrangements
M Allcock is a deferred member and D Taylor an active member of the defined contribution scheme of the FW Thorpe Retirement Benefits Scheme and
have a final salary guarantee as they were previously members of the defined benefit section. A M Cooper is a deferred member of the defined contribution
section of the FW Thorpe Retirement Benefits Scheme and has a personal pension to which the company contributes. C Muncaster has a personal pension to
which the company contributes.
C M Brangwin, I A Thorpe, A B Thorpe and P D Mason are retired members of the defined benefit section.
The FW Thorpe Retirement Benefits Scheme is a funded, HMRC approved occupational pension scheme. The scheme is divided into two sections – a defined
benefit scheme and a defined contribution scheme. The defined benefit section was closed to new members on 1 October 1995.
The defined benefit section aims to provide a maximum pension of two-thirds of pensionable salary at normal retirement date. M Allcock’s and D Taylor’s
pensionable salary includes an average of the previous three years’ profit bonus. Defined contribution members contribute up to 5% of basic salary and the
company contributes up to 9.5%.
M Allcock and A M Cooper have ceased being active members of the FW Thorpe Retirement Benefits Scheme due to HMRC limits on lifetime allowances and
annual contributions. Subsequently the company has entered into pension compensation arrangements with M Allcock and A M Cooper to compensate
them for the loss of these employer pension contributions. During the financial year the company paid pension compensation to M Allcock of £37,319
(2016: £nil) and to A M Cooper £2,152 (2016: £246).
All the executive directors are covered by life assurance benefit of four times pensionable salary. In addition, the defined benefit scheme members are
entitled to a spouse’s pension on death.
The following directors, excluding those classified as pensioners, had accrued entitlements under the defined benefit section of the pension scheme.
M Allcock
D Taylor
Age at
year end
Normal
pension age
Value of
accrued pension
at 30 June 2017
£pa
Director’s
contributions
during the year
£
Change in value
of accrued
pension since
30 June 2016
£pa
49
55
65
65
110,327
72,819
8,482
8,073
2,207
9,043
The following table shows the contributions paid by the company in respect of those directors participating in the defined contribution section of the
pension scheme.
A M Cooper
44
25548.04 – 17 October 2017 9:16 AM – Proof 12
2017
£’000
–
2016
£’000
8,237
Annual Report and Accounts for the year ended 30 June 2017 C Muncaster and A M Cooper have personal pensions which are not part of the company scheme, and the following contributions have been made during
the year.
C Muncaster
A M Cooper
2017
£’000
13,596
10,000
2016
£’000
11,933
2,500
Directors’ Shareholdings
The directors listed below were in office during the year. Directors’ interests in the share capital of the company at 30 June 2017 and 1 July 2016 were as
follows:
Executive directors
A B Thorpe
M Allcock
D Taylor
A M Cooper
C Muncaster
Non-executive directors
C M Brangwin
I A Thorpe
P D Mason
Ordinary shares of 1p Beneficial
2017
2016
27,602,700
114,000
55,913
84,000
–
27,602,700
114,000
55,913
84,000
–
7,731,550
25,047,120
1,626,370
7,731,550
25,047,120
1,626,370
The market price of the company’s shares at the beginning and end of the financial year was 224p and 390p respectively, and the range of market prices
during the year was from 203p to 412.5p.
Executive Share Ownership Plan (ESOP)
Share options were granted during 2014, under the company’s ESOP, to the company’s executive directors and certain directors of subsidiary companies. The
plan allows the vesting of options subject to the achievement of performance targets, being annual growth of pre-tax Earnings Per Shares in excess of RPI
plus 3% over a five-year period. The options that were granted to the executive directors are detailed in the table below:
Date Granted
Share Options
Exercise price (p)
A B Thorpe
M Allcock
D Taylor
A M Cooper
C Muncaster
24 October 2014
200,000
124
24 October 2014
200,000
124
24 October 2014
200,000
124
24 October 2014
200,000
124
24 October 2014
200,000
124
There have been no other changes in the interests of the directors in the share capital of any company in the Group during the period 1 July 2017
to 16 October 2017.
Approved by the Board and signed on its behalf by:
Craig Muncaster
Director
16 October 2017
25548.04 – 17 October 2017 9:16 AM – Proof 12
45
www. fwthorpe.co.ukStock Code: TFWGovernance Independent Auditors’ Report to the
Members of FW Thorpe Plc
Report on the audit of the financial statements
Opinion
In our opinion, FW Thorpe Plc’s Group financial statements and company financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s and of the company’s affairs as at 30 June 2017 and of the Group’s profit and the Group’s and the
company’s cash flows for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union and, as regards the company’s financial statements, as applied
in accordance with the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which comprise: the Consolidated and
Company Statement of Financial Position as at 30 June 2017; the Consolidated Income Statement and Consolidated Statement of Comprehensive Income,
the Consolidated and Company Statement of Cash Flows, and the Consolidated and Company Statements of Changes in Equity for the year then ended; and
the notes to the financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are
further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
Our audit approach
Overview
Materiality
Audit scope
Key audit
matters
The scope of our audit
• Overall Group materiality: £1.0m (2016: £0.8m), based on approximately 5% of profit before tax.
• Overall company materiality: £0.9m (2016: £0.8m), based on approximately 5% of profit before tax.
• We conducted an audit of the complete financial information of two financially significant reporting units:
Thorlux Lighting and Lightronics, as well as five other reporting units located in the UK,
such that the audit work was complete prior to finalisation of the Group financial statements.
• This has resulted in coverage of 98% of revenue, 98% of profit before tax and 99% of net assets.
• Valuation of Lightronics share appreciation rights repurchase obligation (Group and company).
• Valuation of warranty provision (Group and company).
• Valuation of capitalised development costs (Group and company).
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we
looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including
those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified
by our audit.
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Annual Report and Accounts for the year ended 30 June 2017
Key audit matter
How our audit addressed the key audit matter
Valuation of Lightronics share appreciation rights
repurchase obligation
Group and company
Refer to the critical accounting estimates and judgements in note 1 to the
financial statements and note 21 for trade and other payables.
On acquisition of Lightronics in FY15, share appreciation rights equivalent
to 35% of the acquired business were sold back to the previous investors
and management. The Group and company are obligated to repurchase
these rights at an EBITDA (Earnings before Interest, Tax, Depreciation and
Amortisation expense) multiple (based on an average of the previous
two years) by FY21 with the option to exercise being held by the previous
investors and management.
Where the share appreciation rights are due to previous investors, this
is accounted for as contingent consideration whereas for previous
management who remain employed it is accounted for as a cash settled
share based payment. Any revaluation of the contingent consideration is
recognised immediately whilst any revaluation of the total share based
payment charge is spread across the remaining option period, with both
elements charged to administrative expenses.
The valuation of repurchase obligation involves judgement with respect to
both the expected EBITDA at redemption and also the redemption date.
Valuation of warranty provision
Group and company
Refer to the critical accounting estimates and judgements in note 1 to the
financial statements and note 23 for provisions.
The Group makes provisions for warranties where it is obligated to repair
or replace faulty goods under the terms and conditions of sale. The typical
warranty provision offered is for a period of five years though longer
periods can be offered on certain product lines. Amounts have been
provided based on known faults at the year-end date where rectification
will be due and also based on expected failure rates as applied to sales
made within the warranty period.
The valuation of the warranty provision involves judgement with respect
to the expected failure rate especially when applied to new products at
the start of their warranty period.
Valuation of capitalised internal development costs
Group and company
Refer to the critical accounting estimates and judgements in note 1 to the
financial statements and note 9 for intangibles.
The Group undertakes development activities on new products and
such internal development costs are capitalised where allowable under
IAS 38 – “Intangible Assets”. Judgement has been applied in considering
whether the requirements for capitalising such internal development costs
under IAS 38 have been met, the level and nature of costs which should be
capitalised and also the period over which costs should be amortised.
We tested the key judgements within the repurchase obligation valuation,
being the annual revenue and EBITDA growth assumptions and the
timing of when the option is estimated to be exercised. With reference
to the historical performance of Lightronics, the wider macroeconomic
conditions, review of forecast information and discussions with Lightronics
management, these assumptions on growth and timing were considered
to be reasonable.
We recalculated and ensured there were no changes in the split in the
share appreciation rights percentage holdings between previous investors
and management through enquiries with management and review of
Board minutes. We considered the accounting for each tranche and
ensured it was compliant with the requirements of IAS 39 – “Financial
Instruments: Recognition and measurement” and IFRS 2 – “Share-based
payment”.
We found that the valuation of the share appreciation rights repurchase
obligation was consistent with the evidence obtained.
We have audited the specific provisions held at year-end by inspecting
correspondence to confirm rectification is required and recalculating
the provision amount based on material cost and estimated labour and
installation expenditure.
We have enquired with management and reviewed Board minutes to
ensure that no specific rectification issues have been identified which were
not provided for at year-end.
We have corroborated actual failure rates against the expected failure
rate as used to calculate a provision where no known rectification issues
have been identified. We have additionally reviewed the judgement
management has made on those products where it would be too early in
the sales cycle to extrapolate a failure rate across the remaining
warranty term.
We found that the valuation of the warranty provision was consistent with
the evidence obtained and the estimates applied are not unreasonable.
We have assessed the development activities performed by the Group
against the criteria for capitalising internal development costs under
IAS 38.
We have performed testing over the amounts capitalised in the year by
agreeing payroll amounts to payslips and assessing the percentage of
payroll costs capitalised with respect to the employee and their role in the
development of products.
We have assessed the amortisation period of three years across the Group
with reference to the product launches and knowledge of the industry.
We found that the valuation of capitalised development costs was
consistent with the evidence obtained.
25548.04 – 17 October 2017 9:16 AM – Proof 12
47
www. fwthorpe.co.ukStock Code: TFWGovernance
Independent Auditors’ Report to the
Members of FW Thorpe Plc continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking
into account the structure of the Group and the company, the accounting processes and controls, and the industry in which they operate.
The Group financial statements are a consolidation of a number of reporting units, comprising the Group’s businesses within its nine operating segments.
In establishing the overall approach to the Group audit, we identified two reporting units which, in our view, required an audit of their complete financial
information both due to their size and risk characteristics: Thorlux Lighting (the Company) and Lightronics. Thorlux Lighting was audited by the Group
engagement team while Lightronics was audited by a component audit team located in the Netherlands. The work performed by the component auditors
was subject to review both remotely and in person by the Group engagement team and the work performed over the valuation of the warranty provision
has fed into our key audit matters.
In addition, we conducted the full scope audits of five reporting units located in the UK such that the audit work was complete prior to finalisation of the
Group financial statements.
The audit work performed at these seven reporting units, together with additional procedures performed on centralised functions and at the Group level,
including audit procedures over the consolidation, gave us the evidence we needed for our opinion on the Group financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative
considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial
statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as
a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£1.0m (2016: £0.8m).
Group financial statements
Company financial statements
£0.9m (2016: £0.8m).
How we determined it
Approximately 5% of profit before tax.
Approximately 5% of profit before tax.
Rationale for
benchmark applied
We believe that profit before tax is the primary measure
used by the shareholders in assessing the performance of
the entity, and is a generally accepted auditing benchmark.
We believe that profit before tax is the primary measure
used by the shareholders in assessing the performance of
the entity, and is a generally accepted auditing benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality
allocated across components was between £45,000 and £900,000. Certain components were audited to a local statutory audit materiality that was also less
than our overall Group materiality.
We agreed with the audit committee that we would report to them misstatements identified during our audit above £50,000 (Group audit) (2016: £40,000)
and £50,000 (company audit) (2016: £40,000) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group’s and
company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial
statements are authorised for issue.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s and company’s ability to continue
as a going concern.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The
directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not
express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material
misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
48
25548.04 – 17 October 2017 9:16 AM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have
been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain opinions and
matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the year
ended 30 June 2017 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and company and their environment obtained in the course of the audit, we did not identify any
material misstatements in the Strategic Report and Directors’ Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 42, the directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the company’s ability to continue as a going concern,
disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the
Group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by
us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
David Teager (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
16 October 2017
25548.04 – 17 October 2017 9:16 AM – Proof 12
49
www. fwthorpe.co.ukStock Code: TFWGovernance Financial
Statements
52
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
53
Consolidated and Company Statement of Financial Position 54
55
Consolidated Statement of Changes in Equity
56
Company Statement of Changes in Equity
57
Consolidated and Company Statement of Cash Flows
58
Notes to the Financial Statements
92
Notice of Meeting
94
Financial Calendar
Veka, Burnley
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Annual Report and Accounts for the year ended 30 June 2017
25548.04 – 16 October 2017 4:52 PM – Proof 12
51
www. fwthorpe.co.ukStock Code: TFW Consolidated Income Statement
For the year ended 30 June 2017
Notes
2017
£’000
2016
£’000
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Other operating income
Operating profit
Finance income
Finance costs
Share of profit/(loss) of joint ventures
Profit before income tax
Income tax expense
Profit for the year
2
3
5
5
6
105,448
(59,025)
46,423
(10,598)
(17,636)
233
18,422
535
(784)
178
18,351
(3,851)
14,500
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
– Basic
– Diluted
The notes on pages 58 to 91 form part of these financial statements.
Total
Total
Notes
7
7
2017
pence
12.54
12.47
The company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the company income statement.
88,946
(50,000)
38,946
(8,455)
(14,532)
236
16,195
702
(627)
(1)
16,269
(3,270)
12,999
2016
pence
11.24
11.21
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25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 Consolidated Statement of Comprehensive Income
For the year ended 30 June 2017
Profit for the year:
Other comprehensive income/(expenses)
Items that may be reclassified to profit or loss
Revaluation of available-for-sale financial assets
– Arising in year
– Reclassified in year
Exchange differences on translation of foreign operations
– Arising in year
– Reclassified in year
Taxation
Items that will not be reclassified to profit or loss
Actuarial loss on pension scheme
Movement on unrecognised pension scheme surplus
Other comprehensive income for the year, net of tax
Notes
2017
£’000
14,500
2016
£’000
12,999
14
15
22
22
287
–
657
–
18
962
(1,211)
1,071
(140)
822
(74)
–
1,627
–
60
1,613
(1,285)
1,095
(190)
1,423
Total comprehensive income for the year attributable to equity shareholders
15,322
14,422
The notes on pages 58 to 91 form part of these financial statements.
25548.04 – 16 October 2017 4:52 PM – Proof 12
53
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Consolidated and Company Statement of Financial Position
As at 30 June 2017
Group
2017
£’000
Notes
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Investment property
Loans and receivables
Equity accounted investments
Available-for-sale financial assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Other financial assets at fair value through profit or loss
Loans and receivables
Short-term financial assets
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Current income tax liabilities
Total current liabilities
Net current assets
Non-current liabilities
Retirement benefit deficit
Other payables
Provisions for liabilities and charges
Deferred income tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Capital redemption reserve
Foreign currency translation reserve
Retained earnings
Total equity
8
9
10
11
12
13
14
15
16
17
18
12
19
20
21
22
21
23
15
24
25
25
25
2016
£’000
14,900
15,183
–
2,131
4,980
936
3,348
27
41,505
18,863
21,914
389
–
14,910
18,295
74,371
Company
2017
£’000
2016
£’000
9,547
3,501
13,682
9,401
3,058
968
3,630
–
43,787
14,595
21,456
389
750
16,981
22,528
76,699
8,525
3,381
13,682
6,926
4,980
936
3,348
–
41,778
11,311
22,988
389
–
14,910
16,471
66,069
18,837
15,927
–
2,163
3,058
936
3,630
19
44,570
22,592
18,995
389
750
16,981
24,678
84,385
128,955
115,876
120,486
107,847
(17,826)
(1,606)
(19,432)
64,953
–
(5,774)
(1,537)
(920)
(8,231)
(27,663)
101,292
1,189
656
137
2,263
97,047
101,292
(16,700)
(1,963)
(18,663)
55,708
–
(4,619)
(1,088)
(799)
(6,506)
(25,169)
90,707
1,189
656
137
1,606
87,119
90,707
(14,438)
(866)
(15,304)
61,395
–
(5,729)
(548)
(666)
(6,943)
(22,247)
98,239
1,189
656
137
–
96,257
98,239
(13,504)
(1,601)
(15,105)
50,964
–
(4,619)
(507)
(600)
(5,726)
(20,831)
87,016
1,189
656
137
–
85,034
87,016
The Group profit includes a profit of £15.8m (2016: £13.7m) for the company.
The notes on pages 58 to 91 form part of these financial statements.
The financial statements on pages 52 to 91 were approved by the Board on 16 October 2017 and signed on its behalf by
Mike Allcock
54
Craig Muncaster
Company Registration Number: 317886
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017
Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
Balance at 1 July 2015
Comprehensive income/(expense)
Profit for the year to 30 June 2016
Actuarial loss on pension scheme
Movement on unrecognised pension scheme surplus
Revaluation of available-for-sale financial assets
Movement on associated deferred tax
Impact of deferred tax rate change
Transfer to foreign currency translation reserve
Exchange differences on translation of foreign
operations
Total comprehensive income
Transactions with owners
Dividends paid to shareholders
Share based payment charge
Total transactions with owners
Balance at 30 June 2016
Comprehensive income/(expense)
Profit for the year to 30 June 2017
Actuarial loss on pension scheme
Movement on unrecognised pension scheme surplus
Revaluation of available-for-sale financial assets
Movement on associated deferred tax
Impact of deferred tax rate change
Exchange differences on translation of foreign
operations
Total comprehensive income
Transactions with owners
Dividends paid to shareholders
Share based payment charge
Total transactions with owners
Balance at 30 June 2017
Notes
Share
capital
£’000
1,189
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Foreign
currency
translation
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
656
137
–
80,882
82,864
22
22
14
15
15
26
27
22
22
14
15
15
26
27
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(21)
12,999
(1,285)
1,095
(74)
14
46
21
12,999
(1,285)
1,095
(74)
14
46
–
1,627
1,606
–
1,627
12,816
14,422
–
–
–
(6,651)
(6,651)
72
72
(6,579)
(6,579)
1,189
656
137
1,606
87,119
90,707
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,500
(1,211)
1,071
287
(50)
68
14,500
(1,211)
1,071
287
(50)
68
657
657
–
657
14,665
15,322
–
–
–
(4,858)
(4,858)
121
121
(4,737)
(4,737)
1,189
656
137
2,263
97,047
101,292
The notes on pages 58 to 91 form part of these financial statements.
25548.04 – 16 October 2017 4:52 PM – Proof 12
55
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Company Statement of Changes in Equity
For the year ended 30 June 2017
Balance at 1 July 2015
Comprehensive income/(expense)
Profit for the year to 30 June 2016
Actuarial loss on pension scheme
Movement on unrecognised pension scheme surplus
Revaluation of available-for-sale financial assets
Movement on associated deferred tax
Impact of deferred tax rate change
Total comprehensive income
Transactions with owners
Dividends paid to shareholders
Share based payment charge
Total transactions with owners
Balance at 30 June 2016
Comprehensive income/(expense)
Profit for the year to 30 June 2017
Actuarial loss on pension scheme
Movement on unrecognised pension scheme surplus
Revaluation of available-for-sale financial assets
Movement on associated deferred tax
Impact of deferred tax rate change
Total comprehensive income
Transactions with owners
Dividends paid to shareholders
Share based payment charge
Total transactions with owners
Balance at 30 June 2017
22
22
14
15
15
26
27
22
22
14
15
15
26
27
Notes
Share
capital
£’000
1,189
Share
premium
account
£’000
656
Capital
redemption
reserve
£’000
137
Retained
earnings
£’000
78,160
13,661
(1,285)
1,095
(74)
14
42
13,453
(6,651)
72
(6,579)
Total
equity
£’000
80,142
13,661
(1,285)
1,095
(74)
14
42
13,453
(6,651)
72
(6,579)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,189
656
137
85,034
87,016
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15,800
(1,211)
1,071
287
(50)
63
15,960
(4,858)
121
(4,737)
15,800
(1,211)
1,071
287
(50)
63
15,960
(4,858)
121
(4,737)
1,189
656
137
96,257
98,239
The notes on pages 58 to 91 form part of these financial statements.
56
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 Consolidated and Company Statement of Cash Flows
For the year ended 30 June 2017
Cash flows from operating activities
Cash generated from operations
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangibles
Purchase of subsidiary (inclusive of cash acquired)
Purchase of investment property
Purchase of available-for-sale financial assets
Sale of available-for-sale financial assets
Investment in associate
Property rental and similar income
Dividend income
Net purchase of short-term financial assets
Interest received
Receipt of loan notes
Net cash used in investing activities
Cash flows from financing activities
Dividends paid to company’s shareholders
Net cash used in financing activities
Effects of exchange rate changes on cash
Net increase/(decrease) in cash in the year
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The notes on pages 58 to 91 form part of these financial statements.
Notes
28
26
20
Group
2017
£’000
22,380
(3,840)
18,540
(5,400)
262
(2,148)
240
(100)
–
5
–
31
210
(2,071)
393
1,090
(7,488)
(4,858)
(4,858)
189
6,383
18,295
24,678
2016
£’000
18,946
(3,323)
15,623
(2,543)
122
(1,764)
–
(28)
(404)
–
(936)
74
177
(5,552)
314
200
(10,340)
(6,651)
(6,651)
487
(881)
19,176
18,295
Company
2017
£’000
15,806
(3,044)
12,762
(2,131)
169
(1,570)
–
(2,651)
–
5
–
315
4,524
(2,071)
396
1,090
(1,924)
(4,858)
(4,858)
77
6,057
16,471
22,528
2016
£’000
13,737
(2,307)
11,430
(1,782)
85
(1,404)
–
(24)
(404)
–
(936)
348
1,973
(5,552)
217
200
(7,279)
(6,651)
(6,651)
103
(2,397)
18,868
16,471
25548.04 – 16 October 2017 4:52 PM – Proof 12
57
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements
For the year ended 30 June 2017
1 Accounting Policies
The principal accounting policies applied in the preparation of these consolidated financial statements and company financial statements (the “financial
statements”) are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
FW Thorpe Plc is incorporated in England and Wales. The company is domiciled in the UK. The company is a public limited company which is listed on the
Alternative Investment Market. The address of its registered office is Merse Road, North Moons Moat, Redditch, Worcestershire, B98 9HH.
Basis of preparation
The consolidated and company financial statements of FW 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.
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. With specific regard to IFRS 15, the directors do not expect this to have a material
impact on reported profits. For IFRS 16, the directors, although not expecting any material impacts on reported profits, are evaluating the effect on the
statement of financial position.
The financial statements are presented in pounds sterling, rounded to the nearest thousand.
58
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 1 Accounting Policies continued
The preparation of financial information in conformity with the basis of preparation described above requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the company’s and Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial information, are disclosed
in the critical accounting estimates and judgements section.
Basis of consolidation
The financial statements for FW Thorpe Plc incorporate the financial statements of the company and its subsidiary undertakings.
A subsidiary is a company controlled directly by the Group and all the subsidiaries are wholly owned by the Group. The Group achieves control over the
subsidiaries by being able to influence financial and operating policies so as to obtain benefits from their activities.
Intra-group transactions, balances, income and expenses are eliminated in preparing consolidated financial statements.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary
is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair
value of any asset or liability resulting from a contingent consideration agreement. Acquisition related costs are expensed as incurred. Identifiable assets
acquired and liabilities and contingent liabilities assumed on a business combination are measured initially at their fair values at the acquisition date. The
Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s
proportionate share of the recognised amounts of the acquiree’s identifiable net assets.
Equity accounted investments
The Group’s interests in equity accounted investments comprise interests in joint ventures and an associate.
Joint ventures are all entities over which the Group exercised joint control. Associates are those entities in which the Group has significant influence, but not
control or joint control, over the financial and operating policies. Investments in joint ventures and associates are accounted for by the equity method of
accounting and are initially recognised at cost.
The Group discloses its share of the result of the equity accounted investments on the face of the income statement. The Group also discloses its share of the
net assets on the face of the statement of financial position.
Unrealised gains on transactions between the Group and its equity accounted investments are eliminated to the extent of the Group’s interest in the joint
venture and that unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The carrying amount of each equity accounted investment is tested for impairment by comparing its recoverable amount with its carrying amount
whenever there is an indication that the investment may be impaired.
Revenue recognition
The Group recognises revenue when the amount of revenue can be reliably measured, when it is probable that future economic benefits will flow to the
entity and when specific criteria have been met for each of the Group’s activities. The amount of revenue is not considered to be reliably measurable until all
contingencies relating to the sale have been resolved. Revenue comprises the fair value of the consideration received or receivable for the sale of goods and
services. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each
arrangement. Revenue is subsequently recognised based upon the goods and services provided, when these goods have been delivered to the customer or
the service performed, excluding VAT and trade discounts.
Interest income
Interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired the Group reduces the carrying
amount to its recoverable amount, being the estimated cash flow discounted at the original effective interest rate of the instrument, and continues
unwinding the discount as interest income.
Interest on impaired loans is recognised using the original effective interest rate.
Dividend income
Dividend income is recognised when the right to receive payment is established.
25548.04 – 16 October 2017 4:52 PM – Proof 12
59
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
1 Accounting Policies continued
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, is identified as the Group Board.
The Group is organised into nine operating segments based on the products and customer base in the lighting market. The largest businesses, on an
ongoing basis, are Thorlux and Lightronics Participaties B.V. 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 Limited.
Pension costs
The Group operates a hybrid defined benefit and defined contribution pension scheme. The basis of the Group’s hybrid pension scheme provides benefits
to members based upon the following:
• Service before 1 October 1995, benefits provided are defined benefit in nature (the ”pure“ defined benefit element);
• Service after 1 October 1995, has two elements:
• For members joining pre-1 October 1995, benefits provided are the maximum of their defined contribution pension and their defined benefit pension
(the ”defined benefit underpin“ element);
• For members joining post-1 October 1995, benefits provided are defined contribution in nature (the “pure defined contribution” element).
The contributions of all three elements are paid into one pension scheme, where the contributions and assets are segregated and ring-fenced from each
other. The assets of the scheme are invested and managed independently of the finances of the Group. Pension costs are assessed in accordance with the
advice of an independent qualified actuary. Costs include the regular cost of providing benefits, which it is intended should remain at a substantially level
percentage of current and expected future earnings of the employees covered. Variations from the regular pensions cost are spread evenly through the
income over the remaining service lives of current employees. Contributions made to the defined benefit scheme are charged to the income statement in
the period in which they are made.
The liability or surplus recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined
benefit obligation at the statement of financial position date less the fair value of plan assets, together with adjustments for unrecognised past-service costs.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. In the defined benefit underpin
element of the scheme the liabilities reflect the greater of the defined contribution or defined benefit liabilities.
For the defined benefit underpin element of the scheme each member is tested to see whether the pension on a defined contribution or defined benefit
basis is higher. The liabilities shown in the pensions note are based on the greater of the two liabilities for each member, which in almost all cases is the
defined benefit liability. For the service cost, again tests are performed to see which is the higher for each member out of the company’s share of the defined
contribution payments or the company’s share of accruing benefits on a defined benefit basis. The higher of these two figures for each member is then used
to give the total service cost; again the defined benefit cost is the higher for the vast majority of members.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality
corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the
related pension liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in the statement of
comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a
specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period.
For defined contribution plans and pure defined contribution elements, the Group pays contributions to publicly or privately administered pension
insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid.
The contributions are recognised as employee benefit expense in the income statement as they fall due, or as an accrued or prepaid expense. Prepaid
contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. A defined benefit surplus is only
recognised if it meets the following criteria: if the Group has an unconditional right to a refund; or if the Group can realise it at some point during the life of
the plan or when the plan liabilities are settled. If the criteria are not met then a defined benefit surplus is not recognised.
60
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 1 Accounting Policies continued
Foreign currencies
Transactions in foreign currency are converted to sterling using the exchange rate applicable to the date of the transaction. Foreign currency gains and
losses resulting from the settlement of foreign currency transactions at a different time are recognised in the income statement. Currency exchange
differences arising from holding monetary assets or liabilities in a foreign currency are fair valued at the statement of financial position date in accordance
with prevailing exchange rates and resulting gains or losses are recognised in the income statement.
Taxation
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date in the
countries where the company’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an
asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the statement of financial position date and
are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences
can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and joint ventures, except where the timing of the reversal
of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Dividend distribution
Final dividend distribution to the company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends
are approved by the company’s shareholders.
Interim dividends are recognised as a liability in the Group’s financial statements when approved by the directors.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses where applicable. Cost includes the original purchase
price together with the costs attributable to bringing the asset to its working condition for its intended use.
Depreciation is calculated on a straight-line basis to write down the cost less estimated residual value of all plant and equipment assets by equal instalments
over their expected useful life. The rates generally applicable are:
Freehold land
Buildings
Plant and equipment
Nil
2%–10%
10%–50%
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each statement of financial position date. Assets are reviewed for
impairment where there is an indication that the carrying value may not be recoverable.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within administrative expenses in
the income statement.
Leases
Operating leases, and payments made under them, are charged to the income statement on a straight-line basis over the term of the lease.
25548.04 – 16 October 2017 4:52 PM – Proof 12
61
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
1 Accounting Policies continued
Intangible assets
Development costs
It is technically feasible to complete the intangible asset so that it will be available for use;
The Group undertakes development activities on an ongoing basis. Part of these costs relate to projects where the benefit is received in the short term (less
than one year) and part relates to longer term projects where the benefit is expected to be received for several years to come. Costs associated with the
shorter term activities are expensed as and when they are incurred. Costs associated with the longer term projects are capitalised as an intangible asset and
amortised over the expected life of the benefit at 33.33% per annum commencing when the asset is available for use within the business. Development
assets are recognised as intangible assets when the following criteria are met:
•
• Management intends to complete the intangible asset and use or sell it;
• There is an ability to use or sell the intangible asset;
•
• Adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and
• The expenditure attributable to the intangible asset during its development can be reliably measured. Other development expenditures that do not
It can be demonstrated how the intangible asset will generate probable future economic benefits;
meet these criteria are recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
The economic success for development activities is uncertain and carrying amounts are reviewed at each statement of financial position date for impairment
in accordance with IAS 36.
Development assets are valued at cost less accumulated amortisation and any impairment losses.
Fishing rights
Fishing rights are stated at cost less accumulated impairment where applicable. The rights are not amortised, but assessed annually for impairment.
Goodwill
Goodwill is stated at cost less accumulated impairment where applicable. Goodwill represents the excess of the cost of an acquisition over the fair value of
the Group’s share of the net assets of the acquired subsidiary undertaking at the date of acquisition. Goodwill is reviewed for impairment at least annually or
more frequently if events or changes in circumstances indicate a potential impairment. An impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of
cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
Software costs
Software costs are stated at cost less accumulated amortisation and impairment where applicable. Amortisation is calculated on a straight-line basis to write
down the cost less estimated residual value over its useful life. The amortisation rates are between 20% and 50% per annum.
Patent costs
Patents are stated at cost less accumulated amortisation. Amortisation is calculated on a straight-line basis to write down the cost less estimated residual
value over its useful life. The amortisation rate is 20%.
Other intangible assets
An intangible asset acquired in a business combination is recognised at fair value to the extent it is probable that the expected future economic benefits
attributable to the asset will flow to the Group and that its cost can be measured reliably. Intangible assets principally relate to brand names and technology
which were valued discounting estimated future net cash flow from the asset. The cost of intangible assets is amortised through the income statement on a
straight-line basis over their estimated economic life.
62
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 1 Accounting Policies continued
Investment properties
Investment properties are recognised at cost, and then subsequently cost less accumulated depreciation and (if applicable) any accumulated impairment
losses. Freehold land is not depreciated.
In the company accounts land and buildings (and integral fixtures and fittings) not occupied by the company are included within investment property.
Investments in subsidiaries
Investments in subsidiaries are held at cost less impairment. Cost includes directly attributable costs of investment.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined by the first-in, first-out (FIFO) method.
The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads based on
normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling
expenses. Provision is made against the cost of slow-moving, obsolete and other stock lines based on the net realisable value.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, using the effective interest method, less provision
for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect
all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade
receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the
amount of the loss is recognised in the income statement within “distribution costs”. When a trade receivable is uncollectable, it is written off against the
allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against “distribution costs” in the income
statement.
Financial assets at fair value through profit and loss
Financial assets at fair value through profit and loss are financial assets held for trading and are measured at their fair values.
Non-current assets and disposal groups held for sale
Non-current assets and disposal groups are classified as assets held for sale when their carrying amount is to be recovered principally through a sale
transaction and a sale is considered highly probable. They are stated at the lower of their carrying amount and fair value less costs to sell if their carrying
amount is to be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
Short-term financial assets
Short-term financial assets are defined as cash term deposits with banks with an original term of three months and over.
Cash and cash equivalents
Cash and cash equivalents are defined as cash in hand, on demand deposits and short-term deposits with banks with an original term less than three
months.
Current asset investments
Current asset investments are valued at fair value. Changes in fair value are recognised in the income statement.
Available-for-sale financial assets
The fair value of quoted investments is based on current bid prices. Changes to fair value are recognised in the statement of comprehensive income.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
25548.04 – 16 October 2017 4:52 PM – Proof 12
63
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
1 Accounting Policies continued
Provisions
Provisions are recognised in the statement of financial position when a Group company has a present obligation (legal or constructive) as a result of a past
event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made
of the amount of the obligation. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the
statement of financial position date.
If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to the liability. A provision for restructuring is recognised when the Group has approved
a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced to those affected by it. In accordance with
the Group’s published environmental policy and applicable legal requirements, a provision for site restoration in respect of contaminated land is recognised
when land is contaminated.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost
of meeting its obligations under the contract.
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below.
Estimates
Judgements
Warranty
The Group makes provisions for the warranty provided with the terms and conditions of sale to the customer based on past
experience together with specific provisions for known issues. There are quality control procedures in place to ensure that
products reaching customers are of a high standard. The technical support areas record all warranty issues in order that
problems can be identified that may affect a wider customer base. Additionally, product failures are tested thoroughly to
examine technical failures and strategies are developed to minimise and correct issues arising from that examination.
The Group works closely with its suppliers to ensure a low failure rate for components.
Lightronics share appreciation rights
The Group has an obligation to purchase the share appreciation rights from the management and former shareholders of the
Lightronics business. In arriving at this value the recent performance and future expectations of the Lightronics business have
been analysed to forecast the EBITDA upon which the obligation is based. The key assumptions considered are changes in
revenue, the EBITDA % and changes in forecast costs, up to the sixth year after acquisition when the option is expected to be
exercised. The impact of this assessment are changes to the cash settled share based payment charge and the obligation to
purchase the share appreciation rights. This analysis is reviewed and updated each year and, if necessary, adjustments are made
to ensure that the provision value is sufficient to cover the expected obligation.
Development costs
The Group undertakes development activities and the commercial viability of these activities is assessed on a continual
basis. The Group makes assumptions about the future value of the work based on past experience of similar development
projects and the feedback from the marketplace about future expectations for technological development. The Group seeks
to minimise the risk of product development failure by engaging with others to overcome technological difficulties and by
regularly assessing the expectation of the market.
Retirement benefit obligations
The Group recognises its obligations to employee retirement benefits. The quantification of these obligations is subject
to significant estimates and assumptions regarding life expectancy, discount and inflation rates and the rate of increase in
pension payments. In making these assumptions the Group takes advice from an independent qualified actuary about which
assumptions best reflect the nature of the Group’s obligations to employee retirement benefits. These assumptions are
regularly reviewed by our actuaries Cartwright Benefit Consultants Ltd to ensure their appropriateness.
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, commodity price risk and security price risk), credit risk and
liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the Group’s financial performance. The Group may use derivative financial instruments to hedge certain risk exposures.
64
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 1 Accounting Policies continued
(a) Market risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the euro,
US dollar, Australian dollar and Arab Emirate dirham. Foreign exchange risk arises from future commercial transactions denominated in a currency that is not
the entity’s functional currency as well as bank account balances, trade and other receivables as well as trade and other payables denominated in currencies
other than sterling. The Group has carried out an exercise to evaluate the effect of a movement of 1% in each currency other than sterling, and the results are
not significant. The risk is managed by maintaining relatively low currency balances and selling or buying currency when required.
(ii) Price risk
The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated statement of financial
position either as available-for-sale or at fair value through profit or loss.
The Group has investments in UK listed securities of other entities and these are publicly traded on the London Stock Exchange. The nature of the list of
investments held means the investments can go up and down in value.
(iii) Commodity price risk
The Group has an exposure to the risk of commodity price changes, in particular, metals. The Group seeks to minimise the risk by agreeing prices with major
suppliers in advance.
(iv) Interest rate risk
The Group is exposed to interest rate risk because it has cash investments and short-term financial assets which are mostly interest-bearing. The effect of a
reduction in interest rates is to reduce financial income. There are no borrowings and the Group has no exposure to the risk of increased interest cost other
than pension scheme interest cost.
(b) Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and
financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. For banks
and financial institutions, only independently rated parties with a minimum Fitch rating of F1 are accepted. If wholesale customers are independently rated,
these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial
position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board. The
utilisation of credit limits is regularly monitored.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the ability to close out market positions. Management
monitors rolling forecasts of the Group’s liquidity reserve, which comprises cash and cash equivalents together with short-term financial assets (note 19) on
the basis of expected cash flow. All external current liabilities are expected to mature within four months.
Capital risk management
The Group’s policy has been to maintain a strong capital basis in order to maintain investor, customer, creditor and market confidence. This sustains future
development of the business, safeguarding the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for
other stakeholders.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders or
issue new shares. From time to time the Group purchases its own shares in the market; the timing of these purchases is dependent on market prices, to
ensure such transactions are sufficiently beneficial for the company, its earnings per share and returns to investors. The Group continues to seek to maintain
the balance of these returns, while strengthening the reserves and equity position of the company, via continued profitability and structured growth.
25548.04 – 16 October 2017 4:52 PM – Proof 12
65
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
1 Accounting Policies continued
The Group has a long-standing policy not to utilise debt within the business, providing a robust capital structure even within the toughest economic
conditions. The Group’s significant cash resources allow such a position, but also require close management to ensure that sufficient returns are being
generated from these resources. The Group’s policy with regard to the cash resources is to ensure they generate sufficient returns, whether by investment
in business activities, such as plant and equipment, or assessing suitable opportunities to grow the business, or the physical investment of these funds to
ensure appropriate returns to investors.
The Group is able to maintain its current capital structure because there are no externally imposed capital requirements, and there were no changes in the
Group’s approach to capital management during the year.
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.
Fair value estimation
Financial instruments
Financial instruments that are measured at fair value are disclosed in the consolidated financial statements in accordance with the following fair value
measurement hierarchy:
i. Quoted prices (unadjusted) in active markets for identical assets and liabilities (level 1)
ii.
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices), or indirectly (that is,
derived from prices) (level 2)
iii. Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3)
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques.
These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Other assets and liabilities
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial
liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the
Group for similar financial instruments.
Share capital
Ordinary shares are classified as equity.
Where any Group company purchases the company’s equity share capital (treasury shares), the consideration paid, including any directly attributable
incremental costs (net of income taxes), is deducted from the equity attributable to the company’s equity holders until the shares are cancelled or reissued.
Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related
income tax effects, is included in equity attributable to the company’s equity holders.
Share based payments
Senior executives of the Group receive remuneration in the form of share based payments and other employees through a “SAYE” scheme. The fair value of
the shares or share options granted is recognised over the vesting period to reflect the value of the employee services received. The charge relating to grants
to employees of the company is recognised as an expense in the profit and loss account.
The fair value of options granted, excluding the impact of any non-market vesting conditions, is calculated using established option pricing models. The
probability of meeting non-market vesting conditions, which include profitability targets, is used to estimate the number of share options which are likely
to vest.
66
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 2 Segmental Analysis
(a) Business segments
The segmental analysis is presented on the same basis as that used for internal reporting purposes. For internal reporting FW Thorpe is organised into 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.
FW Thorpe’s chief operating decision-maker (CODM) is the Group Board. The Group Board reviews the Group’s internal reporting in order to monitor and
assess 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.
Year to 30 June 2017
Revenue to external customers
Revenue to other group companies
Total revenue
Operating profit/(loss)
Net finance expense
Share of profit of joint venture
Profit before income tax
Year to 30 June 2016
Revenue to external customers
Revenue to other group companies
Total revenue
Operating profit
Net finance income
Share of loss of joint venture
Profit before income tax
Thorlux
£’000
Lightronics
£’000
65,323
3,794
69,117
14,162
19,243
304
19,547
2,372
Other
companies
£’000
20,882
4,364
25,246
2,163
Inter-
segment
adjustments
£’000
Total
continuing
operations
£’000
–
(8,462)
(8,462)
105,448
–
105,448
(275)
18,422
54,157
2,409
56,566
11,699
15,524
60
15,584
2,103
19,265
2,401
21,666
2,189
–
(4,870)
(4,870)
204
(249)
178
18,351
88,946
–
88,946
16,195
75
(1)
16,269
Inter segment adjustments to operating profit consist of property rentals on premises owned by FW Thorpe Plc and adjustments to profit related to stocks
held within the Group that were supplied by another segment.
b) Geographical analysis
The Group’s business segments operate in four main areas, the UK, the Netherlands, the rest of Europe and the rest of the World. The home country of the
company, which is also the main operating company, is the UK.
UK
Netherlands
Europe
Other countries
2017
£’000
71,547
17,243
12,348
4,310
105,448
2016
£’000
64,231
14,113
8,529
2,073
88,946
The vast majority of assets and capital expenditure are in the UK, and cannot be split geographically in relation to the Group’s revenues.
25548.04 – 16 October 2017 4:52 PM – Proof 12
67
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
3 Group Operating Profit
Profit on sale of Property, Plant & Equipment
Rental income from investment property
Depreciation of investment property
Depreciation of Property, Plant & Equipment
– owned property
Operating lease rentals
– land and buildings
– other
Amortisation of intangible assets and impairment
Research and development expenditure credit
Currency losses/(gains) recognised in income statement
Services provided by the company’s auditors
Fees payable to company’s auditors for audit of financial statement
Fees payable to the company’s auditor and its associates for other services
Audit of company’s subsidiaries
Taxation advisory services
2017
£’000
(119)
(131)
68
2016
£’000
(89)
(126)
68
1,629
1,455
272
320
2,302
(233)
9
2017
£’000
85
48
6
139
239
245
2,277
(236)
(45)
2016
£’000
89
48
–
137
It is the Group’s practice to employ PricewaterhouseCoopers LLP on assignments additional to their statutory audit duties where their expertise and
experience with the Group are important.
Other operating income consists of the research and development expenditure credit of £233,000 (2016: £236,000). This is a credit provided by the UK
government for carrying out research and development. In prior years this credit was included as a deduction from the tax expense.
68
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 4 Employee Information
The average monthly number of employees employed by the Group (including executive directors) during the year is analysed below:
Average headcount
Production
Sales and distribution
Administration
Total average headcount
Employment costs of all employees (including executive directors)
Wages & salaries
Social security costs
Other pension costs
Group
Company
2017
Number
2016
Number
2017
Number
2016
Number
288
153
198
639
273
135
183
591
173
99
144
416
Group
Company
2017
£’000
24,319
2,544
1,226
28,089
2016
£’000
20,519
2,115
1,074
23,708
2017
£’000
16,362
1,748
833
18,943
167
93
134
394
2016
£’000
13,693
1,476
785
15,954
Other pension costs include contributions to pension schemes and other employer’s pension related charges comprising life assurance of £98,000 (2016:
£80,000), pension administration and professional charges of £77,000 (2016: £94,000) and private pension schemes amounting to £56,000 (2016: £71,000).
Contributions to the defined contribution section amounted to £248,000 (2016: £261,000) and contributions to other schemes administered independently
of the FW Thorpe pension schemes amounted to £460,000 (2016: £327,000).
Directors’ Emoluments
Aggregate emoluments
Contributions to money purchase schemes
Highest paid director
Total of emoluments and amounts receivable
Group
Company
2017
£’000
1,728
24
1,752
2016
£’000
1,552
23
1,575
2017
£’000
1,505
24
1,529
2016
£’000
1,356
23
1,379
Group
Company
2017
£’000
436
2016
£’000
384
2017
£’000
436
2016
£’000
384
At 30 June 2017 retirement benefits were accruing to M Allcock and D Taylor (2016: M Allcock and D Taylor) under the defined benefit scheme and to A M
Cooper (2016: A M Cooper) under the defined contribution scheme.
Further details are provided in the directors’ remuneration report on pages 43 to 45.
25548.04 – 16 October 2017 4:52 PM – Proof 12
69
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
5 Net finance income/expense
Finance income
Current assets
Interest receivable
Non-current assets
Fair value adjustments on loans
Dividend income on available-for-sale financial assets
Net rental income
Finance cost
Current liabilities
Interest payable
Share appreciation right distribution
Non-current assets
Impairment charge on loan notes
Net finance (expense)/income
6 Income Tax Expense
Analysis of income tax expense in the year:
Current tax
Current tax on profits for the year
Adjustments in respect of prior years
Total current tax
Deferred tax
Origination and reversal of temporary differences
Total deferred tax
Income tax expense
2017
£’000
266
–
210
59
535
2
582
200
784
(249)
2017
£’000
4,374
(662)
3,712
139
139
3,851
2016
£’000
396
45
177
84
702
3
624
-
627
75
2016
£’000
3,726
(268)
3,458
(188)
(188)
3,270
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:
Profit before income tax
Profit on ordinary activities multiplied by the standard rate in the UK of 19.75% (2016: 20.00%)
Effects of:
Expenses not deductible for tax purposes
Accelerated tax allowances and other timing differences
Adjustments in respect of prior years
Foreign profit taxed at higher rate
Other
Tax charge
2017
£’000
18,351
3,624
498
241
(662)
150
–
2016
£’000
16,269
3,254
349
(158)
(268)
97
(4)
3,851
3,270
The effective tax rate was 20.99% (2016: 20.10%). Adjustments in respect of prior years include the release of tax provisions in relation to research and
development costs.
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.
70
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 7 Earnings Per Share
Basic and diluted earnings per share for profit attributable to equity holders of the company
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary
shares in issue during the year, excluding ordinary shares purchased by the company and held as treasury shares.
Basic
Weighted average number of ordinary shares in issue
Profit attributable to equity holders of the company (£’000)
Basic earnings per share (pence per share) total
Diluted
Weighted average number of ordinary shares in issue (diluted)
Profit attributable to equity holders of the company (£’000)
Diluted earnings per share (pence per share) total
8 Property, Plant and Equipment
2017
2016
115,675,590
115,675,590
14,500
12.54
12,999
11.24
2017
2016
116,303,503
115,938,805
14,500
12.47
12,999
11.21
Cost
At 1 July 2016
Acquisition of a subsidiary
Additions
Disposals
Transfers
Currency translation
At 30 June 2017
Accumulated depreciation
At 1 July 2016
Acquisition of a subsidiary
Charge for the year
Disposals
Currency translation
At 30 June 2017
Net book amount
At 30 June 2017
Cost
At 1 July 2015
Additions
Disposals
Transfers
Currency translation
At 30 June 2016
Accumulated depreciation
At 1 July 2015
Charge for the year
Disposals
Transfer
Currency translation
At 30 June 2016
Net book amount
At 30 June 2016
Freehold land
and buildings
£’000
Group
Plant and
equipment
£’000
Total
£’000
Freehold land
and buildings
£’000
Company
Plant and
equipment
£’000
11,541
–
2,935
–
80
–
14,556
2,567
–
222
–
–
2,789
18,410
44
2,715
(2,131)
(80)
32
18,990
12,484
9
1,407
(1,988)
8
11,920
29,951
44
5,650
(2,131)
–
32
33,546
15,051
9
1,629
(1,988)
8
14,709
5,867
–
325
–
–
–
6,192
1,718
–
112
–
–
1,830
14,614
–
1,909
(1,875)
–
–
14,648
10,238
–
994
(1,769)
–
9,463
Total
£’000
20,481
–
2,234
(1,875)
–
–
20,840
11,956
–
1,106
(1,769)
–
11,293
11,767
7,070
18,837
4,362
5,185
9,547
11,079
462
–
–
–
11,541
2,358
209
–
–
–
2,567
8,974
16,585
2,074
(349)
80
20
18,410
11,472
1,246
(316)
80
2
12,484
27,664
2,536
(349)
80
20
29,951
13,830
1,455
(316)
80
2
15,051
5,926
14,900
5,403
464
–
–
–
5,867
1,618
100
–
–
–
1,718
4,149
13,549
1,285
(225)
5
–
14,614
9,486
889
(197)
60
–
10,238
18,952
1,749
(225)
5
–
20,481
11,104
989
(197)
60
–
11,956
4,376
8,525
71
Freehold land which was not depreciated at 30 June 2017 amounted to £1,033,000 (2016: £1,033,000) (Group and company).
25548.04 – 16 October 2017 4:52 PM – Proof 12
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
9 Intangible Assets
Group 2017
Cost
At 1 July 2016
Acquisition of a subsidiary
Additions
Write-offs and transfers
Currency translation
At 30 June 2017
Accumulated amortisation
At 1 July 2016
Charge for the year
Impairment for the year
Write-offs and transfers
Currency translation
At 30 June 2017
Net book amount
At 30 June 2017
Goodwill
£’000
Development
costs
£’000
Technology
£’000
9,972
524
–
(600)
386
10,282
600
–
262
(600)
–
262
6,454
–
1,715
(1,757)
36
6,448
2,778
1,560
–
(1,757)
7
2,588
1,791
–
–
–
84
1,875
575
218
–
–
21
814
Brand
name
£’000
736
–
–
–
32
768
315
116
–
–
11
442
Software
£’000
Patents
£’000
1,195
–
306
23
4
1,528
879
146
–
23
2
1,050
150
–
–
–
–
150
150
–
–
–
–
150
Fishing
rights
£’000
182
–
–
–
–
Total
£’000
20,480
524
2,021
(2,334)
542
182
21,233
–
–
–
–
–
–
5,297
2,040
262
(2,334)
41
5,306
10,020
3,860
1,061
326
478
–
182
15,927
Write-offs relate to development assets where no further economic benefits will be obtained.
Goodwill
£’000
Development
costs
£’000
Technology
£’000
Brand
name
£’000
Software
£’000
Patents
£’000
Fishing
rights
£’000
Group 2016
Cost
At 1 July 2015
Additions
Write-offs and transfers
Currency translation
At 30 June 2016
Accumulated amortisation
At 1 July 2015
Charge for the year
Write-offs and transfers
Currency translation
At 30 June 2016
Net book amount
At 30 June 2016
9,063
–
–
909
9,972
600
–
–
–
600
5,797
1,681
(1,052)
28
6,454
1,947
1,882
(1,052)
1
2,778
1,583
–
–
208
1,791
356
182
–
37
575
9,372
3,676
1,216
657
–
–
79
736
198
97
–
20
315
421
1,039
251
(109)
14
1,195
901
86
(109)
1
879
150
–
–
–
150
120
30
–
–
150
182
–
–
–
182
–
–
–
–
–
Total
£’000
18,471
1,932
(1,161)
1,238
20,480
4,122
2,277
(1,161)
59
5,297
316
–
182
15,183
Amortisation and impairment of £2,302,000 (2016: £2,277,000) is included in the administrative expenses. Included in goodwill are amounts of £2,618,000
(2016: £2,618,000) arising from the acquisition of Portland Lighting in 2011 and €7,784,000 (£6,835,000) (2016: €7,784,000; £6,469,000) arising from the
acquisition of Lightronics BV in 2015. This goodwill is not amortised. The goodwill for Lightronics is revalued annually to the closing exchange rate, as it is
denominated in euros, with the movement recorded in exchange differences on translation of foreign operations in the Statement of Changes in Equity.
The Group tests intangible assets annually for impairment, or more frequently if there are indications of impairment. A discounted cash flow analysis is
computed to compare the discounted estimated future operating cash flows to the net carrying value of the goodwill and other intangible assets for each
operating segment or business as appropriate.
72
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 9 Intangible Assets continued
Company 2017
Cost
At 1 July 2016
Additions
Write-offs and transfers
At 30 June 2017
Accumulated amortisation
At 1 July 2016
Charge for the year
Write-offs and transfers
At 30 June 2017
Net book amount
At 30 June 2017
Goodwill
£’000
Development
costs
£’000
Software
£’000
Patents
£’000
5,374
1,145
(1,415)
5,104
2,399
1,213
(1,415)
2,197
943
298
–
1,241
719
110
–
829
150
–
–
150
150
–
–
150
600
–
(600)
–
600
–
(600)
–
–
Fishing
rights
£’000
182
–
–
182
–
–
–
–
Total
£’000
7,249
1,443
(2,015)
6,677
3,868
1,323
(2,015)
3,176
2,907
412
–
182
3,501
Write-offs relate to development assets where no further economic benefits will be obtained.
Company 2016
Cost
At 1 July 2015
Additions
Write-offs and transfers
At 30 June 2016
Accumulated amortisation
At 1 July 2015
Charge for the year
Write-offs and transfers
At 30 June 2016
Net book amount
At 30 June 2016
Goodwill
£’000
Development
costs
£’000
Software
£’000
Patents
£’000
Fishing
rights
£’000
5,023
1,330
(979)
5,374
1,737
1,641
(979)
2,399
803
220
(80)
943
743
61
(85)
719
150
–
–
150
120
30
–
150
182
–
–
182
–
–
–
–
Total
£’000
6,758
1,550
(1,059)
7,249
3,200
1,732
(1,064)
3,868
600
–
–
600
600
–
–
600
–
2,975
224
–
182
3,381
For development costs, the Group capitalises employee costs and directly attributable material costs necessary to design, construct and test new and
improved product ranges and technology. These costs are only capitalised where they meet all the criteria set out in IAS 38.
Where development costs relate to products or technologies that are not expected to generate future economic benefits, do not meet the requirements of
IAS 38 or relate to research, they are charged to the income statement.
25548.04 – 16 October 2017 4:52 PM – Proof 12
73
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
10 Investments in Subsidiaries
The cost of investment in subsidiaries is as follows:
Investment in subsidiaries – cost
The movement in the investment and provisions is as follows:
At 1 July 2016 and 30 June 2017
11 Investment Property
Company
2017
£’000
2016
£’000
13,682
13,682
Costs
£’000
13,682
Provision
£’000
–
Cost
At 1 July 2016
Additions
Disposals
Transfers
At 30 June 2017
Accumulated depreciation
At 1 July 2016
Charge for the year
Disposals
Transfer
At 30 June 2017
Net book amount
At 30 June 2017
Freehold land
and buildings
£’000
1,009
–
–
(20)
989
58
58
–
–
116
873
Group
Company
Other
£’000
1,190
100
–
20
1,310
10
10
–
–
20
Total
£’000
2,199
100
–
–
2,299
68
68
–
–
Freehold land
and buildings
£’000
6,672
2,551
–
(95)
9,128
936
160
–
(41)
136
1,055
Other
£’000
1,190
100
–
95
1,385
–
16
–
41
57
Total
£’000
7,862
2,651
–
–
10,513
936
176
–
–
1,112
1,290
2,163
8,073
1,328
9,401
The following amounts have been recognised in the income statement:
Rental income
Direct operating expenses arising from investment properties
that generate rental income
Group
2017
£’000
131
2016
£’000
126
Company
2017
£’000
410
2016
£’000
394
(135)
(96)
(243)
(205)
The investment property and land, for the Group, consists of property held for investment purposes, a property with land and fishing rights by the River
Wye, and land designated for woodland in Monmouthshire. The associated fishing rights for the property by the River Wye are included in intangible assets.
Investment property of £1,335,000 (2016: £1,318,000) is freehold land and therefore not depreciated; the property element includes accumulated
depreciation of £406,000 (2016: £337,000) which relates to the property occupied by Mackwell Electronics Ltd. At the date of disposal of this business, the
cumulative value of depreciation of the property occupied by Mackwell Electronics Ltd was £269,000.
An external fair value exercise was undertaken in June 2017 of the land by the River Wye and the land in Monmouthshire which has resulted in a value of
£1.65m, which is greater than the carrying value of those specific investment properties.
The company’s investment properties consist of land and buildings used by subsidiaries in their normal course of business. The company receives rental
income from the subsidiaries for the use of these premises and incurs amortisation costs.
Each investment property generates rental income.
74
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 12 Loans and receivables
Mackwell Electronics Limited
Following the disposal of Mackwell Electronics Limited on 2 December 2011, the Group acquired loan notes of £2,000,000 as part of the consideration. The
loan notes outstanding at the end of the year of £950,000 (2016: £950,000) were due for repayment on 2 December 2016 however, final repayment is now
due in December 2017, following an extension of 12 months.
No repayment was received during the year, thus the balance due at 1% over the Bank of England base rate is £950,000 (2016: £950,000). The balance due at
the higher interest rate of 4% above the Bank of England base rate is £nil (2016: £nil).
Sugg Lighting Limited
Following the disposal of Sugg Lighting Limited on 6 February 2015 the Group acquired loan notes of £1,634,000 secured on the freehold property. As at
30 June 2017, the outstanding value of these loan notes was £1,472,720 (2016: £1,576,920).
The loan notes to Sugg Lighting Limited are secured on the freehold property and repayable in monthly instalments to be fully repaid ten years from
drawdown on 6 February 2015. The interest rate applied to these loan notes is 3% over Bank of England base rate.
Lightronics Participaties B.V.
Part of the acquisition of Lightronics Participaties B.V. included partial funding of the 35% share appreciation rights held by existing shareholders and
management. This was achieved by the issue of a loan of €4,200,000, of which €1,000,000 were repaid immediately after the completion of the acquisition.
At the date of the financial statements, the loan notes balance was €1,805,000 (2016: €2,952,000) equating to £1,585,000 (2016: £2,453,000) 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%.
As at the date of these financial statements, the Group and company have made a provision of £200,000 (2016: £nil) for loan notes.
13 Equity Accounted Investments
The Group had a joint venture in Australia with its local agent. The venture was jointly controlled with equal voting rights with the Group holding a 51%
interest. Thorlux Lighting Australasia Pty Ltd is registered in Queensland and operates from a sales office in Melbourne. The Group previously applied
the equity method of accounting to recognise this interest. On the 1 July 2016, the Group increased its shareholding to 100%, by purchasing the 49%
shareholding of LCA Holdings PTY Ltd for a nominal sum.
The Group has a joint venture in United Arab Emirates. Thorlux Lighting LLC is registered in United Arab Emirates and operates from a sales office in Abu
Dhabi. The Group has applied the proportionate consolidation method of accounting to recognise this interest. Additions of £32,000 (2016: £nil) reflects the
49% of the share capital the company owns of this joint venture.
The Group invested €1,200,000 for 40% of the share capital of Luxintec S.L., a company based in Spain. The Group has applied the equity method of
accounting to recognise this interest.
At 1 July
Additions
Disposals
Share of profit/(loss)
Exchange rate movement
At 30 June
Group
Company
2017
£’000
936
–
(178)
178
–
936
2016
£’000
–
936
–
(1)
1
936
2017
£’000
936
32
–
–
–
968
2016
£’000
–
936
–
–
–
936
25548.04 – 16 October 2017 4:52 PM – Proof 12
75
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
14 Available-for-sale Financial Assets
Group and company
Beginning of year
Net (disposals)/additions
Revaluation
30 June
2017
£’000
3,348
(5)
287
3,630
30 June
2016
£’000
3,018
404
(74)
3,348
Regular purchases and sales of financial assets are recognised on the trade date – the date on which the Group commits to purchase or sell the asset.
Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are
derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially
all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value.
There were no impairment provisions on available-for-sale financial assets in 2017 or 2016.
Available-for-sale financial assets comprise listed equity in the UK, and are almost entirely denominated in UK pounds.
None of these assets is either past due or impaired.
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired.
For equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is evidence that
the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity
and recognised in the Consolidated Income Statement. Impairment losses recognised in the Consolidated Income Statement on equity instruments are not
reversed through the Consolidated Income Statement.
15 Deferred Income Tax
Deferred income tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets against current tax liabilities and
when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:
Deferred tax assets
Deferred tax liabilities
Net deferred tax liabilities
The net movement on the deferred income tax account is as follows:
Beginning of year
Income statement charge
Tax credited directly to equity
Currency translation
End of year
Group
Company
2017
£’000
19
(920)
(901)
Group
2017
£’000
(772)
(139)
18
(8)
(901)
2016
£’000
27
(799)
(772)
2016
£’000
(1,004)
188
60
(16)
(772)
2017
£’000
–
(666)
(666)
Company
2017
£’000
(600)
(79)
13
–
(666)
2016
£’000
–
(600)
(600)
2016
£’000
(835)
179
56
–
(600)
76
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 15 Deferred Income Tax continued
The movement in Group deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same
tax jurisdiction, is as follows:
Accelerated tax
depreciation
£’000
Retirement
benefit
obligations
£’000
Other
£’000
Total
£’000
Deferred tax asset
At 1 July 2015
Credited to the income statement
Charged directly to equity
At 1 July 2016
Charged to the income statement
Charged directly to equity
At 30 June 2017
Deferred tax liabilities
At 1 July 2015
Charged/(credited) the income statement
(Credited) directly to equity
Currency translation
At 1 July 2016
Charged/(credited) to the income statement
Charged/(credited) to equity
Currency translation
At 30 June 2017
17
11
(1)
27
(5)
(3)
19
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Accelerated tax
depreciation
£’000
Research &
development
£’000
Fair value &
other timing
differences
£’000
164
(104)
(4)
16
72
267
(5)
2
336
728
10
(37)
–
701
50
(64)
6
693
129
(83)
(20)
–
26
(183)
48
–
(109)
The movement in the company deferred income tax liabilities during the year is as follows:
Deferred tax liabilities
At 1 July 2015
Credited to the income statement
Credited directly to equity
At 1 July 2016
Charged/(credited) to the income statement
Charged/(credited) to equity
At 30 June 2017
The deferred income tax credited/(charged) to equity during the year is as follows:
Deferred tax credited/(charged) to equity
Tax on revaluation for sale of financial assets
Impact of deferred tax rate change
Accelerated tax
depreciation
£’000
Research &
development
(£’000)
Fair value &
other timing
differences
(£’000)
60
(27)
(3)
30
268
(3)
295
646
(70)
(32)
544
(7)
(57)
480
129
(82)
(21)
26
(182)
47
(109)
Group
Company
2017
£’000
(50)
68
18
2016
£’000
14
46
60
2017
£’000
(50)
63
13
25548.04 – 16 October 2017 4:52 PM – Proof 12
17
11
(1)
27
(5)
(3)
19
Total
£’000
1,021
(177)
(61)
16
799
134
(21)
8
920
Total
£’000
835
(179)
(56)
600
79
(13)
666
2016
£’000
14
42
56
77
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
16 Inventories
Raw materials
Work in progress
Finished goods
Group
Company
2017
£’000
14,840
1,735
6,017
22,592
2016
£’000
12,806
1,882
4,175
18,863
2017
£’000
7,412
1,495
5,688
14,595
2016
£’000
5,457
1,660
4,194
11,311
The cost of inventories recognised as an expense and included in cost of sales amounted to £44,503,000 (2016: £38,052,000). The amount of write-down in
inventory to net realisable value is £1,051,000 (2016: £672,000).
17 Trade and Other Receivables
Current
Trade receivables
Other receivables
Prepayments and accrued income
Amounts owed by subsidiaries
Total
Group
Company
2017
£’000
17,216
528
1,251
–
18,995
2016
£’000
19,879
688
1,347
–
21,914
2017
£’000
11,063
497
929
8,967
21,456
2016
£’000
12,882
674
741
8,691
22,988
Amounts owed by subsidiaries, except cash balances, are unsecured, interest free and have no fixed date for repayment. Amounts owed in relation to cash
balances generate interest in line with the Group’s deposit facilities.
Trade receivables past due date not provided
Group
Company
2017
£’000
1,849
2016
£’000
995
2017
£’000
866
2016
£’000
786
A significant proportion of the amounts past due date were settled shortly after the end of the financial year, and taken together with the credit insurance
policy and good credit history, the directors consider that there is no impairment and the trade receivables are therefore stated at their fair value, which
equals their book value.
Provisions are made for bad debts when an undisputed debt is three months past due date or earlier if an adverse event occurs. A significant proportion of
the trade receivables are insured. The policy covers 90% of the debt in the event of a claim for default. The bad debt provision includes the remaining 10% of
the default in the event of a potential claim. No bad debt provision is made in respect of trade receivables from Government departments or agencies. At
30 June 2017 the bad debt provision for the Group amounted to £128,000 (2016: £78,000) and for the company £nil (2016: £4,000).
During the year the following amounts were written off:
Bad debts written off
Bad debts recovered
Net bad debt (credit)/expense
Group
2017
£’000
10
(14)
(4)
2016
£’000
15
(8)
7
Company
2017
£’000
8
–
8
At 30 June 2017, trade receivables were due to the Group and company in the following currency denominations:
Due in £ sterling
Due in € euro
Due in UAE dirham
Due in Australian dollars
Due in $ United States dollars
78
Group
Company
2017
£’000
13,131
3,550
386
139
10
17,216
2016
£’000
14,583
4,095
339
695
167
19,879
2017
£’000
10,132
931
–
–
–
11,063
25548.04 – 16 October 2017 4:52 PM – Proof 12
2016
£’000
7
–
7
2016
£’000
10,800
1,220
–
695
167
12,882
Annual Report and Accounts for the year ended 30 June 2017 The other assets within trade and other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any
collateral as security.
18 Other Financial Assets at Fair Value Through Profit and Loss
The Group and company have units in a sterling cash fund. At 30 June 2017 this amounted to £389,000 (2016: £389,000).
Sterling cash fund
19 Short-term Financial Assets
Group and company
Beginning of year
Net purchases
End of year
30 June
2017
£’000
389
2017
£’000
14,910
2,071
16,981
30 June
2016
£’000
389
2016
£’000
9,358
5,552
14,910
The short-term financial assets consist of term cash deposits in sterling with an original term in excess of three months.
The banks where the deposits are held are rated “A” by Fitch, with a specific rating of “F1” for short-term funds.
20 Cash and Cash Equivalents
Cash at bank and in hand
Group
2017
£’000
2016
£’000
Company
2017
£’000
2016
£’000
24,678
18,295
22,528
16,471
The banks where the funds are held are rated “A” by Fitch, with a specific rating of “F1” for short-term funds.
21 Trade and Other Payables
Current liabilities
Trade payables
Other payables
Social security and other taxes
Accruals and deferred income
Amounts owed to subsidiaries
Non-current liabilities
Other payables
Group
Company
2017
£’000
9,147
849
1,220
6,610
–
2016
£’000
7,920
1,334
2,328
5,118
–
2017
£’000
5,948
249
411
4,593
3,237
2016
£’000
4,502
387
1,498
3,852
3,265
17,826
16,700
14,438
13,504
5,774
5,774
4,619
4,619
5,729
5,729
4,619
4,619
Amounts owed to subsidiaries, except cash balances, are unsecured, interest free and have no fixed date of repayment. Amounts owed in relation to cash
balances generate interest in line with the Group’s deposit facilities. Non-current liabilities is a commitment to purchase the outstanding share appreciation
rights in the subsidiary, Lightronics Participaties B.V. and post employment employment benefits at Thorlux Australasia Pty Ltd and Thorlux Lighting LLC.
25548.04 – 16 October 2017 4:52 PM – Proof 12
79
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
22 Pension Scheme
The Group operates a funded hybrid pension scheme for employees in the UK. The scheme is approved by the Inland Revenue under Chapter 1 Part XIV of
the Income and Corporation Taxes Act 1988. Membership is contracted in to the second state pension. The basis of the Group’s hybrid pension scheme is to
provide benefits to members based on the following:
• For service prior to 1 October 1995, the benefits provided are defined benefit in nature.
• For service from 1 October 1995, the benefits provided have two elements depending on the date that the member joined the pension scheme.
• For members joining before 1 October 1995, benefits provided are the higher of their defined contribution pension and their defined benefit pension.
• For members joining on or after 1 October 1995, benefits provided are defined contribution in nature.
The contributions of the pure defined contribution, the defined benefit underpin and pure defined benefit elements are paid into one pension scheme,
where the contributions and assets are segregated and ring-fenced from each other.
For the defined benefit underpin element of the scheme, each member is tested to see whether the pension on a defined contribution or defined benefit
basis is higher. The liabilities shown in the pensions note are based on the greater of the two liabilities for each member, which in almost all cases is the
defined benefit liability. For the service cost, again, tests are performed to see which is the higher for each member out of the company’s share of the
defined contribution payments or the company’s share of accruing benefits on a defined benefit basis. The higher of these two figures for each member is
then used to give the total service cost; again the defined benefit cost is the higher for the vast majority of members.
The assets of the scheme are held separately from the assets of the Group, being invested in Managed Funds. Contributions by the Group to the scheme
during the year ended 30 June 2017 amounted to £675,000 (2016: £691,000). Contributions are determined by an independent qualified actuary on the basis
of triennial valuations using the Project Unit Method.
The date of the most recent actuarial valuation was 30 June 2015, and at that date the value of the fund was £31,704,000. This was sufficient to cover 102% of
the value of the benefits accrued to members after allowing for future increases in earnings. In arriving at the actuarial valuation, the following assumptions
were adopted:
Price inflation
Salary increases
Discount rate
Revaluation for deferred pensioners
3.40%
5.05%
3.60%
2.40%
The figures at 30 June 2015 have been updated as at the statement of financial position dates in order to assess the additional disclosures required under
IAS 19 as at 30 June 2017 by an independent qualified actuary using the following major assumptions:
Price inflation
Salary increases
Discount rate
Revaluation for deferred pensioners
Pension increases in payment of 5% pa or RPI if less
Pension increases in payment of 2.55% pa or RPI if less
Life expectancy at age 65 – men
Life expectancy at age 65 in 20 years – men
Life expectancy at age 65 – women
Life expectancy at age 65 in 20 years – women
2017
3.50%
3.50%
2.60%
2.50%
3.30%
2.20%
2016
3.00%
3.00%
2.90%
2.00%
2.90%
2.00%
2015
3.40%
3.40%
3.80%
2.40%
3.30%
2.20%
2014
3.50%
3.50%
4.30%
2.50%
3.30%
2.20%
2013
3.40%
3.50%
4.60%
2.50%
3.30%
2.25%
23.0 years
24.7 years
25.3 years
27.1 years
23.0 years
24.0 years
25.0 years
26.0 years
23.0 years
24.4 years
24.9 years
26.4 years
22.9 years
24.3 years
24.8 years
26.3 years
24.2 years
26.2 years
26.6 years
28.5 years
80
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 22 Pension Scheme continued
The statement of financial position figures required under IAS 19 are as follows:
30 June 2017
30 June 2016
30 June 2015
30 June 2014
30 June 2013
Expected
long-term
rate of return
£’000
Expected
long-term
rate of return
£’000
Value
£’000
2.60% 12,152
2.60% 25,859
413
2.60%
2.90%
2.90%
2.90%
38,424
(37,710)
714
Expected
long-term
rate of return
£’000
n/a
3.80%
n/a
Value
£’000
14,968
19,311
1,237
35,516
(33,731)
1,785
Expected
long-term
rate of return
£’000
n/a
4.60%
0.50%
Expected
long-term
rate of return
£’000
n/a
4.30%
n/a
Value
£’000
13,696
16,486
1,522
31,704
(28,824)
2,880
Value
£’000
12,796
14,707
1,448
28,951
(26,053)
2,898
Equities
Bonds
Other
Total market value of
assets
Present value of
scheme liabilities
Surplus in the scheme
Amounts recognised in the statement of financial position
The amounts recognised in the statement of financial position are determined as follows:
Present value of funded obligations
Fair value of plan assets
Surplus in the scheme
Less restriction of surplus recognised in the statement of financial position
Asset recognised in the statement of financial position
Movement in defined benefit obligation
The movement in the defined benefit obligation over the year is as follows:
At 1 July
Current service cost
Interest cost
Contributions by plan participants
Actuarial losses
Benefits paid
At 30 June
Movement in the fair value of the plan assets
The movement in the fair value of the plan assets of the year is as follows:
At 1 July
Expected return in plan assets
Actuarial gains
Employer contributions
Employee contributions
Benefits paid
At 30 June
2017
£’000
(37,710)
38,424
714
(714)
–
2017
£’000
(33,731)
(535)
(975)
(327)
(3,383)
1,241
(37,710)
2017
£’000
35,516
1,026
2,121
675
327
(1,241)
38,424
Value
£’000
11,829
13,267
1,545
26,641
(24,959)
1,682
2016
£’000
(33,731)
35,516
1,785
(1,785)
–
2016
£’000
(28,824)
(501)
(1,092)
(342)
(4,010)
1,038
(33,731)
2016
£’000
31,704
1,205
2,612
691
342
(1,038)
35,516
81
25548.04 – 16 October 2017 4:52 PM – Proof 12
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
22 Pension Scheme continued
Amounts recognised in income statement
The amounts recognised in the income statement are as follows:
Current service cost
Net interest cost
Actuarial gain recognised in statement of comprehensive income for the year
Actual return less expected return on pension scheme assets
Experience losses arising on the scheme liabilities
Changes in assumptions underlying the present value on the scheme liabilities
Movement in recovery plan liability
Net interest income
Restriction of pension scheme surplus
Actuarial loss recognised in the statement of comprehensive income
Cumulative actuarial loss recognised in the statement of comprehensive income at 1 July
Actuarial loss recognised in the statement of comprehensive income for the year
Cumulative actuarial loss recognised in the statement of comprehensive income at 30 June
2017
£’000
535
–
535
2017
£’000
2,121
(1,129)
(2,254)
–
51
1,071
(140)
2017
£’000
(4,321)
(1,211)
(5,532)
2016
£’000
501
–
501
2016
£’000
2,612
(1,401)
(2,609)
–
113
1,095
(190)
2016
£’000
(3,036)
(1,285)
(4,321)
The restriction in the scheme surplus is excluded from the cumulative actuarial gain recognised in the statement of comprehensive income. As a result of the
most recent valuation, and in light of the non-recognition of the pension scheme surplus, the recovery plan liability of £189,000 (2016: £189,000) is included
in Other Payables.
The expected return on plan assets is determined by considering the expected returns available on the assets underlying the current investment policy.
Expected yields on fixed interest investments are based on gross redemption yields as at the statement of financial position date. Expected returns on equity
and property investments reflect long-term real rates of return experienced in the respective markets.
The actual return on plan assets over the year ending 30 June 2017 was £3,147,000 (2016: £3,817,000) or 8.9% (2016: 12.0%). The Group expects to pay
£647,000 contributions (2016: £627,000) into the pension scheme during the forthcoming year.
82
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 22 Pension Scheme continued
History of experience gains and losses recognised in the statement of comprehensive income
2017
2016
2015
2014
2013
£’000
%
£’000
%
£’000
%
£’000
%
£’000
%
2,121
2,612
1,304
Difference between the expected and actual return on
scheme assets
Percentage of scheme assets
Experience (loss)/gain on scheme liabilities
Percentage of the present value of scheme liabilities
Changes in assumptions underlying the present value of
the scheme liabilities
Percentage of the present value of scheme liabilities
Movement in recovery plan liability
Percentage of the present value of scheme liabilities
Net interest income
Percentage of the present value of scheme liabilities
(1,129)
6%
3%
(1,401)
(2,254)
(2,609)
–
51
6%
0%
0%
–
113
Amount which has been recognised in the SOCI
(1,211)
(1,285)
23 Provision for Liabilities & Charges
7%
4%
8%
0%
0%
4%
(142)
(1,553)
–
144
(247)
4%
0%
5%
0%
0%
1%
767
(99)
58
(189)
87
624
1,061
(438)
191
–
47
861
3%
0%
0%
1%
0%
2%
At 1 July 2016
Additions
Utilisation
Currency translation
At 30 June 2017
Analysis of total provisions
Non-current
Total
WEEE
provision
£’000
102
–
–
–
102
Group
Warranty
provision
£’000
986
582
(161)
28
1,435
WEEE
provision
£’000
Company
Warranty
provision
£’000
102
–
–
–
102
405
150
(109)
–
446
Total
£’000
1,088
582
(161)
28
1,537
Group
Company
2017
£’000
1,537
1,537
2016
£’000
1,088
1,088
2017
£’000
548
548
4%
2%
1%
0%
0%
3%
Total
£’000
507
150
(109)
–
548
2016
£’000
507
507
WEEE provision
A potential liability exists for the future cost of disposal of products under the WEEE legislation for a transitional period between the adoption of the WEEE
legislation in the European Union in August 2005 and the effective date in the UK of 1 July 2007.
From 1 July 2007 the Group has followed Regulation 9 of the legislation and amended the terms of sale to its customers so that the customer is responsible
for the actual costs of WEEE at the time of disposal.
Although the timescale of the utilisation of this provision cannot be predicted with certainty, it is expected that it will not be utilised before 30 June 2018.
Warranty provision
The provision for warranty is in accordance with the accounting policy described in note 1.
25548.04 – 16 October 2017 4:52 PM – Proof 12
83
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
24 Share Capital
Allotted and fully paid
118,935,590 ordinary shares of 1p each (2016: 118,935,590 ordinary shares of 1p each)
The ordinary shareholders each have one vote per share.
Movements in treasury shares included in share capital
Share capital at 1 July and 30 June
Number of shares held in treasury at 30 June
Group and Company
2017
£’000
2016
£’000
1,189
1,189
Group and Company
2017
£’000
33
2016
£’000
33
3,260,000
3,260,000
There were no shares issued during the year (2016: nil). There are 2,159,126 (2016: 1,700,000) share options outstanding at the year end.
25 Other Reserves
Share premium account
Capital redemption reserves
Foreign currency translation reserve
26 Dividends
Dividends paid during the year are outlined in the tables below:
Dividends paid (pence per share)
Final dividend
Special dividend
Interim dividend
Total
Group
Company
2017
£’000
656
137
2,263
3,056
2016
£’000
656
137
1,606
2,399
2017
£’000
656
137
–
793
2017
2.85
–
1.35
4.20
2016
£’000
656
137
–
793
2016
2.55
2.00
1.20
5.75
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.
Dividends proposed (pence per share)
Final dividend
Dividends paid
Final dividend
Special dividend
Interim dividend
Total
Dividends proposed
Final dividend
84
25548.04 – 16 October 2017 4:52 PM – Proof 12
2017
3.55
2017
£’000
3,297
–
1,561
4,858
2017
£’000
4,106
2016
2.85
2016
£’000
2,950
2,314
1,387
6,651
2016
£’000
3,297
Annual Report and Accounts for the year ended 30 June 2017 27 Share Based Payment Charge
The Group operates a share based remuneration scheme, created to motivate and retain those employees responsible for the continued success of the
Group.
The Executive Share Ownership Plan (ESOP) allows for the vesting of options subject to the achievement of performance targets, being annual growth of
pre-tax Earnings per Share in excess of RPI plus 3% over a five-year period.
During the year the Group introduced a Save As You Earn (SAYE) for UK based employees that matures in October 2021.
Rather than issue new shares, the company will utilise shares that are already held in treasury to satisfy options.
Under IFRS 2, an expense is recognised in the income statement for share based payments, calculated on the fair value at the settlement date. The
application of IFRS 2 gave rise to a charge of £121,000 (2016: £72,000) for the period.
At 30 June 2017, there were no options exercisable (2016: nil) under the ESOP or SAYE schemes.
a) Details of changes in the number of awards outstanding during the year are set out below:
Outstanding at 1 July 2016
Granted during the year
Exercised during the year
Forfeited during the year
Lapsed during the year
Outstanding at 30 June 2017
ESOP Scheme
SAYE Scheme
Total
Options
1,700,000
–
–
–
–
1,700,000
Exercise price
(p/s)
124
–
–
–
–
124
Options
–
463,000
–
(3,874)
–
459,126
Exercise price
(p/s)
–
209
–
–
–
Options
1,700,000
463,000
–
(3,874)
–
209
2,159,126
The weighted average contractual life of the share based payments outstanding at the end of the year is 7.3 years for the ESOP scheme and 4.8 years for the
SAYE scheme.
b) Fair value calculations
The fair value of the share options granted during the year were calculated using the methods, principle assumptions and data set out below:
Method used
Date of grant
Share price at date of grant (p/s)
Exercise price (p/s)
Expected option life (years)
Vesting period (years)
Expected volatility
Expected dividend yield
Risk free rate
Fair value per share (p/s)
ESOP Scheme
Black–Scholes
24 October 2014
124
124
3 – 7
3 – 7
23% – 28%
3.02%
1.06% – 1.90%
18.61 – 21.07
SAYE Scheme
Black–Scholes
15 July 2016
233
209
5
5
27%
1.90%
0.91%
54.84
Expected volatility was determined by calculating the annualised standard deviation over the daily changes in the share price, and measured against
historical share price movements over the number of years vesting period prior to the grant of the options.
Cash-settled share based payment charge
Arising from the acquisition of Lightronics Participaties B.V., the Group entered into a cash-settled share based payment arrangement with certain
employees of Lightronics Participaties B.V. Under this arrangement, the Group is committed to purchase the 43% of the share appreciation rights held by
these employees, between the third and sixth anniversaries of the acquisition, calculated by a pre-determined earnings multiple used to value the initial
investment.
Under IFRS 2, an expense is recognised in the income statement for share based payments, calculated on the fair value at the settlement date. The
application of IFRS 2 gave rise to a charge of £234,000 (2016: £122,000) for the period. The total liability at 30 June 2017 was £382,000 (2016: £148,000).
The fair value of the share based payment was calculated by estimating the additional payment due to the relevant employees, was reviewed during the year
based on current performance. This review resulted resulted in an annual increase in the share based payment charge of £92,000.
25548.04 – 16 October 2017 4:52 PM – Proof 12
85
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
28 Cash Generated from Operations
Cash generated from continuing operations
Profit before income tax
Depreciation charge
Amortisation/impairment of intangibles
Profit on disposal of property, plant and equipment
Net finance expense/(income)
Retirement benefit contributions in excess of current and past service charge
Share of (profit)/loss from joint venture
Share based payment charge
Research and development expenditure credit
Effects of exchange rate movements
Changes in working capital
– Inventories
– Trade and other receivables
– Payables and provisions
Group
2017
£’000
18,351
1,697
2,302
(119)
249
(140)
(178)
337
(233)
113
(3,646)
2,156
1,491
2016
£’000
16,269
1,523
2,277
(89)
(75)
(190)
1
193
(236)
182
(1,128)
(2,094)
2,313
Company
2017
£’000
18,360
1,282
1,323
(63)
(4,198)
(140)
–
121
(170)
33
(3,284)
3,511
(969)
Cash generated from continuing operations
22,380
18,946
15,806
2016
£’000
16,040
1,164
1,732
(57)
(4,346)
(190)
1
46
(165)
182
506
(3,057)
1,881
13,737
29 Commitments
(a) Capital commitments
Capital expenditure contracted for at the statement of financial position date but not yet incurred is as follows:
Property, plant and equipment
Group
2017
£’000
477
2016
£’000
84
Company
2017
£’000
462
2016
£’000
77
(b) Operating lease commitments
The Group leases premises under non-cancellable operating lease agreements. The lease terms are between one and four years (2016: one and four years),
and the lease agreements are renewable at the end of the lease period at market rate.
Additional information
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Group
Within one year
Within two to five years
Over five years
Company
Within one year
Within two to five years
Over five years
86
Land and
buildings
2017
£’000
298
36
–
334
Land and
buildings
2017
£’000
10
–
–
10
Other
2017
£’000
144
240
–
384
Other
2017
£’000
5
8
–
13
Total
2017
£’000
442
276
–
718
Total
2017
£’000
15
8
–
23
Land and
buildings
2016
£’000
267
275
–
542
Land and
buildings
2016
£’000
9
3
–
12
Other
2016
£’000
148
253
–
401
Other
2016
£’000
–
–
–
–
Total
2016
£’000
415
528
–
943
Total
2016
£’000
9
3
–
12
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 30 Financial Instruments by Category
All financial instruments measured at fair value are categorised as level 2 in the fair value measurement hierarchy, whereby the fair value is determined by
using valuation techniques, except for £4,019,000 (2016: £3,737,000) of fixed rate listed investments included in available-for-sale and other financial assets at
fair value through profit or loss that are classified as level 1. The valuation techniques for level 2 instruments use observable market data where it is available,
for example quoted market prices, and rely less on estimates.
The accounting policies for financial instruments have been applied to the line items below:
Group
30 June 2017
Assets as per statement of financial position
Loans and receivables
Available-for-sale financial assets
Other financial assets at fair value through the profit and loss
Trade and other receivables
Short-term financial assets
Cash and cash equivalents
Total
Group
30 June 2016
Assets as per statement of financial position
Loans and receivables
Available-for-sale financial assets
Other financial assets at fair value through the profit and loss
Trade and other receivables
Short-term financial assets
Cash and cash equivalents
Total
Company
30 June 2017
Assets as per statement of financial position
Loans and receivables
Available-for-sale financial assets
Other financial assets at fair value through the profit and loss
Trade and other receivables
Short-term financial assets
Cash and cash equivalents
Total
Loans and
receivables
£’000
Available-
for-sale
£’000
3,808
–
–
17,745
16,981
24,678
63,212
–
3,630
–
–
–
–
3,630
Loans and
receivables
£’000
Available-
for-sale
£’000
4,980
–
–
20,567
14,910
18,295
58,752
–
3,348
–
–
–
–
3,348
Loans and
receivables
£’000
Available-
for-sale
£’000
3,808
–
–
20,528
16,981
22,528
63,845
–
3,630
–
–
–
–
3,630
Assets at
fair value
through
the profit
and loss
£’000
–
–
389
–
–
–
389
Assets at
fair value
through
the profit
and loss
£’000
–
–
389
–
–
–
389
Assets at
fair value
through
the profit
and loss
£’000
–
–
389
–
–
–
389
Total
£’000
3,808
3,630
389
17,745
16,981
24,678
67,231
Total
£’000
4,980
3,348
389
20,567
14,910
18,295
62,489
Total
£’000
3,808
3,630
389
20,528
16,981
22,528
67,864
87
25548.04 – 16 October 2017 4:52 PM – Proof 12
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
30 Financial Instruments by Category continued
Company
30 June 2016
Assets as per the statement of financial position
Loans and receivables
Available-for-sale financial assets
Other financial assets at fair value through the profit and loss
Trade and other receivables
Short-term financial assets
Cash and cash equivalents
Total
The above analysis excludes prepayments.
Liabilities as per the statement of financial position
Trade and other payables (excluding statutory liabilities)
Post employment benefits
Deferred consideration
Financial liabilities are measured at amortised cost.
Loans and
receivables
£’000
Available-
for-sale
£’000
4,980
–
–
22,247
14,910
16,471
58,608
–
3,348
–
–
–
–
3,348
Assets at
fair value
through
the profit
and loss
£’000
–
–
389
–
–
–
389
Group
Company
30 June
2017
£’000
16,608
45
5,729
30 June
2016
£’000
14,372
–
4,472
30 June
2017
£’000
14,027
–
5,729
Total
£’000
4,980
3,348
389
22,247
14,910
16,471
62,345
30 June
2016
£’000
12,006
–
4,427
The Group and company did not have derivative financial instruments at 30 June 2017 or 30 June 2016. All assets and liabilities above are considered to be at
fair value.
31 Related Party Transactions
The following amounts relate to transactions between the company and its related undertakings:
2017
Compact Lighting Limited
Philip Payne Limited
Solite Europe Limited
Portland Lighting Limited
TRT Lighting Limited
Thorlux Lighting LLC
Lightronics Participaties B.V.
Thorlux Australasia PTY Limited
Purchases
of goods
£’000
Sales
of goods
£’000
Sales
of services
£’000
857
633
632
1
1,699
–
129
1,009
253
130
444
–
1,344
474
139
–
49
48
99
24
64
–
–
–
Dividends
paid to
company
£’000
–
450
250
1,000
–
–
1,839
–
88
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 31 Related Party Transactions continued
2016
Compact Lighting Limited
Philip Payne Limited
Solite Europe Limited
Portland Lighting Limited
TRT Lighting Limited
Thorlux Lighting LLC
Lightronics Participaties B.V.
Balances due to and from the company by related entities were as follows:
Compact Lighting Limited
Philip Payne Limited
Solite Europe Limited
Portland Lighting Limited
TRT Lighting Limited
Thorlux Lighting LLC
Lightronics Participaties B.V.
Thorlux Australasia PTY Limited
Total
Purchases
of goods
£’000
Sales
of goods
£’000
Sales
of services
£’000
158
552
596
–
940
–
19
51
63
373
–
1,527
385
10
48
38
33
25
64
–
–
Dividends
paid to
company
£’000
–
500
50
750
–
–
2,067
Amounts due to related party
at 30 June
Amounts due from related party
at 30 June
2017
£’000
(35)
(909)
(574)
(1,527)
(175)
–
(17)
–
2016
£’000
(51)
(813)
(510)
(1,675)
(216)
–
–
–
(3,237)
(3,265)
2017
£’000
1,309
10
7
2
2,851
1,105
2,095
1,588
8,967
2016
£’000
1,339
15
128
10
4,243
1,101
1,708
–
8,544
Trading balances arise from transactions of goods and services carried out under normal commercial terms.
Cash resources are managed centrally by the company and result in balances owed to and from the company when cash is transferred.
The key management personnel are the Group Board directors; their interests are disclosed in the directors’ remuneration report on pages 43 to 45. There
are 4 employees who are related parties (2016: 4). Total remuneration for the period was £195,000 (2016: £199,000).
The company owns 40% of the share capital of Luxintec S.L., a company registered in Spain. During the year the company sold goods to Luxintec S.L.
amounting to £5,000 (2016: £nil), purchased goods amounting to £84,000 (2016: £73,000), and sold services of £nil (2016: £nil). At the year end there were
trade balances due to Luxintec S.L. of £2,000 (2016: £nil) and £5,000 due from Luxintec S.L. (2016: £nil).
25548.04 – 16 October 2017 4:52 PM – Proof 12
89
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notes to the Financial Statements continued
For the year ended 30 June 2017
32 Group Companies
The parent company has the following investments as at 30 June 2017 and 30 June 2016:
Name of undertaking
Compact Lighting Limited
Philip Payne Limited
Solite Europe Limited
Portland Lighting Limited
TRT Lighting Limited
Lightronics Participaties B.V.
Lightronics B.V.
Lightronics GmbH
Thorlux Australasia PTY Limited
Thorlux Lighting L.L.C.
Luxintec S.L.
Country of
incorporation
Description of
shares held
England
England
England
England
England
Netherlands
Netherlands
Germany
Australia
Ordinary £1 shares
Ordinary £1 shares
Ordinary £1 shares
Ordinary £1 shares
Ordinary £1 shares
Ordinary €0.01 shares
Ordinary €454 shares
Ordinary €1 shares
Ordinary $1 shares
United Arab Emirates Ordinary AED 1,000 shares
Ordinary €1 shares
Spain
Proportion of nominal value of issued shares
held by Group and Company
30 June
2017
100%
100%
100%
100%
100%
100%
100%
100%
100%
49%
40%
30 June
2016
100%
100%
100%
100%
100%
100%
100%
100%
51%
49%
40%
The registered office addresses of these Group companies are:
Compact Lighting Limited
Philip Payne Limited
Solite Europe Limited
Portland Lighting Limited
TRT Lighting Limited
Lightronics Participaties B.V.
Lightronics B.V.
Lightronics GmbH
Thorlux Australasia PTY Limited
Thorlux Lighting L.L.C.
Luxintec S.L.
Merse Road, North Moons Moat, Redditch, Worcestershire, B98 9HH, England
Merse Road, North Moons Moat, Redditch, Worcestershire, B98 9HH, England
Merse Road, North Moons Moat, Redditch, Worcestershire, B98 9HH, England
Merse Road, North Moons Moat, Redditch, Worcestershire, B98 9HH, England
Merse Road, North Moons Moat, Redditch, Worcestershire, B98 9HH, England
Spuiweg 19, 5145 NE Waalwijk, Netherlands
Spuiweg 19, 5145 NE Waalwijk, Netherlands
Bahnhofstrasse 72, 27404 Zeven, Germany
31 Cross Street, Brookvale, NSW 2100, Australia
Office No. 2, Ghantoot International Building, Plot No: M.14-26, Musaffah Industrial Area, PO Box 108168,
Abu Dhabi, United Arab Emirates
Calle Pino Negral, parcelas 13-14, Sector Industrial El Brizo II, Aldeamayor de San Martin, 47162,
Valladolid, Spain
The principal activities of these Group companies are:
Compact Lighting Limited
Philip Payne Limited
Solite Europe Limited
Portland Lighting Limited
TRT Lighting Limited
Lightronics Participaties B.V.
Lightronics B.V.
Lightronics GmbH
Thorlux Australasia PTY Limited
Thorlux Lighting L.L.C.
Luxintec S.L.
– design and manufacture of lighting solutions for retail applications
– design and manufacture of illuminated signs
– design and manufacture of clean room lighting equipment
– design and manufacture of lighting for signs
– design and manufacture of lighting for roads and tunnels
– holding company
– design and manufacture of external and impact resistant lighting
– sale of external and impact resistant lighting
– sale of lighting equipment to industrial and commercial markets
– sale of lighting equipment to industrial and commercial markets
– design and manufacture of LED luminaires and lenses
90
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 33 Acquisition Of Subsidiary
On 1 July 2016 the Group acquired the remaining 49% of the share capital of Thorlux Australasia PTY Limited for a nominal sum.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out below.
Cash
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Total identifiable assets
Goodwill
Total purchase consideration
Total purchase consideration satisfied by:
Cash
Waiving of previous receivable
Fair value of previously held balances
Total consideration
Net cash outflow arising on acquisition
Cash consideration
Less cash in subsidiary acquired
Cash (inflow) on acquisition
£’000
240
35
64
51
(40)
350
524
874
–
696
178
874
–
(240)
(240)
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.
The goodwill relates to the fair value of the net assets.
34 Events After The Statement Of Financial Position Date
On the 27 September 2017 a new loan agreement was made for the benefit of Mackwell Electronics Limited. This replaces existing agreements that were due
for repayment in 2017. The new loans are due for repayment in September 2020 and September 2022.
25548.04 – 16 October 2017 4:52 PM – Proof 12
91
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Notice of Meeting
Notice is hereby given that the eightieth Annual General Meeting of FW Thorpe Plc will be held at Merse Road, North Moons Moat, Redditch, Worcestershire,
B98 9HH on 23 November 2017 at 3.15 pm to transact the following business:
Ordinary business
1.
To receive and adopt the Annual Report and Accounts for the year ended 30 June 2017.
2.
3.
4.
5.
6.
To declare a final dividend.
To re-elect Mr M Allcock as a director.
To re-elect Mr P D Mason as a director.
To elect Mr J E Thorpe as a director.
To re-appoint PricewaterhouseCoopers LLP as auditors of the company, to hold office until the conclusion of the next General Meeting at which
accounts are laid before the company and to authorise the directors to fix the auditors’ remuneration.
Special business
To consider and, if thought fit, to pass the following resolutions which will be proposed in the case of 7 as an ordinary resolution and in the case of 8 as a
special resolution.
7.
8.
That the directors’ remuneration report (as set out on pages 43 to 45 of the Annual Report and Accounts) for the year ended 30 June 2017 be approved.
That the company be generally and unconditionally authorised to make market purchases (within the meaning of section 693(4) of the Companies Act
2006) of ordinary shares of 1p each of the company provided that:
(a)
the maximum number of ordinary shares hereby authorised to be acquired is 11,893,559;
(b)
the minimum price which may be paid for any such share is 1p;
(c)
the maximum price which may be paid for any such share is an amount equal to 105% of the average of the middle market quotations for an
ordinary share in the company as derived from the Alternative Investment Market for the five business days immediately preceding the day on
which such share is contracted to be purchased;
(d)
the authority hereby conferred shall expire on the date of the Annual General Meeting of the company in 2018; and
(e)
the company may make a contract to purchase its ordinary shares under the authority hereby conferred prior to the expiry of such authority,
which contract will or may be executed wholly or partly after the expiry of such authority, and may purchase its ordinary shares in pursuance of
any such contract.
Notes
1.
2.
3.
4.
5.
Copies of the directors’ service contracts will be available for inspection during usual business hours, at the registered office of the company on any
weekday (Saturdays and public holidays excepted) from the date of this notice until the date of the meeting and also at the meeting for at least 15
minutes prior to, and until the conclusion of, the meeting.
To be entitled to attend and vote at the meeting (and for the purposes of the determination by the company of the votes they may cast), members must
be registered in the Register of Members of the company at 6.30 pm on 21 November 2017 (or, in the event of any adjournment, 6.30 pm on the date
which is two days before the time of the adjourned meeting). Changes to the Register of Members of the company after the relevant deadline shall be
disregarded in determining the rights of any person to attend and vote at the meeting.
A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend, speak and vote on his or her behalf. A proxy need
not also be a member but must attend the meeting to represent you. Details of how to appoint the Chairman of the meeting or another person as your
proxy using the form of proxy are set out in the notes on the form of proxy. If you wish your proxy to speak on your behalf at the meeting you will need to
appoint your own choice of proxy (not the Chairman) and give your instructions directly to them.
To appoint more than one proxy, an additional proxy form(s) may be obtained by contacting the company’s registrars, Equiniti, Aspect House, Spencer
Road, Lancing, West Sussex, BN99 6DA, or you may photocopy the proxy form. Please indicate in the box next to the proxy holder’s name the number
of shares in relation to which they are authorised to act as your proxy. Please also indicate by ticking the box provided if the proxy instruction is one of
multiple instructions being given.
A reply paid form of proxy is enclosed with shareholders’ copies of this document. To be valid, it should be lodged with the company’s registrars, Equiniti,
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, so as to be received not later than 3.15 pm on 21 November 2017 or 48 hours before
the time appointed for any adjourned meeting or, in the case of a poll taken subsequent to the date of the meeting or adjourned meeting, so as to be
received no later than 24 hours before the time appointed for taking the poll.
92
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017
6.
CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for the Annual General
Meeting and any adjournment(s) thereof by utilising the procedures described in the CREST Manual. CREST personal members or other CREST sponsored
members (www.euroclear.com), and those CREST members who have appointed (a) voting service provider(s), should refer to their CREST sponsor or
voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly
authenticated in accordance with Euroclear UK & Ireland’s specifications and must contain the information required for such instructions, as described
in the CREST Manual. The message must be transmitted so as to be received by the issuer’s agent ID RA19, by 3.15 pm on 21 November 2017 (or, in the
case of an adjournment of the Annual General Meeting, not later than 48 hours before the time fixed for the holding of the adjourned meeting). For this
purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from
which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland does not make available
special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST
Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored
member or has appointed (a) voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be
necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where
applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical
limitations of the CREST system and timings.
The company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities 2001 (as
amended).
7.
As at 16 October 2017 (being the last practicable day prior to the publication of this notice), the company’s issued share capital consists of ordinary
shares of 1p each, carrying one vote each. Excluding 3,260,000 shares held in treasury, the total voting rights in the company as at 16 October 2017 are
115,675,590.
8.
Appointment of a proxy will not preclude a member from subsequently attending and voting at the meeting should he or she subsequently decide to do
so. You can only appoint a proxy using the procedures set out in these notes and the notes to the form of proxy.
By order of the Board
Craig Muncaster
Director
Registered Office:
Merse Road
North Moons Moat
Redditch
Worcestershire
B98 9HH
16 October 2017
25548.04 – 16 October 2017 4:52 PM – Proof 12
93
www. fwthorpe.co.ukStock Code: TFWFinancial Statements Financial Calendar
2017
23 October
Posting of the Annual Report and Accounts
23 November
Annual General Meeting
30 November
Payment of final dividend
2018
March
April
Announcement of interim results
Payment of interim dividend
September
Announcement of results for the year
94
25548.04 – 16 October 2017 4:52 PM – Proof 12
Annual Report and Accounts for the year ended 30 June 2017 25548.04 – 17 October 2017 9:16 AM – Proof 12
25548.04 – 17 October 2017 9:16 AM – Proof 12
Merse Road
North Moons Moat
Redditch
Worcestershire
B98 9HH
England
Tel: + 44 (0)1527 583200
Fax: + 44 (0)1527 584177
Incorporating:
www.fwthorpe.co.uk
25548.04 – 17 October 2017 9:16 AM – Proof 12
25548.04 – 17 October 2017 9:16 AM – Proof 12