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9
Annual Report and Accounts 2019
Investment Case
01
A well positioned
portfolio of
companies over
seven different
countries
Read more on
pages 02 to 05
02 Innovative products
with market-leading
technology
Read more on
pages 28 to 35
03 Strong profit
margins and robust
balance sheet
Read more on
pages 36 and 37
Visit us online at:
www.fwthorpe.co.uk
Welcome to the
2019 Annual Report
Who We Are
We specialise in designing and manufacturing
professional lighting systems.
We currently employ over 650 people and
although each company works autonomously,
our skills and markets are complementary.
Our Purpose
Provide technically advanced lighting solutions
that deliver long term lowest cost of ownership.
Our Vision
Maintain a consistently respected and profitable
organisation with an environmental conscience.
Our Values
Integrity
Honesty
Longevity
Pictured on front cover: Swansea University Library, Swansea
Annual Report and Accounts for the year ended 30 June 2019
Highlights
Revenue (£m)
�0.9%
2019
2018
2017
2016
2015
Operating Profit (£m)
Contents
�0.5%
110.6
2019
109.6
105.4
88.9
73.5
2018
2017
2016
2015
19.6*
19.5
18.4
16.2
13.7
* 2019 includes profit on the disposal
of property of £1.9m
Business Overview
Highlights
FW Thorpe at a Glance
Strategic Report
Chairman’s Statement
Marketplace
Business Model
Strategy
Key Performance Indicators
Strategy in Action
Queen’s Awards 2019 Winner
Product Innovation: Flex System
Product Innovation: Optio
Basic Earnings per Share (Pence)
Diluted Earnings per Share (Pence)
Investing in a greener future
−%
2019
2018
2017
2016
2015
+0.1%
13.91
13.91
12.54
11.24
10.12
2019
2018
2017
2016
2015
13.83
13.81
12.47
11.21
10.11
Dividend per Share (Pence)
Operational Highlights
�2.4%
2019
2018
2017
2016
2015
5.53
5.40
4.90
4.05
3.65
1. Revenue growth supported by
Lightronics and Famostar
Improved second half performance
of Thorlux
2.
3. Operating result supported by sale
of Portsmouth property
4. Continued investment in the
Group – Thorlux factory equipment
investments, Lightronics and
TRT facilities
On the road with the SmartScan van
Operational Performance
Financial Performance
Principal Risks and Uncertainties
Sustainability
Our Governance
Board of Directors
Directors’ Report
Statement of Directors’
Responsibilities
Directors’ Remuneration Report
Independent Auditors’ Report
to the Members of FW Thorpe Plc
Our Financials
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated and Company
Statements of Financial Position
Consolidated Statement of
Changes in Equity
Company Statement of
Changes in Equity
Consolidated and Company
Statements of Cash Flows
Notes to the Financial Statements
01
02
08
12
14
16
18
19
20
22
24
26
28
36
38
40
44
46
51
52
56
64
65
66
67
68
69
70
Notice of Meeting
Financial Calendar
114
116
01
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk
FW Thorpe at a Glance
The complete service offering we provide...
Manufacturing
Commissioning
+20%
Punch/Bend capacity
+100%
Laser cutting capacity
£0.7m
Revenue from this service
(2018: £0.7m)
Design &
Development
£1.8m
Group spend on
capitalised R&D
(2018: £1.6m)
Read about our service offering
on pages 14 and 15
Our Strategic pillars...
Focus on high quality
products and good
leadership in technology
Continue to grow the
customer base for Group
companies
Focus on manufacturing
excellence
Continue to develop high
quality people
Read about our strategic pillars
on pages 16 and 17
1965
1989
1990
1992
1996
2005
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
Transferred
to AIM
FW Thorpe Timeline
1936
1940-
1960
Established by
Frederick William
Thorpe and his
son Ernest Thorpe.
Spinning circular
reflectors
Moved to larger
premises twice
to cope with the
expansion into
linear fluorescent
luminaires, and to
enter the exterior
and hazardous
markets
02
Annual Report and Accounts for the year ended 30 June 2019 We focus on long-term growth and stability, achieved by delivering
market-leading products, backed by excellent customer service.
3
1
7
2
4
5
Revenue by region (£m)
2019
2.5
11.2
28.2
68.7
UK
Netherlands
Rest of Europe
Rest of the World
6
2018
5.5
10.7
22.7
70.7
UK
Netherlands
Rest of Europe
Rest of the World
Our Global Footprint
1
United Kingdom
Thorlux Lighting, Philip Payne,
Solite Europe, Portland Lighting,
TRT Lighting
2 Netherlands
Lightronics, Famostar
3
Ireland
Thorlux Lighting
4
5
6
7
Germany
Thorlux Lighting
United Arab Emirates
Thorlux Lighting
Australia
Thorlux Lighting Australasia
Spain
Luxintec
2009
2011
2013
2014
2015
2016
2017
2018
2019
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
Acquired
Famostar –
Netherlands
Improved
emergency
lighting product
offering
Compact
Lighting
business
successfully
merged with
Thorlux Lighting
Portsmouth
facility sold
03
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk FW Thorpe at a Glance continued
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.
Key products
•
Recessed, surface
and suspended
luminaires
Emergency
lighting systems
•
• Hazardous
area lighting
• High and low
bay luminaires
Lighting controls
Exterior lighting
•
•
Market sectors
Commercial
•
•
Industrial
Education
•
• Healthcare
• Manufacturing
Retail, Display
•
and Hospitality
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
Read more on page 29
Read more on page 30
Description
Solite Europe is a leading
manufacturer and supplier of
clean room lighting equipment
and luminaires within the UK
and Europe.
Solite provide luminaires for
laboratories, pharmaceutical and
semi-conductor manufacturing
areas including hospitals, kitchens
and food preparation applications.
Key products
•
Clean room
luminaires
Pharmaceutical
Market sectors
•
• Healthcare
•
Education/Research
Key products
•
Lighting for signs
Market sectors
Retail
•
• Hospitality
Advertising
•
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.
Read more on page 31
Read more on page 32
04
Annual Report and Accounts for the year ended 30 June 2019 Key products
Road and
•
tunnel lighting
Amenity lighting
•
Market sectors
•
•
Infrastructure
Facilities –
car parking
Description
TRT (Thorlux Road and Tunnel)
Lighting is an independent
specialist company 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.
TRT produces quality, efficient,
stylish, high performance LED
products that are manufactured
in the UK.
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.
Key products
Road lighting
•
•
Amenity lighting
• Outdoor wall and
ceiling luminaires
Lighting controls
•
Market sectors
•
•
Infrastructure
Facilities –
car parking
• Housing
Read more on page 33
Read more on page 34
Description
Based in Velp, the Netherlands,
Famostar specialises in the
development, manufacture and
supply of emergency lighting
products. Revenue is derived
from the Netherlands, where it is
considered one of the foremost
brands in the market.
Famostar was originally
established in 1947, with
each product being designed
and manufactured at its own
production facility. Famostar has
a reputation for designing and
manufacturing reliable luminaires
offering solutions for sectors
including commercial, industrial,
education and retail applications.
Read more on page 35
Emergency lighting
knowledge and expertise
is key to the success of the
business. Famostar offers
both the correct technical
solution and unique
proposals to complement
the needs of the customer.
Key products
•
Emergency
exit signage
Emergency
lighting systems
•
Market sectors
Commercial
•
Industrial
•
Education
•
Retail & Hospitality
•
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
05
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Strategic
Report
08
Chairman’s Statement
12 Marketplace
14
16
18
19
20
22
24
26
Business Model
Strategy
Key Performance Indicators
Strategy in Action:
Queen’s Awards 2019 Winner
Product Innovation: Flex System
Product Innovation: Optio
Investing in a greener future
On the road with the SmartScan van
28 Operational Performance
36
38
40
Financial Performance
Principal Risks and Uncertainties
Sustainability
Pictured: BuroHappold, Leeds
Chairman’s
Statement
£42m
Revenue from outside the UK
(2018: £39m)
08
“ Overall, Management are
pleased with the recovery and satisfied
that, to the best of our judgement, the
Group has gained market share in
tough trading conditions.”
Despite a tremendous effort by Group employees, and as forecast
in the interim results announcement, operating profit before
disposals for the 2018/19 financial year took a step backwards
when compared with last year’s record. As reported, UK operations
suffered from a significant general downturn in market conditions
in the first half of the year, and despite an excellent recovery of
orders in the second half and good contributions by Lightronics
and Famostar in the Netherlands, revenue increased only
marginally over the year. It is, however, pleasing to report that
despite ongoing uncertain economic conditions in the UK, orders
closed ahead of the previous year and the Group entered the new
financial year with a healthy order book.
Group results
In 2018/19, Group revenue reached
£110.6m, an increase of 0.9%, but
underlying operating profit was down by
9.3% to £17.6m. A reduction in operating
profit was experienced across a number
of our UK operations, but most notably
at the Group’s largest company, Thorlux
Lighting, as a result of costs associated
with closing down the Portsmouth
factory, reduced efficiency due to
managing the slowdown followed by
a sudden ramp-up of production, and
a slight squeeze on margins. Overall,
Management are pleased with the
recovery and satisfied that, to the best
of our judgement, the Group has gained
market share in tough trading conditions.
Both revenue and operating profit are
supplemented by the first full-year
inclusion of Famostar; the prior year
only represented six months’ results for
the Netherlands business. Operating
profit and profit before tax were
supported by the sale of the Thorlux
Portsmouth and Sugg Lighting factories
for £4.8m, realising a £1.9m gain on
disposal. Revenue generated outside
the UK was £42m, or 38% of the total,
the majority from European countries
served by Group acquisitions in the last
few years. Organic growth for exporting
products from the Group’s UK companies
remains a firm target, but this year took
a step backwards despite the weak
pound. In particular, Australia and the
UAE suffered from a lack of significant
projects, each region with its own unique
set of trading and economic difficulties.
The pressure remains on, and I remain
committed to offsetting risk within the
Group by ensuring the companies are as
multinational as practical in their trading.
There is a detailed summary of each
company’s performance later in the
Annual Report and Accounts, but I would
like to recognise the improvement in
profitability at the Group’s UK-based street
lighting producer, TRT Lighting (£0.8m,
up 103%), further improvements at
Lightronics, and, after only a short time as
part of the Group, how Famostar has made
an excellent contribution, increasing its
own profits considerably and making a real
impact on the overall figures.
Annual Report and Accounts for the year ended 30 June 2019 University of Worcester Arena, Worcester
During the year, numerous acquisition
opportunities have presented themselves.
Each of these has been investigated,
several in some detail. Within the Board,
we continue to try and find the right
companies that fit the Board’s criteria,
including for them to be non-competing,
complementary, and to have potential
synergies with other Group companies.
The Board has continued and committed
to invest to underpin Group companies
and to support growth. To that end: the
construction of new facilities for Portland
Lighting continues at pace (£1.6m); the
Group acquired the present factory and
offices for Famostar (£2.3m), after the
year end, from the leaseholder, together
with a significant amount of adjoining
land, in anticipation of future expansion
(£0.3m); the extension and renovation of
the Lightronics building was completed
(£1.0m); and the Group invested in the
sheet metal factory at Thorlux Lighting,
with new state of the art metal-piercing
machines (£1.6m). I am proud to report
that the roof of Thorlux Lighting’s sheet
metal factory now supports 909 solar
panels, contributing 225,000 kWh of
annual electricity, providing continuation
of the Group’s green manufacturing and
distribution policy, and even charging
the hybrid electric cars of myself and
my colleagues with near zero-carbon
electricity during our working days.
Performance as a whole for the year
to 30 June 2019 allows the Board to
recommend a final dividend of 4.10p
per share (2018: 4.00p), which gives a
total for the year of 5.53p (2018: 5.40p).
In recent years, I have reported on the
difficulties in finding organic revenue
growth during tough trading conditions.
I believe the current challenges are
caused by several factors. Among these,
of course, is the Brexit situation, which
is hitting general business confidence,
as can be seen in our sales to certain
sectors in the UK. While the Brexit
debate continues, the Government
is not focussed on general everyday
tasks, which is also arguably affecting
an amount of potential revenue from
customers reliant upon government
investment. Finally, customer interest in
LED luminaire technology has peaked
because of the smaller improvements
in LED chip performance; in particular,
short-payback retrofit projects are fewer.
It is pleasing that in such changing times,
the Group can still produce a set of
creditable figures.
The Group companies do, however, need
to keep improving, and in particular be
more agile. All Group companies operate
on annually reviewed objectives and
key performance indicators, set by each
board at the start of each financial year.
In addition, the Group Board has a longer
term strategy and planning review.
The product life cycle of lighting products
used to be long; however, LED luminaires
and control systems now need updating
regularly. The lighting industry should be
proud of what it has achieved in recent
years, with LED luminaires and control
systems often using 70% less power than
their conventional counterparts, and
as such making a real contribution to
government energy-reduction objectives.
However, with such large reductions
in power usage, and associated
environmental impacts, control system
effectiveness is less pronounced and
monetary paybacks are extended.
Therefore, systems now need to provide
greater benefits in addition to energy
saving alone.
Nowadays, within the Group we are
changing our emphasis, and our sales
engineers talk far more about other
factors as well as energy saving. These
changes are exciting whilst also a threat.
If we change and adapt, like we did for
the “LED revolution” years ago and the
“wireless revolution” not so long ago,
then our luminaires can provide data
and status information for numerous
reasons, including, for example, users’
presence-detection profiling to determine
operational efficiency improvements, and
automatic emergency lighting testing to
provide health and safety compliance. We
can also fine-tune lighting automatically,
for example its colour temperature, to
follow a natural daylight rhythm. People
in the workplace are expensive; if we can
help people be more efficient and provide
an environment in which they can be
more productive, through good quality
lighting, then that can deliver a return
on investment more quickly than energy
savings ever did.
The SmartScan emergency lighting
system has found synergies across most
Group companies. Using a common
software “backbone” allows Thorlux
to tailor the system to suit individual
company needs such as branding or local
09
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Chairman’s
Statement continued
+2.4%
Dividend
(2018: +10.2%)
testing nuances. Philip Payne and Solite
already use SmartScan technology, and by
the end of this calendar year SmartScan
will be launched at Famostar, TRT and
Lightronics. In the near future, there are
plans to extend the SmartScan platform
further, to bring other non-lighting
devices into its web portal, for example to
provide warehouse dock door monitoring
and solar panel energy logging.
Thorlux introduced its new Flex System
last year, but full production only started
recently. This new range builds on the
theme of providing lighting for workplace
well-being. Please see the article on pages
20 to 21 in this Annual Report for details,
or the Thorlux website. The system has
several patented elements and is a rather
radical approach to lighting a space.
It certainly looks the part in the newly
refurbished Lightronics building, and
I hope customers will feel the same.
Personnel
I would like to thank my whole team for
their continued support and diligence.
We all have objectives to meet, and whilst
these are challenging, they are necessary
to continue on the path of steady,
sustainable and profitable growth.
Andrew Thorpe retired from executive
duties on 28 June 2019. Further to my
announcement at the time, I would like
to repeat, on behalf of the Board and all
employees, our thanks to Andrew for his
diligence in his many years working for
our company. Andrew will be a welcome
visitor every month for board meetings
and at any time in between.
I am also pleased to share with you that we
have added two relative “youngsters” to
the Thorlux Board; one started with us as
an apprentice and the other as a trainee.
Outlook
It has never been possible for the Board
to predict order income beyond the
next few months; in the current climate,
predictions seem even more challenging.
All we can do is to remain focussed and
capable to flex with the times.
I strongly believe that if we, within the
Group, continue to develop products
that our customers desire, then that is a
good starting point. Beyond that, we then
have to continually assess our methods
and routes to market and be prepared to
change to suit the times. We also need
to ensure we are showing our wares to
as many customers as possible, through
better marketing and targeted sales.
The Group Board has targets and plans
in place for all of the Group’s companies;
Board members remain committed to
resume a path of steady growth. We
are, at this moment, however, subject
to unpredictable economic conditions,
particularly in the UK, with the threat
of a disorderly exit from the EU and the
Government in disarray. Whilst we have
some plans in place to mitigate these
impacts, current uncertainty only serves
to weigh on our customers’ confidence
to invest in capital projects. We can only
hope that, whatever the outcome over
the next few months, any downturn
in some sectors will be offset by some
reinvigoration in government-led
investment.
Mike Allcock
Chairman and Joint Chief Executive
18 October 2019
10
Pictured right: Lightronics Offices, Waalwijk
Annual Report and Accounts for the year ended 30 June 2019
11
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Marketplace
are growing?
Q Which market sectors
A The main growth areas have
been healthcare and logistics. This
continues to justify our investment
in business development for these
areas. We will consider some further
investment in targeted selling
resource during 2020.
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 overarching
trends that affect us as a Group.
The growth in these areas, however,
was offset by reductions in public
sector related and industry spending.
Commercial
Housing
Industrial
you focusing on?
Q Which sectors are
A Our product and solution
portfolio continues to evolve and
can cater for a variety of different
sectors. We continue to focus on the
healthcare, logistics and retail sectors
but with some renewed endeavour
on transport and education.
Q Do your competitors
have an interest in each
of these markets as well?
A We have both domestic and
international competition across
all of these markets, from listed
multinationals to solid private
businesses. We continue to
differentiate ourselves with product
and systems innovation, combined
with excellent customer service
through the life cycle of a project.
Q Are you in each of
these markets in all of
the geographies you
operate within?
A We tend to focus on particular
product ranges in new territories. We
focus on our industrial products with
controls technology as this has driven
export success in the past. That
does not preclude us from offering
solutions in other sectors and we
have won orders in education and
facilities as examples.
12
Facilities
Education
Infrastructure
Healthcare
Advertising
Manufacturing
Research &
Development
Retail
Pharmaceutical
Display
Hospitality
UK
Revenue
-3%
•
Weakened demand in
some traditional sectors.
Increased business from
healthcare and logistics
Rest of Europe
Revenue
+4%
• Additional business in
Norway, France, Germany
Netherlands
Revenue
+24%
•
Increased percentage driven
by full year of Famostar and growth
at Lightronics
Rest of the World
Revenue
-54%
• Caused by lack of demand in
Australia and the UAE
Lower level of project activity
•
Annual Report and Accounts for the year ended 30 June 2019 Increase in demand for
technology
Adoption of LED
technology and decline
of fluorescent lighting
Globalisation
What this means:
What this means:
What this means:
•
•
•
Evolution of controls technology
– wireless
Connectivity with the internet
and other devices – the internet
of things
Ability to offer customers
additional functionality by adding
different sensor technology and
presenting data, e.g. air quality
data, occupancy profiling
• 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 90% of
total revenue in recent years
•
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:
Opportunity it provides:
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
• Offer solutions to provide
additional data specific to the
market sector, i.e. occupancy
sensing for logistics and facilities
management
• 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
• Offer previous fluorescent
customers opportunity to upgrade
•
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:
How we are responding:
How we are responding:
• Well placed with introduction of
• All new product developments are
• Working with global customers
SmartScan in 2016
LED based
• Further development of the
SmartScan platform, bringing
other non-lighting devices into the
web portal
• Occupancy profiling, air quality
sensing, and the ability to change
colour temperature are all features
• Continual review of LED technology
offerings to take advantage of the
latest advances and ensure we are
offering the best solutions to our
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
13
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk 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.
>
>
>
The key resources
we utilise...
The brands we
operate through...
The key markets we serve...
Design & Innovation
Products, software,
lighting design
Continuous product development
Talented People
Continual development
Commercial
Industrial
Education
Healthcare
Manufacturing
Commercial
Industrial
Education
Healthcare
Manufacturing
Retail
Retail
Display
Display
Hospitality
Pharmaceutical
Hospitality
Pharmaceutical
Research &
Development
Research &
Development
Advertising
Infrastructure
Facilities
Advertising
Infrastructure
Facilities
Housing
Housing
Commercial
Commercial
Industrial
Industrial
Education
Education
Healthcare
Manufacturing
Healthcare
Manufacturing
Retail
Retail
Display
Display
Manufacturing Facilities
UK – multiple sites,
Europe – Netherlands, Spain
Continual investment
Commercial
Commercial
Hospitality
Pharmaceutical
Hospitality
Pharmaceutical
Research &
Development
Research &
Development
Advertising
Infrastructure
Advertising
Infrastructure
Facilities
Facilities
Housing
Housing
Industrial
Industrial
Education
Education
Healthcare
Manufacturing
Healthcare
Manufacturing
Retail
Retail
Display
Display
Commercial
Industrial
Education
Healthcare
Manufacturing
Retail
Hospitality
Pharmaceutical
Hospitality
Pharmaceutical
Research &
Development
Research &
Development
Advertising
Infrastructure
Advertising
Infrastructure
Display
Facilities
Facilities
Housing
Housing
Education
Pharmaceutical
Healthcare
Research &
Development
Manufacturing
Advertising
Retail
Infrastructure
Display
Facilities
Housing
Financial &
Environmental
Sustainability
Financial stability,
Carbon Offset Scheme
Industrial
Commercial
Hospitality
14
Hospitality
Pharmaceutical
Research &
Development
Advertising
Infrastructure
Facilities
Housing
Annual Report and Accounts for the year ended 30 June 2019 >The service offering
we provide...
>
Solutions provided
for our customers...
>
The value generated...
Design &
Development
Target
Customers
Those responsible for the
whole life cycle cost of the
products/services we supply
− Energy efficiency
− Low maintenance
− Rapid installation
− Longevity of product
− Low total cost of
ownership
£1.8m
Group spend on
capitalised R&D
(2018: £1.6m)
Manufacturing
+20%
Punch/Bend capacity
+100%
Laser cutting capacity
Commissioning
£0.7m
Revenue from this service
(2018: £0.7m)
Customers
Short-term
Replacement of ageing technology
with improved lighting systems
Long-term
Innovative lighting that delivers cost
savings and additional benefits, such
as data capture and presentation
Shareholders
Short-term
Opportunity to invest in a company
that pays a progressive dividend
Long-term
Sustainable profit growth
drives future shareholder returns
Employees
Short-term
Opportunity to work with an
innovative market leading company
within the lighting industry
Long-term
Continual development with a
variety of Group companies in a
number of different territories
15
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk 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
Strategy in Action
1
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.
2
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.
Focus on manufacturing excellence
Along with continued product development, the need to
innovate the production process is essential.
• Continued enhancement of features for the SmartScan
wireless system – occupancy profiling, air quality,
colour changing capability and further data capture
Introduction of the Flex System – a new innovative
method of general illumination
Integration of lens and optical technology into certain
ranges using Luxintec
•
•
•
•
•
•
•
Targeted approach in the Netherlands with Thorlux
industrial product portfolio
Luxintec adoption of Smart and SmartScan technology
in existing product portfolio
Introduce Famostar product portfolio to territories
where the Group has a presence
TRT facility expanded to improve capacity and disaster
recovery for PCB and painting process at Thorlux
Expanded and refurbished Lightronics facility –
increased capacity and showcase Group’s products
• Acquired new facility for Portland
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
3
4
•
•
•
•
•
Further development of SmartScan
Product acceptance
Case Study:
• Continuous research and development
Initial product introduction
Queen’s Award 2019 Winner
Targeted acquisition
Read more on page 19
• Consider further sales offices overseas
Potential business development
investment
Investment in sales personnel in the
UK and overseas
Targeted acquisition
Short term cost increase
without immediate return
Prolonged time required to
establish FW Thorpe brands
in new territories
Case Study:
On the road with the SmartScan van
Read more on pages 26 and 27
• Development of Lightronics facilities –
introduce Application Centre concept
Reduced productivity while
Case Study:
changes are implemented
Investing in a greener future
Learning curve on
introduction of new products
and processes
Read more on pages 24 and 25
• Continued investment in
manufacturing facilities
• Acquire Famostar facility and
neighbouring land
• Continued investment in training
and personnel development
• Ability to retain staff in
competitive local job markets
•
Potential loss of UK
personnel from the EU due to
Brexit uncertainty
•
•
•
•
•
•
C
A
C
D
E
C
C
I
Integrity
Honesty
Longevity
Our Values
16
Annual Report and Accounts for the year ended 30 June 2019
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.
• Continued enhancement of features for the SmartScan
wireless system – occupancy profiling, air quality,
colour changing capability and further data capture
Introduction of the Flex System – a new innovative
method of general illumination
Integration of lens and optical technology into certain
ranges using Luxintec
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.
Targeted approach in the Netherlands with Thorlux
industrial product portfolio
Luxintec adoption of Smart and SmartScan technology
in existing product portfolio
Introduce Famostar product portfolio to territories
where the Group has a presence
Focus on manufacturing excellence
Along with continued product development, the need to
innovate the production process is essential.
TRT facility expanded to improve capacity and disaster
recovery for PCB and painting process at Thorlux
Expanded and refurbished Lightronics facility –
increased capacity and showcase Group’s products
• Acquired new facility for Portland
Continue to develop high quality people
One of our main sources of competitive advantage, it is
Training and development
• Apprentice scheme continues
imperative we continually develop and retain talent within
Investment in management training
the business.
•
•
•
•
•
•
•
•
•
Priority
Progress to date
Future opportunities
Associated risks
Strategy in Action
Further development of SmartScan
•
• Continuous research and development
•
Targeted acquisition
C
•
•
Product acceptance
Initial product introduction
Case Study:
Queen’s Award 2019 Winner
Read more on page 19
Read more about our Principal Risks
and Uncertainties on pages 38 and 39
• Consider further sales offices overseas
Potential business development
•
investment
Investment in sales personnel in the
UK and overseas
Targeted acquisition
•
•
• Development of Lightronics facilities –
introduce Application Centre concept
• Continued investment in
manufacturing facilities
• Acquire Famostar facility and
neighbouring land
• Continued investment in training
and personnel development
A
C
D
E
C
C
I
•
•
•
•
Short term cost increase
without immediate return
Prolonged time required to
establish FW Thorpe brands
in new territories
Case Study:
On the road with the SmartScan van
Read more on pages 26 and 27
Reduced productivity while
changes are implemented
Learning curve on
introduction of new products
and processes
Case Study:
Investing in a greener future
Read more on pages 24 and 25
• Ability to retain staff in
•
competitive local job markets
Potential loss of UK
personnel from the EU due to
Brexit uncertainty
Risks key
A Adverse economic conditions
D Price changes
G Movements in currency exchange
B Changes in government legislation or policy
E Business continuity
H Cyber security
C Competitive environment
F Credit risk
I Exit from the European Union
17
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Key Performance
Indicators
The following key performance indicators are considered to be the most appropriate for
measuring how successful the Group has been in meeting its strategic objectives.
Revenue (£m)
�0.9%
2019
2018
2017
2016
2015
Operating Profit (£m)
�0.5%
2019
2018
2017
2016
2015
Performance in 2019
•
•
•
Increase supported by first full year inclusion
of Famostar (+£4.1m)
Revenue reduced at Thorlux, UAE and Australia
Lightronics ahead with most subsidiary companies
similar to last year
110.6
109.6
105.4
88.9
73.5
19.6*
19.5
18.4
Performance in 2019
• Operating profit supported by profit on disposal of property
– sale of Portsmouth facility
• Additional profit from first full year of Famostar +£0.6m,
•
•
significant improvement by TRT
Thorlux, UAE and Australia lower than last year
Increased provision for Lightronics earn-out reduced
operating profit by £0.7m compared to 2018
16.2
13.7
* 2019 includes profit on the disposal of property of £1.9m
Basic Earnings per Share (Pence)
−%
2019
2018
2017
2016
2015
18
Performance in 2019
• Driven by operating results
•
Increased number of shares due to exercise of executive
share options
13.91
13.91
12.54
11.24
10.12
Annual Report and Accounts for the year ended 30 June 2019 B
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Strategy
in Action
Queen’s Awards 2019 Winner
Mike Allcock receiving the Queen’s Award from Vice Lord-Lieutenant, The Hon. Lady Morrison
Vice Lord-Lieutenant, The Hon. Lady Morrison with Tony Cooper
We are delighted to announce
that the Prime Minister and
Her Majesty the Queen have
selected Thorlux Lighting as a
winner of the Queen’s Award
for Enterprise in the Innovation
category. This prestigious
accolade is for the development
of the SmartScan wireless
lighting management system.
Established in 1965, the Queen’s Awards
for Enterprise are the most prestigious
business awards in the country with
winning businesses able to use the
esteemed Queen’s Award emblem for the
next five years.
“It is a huge honour to receive a Queen’s
Award for Enterprise,” Thorlux Managing
Director, Mike Allcock said. “This is a most
welcome recognition of our commitment
to supporting technological innovation
in the UK and of our contribution to the
manufacturing sector. It is a reflection of
the tremendous energy and commitment
of our staff as well as their pursuit of the
very best in product innovation.”
Andrew Thorpe and Mike Allcock at Buckingham Palace
Stock Code: TFW www. fwthorpe.co.uk
19
Strategy
in Action continued
Product Innovation: Flex System
“ LED
technology affords
fresh thinking
when it comes to
luminaire design.”
In 2019, Thorlux launched the revolutionary Flex System range.
Flex System provides a radical solution for suspended ceiling
systems and comprises two luminaire types, Flexline and Flexview.
With people’s health and wellbeing
becoming a primary consideration in
building and services design, this new
luminaire range has been developed
to coincide with this focus. Flex System
offers a highly efficient, low glare yet
striking and inspirational lighting solution
for a variety of applications.
illumination. By separating the lighting
elements and having dedicated main
space illumination, light output, efficiency
and quality are not affected, unlike the
situation often found with other picture
panel type luminaires. The separate-optic
concept now has a patent granted in the
UK, and the EU patent is progressing.
Choice of luminaires
Flexline is a super-narrow linear luminaire
that breaks from convention by taking
the lighting outside the ceiling tile. With
sophisticated and highly efficient low
glare optics, designed in conjunction
with Luxintec, Flexline offers a radically
different solution to conventional 600 x
600 luminaires. An extruded anodised
aluminium body, just 24 mm wide, houses
the very latest LED printed circuit boards
with high performance optics. This linear
system simply clips to the ceiling T bar
using tool-free connection springs. The
linear T bar mounted approach now has
a patent granted in the UK, and the EU
patent is progressing.
Flexview is a recessed lay-in luminaire
with a dual light engine combining low
power edge-lit technology for its picture
window, with separate high performance
low glare optics for main space
Creating inspirational spaces
Both Flexline and Flexview are available
in a variety of pre-configured kits which
comprise different shapes and sizes of
luminaire. This range provides lighting
designers with a level of creativity never
seen before, allowing them to produce
inspirational and imaginative lighting
layouts.
“LED technology affords fresh thinking
when it comes to luminaire design, as
we are not bound by conventional lamp
forms. It’s time to think ‘outside the box’.
Flex System is a prime example of this,
allowing a new and exciting approach
to lighting spaces whilst still providing
a highly efficient and low glare solution,”
says Richard Caple, Marketing Director -
Thorlux Lighting.
Pictured: Flex System installed
at Lightronics, Waalwijk
20
Annual Report and Accounts for the year ended 30 June 2019
B
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Comfortable, glare free lighting
Poor glare control from lighting can be
distracting and cause discomfort, which
may lead to headaches, eye strain and
fatigue. The optics within the Flex System
range have been developed from within
the FW Thorpe group in association with
Luxintec. The patented optical system
provides high efficiency by focusing the
light from the LED onto a nano-prism
optic, which de-glares the brightness of
the LED as well as distributing the light
in the desired direction. A louvre system
then provides 360-degree glare control
and is available in white, metallised and
black finishes to fine-tune the control
depending on the application.
Flexibility
Luminaires are supplied with a wattage
selector switch mounted to the gear
enclosure, providing a choice of four
outputs from one fixture. This new
innovation not only simplifies ordering
for customers, it also provides great
flexibility, allowing the output to be
adjusted to suit the needs of the user
and the space. In addition, for Thorlux,
the overall stock holding of finished
luminaires is reduced. The Flex System
revolutionises the way spaces are
illuminated, by combining sophisticated
low glare optics, innovative luminaire
design, high performance LEDs and
simple tool free installation, Flex System
is challenging people to rethink their
lighting possibilities.
Stock Code: TFW www. fwthorpe.co.uk
21
Strategy
in Action continued
Product Innovation: Optio
“ During
the product
development stage,
there were four key
elements of focus.”
Optio is the new residential street lighting range from TRT, which
has been developed through gathering feedback from customers
and listening to the daily challenges they face.
High volume roll-out projects are
primarily cost driven and often ignore the
practical and technical issues associated
with lantern replacements in the field,
which can lead to indirect additional
cost, revisits and unnecessary complexity.
Optio has been designed to address these
technical issues and achieve compliance
with multiple roadway challenges by
offering unparalleled flexibility.
Optio’s cast aluminium body and hinged
canopy are both pre-treated with a full
polyester powder coated finish to meet
the rigorous demands of the external
environment. Optio’s low weight and
low windage surface area render it ideal
for retrofitting to existing columns. A
sleek and modern aesthetic makes Optio
suitable for any residential street lighting
replacement programme.
22
Annual Report and Accounts for the year ended 30 June 2019 During the product development stage, there were four key elements of focus following feedback from
customer consultation:
Multi-optic design
Optio incorporates a unique patent-pending OptiSet feature,
which allows on-site adjustment of the lens system to set
the desired optical distribution according to the needs of
the application. One luminaire type is therefore suitable for
residential, footpath or area lighting. The high performance lens
system, designed in association with Luxintec, provides excellent
uniformity and comfort. There is also the ability to retrofit light
shields, providing the installer with further refinement for
sensitive areas where light trespass is an issue.
Adjustable light output
Using the well-established TRT PowerSet module, the power
output of each Optio luminaire can be configured during
installation, further increasing the flexibility of the luminaire.
PowerSet, in conjunction with the OptiSet lensing arrangement,
means Optio meets the needs of all residential lighting standards
without over lighting or producing unwanted spill light.
Adaptable mounting bracketry
A vast number of existing column and mounting styles are
installed on our highways. Optio therefore incorporates TRT’s
unique patent-pending MountSet feature, which facilitates
mounting on any existing or a newly chosen lighting column
or bracket. MountSet not only simplifies installation, but also
removes the need for installing contractors to stock a myriad of
costly adaptors.
Reduced stock holding
Combining the OptiSet, PowerSet and MountSet features into
one product out of a single box, Optio provides the equivalent
solution to over 100 variations of a typical competitor’s street
light. Optio therefore allows customers to reduce their stock
holding. Each product can be set to perfectly suit its application,
whether set in the workshop prior to installation, or on the top
of the column.
23
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Strategy
in Action continued
Investing in a greener future
“ The system
is estimated to
produce 224,470
kWh of electricity
per annum.”
Thorlux manufactures over 400,000 luminaires per annum at its
modern self-contained factory in Redditch, Worcestershire, UK.
Energy-intensive processes, such as sheet metal punching, laser
cutting and forming, powder coating and assembling LED printed
circuit boards, take place in the factory.
Thorlux has, therefore, installed solar
photovoltaic units on the roof of its
manufacturing facility. The system is
estimated to produce 224,470 kWh of
electricity per annum, helping to power
the plant and equipment as well as
charging the company’s fleet of hybrid
vehicles. Over its operational lifetime,
through reduced consumption from the
National Grid, the installation will deliver
a total CO2 reduction of 1,580 tonnes and
financial savings of over £1 million.
The company is continually measuring
and improving its environmental
credentials, and for many years has had
an energy-monitoring programme in
place which is independently audited and
accredited to ISO 14001.
In 2009, Thorlux invested in its own
carbon offsetting programme, planting
trees on its own land in Monmouthshire
to offset the CO2 generated in its
manufacturing and selling activities.
The company has planted an incredible
150,000 trees over the last ten years.
However, even with this responsible
and proactive approach, the company
thought that further improvements could
be made to reduce its environmental
impact and carbon footprint.
Pictured: Solar Photovoltaic installation
at Thorlux, Redditch
24
Annual Report and Accounts for the year ended 30 June 2019 25
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Strategy
in Action continued
On the road with the SmartScan van
University of Birmingham
Worcester NHS
10
Countries visited
23,721
Miles travelled
138
SmartScan demos completed
In the summer of 2018, Thorlux invested in a custom-made
SmartScan demonstration van. The vehicle is fitted out with the
latest SmartScan technology and product innovations and travels
throughout the UK and mainland Europe visiting potential and
existing customers.
Visitors to the van get the chance to
see first hand the SmartScan system
in operation and speak to our expert
product managers.
One of the recent successes following a
visit by the SmartScan van is a project
supplying Hi-Bar luminaires with
SmartScan wireless controls to the brand
new offices of BuroHappold in Leeds.
Slim and elegant, the Hi-Bar combines
supreme efficiency and longevity with
design flexibility. Integral sensors monitor
ambient light and presence, control
output to the correct level, dim and
switch when there is sufficient daylight
and illuminate only when the area is
occupied.
SmartScan installation at BuroHappold offices in Leeds
26
Annual Report and Accounts for the year ended 30 June 2019 UK
Ireland
Denmark
Thorlux Thursday event at Thorlux in Redditch
Netherlands
Germany
France
Lightronics, Netherlands
SmartScan van destinations over the last 12 months
The Man Behind the Wheel – Jakub Kaczorek
1 What do you enjoy the most about
the job?
4 Are there any places you would
particularly like to visit?
I enjoy all parts of my job, but mostly
interacting with people. I think this
job is a great platform to learn about
marketing and sales, and is almost like
an apprenticeship for marketing. The
job covers everything and constantly
provides new experiences. I also enjoy
visiting different places and that my job is
never the same in the sense that one day
I could be in France, and the next at an
exhibition in the Netherlands.
2 Which is your favourite of the places
you have visited?
I loved the people in Ireland and the
Netherlands, and have great memories of
those places. Enjoying the landscape in
Snowdonia was also one of my favourite
experiences, likewise with the scenery in
Austria.
3 What don’t you like about your job?
The ferries! I enjoy travelling with my job
– but not on the ferries, so I try and avoid
them as much as I can. Other than that,
nothing.
I would like to go to Poland, and I am also
excited to visit Aerospace Bristol for our
Thorlux Thursday. I like visiting any new
places and meeting a variety of people.
5 Is there anything you would change
about your job?
My job is perfect for me, but I would like
to use it as a platform to be more involved
in marketing.
6 What surprises people most about
SmartScan?
Probably that it’s completely wireless,
and people are always surprised by how
practical and simple maintenance is.
People expect the system to be complex,
but the five year warranty and simple
design mean the lights are easy to
maintain.
7 Where are you going next?
Over the next four weeks I am visiting
France, the Netherlands and then
Denmark.
27
Jakub Kaczorek
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Operational
Performance
FW Thorpe: Group Performance
2019 Group Company Overview
FW Thorpe Plc encompasses individual companies that concentrate on particular market sectors and
geographical locations. The companies provide the Group with diversity as well as risk mitigation by
not directly competing and by being complementary.
The companies within the Group
can be affected differently by trends
and economic impacts within their
respective markets. The continuing
development and market adoption of
LED and lighting controls technology
means that Group companies can share
the benefits of product and technical
expertise to differentiate themselves from
competitors.
Group performance was below the best-
ever results of last year, although this
year’s results are supported by the first
full-year inclusion of Famostar following
its acquisition in December 2017. During
the year, the Group has been impacted by
economic and political uncertainty and
has taken the decision to carry additional
stock of certain components in case of
disruption from a disorderly exit from the
European Union.
Continued new product introductions,
investment in manufacturing facilities,
and sales into new markets have helped
the Group deliver results ahead of those
of its peers in the lighting market. The
business continues to be 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.
Group Total Revenue (£m)
Excluding Intercompany
25.2
23.1
62.3
Thorlux
Lightronics
Other Companies
Revenue by region (£m)
Excluding Intercompany
2.5
11.2
28.2
68.7
UK
Netherlands
Rest of Europe
Rest of the World
Coventry University, Coventry
28
Annual Report and Accounts for the year ended 30 June 2019 Thorlux Lighting
The 2018/19 financial year has been a “game of two halves”, with revenue and operating profit
improving in the second half, but not enough to match the results of last year. Coupled with
significantly reduced demand in the first quarter of the year, additional costs were incurred to meet
a sudden and sustained increase in demand over a number of months. There were also additional
costs for closing the Portsmouth factory, which weighed heavily on the result. Order income finished
strongly, ending marginally ahead of that of the prior year – a great turnaround, providing a healthy
order book with which to commence the new financial year.
Thorlux’s strategic pillars include
investment in manufacturing; this
has continued again in 2018/19. New
punching capacity was added in the
second half of the year, with a new laser/
punch machine being added in the first
quarter of 2019/20. These investments
will improve the company’s response
to peaks in demand and minimise the
increase in labour costs seen this year.
Process improvement remains key, with
continual investment in software systems
to improve day-to-day activities; Thorlux
expects to see further commitments in
this regard in the years to come.
In the current economic and political
climate, orders continue to be hard-
fought. The company will continue to
invest in product development and will
market its capabilities, perhaps a little
more aggressively than in the past. Whilst
revenue has disappointed this year, the
Group should take heart from order
income growth, since we believe that the
order income of many of Thorlux’s peers
has been significantly down in recent
times. More targeted selling activities,
either sector or territory driven, will be
required, but these will be balanced with
acting on those investments that have
not performed.
Thorlux will continue to aim to achieve
the record sales seen in the last few years.
The current order book and average
monthly revenue in the company’s
second-half performance should give the
Group confidence; however, this needs to
be tempered, given the current political
and economic backdrop.
Thorlux services the broadest portfolio
of sectors and with the most complex
range of products of any group company.
Question marks remain over the
construction sector, with uncertainty
hanging over some major contractors,
and the demise of some others; this
only serves to dampen demand. Sectors
Thorlux has actively targeted have
seen revenue increase during the year
– in particular, healthcare, logistics and
rail; however, this has been offset by
weakness in sectors where Thorlux has
been traditionally strong.
Innovation remains at the forefront for
Thorlux. For example, the new Flex System
was introduced during 2019; this patented
system provides a new way of lighting
a space, utilising the ceiling grid, as well
as offering the opportunity to bring
the outside in with the view of the sky
incorporated into the ceiling. See pages
20 and 21.
SmartScan continues to deliver increased
revenues, with over £22.0m (2018:
£14.0m) of revenue delivered during
the year. New features for this wireless
system are currently being developed
for specific sectors, underlining
Thorlux’s commitment to satisfy its
customers’ needs for data collection and
presentation. New features introduced
this year include dynamic drawings,
providing users with the ability to
interactively and graphically view detailed
data and analytics for selected lighting
from a single lighting point through to
that for a whole building. In addition,
occupancy profiling information and air
quality measurement and reporting are
now being offered to customers.
Overseas offices disappointed this year,
with notable exceptions in both Ireland
and Germany. Thorlux will continue to
focus on improving international sales.
“ The current
order book and
average monthly
revenue in the
company’s second-
half performance
should give the
group confidence.”
£65.9m
Revenue:
−4% (2018: −1%)
Lightronics offices, Waalwijk
29
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Operational
Performance continued
Philip Payne
The architect’s choice, Philip Payne, delivered yet another set of positive results, with both revenue
and operating profit increasing again this year. Providing modified standard products for a discerning
client base continues to be a key to ongoing success.
“ This year
Philip Payne will
commence active
cooperation in the
UK with Famostar.”
£3.4m
Revenue
+2% (2018: +11%)
Specto XT installation at Chambers Square, Edinburgh
SpectoWeb, Philips Payne’s wireless
emergency lighting system, developed
out of and sharing synergies with the
Thorlux platform, provides an important
component of building safety and
ensures regulatory compliance with
minimal disruption and few installation
considerations. The investment in this
system, with Philip Payne working
alongside Thorlux, has paid off, with
revenues increasing to £0.4m (2018:
£0.3m).
It is traditional to list successes with
prestigious clientele, and this year is
no exception. Clients have included
Edinburgh University, Godolphin
Stables, Goldman Sachs, The Palace of
Westminster, Gleneagles, the Glenfiddich
Distillery and Louis Vuitton.
Overseas revenues did not reach new
heights this year. UAE revenues have
suffered in line with the overall revenues
for the Group in this territory. There have
been some successes in mainland Europe
and further afield in Mauritius.
Philips Payne’s investment in digital
printing last year has paid dividends.
Not only has this given the company
the flexibility to react to demand, it
has also supported Thorlux’s product
development of the Flexview system,
which utilises the facility to print
images on panels to give the sky effect
mentioned in the Thorlux report.
See page 29.
For 2019/20, the target is to build on
the success of the last few years. An
investment in selling resource has been
undertaken, and we expect this to deliver
some positive progress. This year Philip
Payne will commence active cooperation
in the UK with Famostar.
30
Annual Report and Accounts for the year ended 30 June 2019 Solite
Following three solid years of growth, Solite has taken a small step backwards this year. Solite is very
much a project-orientated business, servicing the pharmaceutical and healthcare sectors in the main.
In a similar way to Thorlux, Solite has seen some positive momentum in the second half of the year,
with total order income for the year finishing ahead of that for last year; this gives some optimism
for the year ahead.
“ Effort will
be increased
to ensure that
investments in
products and
selling resource
pay off.”
£3.4m
Revenue
−5% (2018: +3%)
31
RAL Space, Didcot
The success of Solite depends on its
ability to deliver special variations of
its product portfolio; whilst this gives
a competitive advantage, it also puts
pressure on the manufacturing process.
To provide support, some minor
investments have been made in the
facilities at Solite this year, re-organising
the factory layout to improve operational
efficiency and adding vertical storage
capability by utilising equipment from
Thorlux’s closed Portsmouth facility.
The business in Ireland, working
alongside Thorlux, is an important
element of the Solite business. It gives the
Group the ability to sell both companies’
products into the market and maximise
any opportunities where both specialist
clean area and more general lighting
products are required.
Following on from its Ministry of Justice
product approval last year, Solite
continues to target the custodial sector. A
number of small projects were delivered
during the year; however, revenue was
not at the levels expected. Effort will be
increased to ensure that investments in
products and selling resource pay off.
The challenge for next year is to achieve
revenue levels in keeping with, if not
surpassing, those of the years before.
Focus continues on product development
to ensure Solite remains at the forefront
from a technology perspective as well
as delivering to customer expectations.
The order book closes the year at normal
levels but with a number of sizeable
opportunities for 2019/20.
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Operational
Performance continued
Portland Lighting
Whilst Portland’s return-on-sales ratio remains the best in the Group, revenues have declined for
another year. This can partially be explained by the dependence on the high street retail sector –
a sector which seems to have been subject to a much-publicised decline over the last few years.
“ Improving
sales outside
the domestic
market remains a
key focus.”
£3.0m
Revenue
−10% (2018: −4%)
As well as the retail sector, Portland
provides products for the brewery and
advertising billboard trade. Projects this
year include work with JC Decaux and
JD Wetherspoon, with retail business
coming from Lidl, Ikea and Carphone
Warehouse. There has also been some
collaboration with TRT: the companies
have worked together to deliver a
solution for lighting handrails at the
Millennium Bridge in Newcastle.
Improving sales outside the domestic
market remains a key focus, and results
this year have been disappointing. There
32
Ecolux Mini illuminating signage at The Foley Arms, Sutton Coldfield
has been no lack of effort though in this
regard, with a new agent for the Benelux
region appointed, some minor sales in
France, and some trade show success in
the Netherlands being among some of
Portland’s positive achievements for
the year.
The target remains to arrest the decline
in revenue. It is unlikely that the domestic
market will improve in the short term;
however, the development of a new
product line and the pursuit of export
opportunities remain key in achieving an
increase in revenue.
Aside from next-day delivery, continued
product development is key to
maintaining competitive advantage.
During 2019, development commenced
of a specific product to target a new sector;
this is still in the early stages, but we hope
to see some commercial benefits in 2020.
Annual Report and Accounts for the year ended 30 June 2019 TRT Lighting
Revenue slipped slightly again this year, but operating profit certainly did not, improving over 100%
from a difficult 2017/18. This has been achieved by improving operational efficiency in the final
assembly of products, in the main, but also with a renewed focus on material costs.
“ The Optio
product is finally
ready to hit the
market.”
£8.5m
Revenue
−1% (2018: −2%)
The new financial year starts with a
solid order book from a street lighting
perspective and some opportunities
to convert some tunnel projects into
revenue; the latter has been a rare
occurrence in the last few years, due
to delays in government spending in
this area. TRT will continue to focus
on operational efficiency and margin
improvement in 2019/20 as well as aiming
to grow revenue.
33
Part of a 19,000+ fitting roll out, Telford
As is true for all Group companies,
continual product development and
enhancements are essential. The Optio
product is finally ready to hit the market.
TRT believes that Optio will differentiate
the business in street lighting, with
key features including selectable light
distributions and power settings, as
well as an adjustable column mounting
that will result in a one-product-fits-all
solution (see pages 22 to 23).
This year also saw the introduction of
a new product line: lighting bollards.
These bollards have been developed in
conjunction with Luxintec, the Group’s
investment in Spain, and Thorlux, with the
latter adding the product to its portfolio.
2018/19 resulted in some long-awaited
tunnel work, albeit at a low level. This has
been an opportunity to sell TRT’s retrofit
kits, where the company believes there
will be further opportunities in the near
future, as well as a new tunnel product,
the X Range. There have been plenty of
projects in the pipeline for a number of
years; we are hopeful that the release of
some smaller opportunities will lead to
larger projects shortly.
In June 2019, the extension to the TRT
factory was completed to house a new
painting facility. This will make TRT
self-sufficient and reduce the pressure on
the Thorlux facility, as well as adding
some disaster recovery capability for
the Group for this particular process.
We expect this facility to be operational
by the end of 2019.
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Operational
Operational
Performance continued
Performance continued
Lightronics
Lightronics delivered another good set of results, with orders, revenue and operating profit
increasing again this year. Growth has been supported by street lighting this year, as it was
last year. Major projects included various city projects in the Netherlands and Germany.
“ The strategy
of growing
Lightronics’
industrial and
emergency lighting
sales continues.”
£23.5m
Revenue
+12% (2018: +8%)
(constant currency +12% (2018: +7%))
Hollanderwijk, Leeuwarden
New product developments during the
year include updates to high volume street
lighting luminaires, a new wall and ceiling
luminaire for outdoor applications, and a
number of shared developments with both
Thorlux and TRT. Lighting controls remain
an important focus area for Lightronics,
with more of the range becoming
“SmartScan ready” and further shared
development with Thorlux on sensor
technology to be launched in 2020.
The strategy of growing Lightronics’
industrial and emergency lighting sales
continues, with some positive results
this year. With continued investment and
closer collaboration, sales of £0.4m were
generated for Thorlux industrial products
this year, an improvement on last year.
Industrial and emergency lighting sales
will continue to be a focus, particularly in
the Netherlands, where demand should
be created with environmental legislation
becoming more stringent on energy
usage by businesses with the drive to
reduce CO2 emissions.
During the year, the management
completed the first phase of the
refurbishment of the facilities at
Lightronics. The neighbouring
buildings have been linked together
to create increased manufacturing
and warehousing capacity to support
recent and future growth. The office and
meeting spaces have been refreshed,
utilising the latest Thorlux and Famostar
products, providing a great live example
for our sales teams to demonstrate to
potential customers. The second phase
will see the creation of the Group’s
European Applications Centre later
this year.
The challenge remains of how to maintain
and improve these results during the
next financial year. Creating demand
for Thorlux products in the Netherlands
remains a potential source of growth.
Margins have been under pressure this
year, and whilst there is an action plan in
place to improve this during 2019/20 it
could put some pressure on results.
34
Annual Report and Accounts for the year ended 30 June 2019 Famostar
This is the first full year inclusion of the Famostar business following its introduction in the second
half of 2017/18. The Group acquired the business in December 2017, with the support of the
management at Lightronics, as a specialist in emergency lighting for a range of market sectors.
“ One
strategic action
has been to embed
the SmartScan
emergency system
into selected
products.”
£7.9m
Revenue
+13% (versus equivalent 12 months)
Famostar has exceeded expectations
this year with a much-improved result
compared to that of the prior year.
The challenge with setting such high
expectations is to maintain and improve
the performance further; we are hopeful
of another promising performance for
2019/20.
35
Focus Filmtheater, Arnhem
Famostar has a different route to
market when compared to other group
businesses. The focus is on end users as
target customers to create demand, as
it is with the majority of our businesses;
however, that demand is ultimately
satisfied via the wholesaler network in the
Netherlands.
Currently, Famostar’s business is very
much in the Netherlands. Famostar
will look to improve revenue, working
alongside Lightronics domestically,
but will also aim to expand into other
territories where the Group has a
presence, starting with the UK in 2020.
One strategic action has been to embed
the SmartScan emergency system into
selected products in the Famostar range.
There has been good progress during
the year, but there is still some work to
be done.
As Famostar closed out the 2018/19
financial year, FW Thorpe demonstrated
its commitment to invest in the business
by agreeing to purchase the building
and neighbouring land where Famostar
is currently located. This gives Famostar
a stable platform for the foreseeable
future and the flexibility to organise its
operations to meet needs as and when
appropriate.
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Financial
Performance
£21.6m
Net cash generated from
operating activities
(2018: £20.7m)
36
“ Underlying operating
profit was dampened by a
number of issues in 2019.
This was partially offset with
improvements at Lightronics
and TRT.”
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 2019.
Results and dividends
Revenue increased by 0.9% to £110.6m
with underlying operating profit (before
profit on disposal) decreasing by 9.3% to
£17.6m, the profit on the disposal of the
Thorlux Portsmouth building of £1.9m
resulted in the operating profit lifting
to £19.6m.
Underlying operating profit was
dampened by a number of issues in 2019.
The operating result for Thorlux was
lower due to a fall in sales revenue and
one off costs associated with the closure
of the Thorlux Portsmouth facility. This
was partially offset with improvements
at Lightronics and TRT, as well as the full
year inclusion of Famostar compared with
only six months last year.
The operating results were further
suppressed by the provision of a further
£2.2m (2018: £1.5m) for the expected
payouts on the Lightronics and Famostar
earn-outs due to the continuing success
of both businesses.
Net finance income was marginally
positive (2018: £0.1m). The net income has
reduced from previous years due to the
accounting treatment of the Lightronics
and Famostar acquisitions and continued
low interest rates on our cash deposits.
The taxation charge represents an
effective rate of 17.52% (2018: 17.67%).
This is broadly similar to the rate in the
previous year, with the rate lower than
the headline corporation tax rate in the
UK due to patent box relief driven by the
Group’s product innovations.
On 18 April 2019, the Company paid
an interim dividend of 1.43p per share
(2018: 1.40p) amounting to £1,660,000
(2018: £1,623,000). A final dividend of
4.10p (2018: 4.00p) per ordinary share
is proposed amounting to £4,763,000
(2018: £4,639,000) and, if approved,
will be paid on 29 November 2019.
Total dividends paid during the year
amounted to £6,299,000 in aggregate
(2018: £5,737,000). The final dividend for
2018 was paid on 29 November 2018.
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 that 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
Annual Report and Accounts for the year ended 30 June 2019 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 44 (2018: 38). 2018 saw the introduction
of the duty to report on payment
practices and performance.
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.
Craig Muncaster
Joint Chief Executive, Group Financial
Director and Company Secretary
18 October 2019
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 2019 or
30 June 2018.
Pension scheme position and
funding
The latest triennial actuarial valuation
was completed as at 30 June 2018. 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
£1,791,000 (2018: £1,605,000) 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 considers that
undertaking formal valuation exercises
would be costly for limited value and
consequently no formal exercise has been
undertaken.
Investment this year included freehold
property in Walsall for Portland and Velp
– Netherlands for Famostar, the extension
and renovation of the Lightronics
building acquired last year, as well as
increased sheet metal working capacity
at Thorlux Lighting and a new painting
facility at TRT.
Group Total Revenue (£m)
Excluding Intercompany
�0.9%
2019
2018
2017
2016
2015
110.6
109.6
105.4
88.9
73.5
Group PBT (£m)
Profit before tax
−%
2019
2018
2017
2016
2015
19.6*
19.6
18.4
16.3
14.4
* 2019 includes profit on the disposal
of property of £1.9m
Underlying Basic EPS (Pence)
Earnings per share
−%
2019
2018
2017
2016
2015
13.91
13.91
12.54
11.24
10.12
37
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk 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 is currently taking
in order to manage them.
Area of risk
Type of risk
Description of risk
Mitigation of risk
Strategic
• Deferred or reduced capital investment plans in market sectors, which our products are
Broad range of customers in differing sectors
supplied into and are key sources of revenue for the Group
• 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
Strategic
•
Reduction in public sector expenditure and changing policy increases risk to our
order book
Continue to seek to diversify our customer portfolio to ensure we have an
Medium
appropriate spread, mitigating the risk of any industry or specific sector spending issues
2 4
• Uncertainty of free access to EU markets
• Develop sales in new markets
Strategic
•
Existing competitors, powerful new entrants and continued evolution of technologies
in the lighting industry eroding our revenue and profitability
• Offering innovative products and service solutions that are technologically
Medium
advanced products to enable us to differentiate ourselves from our competitors
1 2 3 4
Operational
•
Erosion of revenue and profitability
Operational
•
The majority of the Group’s revenues are from products manufactured in the
Redditch facility
• High level of importance attached to environmental management systems,
High
health and safety and preventative maintenance
Financial
•
The Group offers credit terms which carry risk of slow payment and default
Credit policy includes an assessment of the bad debt risk and management
Low
Possible
impact on
Strategic
priorities
performance
impacted upon
Change
in period
High
1 2 4
•
•
•
•
•
•
•
•
•
•
•
•
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,
Medium
in order to minimise the risk of reduction in gross margin, or the loss of market share
from a lack of competitiveness
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
of higher risk customers
The Group maintains a credit insurance policy for a significant proportion of its debtors
The Group has increased its sourcing of materials to maintain a natural hedge to offset
Low
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
Continual review and monitoring of potential risks
Computers encrypted where necessary to protect data
Low
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
1 2
2 3
2
2
1 3 4
2 4
•
•
•
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
A breach of IT security could result in the inability to operate systems effectively and
efficiently or the release of inappropriate information
Significant uncertainty remains over how the economic landscape might be affected in the
next few years
• With the Group having a manufacturing presence in two EU countries, the Netherlands
Medium
and Spain, this leaves us ideally placed to react to any negative trade barriers that may
Financial
Operational
Adverse
economic
conditions
Changes in
government
legislation or
policy
Competitive
environment
Price
changes
Business
continuity
Credit
risk
Movements
in currency
exchange
Cyber
security
A
B
C
D
E
F
G
H
I
38
Exit from the
European Union
Strategic
Annual Report and Accounts for the year ended 30 June 2019 Strategic Priorities key
1 Focus on high quality products and
good leadership in technology
3 Focus on manufacturing
excellence
2 Continue to grow the customer
base for Group companies
4 Continue to develop high
quality people
Risks key
Increase in risk
No change in risk
Decrease in risk
Area of risk
Type of risk
Description of risk
Mitigation of risk
Strategic
• Deferred or reduced capital investment plans in market sectors, which our products are
•
Broad range of customers in differing sectors
supplied into and are key sources of revenue for the Group
• High quality, technically advanced products to differentiate the Group from competitors
Possible
impact on
performance
Strategic
priorities
impacted upon
Change
in period
High
1 2 4
Strategic
•
Reduction in public sector expenditure and changing policy increases risk to our
order book
• Uncertainty of free access to EU markets
•
•
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
2 4
• Develop sales in new markets
Strategic
•
Existing competitors, powerful new entrants and continued evolution of technologies
in the lighting industry eroding our revenue and profitability
• Offering innovative products and service solutions that are technologically
Medium
advanced products to enable us to differentiate ourselves from our competitors
1 2 3 4
Operational
•
The majority of the Group’s revenues are from products manufactured in the
• High level of importance attached to environmental management systems,
High
•
•
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
health and safety and 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
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
Continual review and monitoring of potential risks
Computers encrypted where necessary to protect data
•
•
•
•
•
•
•
Low
Low
Low
• 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
Medium
•
•
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
1 2
2 3
2
2
1 3 4
2 4
39
Adverse
economic
conditions
Changes in
government
legislation or
policy
Competitive
environment
Price
changes
Business
continuity
Credit
risk
Movements
in currency
exchange
Cyber
security
A
B
C
D
E
F
G
H
I
Operational
•
Erosion of revenue and profitability
Redditch facility
Financial
•
The Group offers credit terms which carry risk of slow payment and default
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
Operational
•
A breach of IT security could result in the inability to operate systems effectively and
efficiently or the release of inappropriate information
Exit from the
Strategic
European Union
next few years
•
Significant uncertainty remains over how the economic landscape might be affected in the
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Sustainability
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.
The involvement of employees in the
Group’s performance is encouraged by
various incentive schemes including a
profit related bonus scheme.
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.
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.
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 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
FW Thorpe, making a meaningful difference:
our contributions in 2019
Economic – we generate value
Contribution to UK economy
We are investing in the future
We support the national wage bills
£17.9m
Tax paid, collected
£1.8m
Capitalised R&D expenditure
(2018: £17.7m)
(2018: £1.6m)
£31m
(2018: £30m)
Community
£27,733
Charitable donations
26
Number of charities
(2018: £26,310)
(2018: 38)
40
Annual Report and Accounts for the year ended 30 June 2019 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.
Charitable Gifts
During the year the Group gave £27,733
(2018: £26,310) for charitable purposes.
This is made up of donations to UK
charities for children’s welfare of £1,305,
cancer care of £1,303, healthcare of
£3,926, educational schemes of £3,680,
and local causes of £17,519.
Modern Slavery
Our Modern Slavery Act disclosure is
published on our corporate website
(www.fwthorpe.co.uk) in the company
documents section.
Innovation
12
Patents
6
Granted
6
Pending
Queen’s Award
for innovation
See page 19
Employee
engagement
666
People employed
15
Apprentice employment
(2018: 720)
(2018: 14)
Environment
149,849
Total trees planted
(2018: 149,849)
224,470
kWh of electricity per annum
(estimated production)
Solar panels
2,600 tonnes
CO2 offset per annum 2017/18
(2016/17: 3,287)
Read more on pages 24 to 25
41
Business OverviewStrategic ReportOur GovernanceOur FinancialsStock Code: TFW www. fwthorpe.co.uk Our
Governance
44
Board of Directors
46 Directors’ Report
51
52
56
Statement of Directors’
Responsibilities
Directors’ Remuneration Report
Independent Auditors’ Report
to the Members of FW Thorpe Plc
Pictured: Lightronics offices, Waalwijk
Board of Directors
Mike Allcock
Chairman, Joint Group Chief Executive and Managing Director, Thorlux Lighting
Appointment/Background: 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.
Key Areas of Expertise/Responsibility:
Lighting & Controls Technology, Product Design/
Management, Industry Knowledge, Marketing,
Strategy
Craig Muncaster
Joint Group Chief Executive, Group Financial Director and Company Secretary
Appointment/Background: After graduating
in Business Administration, Craig qualified as a
Chartered Management Accountant in 2000. He has
spent time in the manufacturing and engineering
sectors, previously 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.
Key Areas of Expertise/Responsibility:
Financial Management, Commercial/Legal Risk,
Investor Relations, Mergers & Acquisitions, Company
Secretarial
James Thorpe
Business Development Director, Thorlux Lighting
Appointment/Background: 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.
Key Areas of Expertise/Responsibility:
Sales & Marketing, Business Development, Digital
Marketing
Tony Cooper
Director, Thorlux Lighting
Appointment/Background: 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.
Key Areas of Expertise/Responsibility:
Manufacturing, Business Management, Industry
Knowledge, Project Management
44
Annual Report and Accounts for the year ended 30 June 2019 Committee key
R
Remuneration Committee
David Taylor
Managing Director, Philip Payne
Appointment/Background: 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.
Andrew Thorpe
Non-Executive Director
Key Areas of Expertise/Responsibility:
Manufacturing, Business Management, Financial
Management, Industry Knowledge
Appointment/Background: 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. In July 2019 Andrew
became a non-executive director and member of the
remuneration committee.
Key Areas of Expertise/Responsibility:
R
Manufacturing, Product Design/Management,
Sales & Marketing, Industry Knowledge,
Strategy, Governance
Peter Mason
Non-Executive Director
Appointment/Background: 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.
Key Areas of Expertise/Responsibility:
R
Financial Management, Governance, Company
Secretarial, Industry Knowledge
Ian Thorpe
Non-Executive Director
Appointment/Background: 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.
Key Areas of Expertise/Responsibility:
Manufacturing, Human Resources,
R
Governance, Industry Knowledge
Independent Auditors
PricewaterhouseCoopers
LLP
Donington Court
Pegasus Business Park
Castle Donington
DE74 2UZ
Bankers
Lloyds
Church Green East
Redditch
Worcestershire
B98 8BZ
Solicitors
Keystone Law
48 Chancery Lane
London
WC2A 1JF
Nominated Adviser
N+1 Singer
12 Smithfield Street
London
EC1A 9BD
Pinsent Masons LLP
19 Cornwall Street
Birmingham
B3 2FF
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
BN99 6DA
Registered Office
Merse Road
North Moons Moat
Redditch
Worcestershire
B98 9HH
Registered No
FW Thorpe Plc
is registered
in England
and Wales No.
317886
45
Business OverviewOur FinancialsStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Governance Directors’ Report
The directors present their Directors’
report with the audited consolidated
financial statements of the Group and
the Company for the financial year ended
30 June 2019.
Principal Risks and Uncertainties
The table on pages 38 and 39 details what
we consider to be the principal risks and
uncertainties to the business, and how we
seek to manage and mitigate these risks.
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 64 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 66. A review of
the performance of the business during
the financial year and expected future
developments are contained in the
Chairman’s Statement, the Operational
Performance section and the Financial
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 18 (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.
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.
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.
Proposed Dividend
Details of the proposed dividend are
disclosed in the Financial Performance
section on pages 36 and 37.
Directors
The directors of the Company during the
year and at the date of this report are set
out on pages 44 and 45.
The directors retiring by rotation are
I A Thorpe, D Taylor and J E Thorpe
who, being eligible, offer themselves
for re-election. D Taylor and J E Thorpe
have service contracts terminable on
12 months’ notice.
Directors’ Share Interests
The details of the directors’ share interests
are set out in the directors’ remuneration
report on page 54.
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.
46
Annual Report and Accounts for the year ended 30 June 2019 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.
A B Thorpe
Non-executive director.
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 52 to 55.
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 18 October 2019, 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
6,244,917 (5.3%)
C M Brangwin
7,731,550 (6.5%)
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.
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 18 October 2019 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 2020. 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
The Company’s shares are traded on the
Alternative Investment Market (AIM)
of the London Stock Exchange Plc.
Previously the Company was not required
to comply with the Principles of Good
Governance and Code of Best Practice
(“The UK Corporate Governance Code”,
or the “Code”).
Following a change to the AIM rules
in 2018, from 28 September 2018,
the Company has now adopted the
Quoted Companies Alliance’s “Corporate
Governance Guidelines for Smaller Quoted
Companies” (the QCA Code) which the
Board believes appropriate due to the size
and complexity of the Company.
There are ten principles of the QCA code
and the following table sets out in broad
terms how we comply at this point in time.
47
Business OverviewOur FinancialsStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Governance Directors’ Report continued
Extent of
current
compliance
Compliant
Principle
1
Establish a strategy
and business model
which promote
long-term value for
shareholders
Compliant
2
Seek to
understand and
meet shareholders
needs and
expectations
Commentary
Further disclosure
The Group’s business strategy is detailed in our Annual Report
& Accounts and focuses on delivering long term growth and
stability, achieved through four key strategic priorities:
•
•
•
•
Focus on high quality products and good leadership in
technology
Continue to grow the customer base for Group companies
Focus on manufacturing excellence
Continue to develop high quality people
Meetings are held with shareholders as required, this includes
visits to our various company locations being organised and
encouraged where possible. In addition, all announcements
include contact details for shareholders to contact the
Company if they so choose.
The AGM is another forum for dialogue with our shareholders.
The Notice of Meeting is sent to shareholders at least 21 days
before the meeting.
Any feedback during these meetings is encouraged and acted
upon where appropriate.
3
4
Take into account
wider stakeholder
and social
responsibilities and
their implications
for long-term
success
Embed effective
risk management,
considering both
opportunities and
threats, throughout
the organisation
Compliant
Feedback from employees, customers, suppliers and other
stakeholders is actively encouraged.
Our employees are an important stakeholder group and we
actively encourage dialogue with the Company via various
employee committees within our companies. Reports from
these meetings are distributed to the Board.
Compliant
The Board operates a continuous risk identification and
evaluation process. The results are utilised by the Board to
manage any significant risks.
In addition, the executive directors regularly visit all operating
sites and review financial and commercial issues with an
executive director responsible for each individual company.
The Board has overall responsibility for the system of internal
control and for reviewing its effectiveness throughout the
Group.
Internal financial control is driven by Group finance who visit
each company to assess compliance against key controls. This
includes regular financial reporting that is compared against
plan and previous year’s performance.
Find out more in the
Strategic Report on
pages 08 to 41
Read about our
Strategy on pages
16 and 17
Read about our
Business Model on
pages 14 and 15
Find out more in the
Directors’ Report on
page 46
Find out more in the
Strategic Report on
pages 08 to 41 and
in our Sustainability
section on
pages 40 and 41
Find out more about
our Principal Risk
and Uncertainties
on pages 38 and 39
and in the Directors’
Report on page 46
5
Maintain the
board as a well-
functioning,
balanced team led
by the chair
Partially
Compliant
Total of eight directors, five executive directors and three non-
executive directors.
The non-executives are not considered fully independent.
The Board considers that the non-executive directors are
appropriate as they bring significant experience and expertise
in the sector. In addition, as the directors retire on a three-year
rotation, shareholders have a regular opportunity to ensure
that the composition of the board is in line with their interests.
There is a Remuneration Committee but no Audit Committee,
with matters that would normally be tabled at an Audit
Committee put to the full Board.
Find out more in
Our Governance
on pages 44 to 61
Read about our Board
of Directors on pages
44 and 45
Read our
Directors’ Report
on pages 46 and 47
48
Annual Report and Accounts for the year ended 30 June 2019 Principle
6
Ensure that
between them the
directors have the
necessary up-to-
date experience,
skills and
capabilities
7
Evaluate board
performance
based on clear and
relevant objectives,
seeking continuous
improvement
8
Promote a corporate
culture that is based
on ethical values
and behaviours
9
10
Maintain
governance
structures and
processes that
are fit for purpose
and support good
decision making by
the board
Communicate
how the Company
is governed and
is performing
by maintaining
a dialogue with
shareholders and
other relevant
stakeholders
Extent of
current
compliance
Compliant
Commentary
Further disclosure
The current composition of the Board provides the necessary
skills, experience and capabilities for the size and context of
the Group.
The composition and succession of the Board are subject to
review, considering the future needs of the Group.
Find out more in
Our Governance
on pages 44 to 61
Read about our Board
of Directors on pages
44 and 45
Read our
Directors’ Report
on pages 46 to 50
Find out more in the
Strategic Report
on pages 08 to 41
Read about
our Strategy
on pages 16 and 17
Partially
Compliant
There is no formal evaluation process, however, the Chairman
is responsible for Board performance and accordingly actively
encourages feedback on the content and function of board
meetings.
The composition and succession of the Board are subject to
constant review, considering the ever-changing needs of the
Group. In addition, the directors retire by rotation every three
years giving shareholders the opportunity to ensure that the
board is aligned with their interests.
Compliant
Our core aim is for long term growth and stability.
The Group management team is passionate about developing
the business for the benefit of the shareholders, employees
and customers.
With our focus on excellence, we ensure our Group’s culture
is consistent with the aim of long term growth and stability.
In order to achieve and maintain such a culture, we invest in
training our employees, as mentioned in the Annual Report &
Accounts.
Compliant
The Board as a whole is responsible for robust governance
practices. The roles and responsibilities of each director are
clear and responsibilities understood.
The Board meets at least eight times each year, with additional
meetings as required.
Find out more in the
Directors’ Report on
pages 46 to 50
Read about our Board
of Directors on pages
44 and 45
Compliant
The Company communicates through the Annual Report &
Accounts, full-year and interim announcements, the AGM and
one-to-one meetings with existing or potential shareholders.
Find out more
online at:
www.fwthorpe.co.uk
A range of corporate information is also available on the
Company’s website.
Meetings with shareholders, employee groups, management
and other representative groups provide a platform for raising
any concerns relating to corporate governance.
49
Business OverviewOur FinancialsStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Governance Directors’ Report continued
The Board considers 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 Board does not have a
nominations committee.
The Board believes 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.
Statement on the Provision
of Information to Independent
Auditors
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 £30.8m
cash and £26.5m 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’
Reports
The directors confirm that the information
contained within the Strategic Report
on pages 08 to 41 and the Directors’
Report on pages 46 to 50 is an accurate
representation of the Group’s strategy and
performance.
By order of the Board
Craig Muncaster
Joint Chief Executive, Group Financial
Director and Company Secretary
18 October 2019
Registered Office:
Merse Road
North Moons Moat
Redditch
Worcestershire
B98 9HH
Company Registration Number: 317886
50
Annual Report and Accounts for the year ended 30 June 2019 Statement of Directors’ Responsibilities
in respect of the Financial Statements
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 Group 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 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 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.
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.
Directors’ confirmations
In the case of each director in office at the
date the Directors’ Report is approved:
•
•
so far as the director is aware, there
is no relevant audit information of
which the Group and Company’s
auditors are unaware; and
they have taken all the steps that
they ought to have taken as a director
in order to make themselves aware
of any relevant audit information
and to establish that the Group and
Company’s auditors are aware of that
information.
By order of the Board
Craig Muncaster
Joint Chief Executive, Group Financial
Director and Company Secretary
18 October 2019
51
Business OverviewOur FinancialsStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Governance 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), I A Thorpe,
and A B 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.
3. Long term incentive scheme. This
scheme consists of the “Executive
Share Ownership Plan” (ESOP) details
of which are shown on page 55.
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
M Allcock has a service contract
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.
A B Thorpe, 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.
Total shareholder return
FW Thorpe
AIM All Share
FTSE Fledgling
350
300
250
200
150
100
50
30-06-2014
30-06-2015
30-06-2016
30-06-2017
30-06-2018
30-06-2019
52
Annual Report and Accounts for the year ended 30 June 2019 Directors’ Emoluments (Audited)
Executive
directors
A B Thorpe
M Allcock
D Taylor
A M Cooper
C Muncaster
J E Thorpe
Non-
executive
directors
I A Thorpe
P D Mason
2019
Salary/
fees
£’000
94
235
124
141
235
104
2019
Bonus
£’000
84
167
102
104
167
88
2019
Benefits
£’000
28
14
13
15
12
18
2019
Total
£’000
206
416
239
260
414
210
2018
Total
£’000
213
474
262
293
434
211
2019
Share
options
£’000
50
26
52
6
19
–
2018
Share
options
£’000
72
76
98
98
44
–
28
28
989
–
–
712
15
5
120
43
33
1,821
42
31
1,960
–
–
153
–
–
388
2019
Total
£’000
256
442
291
266
433
210
43
33
1,974
2018
Total
£’000
285
550
360
391
478
211
42
31
2,348
The directors’ emoluments exclude contributions to the pension scheme.
Directors’ Pension Arrangements
M Allcock is a deferred member and D Taylor a pensioner member of the defined contribution scheme of the FW Thorpe Retirement
Benefits Scheme and they have a final salary guarantee as they were previously members of the defined benefit section. A M Cooper
is a deferred member and J E Thorpe an active member of the defined contribution section of the FW Thorpe Retirement Benefits
Scheme. A M Cooper has a personal pension plans to which the Company contributed.
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 17%.
M Allcock, D Taylor and A M Cooper have ceased being active members of the FW Thorpe Retirement Benefits Scheme and
C Muncaster has ceased being an active member of his personal pension scheme due to HMRC limits on lifetime allowances and
annual contributions. Subsequently the Company has entered into pension compensation arrangements with these four directors
and J E Thorpe to compensate them for the loss of these employer pension contributions. During the financial year the Company
paid pension compensation to M Allcock of £145,755 (2018: £78,716), A M Cooper £10,697 (2018: £2,335), C Muncaster £34,882
(2018: £11,062), D Taylor £9,393 (2018: £nil) and to J E Thorpe £5,881 (2018: £nil).
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.
53
Business OverviewOur FinancialsStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Governance Directors’ Remuneration Report continued
There are no directors, excluding those classified as pensioners, having accrued entitlements under the defined benefit section of the
pension scheme.
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.
J E Thorpe
2019
£’000
9,786
2018
£’000
7,674
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
2019
£’000
–
10,000
2018
£’000
3,399
10,000
Directors’ Shareholdings
The directors listed below were in office during the year. Directors’ interests in the share capital of the Company at 30 June 2019 and
1 July 2018 were as follows:
Executive directors
A B Thorpe
M Allcock
D Taylor
A M Cooper
C Muncaster
J E Thorpe
Non-executive directors
I A Thorpe
P D Mason
Ordinary shares of
1p Beneficial
2019
27,682,700
159,500
116,413
112,224
35,000
1,371,450
2018
27,642,700
144,000
84,913
112,224
20,000
1,371,450
25,840,352
1,626,370
25,047,120
1,626,370
The market price of the Company’s shares at the beginning and end of the financial year was 332.5p and 317p respectively, and the
range of market prices during the year was from 219p to 345p.
54
Annual Report and Accounts for the year ended 30 June 2019 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)
M Allcock
A B Thorpe
C Muncaster
24 October 2014 24 October 2014 24 October 2014 24 October 2014 24 October 2014
200,000
124
200,000
124
200,000
124
200,000
124
200,000
124
A M Cooper
D Taylor
During the year the second tranche of shares of this ESOP vested as the performance conditions were met in the financial year ended
30 June 2016, options vested and exercised in the year are shown in the table below:
Number at 1 July 2018
Awarded
Vested
Exercised
Lapsed
Number at 30 June 2019
A B Thorpe
160,000
–
40,000
(40,000)
–
120,000
M Allcock
160,000
–
40,000
(20,000)
–
140,000
D Taylor
160,000
–
40,000
(40,000)
–
120,000
A M Cooper
160,000
–
40,000
(4,839)
–
155,161
C Muncaster
180,000
–
40,000
(15,000)
–
165,000
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 2019 to 18 October 2019.
Approved by the Board and signed on its behalf by:
Craig Muncaster
Joint Chief Executive, Group Financial
Director and Company Secretary
18 October 2019
55
Business OverviewOur FinancialsStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Governance 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 2019 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 International Financial Reporting Standards (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 2019; the Consolidated Income Statement and
Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements 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.
• Overall Group materiality: £880,000 (2018: £900,000), based on approximately 5% of profit
before tax and before profit on disposal of property (2018: profit before tax).
• Overall Company materiality: £680,000 (2018: £800,000), based on approximately 5% of profit
before tax.
• An audit was conducted of the complete financial information of the two financially significant
reporting units: Thorlux Lighting and Lightronics BV (located in the Netherlands), as well as
conducting the full scope audits of four (2018: four) reporting units located in the UK such that
the audit work was completed prior to finalisation of the Group financial statements.
The audit work performed at these six reporting units (2018: six reporting units), together with
additional procedures performed on centralised functions at the Group level, including audit
procedures over the consolidation, gave us the audit evidence we needed for our opinion on
the Group financial statements as a whole.
This provided coverage of 91% (2018: 92%) for revenue.
•
•
• Valuation of the share appreciation rights repurchase obligation (Group and Company);
• Valuation of the warranty provision (Group and Company);
• Capitalisation of internal development costs (Group and Company);
• Valuation of balances owed from Group undertakings and related parties (Group and Company).
Our audit approach
Overview
Materiality
Audit scope
Key audit
matters
56
Annual Report and Accounts for the year ended 30 June 2019
The scope of our audit
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.
Key audit matter
How our audit addressed the key audit matter
Valuation of share appreciation rights repurchase obligation
Refer to the critical accounting estimates and judgements in
note 1 to the Financial Statements and note 21 for trade and
other payables.
As part of the acquisition of Lightronics in FY15 and Famostar
in FY18, share appreciation rights equivalent to 35% of the
acquired business were sold back to the previous investors and
Lightronics management. The Group and Company are obliged
to re-purchase 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 the previous
investors, this is accounted for as contingent consideration.
The share appreciation rights in relation to the previous
management who remain employed is accounted for as a cash
settled share based payment. Any re-valuation of the contingent
consideration is recognised immediately, whilst any re-valuation
of the total share based payment charge is spread across the
remaining option period, with both elements charged to
administrative expenses.
The valuation of the repurchase obligation involves judgement
and estimates with respect to the expected EBITDA at
redemption and the redemption date.
Group and Company
The valuation of the repurchase obligation involves assessing
estimates with respect to the expected EBITDA at redemption
and judgement in assessing the expected redemption date.
Based on the historical performance of Lightronics, the
wider macro-economic conditions, our review of the forecast
information and discussions with Lightronics management,
the assumptions on growth and the judgement on timing were
considered reasonable.
We ensured there were no changes in the split in the
share appreciation rights percentage holdings between
previous investors and management through enquiries with
management, review of board minutes and recalculation
of the shareholder appreciation liability. 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.
57
Business OverviewOur FinancialsStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Governance Independent Auditors’ Report continued
to the Members of FW Thorpe Plc
Key audit matter
How our audit addressed the key audit matter
Valuation of warranty provision
Refer to the critical accounting estimates and judgements in
note 1 to the Financial Statements and note 23 for provisions.
The Group and Company makes provisions for warranties where
it is obliged 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 although 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 which are 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.
Group and Company
Capitalisation of internal development costs
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 the capitalised costs
should be amortised.
Group and Company
Valuation of balances owed from Group undertakings and
related parties
Refer to the critical accounting estimates and judgements
in note 1 to the Financial Statements and note 12 and 17 for
receivables and other receivables.
The Group assesses the recoverability of amounts owed from
related entities and the Company assesses the recoverability
of the amounts owed from Group undertakings through
assessment of each balance outstanding at the year end in line
with the requirements of IFRS 9. Judgement has been applied
in considering the likelihood of default or in calculating the
expected settlement period for each balance.
Group and Company
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/ complaint rates for similar
products against the forecast expected failure rate as used to
calculate a provision where no known rectification issues have
been identified.
We found that the valuation of the warranty provision was
consistent with the evidence obtained.
We have assessed the appropriateness of the amounts
capitalised by assessing the expected viability of the associated
development projects and their likely performance, and
considered the reasonableness of management’s assumptions
in light of the historical performance of bringing products
successfully to market.
We have performed testing over the amounts capitalised in the
year by agreeing payroll amounts to payslips and assessed the
reasonableness of 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, knowledge
of the industry and the expected life cycle of the product
considering the nature of the industry.
We found that the accuracy of capitalised development costs
was consistent with the evidence obtained.
We have assessed the balances owed by Group undertakings
and related parties in line with the requirements of IFRS 9.
The expected credit loss model prepared by the client has
considered a range of potential outcomes, which are then
probability weighted depending on the future underlying
performance of the entities. When considering these models
we have applied sensitivity analysis to the key inputs, which
include the probability of, and loss given, default. We have
also considered management’s estimates through comparison
to historical and future business performance in line with
contractual terms and position of the business at the year end.
We found that the valuation of balances owed from Group
undertakings after making impairment provisions and related
parties were consistent with the evidence obtained.
58
Annual Report and Accounts for the year ended 30 June 2019 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.
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.
The Group engagement team audited Thorlux Lighting whilst Lightronics was audited by a non-PwC component audit team located
in the Netherlands. The work performed by the component auditor 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 and development costs has fed into our key
audit matters.
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
£880,000 (2018: £900,000).
£680,000 (2018: £800,000).
Group financial statements
Company financial statements
How we determined it
Approximately 5% of profit before tax
and before profit on disposal of property
(2018: profit before tax).
Approximately 5% of profit before tax.
Rationale for
benchmark applied
We believe that profit before tax before the
profit on disposal of property is the primary
measure used by the shareholders in assessing
the performance of the Group, 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 Group, 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 £61,000 and £680,000. Certain components were audited to a local
statutory audit materiality that was also less than our overall Group materiality.
We agreed with the Board of Directors that we would report to them misstatements identified during our audit above £50,000
(Group audit) (2018: £45,000) and £34,000 (Company audit) (2018: £40,000) as well as misstatements below those amounts that, in
our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
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.
We have nothing to report in respect of the above matters.
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. For example, the terms on which the United Kingdom may withdraw from the
European Union are not clear, and it is difficult to evaluate all of the potential implications on the Group’s trade, customers, suppliers
and the wider economy.
59
Business OverviewOur FinancialsStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Governance
Independent Auditors’ Report continued
to the Members of FW Thorpe Plc
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.
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 2019 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 51, 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.
60
Annual Report and Accounts for the year ended 30 June 2019 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
East Midlands
18 October 2019
61
Business OverviewOur FinancialsStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Governance Our
Financials
64
65
66
67
68
69
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated and Company
Statements of Financial Position
Consolidated Statement
of Changes in Equity
Company Statement
of Changes in Equity
Consolidated and Company
Statements of Cash Flows
70 Notes to the Financial Statements
114 Notice of Meeting
116 Financial Calendar
Pictured: Lightronics Offices, Waalwijk
Consolidated Income Statement
For the year ended 30 June 2019
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Other operating income
Operating profit (before profit on disposal)
Profit on disposal of property
Operating profit
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit for the year
Notes
2019
£’000
2018
£’000
2
3
5
5
6
110,643
(60,264)
50,379
(13,182)
(19,840)
292
17,649
1,917
19,566
1,049
(1,046)
19,569
(3,429)
16,140
109,614
(58,305)
51,309
(11,823)
(20,261)
241
19,466
–
19,466
819
(718)
19,567
(3,457)
16,110
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
Notes
7
7
2019
pence
13.91
13.83
2018
pence
13.91
13.81
The notes on pages 70 to 112 form part of these financial statements.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Company
income statement.
64
Annual Report and Accounts for the year ended 30 June 2019 Consolidated Statement of
Comprehensive Income
For the year ended 30 June 2019
Profit for the year:
Other comprehensive income/(expenses)
Items that may be reclassified to profit or loss
Changes in the fair value of available-for-sale financial assets
Exchange differences on translation of foreign operations
Taxation
Items that will not be reclassified to profit or loss
Revaluation of financial assets at fair value through other comprehensive income
Actuarial (loss)/gain on pension scheme
Movement on unrecognised pension scheme surplus
Taxation
Other comprehensive (expense)/income for the year, net of tax
Notes
2019
£’000
16,140
2018
£’000
16,110
14
15
14
22
22
15
–
153
–
153
(142)
(374)
191
24
(301)
(148)
189
119
(32)
276
–
1,459
(1,615)
–
(156)
120
Total comprehensive income for the year attributable to equity shareholders
15,992
16,230
The notes on pages 70 to 112 form part of these financial statements.
65
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Consolidated and Company Statements
of Financial Position
As at 30 June 2019
Group
2019
£’000
Company
2018
£’000
2019
£’000
2018
£’000
Notes
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Investment property
Financial assets at amortised cost
Loans and receivables
Equity accounted investments and joint arrangements
Financial assets at fair value through other
comprehensive income
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
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
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
At 1 July
Profit for the year attributable to the owners
Other changes in retained earnings
8
9
10
11
12
12
13
14
14
15
16
17
18
19
20
21
21
23
15
24
25
25
25
Total equity
The notes on pages 70 to 112 form part of these financial statements.
25,353
21,687
–
2,006
3,567
–
936
3,683
–
–
57,232
25,506
21,502
387
26,483
30,807
104,685
161,917
(21,912)
(1,935)
(23,847)
80,838
(12,804)
(2,404)
(699)
(15,907)
(39,754)
122,163
1,189
1,266
137
2,535
107,527
16,140
(6,631)
117,036
122,163
22,679
21,596
–
2,076
–
6,139
936
–
3,820
8
57,254
21,489
23,416
389
15,290
28,668
89,252
146,506
(19,253)
(1,853)
(21,106)
68,146
(10,329)
(2,164)
(655)
(13,148)
(34,254)
112,252
1,189
1,017
137
2,382
97,047
16,110
(5,630)
107,527
112,252
11,185
4,192
14,581
9,131
12,115
–
936
3,683
–
–
55,823
18,354
20,594
387
26,483
24,771
90,589
146,412
(17,290)
(931)
(18,221)
72,368
(10,242)
(466)
(493)
(11,201)
(29,422)
116,990
1,189
1,266
137
–
105,582
16,063
(7,247)
114,398
116,990
10,262
3,601
14,581
9,215
–
13,482
968
–
3,820
–
55,929
14,124
21,838
389
15,290
24,333
75,974
131,903
(14,082)
(1,081)
(15,163)
60,811
(7,958)
(436)
(421)
(8,815)
(23,978)
107,925
1,189
1,017
137
–
96,257
14,955
(5,630)
105,582
107,925
The financial statements on pages 64 to 112 were approved by the Board on 18 October 2019 and signed on its behalf by
Mike Allcock
Craig Muncaster
Company Registration Number: 317886
66
Annual Report and Accounts for the year ended 30 June 2019 Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
Balance at 1 July 2017
Comprehensive income/(expense)
Profit for the year to 30 June 2018
Actuarial gain on pension scheme
Movement on unrecognised pension scheme surplus
Changes in the fair value of available-for-sale
financial assets
Movement on associated deferred tax
Exchange differences on translation of foreign
operations
Total comprehensive income
Transactions with owners
Shares issued from exercised options
Dividends paid to shareholders
Share based payment charge
Total transactions with owners
Balance at 30 June 2018
Comprehensive income/(expense)
Profit for the year to 30 June 2019
Actuarial loss on pension scheme
Movement on unrecognised pension scheme surplus
Revaluation of financial assets at fair value through
other comprehensive income
Movement on associated deferred tax
Exchange differences on translation of foreign
operations
Total comprehensive income
Transactions with owners
Shares issued from exercised options
Purchase of own shares
Dividends paid to shareholders
Share based payment charge
Total transactions with owners
Balance at 30 June 2019
Share
capital
£’000
1,189
Share
premium
account
£’000
656
Capital
redemption
reserve
£’000
137
Notes
Foreign
currency
translation
reserve
£’000
2,263
Retained
earnings
£’000
97,047
Total
equity
£’000
101,292
22
22
14
15
26
27
22
22
14
15
26
27
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,189
361
–
–
361
1,017
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,189
249
–
–
–
249
1,266
–
–
–
–
–
–
–
–
–
–
–
137
–
–
–
–
–
–
–
–
–
–
–
–
137
–
–
–
–
–
119
119
–
–
–
–
2,382
–
–
–
–
–
153
16,110
1,459
(1,615)
16,110
1,459
(1,615)
189
(32)
–
189
(32)
119
16,111
16,230
–
(5,737)
106
(5,631)
361
(5,737)
106
(5,270)
107,527 112,252
16,140
(374)
191
16,140
(374)
191
(142)
(142)
24
–
24
153
153
15,839
15,992
–
–
–
–
–
2,535
–
(117)
(6,299)
86
(6,330)
117,036
249
(117)
(6,299)
86
(6,081)
122,163
The notes on pages 70 to 112 form part of these financial statements.
67
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Company Statement of Changes in Equity
For the year ended 30 June 2019
Balance at 1 July 2017
Comprehensive income/(expense)
Profit for the year to 30 June 2018
Actuarial gain on pension scheme
Movement on unrecognised pension scheme surplus
Revaluation of available-for-sale financial assets
Movement on associated deferred tax
Exchange differences on translation of foreign
operations
Total comprehensive income
Transactions with owners
Shares issued from exercised options
Dividends paid to shareholders
Share based payment charge
Total transactions with owners
Balance at 30 June 2018
Adjustment on first time adoption of IFRS 9
(net of tax) *
Restated balance at 1July 2018
Comprehensive income/(expense)
Profit for the year to 30 June 2019
Actuarial loss on pension scheme
Movement on unrecognised pension scheme surplus
Revaluation of financial assets at fair value through
other comprehensive income
Movement on associated deferred tax
Total comprehensive income
Transactions with owners
Shares issued from exercised options
Purchase of own shares
Dividends paid to shareholders
Share based payment charge
Total transactions with owners
Balance at 30 June 2019
22
22
14
15
26
27
22
22
14
15
26
27
Share
capital
£’000
1,189
Share
premium
account
£’000
656
Capital
redemption
reserve
£’000
137
Notes
–
–
–
–
–
–
–
–
–
–
–
1,189
–
–
–
–
–
–
–
–
361
–
–
361
1,017
–
–
–
–
–
–
–
–
–
–
–
–
137
–
Retained
earnings
£’000
96,257
14,955
1,459
(1,615)
189
(32)
–
Total
equity
£’000
98,239
14,955
1,459
(1,615)
189
(32)
–
14,956
14,956
–
(5,737)
106
(5,631)
105,582
361
(5,737)
106
(5,270)
107,925
(616)
(616)
1,189
1,017
137
104,966
107,309
–
–
–
–
–
–
–
–
–
–
–
1,189
–
–
–
–
–
–
249
–
–
–
249
1,266
–
–
–
–
–
–
–
–
–
–
–
137
16,063
(374)
191
16,063
(374)
191
(142)
(142)
24
15,762
24
15,762
–
(117)
(6,299)
86
(6,330)
114,398
249
(117)
(6,299)
86
(6,081)
116,990
The notes on pages 70 to 112 form part of these financial statements.
* The adjustment on the first time adoption of IFRS 9 has arisen from the Company retrospectively applying IFRS 9, for expected
credit losses from receivables due from subsidiaries at 30 June 2018, but electing not to restate the comparative period.
68
Annual Report and Accounts for the year ended 30 June 2019 Consolidated and Company Statements
of Cash Flows
For the year ended 30 June 2019
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 (net of cash acquired)
Purchase of investment property
Disposal of investment property
Net sale of financial assets at fair value through other comprehensive income
Property rental and similar income
Dividend income
Net (deposit)/withdrawal of short-term financial assets
Interest received
Net receipt/(issue) of loan notes
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from the issuance of ordinary shares
Purchase of own shares
Proceeds from loans
Repayment of borrowings
Dividends paid to Company’s shareholders
Net cash used in financing activities
Effects of exchange rate changes on cash
Net increase 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 70 to 112 form part of these financial statements.
Notes
28
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
25,038
(3,476)
21,562
23,998
(3,291)
20,707
15,460
(1,808)
13,652
16,658
(1,680)
14,978
(6,852)
3,796
(2,417)
–
–
12
70
205
225
(11,193)
403
2,575
(13,176)
249
(117)
–
(197)
(6,299)
(6,364)
117
2,139
28,668
30,807
(6,049)
197
(1,967)
(6,313)
–
67
–
190
190
1,691
388
(2,022)
(13,628)
361
–
2,337
–
(5,737)
(3,039)
(50)
3,990
24,678
28,668
(2,726)
306
(2,071)
–
(1,708)
3,479
70
394
4,204
(11,193)
797
1,356
(7,092)
249
(117)
–
–
(6,299)
(6,167)
45
438
24,333
24,771
(2,220)
151
(1,636)
(237)
(108)
67
–
389
3,077
1,691
434
(9,371)
(7,763)
361
–
–
–
(5,737)
(5,376)
(34)
1,805
22,528
24,333
26
69
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements
For the year ended 30 June 2019
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,
limited by shares, which is listed on the Alternative Investment Market. The address of its registered office is Merse Road, North
Moons Moat, Redditch, Worcestershire, B98 9HH, United Kingdom.
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), IFRS IC - IFRS Interpretations Committee and
the Companies Act 2006 applicable to the companies reporting under IFRS. The financial statements have been prepared on a going
concern basis, under the historical cost convention other than available for sale and other financial assets held at fair value per the
provisions of IFRS 9.
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 2019 are:
IFRS 9 “Financial Instruments” (effective 1 January 2018)
IFRS 15 “Revenue from contracts with customers” (effective 1 January 2018)
•
•
• Amendments to IFRS 2, “Share based payments” – Classification and measurement (effective 1 January 2018)
• Amendments to IFRS 4, Amendments regarding implementation of IFRS 9 (effective 1 January 2018)
• Amendment to IFRS 9, “Financial instruments” on general hedge accounting (effective date 1 January 2018)
Other than those described below, the above new and amended standards had an immaterial impact on the financial statements
and as such their impact has not been disclosed.
IFRS 9 replaces IAS 39 “Financial Instruments: Recognition & Measurement” and the changes introduced by the new standard can
be grouped into the following three categories – Classification & Measurement, Impairment, and Hedging. The impact of the new
standard in the Group was the following:
• Classification and measurement: IFRS 9 contains three principal classification categories for financial assets which are amortised
cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit or loss (“FVTPL”). The standard
eliminates the existing IAS 39 categories of held-to-maturity and available-for-sale financial assets. The Group and Company
included the new classification categories for financial assets in the Statement of Financial Position. Equity financial instruments
previously classified as available-for-sale assets have been classified as Financial assets at fair value through other comprehensive
income and loans and receivables as financial assets at amortised cost.
Impairment: IFRS 9 introduces an expected credit loss model which requires expected credit losses and changes to expected
credit losses at each reporting date to reflect changes in credit risk since initial recognition. Financial assets measured at
amortised cost or FVOCI are subject to the impairment provisions of IFRS 9. The adoption of this standard has not resulted in
any material changes in the level of provision for financial assets for the Group. The impact for the Company is disclosed in the
Company Statement of Changes in Equity. At 1 July 2019, the amounts due from subsidiaries were £7,862,000; on adoption of
IFRS 9, this was impaired to £7,246,000.
•
• Hedging: IFRS 9 introduces new hedge accounting requirements. IFRS 9 aligns hedge accounting relationships with the Group’s
risk management objectives and strategy. The Group does not apply hedge accounting, therefore there were no changes arising
from the new standard.
IFRS15 requires entities to apportion revenue earned from contracts to individual performance obligations based on a five-step
model. The adoption of this standard has not resulted in any material impact on reported profits.
The Group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have
been published but are only effective for accounting periods beginning on or after 1 January 2019 or later periods. The new
pronouncements that may have an effect on the Group are listed below:
•
IFRS 16 “Leases” (effective 1 January 2019)
IFRS 16 “Leases” is effective for accounting periods beginning on or after 1 January 2019 and will be adopted by the Group for the
accounting period beginning 1 July 2019. The new standard removed the distinction between operating and finance leases and
requires that an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are
short-term and low-values leases.
70
Annual Report and Accounts for the year ended 30 June 2019 1 Accounting Policies continued
Basis of preparation (continued)
The Group reviewed all of the Group’s leasing arrangements over the last year in light of the new lease accounting rules in IFRS 16.
The standard will affect primarily the accounting for the Group’s operating leases. For the Company, leasing arrangements are not
significant.
As at the reporting date, the Group has non-cancellable operating lease commitments of £2,245,000, see note 29. Of these
commitments, approximately £52,000 relate to short-term leases or low value leases which will both be recognised on a straight-line
basis as expense in profit or loss.
For the remaining lease commitments the Group expects to recognise right-of-use assets of approximately £1,357,000 on 1 July
2019, lease liabilities of £1,710,000 and deferred tax liabilities of £3,000. Overall net assets will be approximately £356,000, and net
current assets will be £373,000 lower due to the presentation of a portion of the liability as a current liability.
The Group expects that net profit after tax will increase by approximately £22,000 for 2020 as a result of adopting the new rules.
Adjusted EBITDA is expected to increase by approximately £440,000 as the operating lease payments were included in EBITDA, but
the amortisation of the right-of-use assets and interest on the lease liability are excluded from this measure. Operating profit, used to
measure segment results, is expected to increase by approximately £120,000.
Operating cash flows will increase and financing cash flows decrease by approximately £345,000 as repayment of the principal
portion of the lease liabilities will be classified as cash flows from financing activities.
The Group’s activities as a lessor are not material and hence the Group does not expect any significant impact on the financial
statements. However, some additional disclosures will be required from next year.
The Group intends to apply the simplified transition approach and will not restate comparative amounts for the year prior to first
adoption. Right-of-use assets for property leases will be measured on transition as if the new rules had always been applied. All
other right-of-use assets will be measured at the amount of the lease liability on adoption (adjusted for any prepaid or accrued lease
expenses).
There are no other standards that are not yet effective that are expected to have a material impact on the entity in the current or
future reporting periods and on foreseeable future transactions.
The financial statements are presented in Pounds Sterling, rounded to the nearest thousand.
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.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the Company
income statement.
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.
71
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements continued
For the year ended 30 June 2019
1 Accounting Policies continued
Equity accounted investments and joint arrangements
Under IFRS 11, ‘Joint Arrangements’, investments in joint arrangements are classified as either joint operations or joint ventures.
The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint
arrangement. FW Thorpe Plc only has joint operations.
Joint operations
FW Thorpe Plc recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly
held or incurred assets, liabilities, revenues and expenses.
Equity accounted investments
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the
group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the group’s share of movements in other
comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint
ventures are recognised as a reduction in the carrying amount of the investment.
Where the group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other
unsecured long-term receivables, the group does not recognise further losses, unless it has incurred obligations or made payments
on behalf of the other entity.
Unrealised gains on transactions between the group and its associates and joint ventures are eliminated to the extent of the group’s
interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the
policies adopted by the group.
Revenue recognition
The Group has adopted IFRS 15 Revenue from Contracts with Customers from 1 July 2018. IFRS 15 provides a single source of
accounting requirements for recognising revenue and costs from contracts with customers, replacing all previous accounting
pronouncements on revenue.
The Group recognises revenue earned from contracts based on individual performance obligations using the five-step model.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at
an amount that reflects the consideration the Group is entitled to in exchange for those goods or services, excluding VAT, trade
discounts and rebates.
The Group has generally concluded that it is the principal in its revenue arrangements. The amount of revenue is not considered to
be reliably measurable until all contingencies relating to the sale have been resolved. 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. The normal
credit terms are 30 to 90 days from delivery.
Revenue from external customers is derived from the supply of light fittings and services to support the sale of these light fittings.
Revenue Stream Revenue Recognition
Light fittings
Services
Revenue is recognised at the point in time when control of the asset is transferred to the customer,
generally on delivery of the goods
Revenue is recognised over time when the service is performed
The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion
of the transaction price needs to be allocated (e.g. warranties, service agreements). In determining the transaction price for the sale
of goods, the Group considers the effects of variable consideration, the existence of significant financing components, non-cash
consideration, and consideration payable to the customer (if any). There were no impacts on reported profits on adoption of IFRS 15.
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.
72
Annual Report and Accounts for the year ended 30 June 2019 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 ten 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 eight remaining operating segments have been
aggregated into the “other companies” reportable segment based upon their size, comprising the entities Philip Payne Limited, Solite
Europe Limited, Portland Lighting Limited, TRT Lighting Limited, Thorlux Lighting L.L.C., Thorlux Australasia Pty Limited, Thorlux
Lighting GmbH and Famostar Emergency Lighting B.V.
Pension costs
The Group operates a hybrid defined benefit and defined contribution pension scheme. 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.
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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.
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Intangible assets
Development costs
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 costs are recognised as intangible assets
when the following criteria are met:
It is technically feasible to complete the intangible asset so that it will be available for use;
•
• Management intends to complete the intangible asset and use or sell it;
•
•
• Adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are
There is an ability to use or sell the intangible asset;
It can be demonstrated how the intangible asset will generate probable future economic benefits;
•
available; and
The expenditure attributable to the intangible asset during its development can be reliably measured. Other development
expenditures that do not 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%.
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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. The
rates generally applicable are:
Technology
Brand name
14%
14%–20%
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.
Financial Assets
(i) Classification
From 1 July 2018, the Group classifies its financial assets in the following measurement categories:
•
•
those to be measured subsequently at fair value (either through OCI or the income statement); and
those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in the income statement or OCI. For investments in equity
instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of
initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).
The Group reclassifies debt investments when and only when its business model for managing those assets changes.
(ii) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase
or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or
have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
(iii) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs
of financial assets carried at FVPL are expensed in the income statement.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely
payment of principal and interest.
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Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow
characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:
•
• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of
principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income
using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in the income statement
together with foreign exchange gains and losses. Impairment losses are included in either administrative expenses, or finance
costs in the income statement dependent on the type of asset impaired.
FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash
flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken
through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses
which are recognised in the income statement. When the financial asset is derecognised, the cumulative gain or loss previously
recognised in OCI is reclassified from equity to profit or loss and recognised in finance income or costs. Interest income from
these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses
are presented in administrative expenses and impairment expenses are included in either administrative expenses, or finance
costs in the income statement.
FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment
that is subsequently measured at FVPL is recognised in the income statement in the period in which it arises.
•
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair
value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to the
income statement following the derecognition of the investment. Dividends from such investments continue to be recognised in the
income statement as finance income when the Group’s right to receive payments is established.
Changes in the fair value of financial assets at FVPL are recognised in the income statement as applicable. Impairment losses (and
reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
(iv) Impairment
From 1 July 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments
carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant
increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables, see accounting policy for trade receivables for further details.
(v) Accounting policies applied until 30 June 2018
The Group has applied IFRS 9 retrospectively, but has elected not to restate comparative information. As a result, the comparative
information provided continues to be accounted for in accordance with the Group’s previous accounting policy.
Classification
Until 30 June 2018, the Group classified its financial assets in the following categories:
financial assets at fair value through profit or loss,
loans and receivables,
•
•
• held-to-maturity investments, and
•
available-for-sale financial assets.
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The classification depended on the purpose for which the investments were acquired. Management determined the classification of
its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluated this designation at the end
of each reporting period.
Reclassification
The Group could choose to reclassify a non-derivative trading financial asset out of the held for trading category if the financial asset
was no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables were permitted to
be reclassified out of the held for trading category only in rare circumstances arising from a single event that was unusual and highly
unlikely to recur in the near term. In addition, the Group could choose to reclassify financial assets that would meet the definition
of loans and receivables out of the held for trading or available-for-sale categories if the Group had the intention and ability to hold
these financial assets for the foreseeable future or until maturity at the date of reclassification.
Reclassifications were made at fair value as of the reclassification date. Fair value became the new cost or amortised cost as
applicable, and no reversals of fair value gains or losses recorded before reclassification date were subsequently made. Effective
interest rates for financial assets reclassified to loans and receivables and held-to-maturity categories were determined at the
reclassification date. Further increases in estimates of cash flows adjusted effective interest rates prospectively.
Subsequent measurement
The measurement at initial recognition did not change on adoption of IFRS 9, see description above.
Subsequent to the initial recognition, loans and receivables and held-to-maturity investments were carried at amortised cost using
the effective interest method.
Available-for-sale financial assets and financial assets at FVPL were subsequently carried at fair value. Gains or losses arising from
changes in the fair value were recognised as follows:
•
•
•
for financial assets at FVPL – in the income statement
for available-for-sale financial assets that are monetary securities denominated in a foreign currency – translation differences
related to changes in the amortised cost of the security were recognised in the income statement and other changes in the
carrying amount were recognised in other comprehensive income
for other monetary and non-monetary securities classified as available-for-sale – in other comprehensive income.
Details on how the fair value of financial instruments is determined are disclosed in the accounting policy note fair value estimation.
When securities classified as available-for-sale were sold, the accumulated fair value adjustments recognised in other comprehensive
income were reclassified to in the income statement finance income or cost.
Impairment
The Group assessed at the end of each reporting period whether there was objective evidence that a financial asset or group of
financial assets was impaired. A financial asset or a group of financial assets was impaired and impairment losses were incurred
only if there was objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the
asset (a ‘loss event’) and that loss event (or events) had an impact on the estimated future cash flows of the financial asset or group
of financial assets that could be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or
prolonged decline in the fair value of the security below its cost was considered an indicator that the assets are impaired.
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Assets carried at amortised cost
For loans and receivables, the amount of the loss was measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding future credit losses that had not been incurred) discounted at the financial
asset’s original effective interest rate. The carrying amount of the asset was reduced and the amount of the loss was recognised
in the income statement. If a loan or held-to-maturity investment had a variable interest rate, the discount rate for measuring any
impairment loss was the current effective interest rate determined under the contract. As a practical expedient, the Group could
measure impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreased and the decrease could be related objectively to an event
occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously
recognised impairment loss was recognised in the income statement.
Impairment testing of trade receivables is described in the accounting policy note for trade receivables.
Assets classified as available-for-sale
If there was objective evidence of impairment 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 the
income statement – was removed from equity and recognised in the income statement.
Impairment losses on equity instruments that were recognised in the income statement were not reversed through the income
statement in a subsequent period.
If the fair value of a debt instrument classified as available-for-sale increased in a subsequent period and the increase could be
objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss was
reversed through the income statement.
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 the Group applies the IFRS 9 simplified approach to measuring expected
credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the
days past due. The expected loss rates are based on the payment profiles of sales over a period 12 months up to the end of the
relevant financial year, and the corresponding historical credit losses experienced within this period. The historical loss rates are
adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers
to settle the receivables, as significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or
financial reorganisation, and default or delinquency in payments. 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.
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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.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method.
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
The presentation of the annual financial statements in conformity with IFRS as adopted by the EU requires the Directors to make
judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are
believed to be reasonable under the circumstances. Actual results may differ from these estimates.
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Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods affected. The key estimates and judgements used in the financial
statements are as follows:
Estimates
Warranty
The Group provides for expected warranty costs covering both specific known warranty claims and calculating
expected future warranty claims in order to estimate the expected costs that will arise in respect of products sold
within the remaining warranty periods. The expected future warranty claims provision is calculated by assessing
historical data, industry failure rates and the Group’s knowledge of products to determine the percentage of sales
that should be provided for to cover future associated warranty costs. Note 23 contains details of the warranty
provision.
Development costs
The Group undertakes development activities and the commercial viability of these activities is assessed on
a continual basis; as such the Group assess each new project using its knowledge to estimate the amount of
development time spent on projects to determine the amount that should be capitalised. Note 9 contains details of
capitalised development costs.
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. To calculate the expected share appreciation repurchase value the
Group has considered the recent and budgeted future performance of the Lightronics business analysing
forecasted EBITDA, revenue and costs upon which the obligation is based. This analysis is reviewed and updated
each year and, if necessary, adjustments are made to ensure that the provision value reflects the best current
estimate of settlement with movements recognised as a share based payment charge. Notes 21 and 27 contain
details of the share appreciation rights.
Famostar share appreciation rights
The Group has an obligation to purchase the share appreciation rights from the same rights holders as for the
Lightronics business. To calculate the expected share appreciation repurchase value the Group has considered the
recent and budgeted future performance of the Famostar business analysing forecasted EBITDA, revenue and costs
upon which the obligation is based. This analysis is reviewed and updated each year and, if necessary, adjustments
are made to ensure that the provision value reflects the best current estimate of settlement with movements
recognised as a share based payment charge. Notes 21 and 27 contain details of the share appreciation rights.
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. Note 22 contains details of the retirement benefit obligations.
Receivables
The Group and Company assesses expected credit losses based on whether each receivable is performing
or underperforming in accordance with IFRS 9. This assessment is undertaken using both historical data and
expected future developments. Notes 12 and 17 contain details for receivables.
Inter-company loan impairment
The Company provides for expected credit losses that may arise from under-performing loans to subsidiary
companies. The expected credit loss is calculated by looking at historical performance and the Company’s
knowledge of how the subsidiary is likely to perform in the future. Note 12 contains details of inter-company loan
impairments.
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Judgements Warranty
The Group provides for expected warranty costs covering both specific known warranty claims and calculating
expected future warranty claims. In determining this provision the Group uses its knowledge of its products in the
application of failure rates for new products at the start of their warranty period.
Development costs
The Group undertakes development activities and the commercial viability of these activities is assessed on a
continual basis; as such the Group assesses each new project to determine whether development costs incurred
should be capitalised within intangible assets or recognised as an expense within administrative expenses. The Group
determines this classification based on 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.
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 over the period to 2021. In determining the expected purchase price the
Group has assumed the repurchase will be made in 2021 thereby assessing the expected purchase price at this date.
Famostar share appreciation rights
The Group has an obligation to purchase the share appreciation rights from the management and former
shareholders of the Lightronics business over the period to 2021. In determining the expected purchase price the
Group has assumed the repurchase will be made in 2021 thereby assessing the expected purchase price at this date.
Retirement benefit obligations
The Group recognises its obligations to employee retirement benefits. Where the fair value of the pension plan
assets exceeds the present value of the defined benefit obligation the Group consider the amount which can
be recognised as an asset within the statement of financial position in line with the requirements of IAS 19. 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. As these criteria are not met the Group has decided not to recognise a net retirement benefit asset.
Receivables
The Group and Company has receivables in the form of loans and trade receivables. Where the receivable is
underperforming, or where credit losses are expected, the Group and Company have recognised a provision based on
the expected loss up to the date when the receivable will be settled.
Inter-company loan impairment
The Company recognises expected credit losses that may arise from under-performing loans to subsidiary companies
based on its expectations of when these loans will be settled.
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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.
(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 and net investments in foreign
operations. 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 financial assets at fair value through other comprehensive income 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.
The Group holds money market funds which are designated at short term investments and also a range of quoted securities which
are designated as financial assets at fair value through other comprehensive income. Management has performed an analysis and do
not believe there to be a material sensitivity to changes in underlying price indices arising from these holdings.
(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. 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.
83
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements continued
For the year ended 30 June 2019
1 Accounting Policies continued
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.
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)
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3)
iii.
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.
84
Annual Report and Accounts for the year ended 30 June 2019 1 Accounting Policies continued
Share based payments
Senior executives of the Group receive remuneration in the form of share based payments through the executive share ownership
plan 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.
Cash-settled share based payments
The Group has cash-settled share based payments for holders of share appreciation rights holders. A liability is recognised equal to
the calculated future fair value as at the date of the statement of financial position.
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 ten 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 Lightronics business
is a material subsidiary and is therefore disclosed separately.
The eight remaining operating segments have been aggregated into the “other companies” reportable segment based upon their
size, comprising the entities Philip Payne Limited, Solite Europe Limited, Portland Lighting Limited, TRT Lighting Limited, Thorlux
Lighting L.L.C., Thorlux Australasia Pty Limited, Thorlux Lighting GmbH and Famostar Emergency Lighting B.V.
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.
Thorlux
£’000
Lightronics
£’000
Other
companies
£’000
Inter-
segment
adjustments
£’000
Total
continuing
operations
£’000
Year to 30 June 2019
Revenue to external customers
Revenue to other Group companies
Total revenue
Operating profit (before disposal of property)
Profit on disposal of property
Operating profit
Net finance income
Profit before income tax
Year to 30 June 2018
Revenue to external customers
Revenue to other Group companies
Total revenue
Operating profit
Net finance income
Profit before income tax
62,304
3,551
65,855
11,578
23,154
366
23,520
2,357
25,185
3,573
28,758
3,661
–
(7,490)
(7,490)
53
64,645
3,930
68,575
13,611
20,860
196
21,056
2,050
24,109
2,956
27,065
3,407
–
(7,082)
(7,082)
398
110,643
–
110,643
17,649
1,917
19,566
3
19,569
109,614
–
109,614
19,466
101
19,567
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 and elimination of profit on transfer of assets
between Group companies.
85
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For the year ended 30 June 2019
2 Segmental Analysis continued
(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
Rest of Europe
Rest of the World
2019
£’000
68,706
28,227
11,185
2,525
110,643
2018
£’000
70,652
22,713
10,726
5,523
109,614
The Group’s assets cannot be split geographically in relation to the Group’s revenue.
(c) Geographical analysis by product types
The Group’s main business segments primary revenue stream is the sale of light fittings, with some ancillary services supporting this
revenue stream.
Light
Fittings
66,359
28,224
11,150
2,521
108,254
Light
Fittings
68,802
22,713
10,712
5,523
107,750
Services
2,347
3
35
4
2,389
Services
1,850
–
14
–
1,864
Total
68,706
28,227
11,185
2,525
110,643
Total
70,652
22,713
10,726
5,523
109,614
2019 (£'000)
UK
Netherlands
Rest of Europe
Rest of the World
2018 (£’000)
UK
Netherlands
Rest of Europe
Rest of the World
86
Annual Report and Accounts for the year ended 30 June 2019 3 Operating Profit
Profit on sale of Property, Plant & Equipment
Profit on sale of investment property
Depreciation of investment property
Depreciation of Property, Plant & Equipment
– owned property
Operating lease rentals
– property
– other
Amortisation of intangible assets
Share appreciation rights (with associated share based payment charges)
Cost of inventories recognised as an expense
Research and development expenditure credit
Currency (gains)/losses recognised in income statement
Services provided by the Company’s auditors
Fees payable to Company’s auditors for audit of financial statements
Fees payable to the Company’s auditors and its associates for other services
Audit of Company’s subsidiaries
Other assurance services
2019
£’000
(2,116)
–
58
2018
£’000
(86)
(39)
59
2,508
2,136
382
388
2,456
2,175
44,659
(292)
(69)
2019
£’000
131
42
6
179
282
397
2,400
1,523
45,052
(237)
247
2018
£’000
112
42
41
195
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.
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
2019
Number
273
177
216
666
2018
Number
302
187
231
720
2019
Number
170
100
149
419
Group
Company
2019
£’000
26,891
3,138
1,453
31,482
2018
£’000
25,988
2,891
1,326
30,205
2019
£’000
17,342
1,931
896
20,169
2018
Number
206
108
162
476
2018
£’000
16,978
1,894
890
19,762
Included in wages and salaries are £1,652,000 (2018: £1,606,000) of temporary employees costs.
Other pension costs include contributions to pension schemes and other employer’s pension related charges comprising life
assurance of £93,000 (2018: £105,000), pension administration and professional charges of £130,000 (2018: £113,000) and private
pension schemes amounting to £15,000 (2018: £19,000).
87
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For the year ended 30 June 2019
4 Employee Information continued
Contributions to the defined contribution section amounted to £251,000 (2018: £247,000) and contributions to other schemes
administered independently of the FW Thorpe pension schemes amounted to £796,000 (2018: £614,000).
Directors’ Emoluments
Aggregate emoluments
Contributions to money purchase schemes
Group
Company
2019
£’000
1,974
20
1,994
2018
£’000
2,348
21
2,369
2019
£’000
1,683
20
1,703
2018
£’000
1,988
21
2,009
At 30 June 2019 no retirement benefits were accruing to any director (2018: D Taylor) under the defined benefit scheme and to
J E Thorpe (2018: J E Thorpe) under the defined contribution scheme. Additionally compensation payments for the loss of pension
contributions totalling £207,000 (2018: £92,000) were made to 5 (2018: 3) directors.
Highest paid director
Total of emoluments and amounts receivable
Group
Company
2019
£’000
442
2018
£’000
550
2019
£’000
442
2018
£’000
550
Compensation payments for the loss of pension contributions for the highest paid director were £146,000 (2018: £79,000).
The key management personnel are the Group Board directors.
Further details are provided in the directors’ remuneration report on pages 52 to 55.
5 Net Finance Income/Expense
Finance income
Interest receivable
Dividend income on financial assets at fair value through other comprehensive income
Dividend income on available-for-sale financial assets
Net rental income
Loan interest
Gain on disposal of financial assets
Finance cost
Interest payable
Share appreciation rights distribution
Loss on settlement of loan notes
Loan interest
Net finance income
2019
£’000
312
225
–
224
213
75
1,049
1
922
9
114
1,046
3
2018
£’000
241
–
190
161
227
–
819
–
657
–
61
718
101
The share appreciation rights distribution are the dividends from Lightronics Participaties B.V. and Famostar Emergency Lighting B.V.
due to the former management of Lightronics Participaties B.V.
88
Annual Report and Accounts for the year ended 30 June 2019 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
2019
£’000
3,963
(609)
3,354
75
75
3,429
2018
£’000
3,930
(170)
3,760
(303)
(303)
3,457
The tax assessed for the year is lower (2018: lower) than the standard rate of corporation tax in the UK of 19.00% (2018: 19.00%).
The differences are explained below:
Profit before income tax
Profit on ordinary activities multiplied by the standard rate in the UK of 19.00% (2018: 19.00%)
Effects of:
Expenses not deductible for tax purposes
Accelerated tax allowances and other timing differences
Adjustments in respect of prior years
Chargeable gains relief on disposal of property
Patent box relief
Foreign profit taxed at higher rate
Tax charge
2019
£’000
19,569
3,718
881
55
(609)
(352)
(597)
333
3,429
2018
£’000
19,567
3,718
648
(383)
(170)
–
(641)
285
3,457
The effective tax rate was 17.52% (2018: 17.67%). Adjustments in respect of prior years relates to refunds received for additional
investment allowances and patent box relief.
The change to the UK corporation tax rate from 19% to 17% from 1 April 2020 was substantively enacted on 6 September 2016 with
the appropriate rate reflected within these financial statements.
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
2019
116,060,378
16,140
13.91
2018
115,834,897
16,110
13.91
Diluted 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, plus the number of shares earnt for share options where performance conditions have been achieved.
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
2019
116,689,595
16,140
13.83
2018
116,692,591
16,110
13.81
89
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements continued
For the year ended 30 June 2019
8 Property, Plant and Equipment
Cost
At 1 July 2018
Additions
Disposals
Currency translation
At 30 June 2019
Accumulated depreciation
At 1 July 2018
Charge for the year
Disposals
Currency translation
At 30 June 2019
Net book amount
At 30 June 2019
Cost
At 1 July 2017
Acquisition of a subsidiary
Additions
Disposals
Transfers
Currency translation
At 30 June 2018
Accumulated depreciation
At 1 July 2017
Acquisition of a subsidiary
Charge for the year
Disposals
Transfers
Currency translation
At 30 June 2018
Net book amount
At 30 June 2018
Freehold
land and
buildings
£’000
Group
Plant and
equipment
£’000
18,676
3,176
(2,199)
67
19,720
3,829
546
(673)
10
3,712
21,328
3,616
(1,116)
23
23,851
13,496
1,962
(962)
10
14,506
Freehold
land and
buildings
£’000
Company
Plant and
equipment
£’000
6,260
114
–
–
6,374
1,958
137
–
–
2,095
16,286
2,553
(535)
–
18,304
10,326
1,437
(365)
–
11,398
Total
£’000
40,004
6,792
(3,315)
90
43,571
17,325
2,508
(1,635)
20
18,218
Total
£’000
22,546
2,667
(535)
–
24,678
12,284
1,574
(365)
–
13,493
16,008
9,345
25,353
4,279
6,906
11,185
14,556
528
3,301
–
294
(3)
18,676
2,789
435
464
–
141
–
3,829
18,990
1,323
2,558
(1,247)
(294)
(2)
21,328
11,920
1,188
1,672
(1,139)
(141)
(4)
13,496
33,546
1,851
5,859
(1,247)
–
(5)
40,004
14,709
1,623
2,136
(1,139)
–
(4)
17,325
6,192
–
68
–
–
–
6,260
1,830
–
128
–
–
–
1,958
14,648
–
2,107
(469)
–
–
16,286
9,463
–
1,246
(383)
–
–
10,326
20,840
–
2,175
(469)
–
–
22,546
11,293
–
1,374
(383)
–
–
12,284
14,847
7,832
22,679
4,302
5,960
10,262
Freehold land which was not depreciated at 30 June 2019 amounted to £769,000 (Group) and £500,000 (Company) (2018: £1,033,000
(Group and Company)).
90
Annual Report and Accounts for the year ended 30 June 2019 9 Intangible Assets
Group 2019
Cost
At 1 July 2018
Additions
Write-offs and transfers
Currency translation
At 30 June 2019
Accumulated amortisation
At 1 July 2018
Charge for the year
Write-offs and transfers
Currency translation
At 30 June 2019
Net book amount
At 30 June 2019
Goodwill
£’000
Development
costs
£’000
Technology
£’000
14,786
–
–
135
14,921
249
–
–
(3)
246
6,779
1,791
(1,293)
15
7,292
3,062
1,662
(1,293)
10
3,441
2,924
–
–
32
2,956
1,117
372
–
15
1,504
Brand
name
£’000
1,291
–
–
13
1,304
599
193
–
9
801
Software
£’000
Patents
£’000
Fishing
rights
£’000
1,789
592
(178)
(1)
2,202
1,128
229
(178)
(1)
1,178
150
–
–
–
150
150
–
–
–
150
182
–
–
–
182
–
–
–
–
–
Total
£’000
27,901
2,383
(1,471)
194
29,007
6,305
2,456
(1,471)
30
7,320
14,675
3,851
1,452
503
1,024
–
182
21,687
Write-offs relate to development assets where no further economic benefits will be obtained.
Group 2018
Cost
At 1 July 2017
Acquisition of a subsidiary
Additions
Write-offs and transfers
Currency translation
At 30 June 2018
Accumulated amortisation
At 1 July 2017
Charge for the year
Write-offs and transfers
Currency translation
At 30 June 2018
Net book amount
At 30 June 2018
Goodwill
£’000
Development
costs
£’000
Technology
£’000
Brand
name
£’000
Software
£’000
Patents
£’000
Fishing
rights
£’000
10,282
4,490
–
–
14
14,786
262
–
–
(13)
249
6,448
–
1,605
(1,281)
7
6,779
2,588
1,753
(1,281)
2
3,062
1,875
1,040
–
–
9
2,924
814
299
–
4
1,117
768
520
–
–
3
1,291
442
157
–
–
599
1,528
–
376
(116)
1
1,789
1,050
191
(113)
–
1,128
150
–
–
–
–
150
150
–
–
–
150
182
–
–
–
–
182
–
–
–
–
–
Total
£’000
21,233
6,050
1,981
(1,397)
34
27,901
5,306
2,400
(1,394)
(7)
6,305
14,537
3,717
1,807
692
661
–
182
21,596
Amortisation and impairment of £2,456,000 (2018: £2,400,000) is included in the administrative expenses. Included in goodwill are
amounts of £2,618,000 (2018: £2,618,000) arising from the acquisition of Portland Lighting Limited in 2011, €7,784,000 (£6,976,000)
(2018: €7,784,000 (£6,890,000)) arising from the acquisition of Lightronics Participaties B.V. in 2015 and €5,057,000 (£4,532,000)
(2018: €5,057,000 (£4,490,000)) arising from the acquisition of Famostar Emergency Lighting B.V. in December 2017. This goodwill is
not amortised. The goodwill for Lightronics, Famostar and Thorlux Australasia is revalued annually to the closing exchange rate, as it
is denominated in euros and Australian dollars respectively, 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, for each
relevant cash generating unit. An EBITDA analysis is computed and used to compare against the net carrying value of the goodwill
and other intangible assets for each cash generating unit as appropriate. A multiple based on a six times EBITDA that we consider a
reasonable multiple for the sector, is used in these computations.
Due to the timing of the acquisitions that gave rise to the majority of our goodwill held, our assessment also considers business
performance and likely net realisable value, which must be assessed as part of settlement of related share appreciation rights. At
expected levels of EBITDA we consider that our goodwill is fully recoverable.
Cash generating units in the Group comprise the entities FW Thorpe Plc, Lightronics Participaties B.V,. Lightronics B.V., Philip Payne
Limited, Solite Europe Limited, Portland Lighting Limited, TRT Lighting Limited, Thorlux Lighting L.L.C., Thorlux Australasia Pty
Limited, Thorlux Lighting GmbH and Famostar Emergency Lighting B.V.
91
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For the year ended 30 June 2019
9 Intangible Assets continued
Company 2019
Cost
At 1 July 2018
Additions
Write-offs and transfers
At 30 June 2019
Accumulated amortisation
At 1 July 2018
Charge for the year
Write-offs and transfers
At 30 June 2019
Net book amount
At 30 June 2019
Development
costs
£’000
Software
£’000
Patents
£’000
Fishing
rights
£’000
5,098
1,470
(1,293)
5,275
2,295
1,256
(1,293)
2,258
1,601
583
(1)
2,183
985
206
(1)
1,190
150
–
–
150
150
–
–
150
182
–
–
182
–
–
–
–
Total
£’000
7,031
2,053
(1,294)
7,790
3,430
1,462
(1,294)
3,598
3,017
993
–
182
4,192
Write-offs relate to development assets where no further economic benefits will be obtained.
Company 2018
Cost
At 1 July 2017
Additions
Write-offs and transfers
At 30 June 2018
Accumulated amortisation
At 1 July 2017
Charge for the year
Write-offs and transfers
At 30 June 2018
Net book amount
At 30 June 2018
Development
costs
£’000
Software
£’000
Patents
£’000
Fishing
rights
£’000
5,104
1,275
(1,281)
5,098
2,197
1,379
(1,281)
2,295
2,803
1,241
360
–
1,601
829
156
–
985
616
150
–
–
150
150
–
–
150
182
–
–
182
–
–
–
–
–
182
3,601
Total
£’000
6,677
1,635
(1,281)
7,031
3,176
1,535
(1,281)
3,430
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.
92
Annual Report and Accounts for the year ended 30 June 2019 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 2017
Additions in year
At 1 July 2018
Additions in year
At 30 June 2019
11 Investment Property
Cost
At 1 July
Additions
Disposals
At 30 June
Accumulated depreciation
At 1 July
Charge for the year
Disposals
At 30 June
Net book amount
At 30 June
The following amounts have been recognised in the income statement:
Rental income
Direct operating expenses arising from investment
properties that generate rental income
Company
2019
£’000
14,581
Costs
£’000
13,682
899
14,581
–
14,581
2018
£’000
14,581
Provision
£’000
–
–
–
–
–
Group
Company
2019
£’000
2,271
–
(12)
2,259
195
58
–
253
2018
£’000
2,299
–
(28)
2,271
136
59
–
195
2019
£’000
10,593
1,708
(2,090)
10,211
1,378
254
(552)
1,080
2,006
2,076
9,131
Group
Company
2019
£’000
198
(95)
2018
£’000
131
(103)
2019
£’000
421
(270)
2018
£’000
10,513
108
(28)
10,593
1,112
266
–
1,378
9,215
2018
£’000
365
(310)
The investment property and land owned by 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 £1,296,000 (2018: £1,307,000) is freehold land and therefore not depreciated; the property element includes
accumulated depreciation of £253,000 (2018: £195,000) which relates to the property occupied by Mackwell Electronics Limited. This
investment property has been independently valued and has a market value that is not materially higher than its cost.
An external fair value exercise was undertaken in June 2019 of the land by the River Wye and the land in Monmouthshire which has
resulted in a value of £1.57m, which is greater than the carrying value of those specific investment properties. The directors’ valuation
of this investment property for the year ended 30 June 2019 shows no material change.
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.
93
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements continued
For the year ended 30 June 2019
12 Financial Assets at Amortised Cost
(2018: Loans and Receivables)
The Group classifies its financial assets at amortised cost (2018: loans and receivables) only if both of the following criteria are met:
•
•
the asset is held within a business model whose objective is to collect the contractual cash flows; and
the contractual terms give rise to cash flows that are solely payments of principal and interest.
Financial assets at amortised cost (2018: Loans and receivables) include the following debt investments. The Group was required to
revise its impairment methodology under IFRS 9 for each of these debt investments and applied the expected credit risk model to
calculate the impairment provision.
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. £100,000 was repaid during the year (2018: £550,000 and £77,000 interest was capitalised), leaving a balance due
at 1% over the Bank of England base rate of £377,000 (2018: £477,000).
This debt investment is considered to be underperforming, and therefore the impairment provision is determined as lifetime
expected credit losses. As at the date of these financial statements, the Group and Company have made a provision of £200,000
(2018: £200,000) for these loan notes.
During 2018 £1,500,000 in new loans were provided to Mr N Brangwin, a director and main shareholder in Mackwell Electronics
Limited, making a total of £1,800,000, with interest payable at 4% over the Bank of England exchange rate. This loan is secured
against Mr Brangwin’s shareholding in FW Thorpe Plc. No repayment was received during the year.
This debt investment is considered to have a minimal risk of default due to the collatertal that is held as security, and therefore the
impairment provision is determined as 12 months expected credit losses. As at the date of these financial statements, no provision
was recorded.
Therefore the total balance due from Mackwell and its directors is £1,977,000 (2018: £2,077,000) after provisions.
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. During the year this loan was settled and as at 30 June 2019, the outstanding value of these loan notes was £nil
(2018: £1,417,000).
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. During the year €982,000 was repaid and at the date of the financial statements, the loan notes
balance was €367,000 (2018: €1,349,000) equating to £328,000 (2018: £1,192,000) 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%.
This debt investment has shown no significant increase in credit risk since the inception of the loan, and therefore the impairment
provision is determined as 12 months expected credit losses. As at the date of these financial statements, no provision was recorded.
Famostar Emergency Lighting B.V.
Part of the acquisition of Famostar Emergency Lighting B.V. included partial funding of the 35% share appreciation rights held by
the existing rights holders in Lightronics Participaties B.V. This was achieved by the issue of a loan of €1,640,000. During the year
€232,000 was repaid and at the date of the financial statements, the loan notes balance was €1,408,000 (2018: €1,640,000) equating
to £1,262,000 (2018: £1,451,000) at the end of year exchange rate. The loan notes are repayable on or before 30 June 2021 and attract
an interest rate of 5%.
This debt investment has shown no significant increase in credit risk since the inception of the loan, and therefore the impairment
provision is determined as 12 months expected credit losses. As at the date of these financial statements, no provision was recorded.
The Group’s maximum exposure to credit risk in respect of financial assets at amortised cost (2018: loans and receivables) from
Famostar and Lightronics is £1,590,000 which represents their carrying value at 30 June 2019. Of this balance, the Group exposure to
credit risk on these receivables is £1,590,000.
We assess the credit risk of our loan note receivables based on the creditworthiness of the counterparty, history of repayment and
security in place, and where required provisions are made.
94
Annual Report and Accounts for the year ended 30 June 2019 12 Financial Assets at Amortised Cost continued
(2018: Loans and Receivables)
At 1 July
Issued
Repaid
Reclassification
Impairment charge
Exchange rate movement
At 30 June
Analysis of total financial assets at amortised cost
(2018: loans and receivables)
Non-current financial assets at amortised cost
Non-current loans and receivables
Current financial assets at amortised cost
Current loans and receivables
Group
Company
2019
£’000
6,139
–
(2,583)
–
–
11
3,567
2018
£’000
3,808
2,951
(1,006)
377
–
9
6,139
2019
£’000
13,482
1,632
(2,988)
–
(124)
113
12,115
Group
Company
2019
£’000
3,567
–
–
–
3,567
2018
£’000
–
6,139
–
–
6,139
2019
£’000
12,115
–
–
–
12,115
2018
£’000
3,808
10,300
(1,005)
377
–
2
13,482
2018
£’000
–
13,482
–
–
13,482
The £1,632,000 loans issued by the Company are £696,000 issued to Lightronics Participaties B.V. for the development of the
property occupied by Lightronics B.V. and £936,000 to Thorlux Lighting L.L.C.
The debt investment to Lightronics Participaties B.V. of €8,493,000 (£7,611,000) has shown no significant increase in credit risk since
the inception of the loan, and therefore the impairment provision is determined as 12 months expected credit losses. As at the date
of these financial statements, no provision was recorded.
The debt investment to Thorlux Lighting L.L.C. of £1,061,000 is considered to be underperforming and therefore the impairment
provision is determined as lifetime expected credit losses. As at the date of these financial statements, the Company has made a
provision of £124,000 for these loan notes.
13 Equity Accounted Investments and Joint Arrangements
The Group has a joint operation in the United Arab Emirates. Thorlux Lighting L.L.C. is registered in the 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 £nil (2018: £nil) reflects the 49% of the share capital the Company owns of this joint operation.
The Group invested €1,200,000 for 40% of the share capital of Luxintec S.L., a company based in Spain, in 2016. The Group has
applied the equity method of accounting to recognise this interest. The Group’s management has elected to present fair value gains
and losses on this equity investment in other comprehensive income.
The Group assesses on a forward looking basis the associated expected credit losses and the impairment methodology applied
depends on whether there has been a significant increase in credit risk, as allowed under IFRS 9 . As at the date of these financial
statements, no provision was recorded for the Group.
At 1 July
Impairment
At 30 June
Group
Company
2019
£’000
936
–
936
2018
£’000
936
–
936
2019
£’000
968
(32)
936
2018
£’000
968
–
968
95
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements continued
For the year ended 30 June 2019
14 Financial Assets at Fair Value through Other Comprehensive Income
(2018: Available-for-sale Financial Assets)
Group and Company
Beginning of year
Additions
Disposals
Revaluation
Currency translation
30 June
2019
£’000
3,820
75
(70)
(142)
–
3,683
30 June
2018
£’000
3,630
–
–
189
1
3,820
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. Financial assets at fair value
through other comprehensive income are subsequently carried at fair value.
There were no impairment provisions on financial assets at fair value through other comprehensive income in 2019 or 2018.
Financial assets at fair value through other comprehensive income 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 year whether there is objective evidence that a financial asset or a group of
financial assets is impaired. For equity investments classified as financial assets at fair value through other comprehensive income,
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 financial assets at fair value through other comprehensive income, 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:
Group
Company
2019
£’000
–
(699)
(699)
2018
£’000
8
(655)
(647)
2019
£’000
–
(493)
(493)
Group
Company
2019
£’000
(647)
(75)
24
–
(1)
(699)
2018
£’000
(901)
303
(32)
(15)
(2)
(647)
2019
£’000
(421)
(96)
24
–
–
(493)
2018
£’000
–
(421)
(421)
2018
£’000
(666)
277
(32)
–
–
(421)
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)/credit
Tax credited/(charged) directly to equity
Acquired due to purchase of subsidiary
Currency translation
End of year
96
Annual Report and Accounts for the year ended 30 June 2019 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:
Deferred tax asset
At 1 July 2017
Charged to the income statement
At 1 July 2018
Charged to the income statement
At 30 June 2019
Deferred tax liabilities
At 1 July 2017
Acquisition of a subsidiary
(Credited)/charged to the income statement
Charged directly to equity
Currency translation
At 1 July 2018
Charged/(credited) to the income statement
Credited directly to equity
Currency translation
At 30 June 2019
Accelerated tax
depreciation
£'000
19
(11)
8
(8)
–
Accelerated tax
depreciation
£’000
336
15
(275)
–
–
76
75
–
(1)
150
Research &
development
£’000
693
–
(41)
–
2
654
12
–
2
668
Fair value &
other timing
differences
£’000
(109)
–
2
32
–
(75)
(20)
(24)
–
(119)
The movement in the Company deferred income tax liabilities during the year is as follows:
Deferred tax liabilities
At 1 July 2017
(Credited)/charged to the income statement
Charged directly to equity
At 1 July 2018
Charged/(credited) to the income statement
Credited directly to equity
At 30 June 2019
Accelerated tax
depreciation
£’000
295
(260)
–
35
77
–
112
Research &
development
£’000
480
(18)
–
462
39
–
501
Fair value &
other timing
differences
£’000
(109)
1
32
(76)
(20)
(24)
(120)
The deferred income tax credited/(charged) to equity during the year is as follows:
Deferred tax credited/(charged) to equity
Tax on revaluation of financial assets at fair value through other
comprehensive income
Group
Company
2019
£’000
24
24
2018
£’000
(32)
(32)
2019
£’000
24
24
Total
£'000
19
(11)
8
(8)
–
Total
£’000
920
15
(314)
32
2
655
67
(24)
1
699
Total
£’000
666
(277)
32
421
96
(24)
493
2018
£’000
(32)
(32)
97
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements continued
For the year ended 30 June 2019
16 Inventories
Raw materials
Work in progress
Finished goods
Group
Company
2019
£’000
17,329
2,862
5,315
25,506
2018
£’000
14,486
2,311
4,692
21,489
2019
£’000
10,987
2,357
5,010
18,354
2018
£’000
6,791
1,898
5,435
14,124
The value of the inventory provision is £3,006,000 (2018: £2,838,000) for the Group and £1,494,000 (2018: £1,106,000) for the
Company.
17 Trade and Other Receivables
Current
Trade receivables
Other receivables
Prepayments and accrued income
Amounts owed by subsidiaries
Total
Group
Company
2019
£’000
19,427
734
1,341
–
21,502
2018
£’000
21,711
204
1,501
–
23,416
2019
£’000
11,406
538
1,035
7,615
20,594
2018
£’000
12,757
122
1,097
7,862
21,838
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
2019
£’000
1,303
2018
£’000
1,489
2019
£’000
548
2018
£’000
657
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.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance
for all trade receivables and contract assets. A significant proportion of the trade receivables are insured. The policy covers 90% of the
debt in the event of a claim for default. No bad debt provision is made in respect of trade receivables from Government departments
or agencies. There were no material changes to the value of expected credit losses on adoption of IFRS 9. At 30 June 2019 the bad
debt provision for the Group amounted to £54,000 (2018: £64,000) and for the Company £2,000 (2018: £1,000).
No provision is held against trade receivables that are not yet due, due to the good credit history and expected financial
performance of customers and the overall exposure is considered low due to levels of credit insurance in place.
Included in amounts owed by subsidiaries are provisions for expected credit losses for Thorlux Lighting L.L.C. of £359,000 and
Thorlux Australasia PTY Limited of £418,000.
During the year the following amounts were written off (excluding amounts owed by subsidiaries):
Group
Company
2019
£’000
26
(21)
5
2018
£’000
21
–
21
2019
£’000
16
(11)
5
2018
£’000
7
–
7
Bad debts written off
Bad debts recovered
Net bad debt expense
98
Annual Report and Accounts for the year ended 30 June 2019 17 Trade and Other Receivables continued
At 30 June 2019, 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
Group
Company
2019
£’000
12,917
5,615
433
370
92
19,427
2018
£’000
15,478
5,656
345
232
–
21,711
2019
£’000
10,215
1,099
–
–
92
11,406
2018
£’000
11,851
906
–
–
–
12,757
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 2019 this amounted to £387,000 (2018: £389,000).
Sterling cash fund
19 Short-term Financial Assets
Group and Company
Beginning of year
Net deposits/(withdrawals)
End of year
30 June
2019
£’000
387
2019
£’000
15,290
11,193
26,483
30 June
2018
£’000
389
2018
£’000
16,981
(1,691)
15,290
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 have a minimum rating of “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
Company
2019
£’000
30,807
2018
£’000
28,668
2019
£’000
24,771
2018
£’000
24,333
The banks where the funds are held have a minimum rating of “A” by Fitch, with a specific rating of “F1” for short-term funds.
99
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements continued
For the year ended 30 June 2019
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
2019
£’000
11,547
1,630
2,275
6,460
–
21,912
2018
£’000
7,928
1,569
2,224
7,532
–
19,253
2019
£’000
8,296
347
664
4,603
3,380
17,290
12,804
12,804
10,329
10,329
10,242
10,242
2018
£’000
4,562
253
900
4,991
3,376
14,082
7,958
7,958
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 (deferred consideration) in the subsidiaries Lightronics Participaties B.V. and
Famostar Emergency Lighting B.V., £2,139,000 (2018: £2,336,000) loan from Spuiweg Holding B.V. and post employment benefits at
Thorlux Australasia Pty Limited and Thorlux Lighting L.L.C.
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 2019 amounted to £606,000 (2018: £633,000). 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 2018, and at that date the value of the fund was £39,556,000. 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%
2.60%
2.60%
100
Annual Report and Accounts for the year ended 30 June 2019 22 Pension Scheme continued
The figures at 30 June 2018 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 2019 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
2019
3.50%
3.50%
2.10%
2.50%
3.30%
2.20%
22.5 years
23.5 years
24.7 years
25.9 years
2018
3.40%
3.40%
2.70%
2.40%
3.20%
2.10%
23.1 years
24.8 years
25.4 years
27.2 years
2017
3.50%
3.50%
2.60%
2.50%
3.30%
2.20%
23.0 years
24.7 years
25.3 years
27.1 years
2016
3.00%
3.00%
2.90%
2.00%
2.90%
2.00%
23.0 years
24.0 years
25.0 years
26.0 years
2015
3.40%
3.40%
3.80%
2.40%
3.30%
2.20%
23.0 years
24.4 years
24.9 years
26.4 years
The Statement of Financial Position figures required under IAS 19 are as follows:
30 June 2019
30 June 2018
30 June 2017
30 June 2016
30 June 2015
Expected
long-term
rate of
Value
return
£’000
£’000
2.70% 12,570
2.70% 26,618
2,387
2.70%
Expected
long-term
rate of
return
£’000
2.70%
2.70%
2.70%
41,575
(39,437)
2,138
Expected
long-term
rate of
return
£’000
2.60%
2.60%
2.60%
Expected
long-term
rate of
return
£’000
2.90%
2.90%
2.90%
Expected
long-term
rate of
return
£’000
n/a
3.80%
n/a
Value
£’000
14,968
19,311
1,237
35,516
Value
£’000
12,152
25,859
413
38,424
Value
£’000
13,154
24,769
1,665
39,588
Value
£’000
13,696
16,486
1,522
31,704
(37,259)
(37,710)
(33,731)
(28,824)
2,329
714
1,785
2,880
Equities
Bonds
Other
Total market
value of assets
Present value of
scheme liabilities
Surplus in the
scheme
Amounts recognised in 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
2019
£’000
(39,437)
41,575
2,138
(2,138)
–
2018
£’000
(37,259)
39,588
2,329
(2,329)
–
101
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements continued
For the year ended 30 June 2019
22 Pension Scheme continued
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 (gain)/loss
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
Amounts recognised in Income Statement
The amounts recognised in the Income Statement are as follows:
Current service cost
Actuarial gain recognised in Statement of Comprehensive Income for the year
Actual return less expected return on pension scheme assets
Experience (losses)/gains arising on the scheme liabilities
Changes in assumptions underlying the present value on the scheme liabilities
Net interest income
Restriction of decrease/(increase) in 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)/gain recognised in the Statement of Comprehensive Income for the year
Cumulative actuarial loss recognised in the Statement of Comprehensive Income at 30 June
102
2019
£’000
(37,259)
(423)
(992)
(298)
(2,195)
1,730
(39,437)
2019
£’000
39,588
1,058
1,755
606
298
(1,730)
41,575
2019
£’000
423
423
2019
£’000
1,755
(294)
(1,901)
66
191
(183)
2019
£’000
(4,073)
(374)
(4,447)
2018
£’000
(37,710)
(477)
(973)
(307)
846
1,362
(37,259)
2018
£’000
38,424
994
592
633
307
(1,362)
39,588
2018
£’000
477
477
2018
£’000
592
214
632
21
(1,615)
(156)
2018
£’000
(5,532)
1,459
(4,073)
Annual Report and Accounts for the year ended 30 June 2019 22 Pension Scheme continued
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 (2018: £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 2019 was £2,813,000 (2018: £1,586,000) or 7.1% (2018: 4.1%). The
Group expects to pay £636,000 contributions (2018: £680,000) into the pension scheme during the forthcoming year.
History of experience gains and losses recognised in the Statement of Comprehensive Income
2019
2018
2017
2016
2015
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
Amount which has been recognised in the SOCI
£’000
1,755
(294)
% £’000
% £’000
% £’000
% £’000
%
592
214
4%
1%
2,121
2,612
1,304
1.5%
(0.6%)
(1,129)
6%
3%
(1,401)
7%
4%
(142)
(1,901)
632
(2,254)
(2,609)
(1,553)
–
66
(374)
5%
0%
0%
1%
–
21
1,459
(1.7%)
–
51
(1,211)
0%
0%
4%
6%
0%
0%
3%
–
113
(1,285)
8%
0%
0%
4%
–
144
(247)
4%
0%
5%
0%
0%
1%
Sensitivity analysis
The impact on the defined benefit obligation of changes in the significant assumptions is shown approximately below:
Assumption varied
As at 30 June 2019
Discount rate 0.5% p.a. higher
Increase in salaries 0.5% p.a. higher
Pension Increase (in payment and in deferment) 0.5% p.a. higher
Life expectancy one year longer
Defined
Benefit
Obligation
£m
39.4
37.5
39.6
40.3
40.4
The figures assume that each assumption is changed independently of the others. Therefore, the disclosures are only a guide
because the effect of changing more than one assumption is not cumulative.
103
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements continued
For the year ended 30 June 2019
23 Provision for Liabilities and Charges
At 1 July 2017
Acquisition of a subsidiary
Additions
Utilisation
Surplus
Currency translation
At 1 July 2018
Additions
Utilisation
Currency translation
At 30 June 2019
Analysis of total provisions
Non-current
Total
WEEE
provision
£’000
102
–
–
–
–
–
102
–
–
–
102
Group
Warranty
provision
£’000
1,435
526
375
(228)
(51)
5
2,062
399
(176)
17
2,302
Total
£’000
1,537
526
375
(228)
(51)
5
2,164
399
(176)
17
2,404
WEEE
provision
£’000
102
–
–
–
–
–
102
–
–
–
102
Company
Warranty
provision
£’000
446
–
75
(187)
–
–
334
40
(10)
–
364
Group
Company
2019
£’000
2,404
2,404
2018
£’000
2,164
2,164
2019
£’000
466
466
Total
£’000
548
–
75
(187)
–
–
436
40
(10)
–
466
2018
£’000
436
436
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 2020.
Warranty provision
The provision for warranty is in accordance with the accounting policy described in note 1.
24 Share Capital
Allotted and fully paid
118,935,590 ordinary shares of 1p each (2018: 118,935,590 ordinary shares of 1p each)
The ordinary shareholders each have one vote per share.
Group and Company
2019
£’000
1,189
2018
£’000
1,189
Movements in treasury shares included in share capital
At 1 July
Shares issued from treasury
Shares repurchased
At 30 June
Group and Company
Group and Company
2019
£’000
30
(2)
–
28
2018
£’000
33
(3)
–
30
2019
No. of shares
2,969,546
(200,614)
46,000
2,814,932
2018
No. of shares
3,260,000
(290,454)
–
2,969,546
There were no new shares issued during the year (2018: nil). 200,614 (2018: 290,454) shares were issued from treasury for the exercise
of share options, of which the Company repurchased 46,000. There are 1,606,711 (2018: 1,852,622) share options outstanding at the
year end.
104
Annual Report and Accounts for the year ended 30 June 2019 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
Interim dividend
Total
Group
Company
2019
£’000
1,266
137
2,535
3,938
2018
£’000
1,017
137
2,382
3,536
2019
£’000
1,266
137
–
1,403
2019
4.00
1.43
5.43
2018
£’000
1,017
137
–
1,154
2018
3.55
1.40
4.95
A final dividend in respect of the year ended 30 June 2019 of 4.10p per share, amounting to £4,763,000 (2018: £4,639,000) is to be
proposed at the Annual General Meeting on 21 November 2019 and, if approved, will be paid on 29 November 2019 to shareholders
on the register on 1 November 2019. The ex-dividend date is 31 October 2019. These financial statements do not reflect this dividend
payable.
Dividends proposed (pence per share)
Final dividend
Dividends paid
Final dividend
Interim dividend
Total
Dividends proposed
Final dividend
2019
4.10
2019
£’000
4,639
1,660
6,299
2019
£’000
4,763
2018
4.00
2018
£’000
4,114
1,623
5,737
2018
£’000
4,639
27 Share Based Payment Charge
Equity settled scheme
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. The Group also operates a Save As
You Earn (SAYE) scheme 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 grant
date. The application of IFRS 2 gave rise to a charge of £86,000 (2018: £106,000) for the year.
At 30 June 2019, there were 190,161 options exercisable (2018: 50,000) under the ESOP or SAYE schemes.
105
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements continued
For the year ended 30 June 2019
27 Share Based Payment Charge continued
a) Details of changes in the number of awards outstanding during the year are set out below:
Outstanding at 1 July 2018
Exercised during the year
Forfeited during the year
Outstanding at 30 June 2019
ESOP Scheme
SAYE Scheme
Total
Options
1,410,000
(199,839)
(30,000)
1,180,161
Exercise price
(p/s)
124
124
–
124
Options
442,622
(775)
(15,297)
426,550
Exercise price
(p/s)
209
209
–
209
Options
1,852,622
(200,614)
(45,297)
1,606,711
The weighted average contractual life of the share based payments outstanding at the end of the year is 5.3 years for the ESOP
scheme and 2.8 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, principal 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. and Famostar Emergency Lighting 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 £790,000 (2018: £429,000) for the year. The total liability at
30 June 2019 was £1,601,000 (2018: £811,000).
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 in an annual increase in the share based payment
charge of £343,000 (2018: £211,000).
106
Annual Report and Accounts for the year ended 30 June 2019 28 Cash Generated from Operations
Cash generated from continuing operations
Profit before income tax
Depreciation charge
Depreciation of investment property
Amortisation of intangibles
Profit on disposal of property, plant and equipment
Profit on disposal of investment property
Net finance income
Retirement benefit contributions in excess of current
and past service charge
Impairment of equity accounted investments
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
Total cash generated from operations
Group
Company
2019
£’000
19,569
2,508
58
2,456
(2,116)
–
(3)
(183)
–
855
(292)
(48)
(4,025)
2,428
3,831
25,038
2018
£’000
19,567
2,136
59
2,400
(125)
–
(101)
(156)
–
533
(237)
163
1,954
(3,610)
1,415
23,998
2019
£’000
17,544
1,574
254
1,462
(137)
(1,942)
(5,650)
(183)
32
855
(215)
(30)
(4,230)
1,426
4,700
15,460
2018
£’000
16,762
1,374
266
1,535
(104)
–
(5,046)
(156)
–
535
(188)
71
471
464
674
16,658
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
Company
2019
£’000
918
2018
£’000
234
2019
£’000
635
2018
£’000
154
(b) Operating lease commitments
The Group leases premises under non-cancellable operating lease agreements. The lease terms are between one and ten years
(2018: one and ten 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
Land and
buildings
2019
£’000
311
1,061
293
1,665
Land and
buildings
2019
£’000
4
–
–
4
Other
2019
£’000
264
316
–
580
Other
2019
£’000
3
–
–
3
Total
2019
£’000
575
1,377
293
2,245
Total
2019
£’000
7
–
–
7
Land and
buildings
2018
£’000
262
765
463
1,490
Land and
buildings
2018
£’000
4
–
–
4
Other
2018
£’000
244
309
–
553
Other
2018
£’000
4
4
–
8
Total
2018
£’000
506
1,074
463
2,043
Total
2018
£’000
8
4
–
12
107
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials
Notes to the Financial Statements continued
For the year ended 30 June 2019
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 £4,070,000 (2018: £4,209,000) of fixed rate listed investments included
in financial assets at fair value through other comprehensive income 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 2019
Assets as per statement of financial position
Loans and receivables
Financial assets at fair value through other comprehensive income
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 2018
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
Financial
assets at
amortised
cost
£’000
Financial assets
at fair value
through other
comprehensive
income
£’000
3,567
–
–
20,161
26,483
30,807
81,018
–
3,683
–
–
–
–
3,683
Loans and
receivables
£’000
Available-
for-sale
£’000
6,139
–
–
21,915
15,290
28,668
72,012
–
3,820
–
–
–
–
3,820
Financial
assets at
fair value
through
the profit
and loss
£’000
–
–
387
–
–
–
387
Assets at
fair value
through
the profit
and loss
£’000
–
–
389
–
–
–
389
Total
£’000
3,567
3,683
387
20,161
26,483
30,807
85,088
Total
£’000
6,139
3,820
389
21,915
15,290
28,668
76,221
108
Annual Report and Accounts for the year ended 30 June 2019 30 Financial Instruments by Category continued
Company
30 June 2019
Assets as per statement of financial position
Loans and receivables
Financial assets at fair value through other comprehensive income
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 2018
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
The above analysis excludes prepayments.
Liabilities as per statement of financial position
Trade and other payables (excluding statutory liabilities)
Post employment benefits
Deferred consideration
Financial liabilities are measured at amortised cost.
Financial
assets at
amortised
cost
£’000
Financial assets
at fair value
through other
comprehensive
income
£’000
12,115
–
–
19,559
26,483
24,771
82,928
–
3,683
–
–
–
–
3,683
Loans and
receivables
£’000
Available-
for-sale
£’000
13,482
–
–
20,741
15,290
24,333
73,846
–
3,820
–
–
–
–
3,820
Financial
assets at
fair value
through
the profit
and loss
£’000
–
–
387
–
–
–
387
Assets at
fair value
through
the profit
and loss
£’000
–
–
389
–
–
–
389
Group
Company
30 June
2019
£’000
19,634
47
12,757
30 June
2018
£’000
17,029
34
10,295
30 June
2019
£’000
16,625
–
10,242
Total
£’000
12,115
3,683
387
19,559
26,483
24,771
86,998
Total
£’000
13,482
3,820
389
20,741
15,290
24,333
78,055
30 June
2018
£’000
13,182
–
7,958
Contractual cash flows relating to current financial liabilities are all due within one year, and are equal to their carrying value.
Non-current financial liabilities consist of an interest bearing loan included in non-current other payables (deferred consideration),
of which the principal amount of €2.4m (£2.1m) is due for repayment in 2021. Interest is contractually due to be paid annually until
maturity, and is estimated at current rates to be €119,000 (£107,000) per year. Furthermore liabilities arising to repurchase share
appreciation rights are non-interest bearing and expected to be repaid in 2021.
The Group and Company did not have derivative financial instruments at 30 June 2019 or 30 June 2018. All assets and liabilities
above are considered to be at fair value.
109
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements continued
For the year ended 30 June 2019
31 Related Party Transactions
The following amounts relate to transactions between the Company and its related undertakings:
2019
Philip Payne Limited
Solite Europe Limited
Portland Lighting Limited
TRT Lighting Limited
Thorlux Lighting L.L.C.
Lightronics Participaties B.V.
Thorlux Australasia PTY Limited
Thorlux Lighting GmbH
Famostar Emergency Lighting B.V.
2018
Compact Lighting Limited
Philip Payne Limited
Solite Europe Limited
Portland Lighting Limited
TRT Lighting Limited
Thorlux Lighting L.L.C.
Lightronics Participaties B.V.
Thorlux Australasia PTY Limited
Thorlux Lighting GmbH
Famostar Emergency Lighting B.V.
Purchases
of goods
£’000
790
722
1
1,271
–
183
–
–
–
Purchases
of goods
£’000
2,126
790
485
6
1,057
–
161
–
–
–
Sales
of goods
£’000
177
394
–
1,342
654
466
519
–
–
Sales
of goods
£’000
30
166
291
10
1,193
1,043
168
1,023
–
–
Sales
of services
£’000
80
178
26
192
–
–
–
–
–
Sales
of services
£’000
131
84
176
24
259
–
–
–
–
–
Purchase
of services
£’000
–
–
–
10
–
–
–
–
–
Purchase
of services
£’000
–
3
–
–
–
–
–
–
277
–
Dividends
paid to
Company
£’000
500
500
850
–
–
2,330
–
–
–
Dividends
paid to
Company
£’000
–
600
250
1,000
–
–
2,130
–
–
–
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 L.L.C.
Lightronics Participaties B.V.
Thorlux Australasia PTY Limited
Thorlux Lighting GmbH
Famostar Emergency Lighting B.V.
Total
Amounts due to
related party at 30 June
Amounts due from
related party at 30 June
2019
£’000
–
(1,021)
(1,034)
(902)
(278)
–
(22)
–
(123)
–
(3,380)
2018
£’000
(55)
(878)
(935)
(1,127)
(132)
–
(16)
–
(233)
–
(3,376)
2019
£’000
–
39
78
8
1,474
305
4,191
1,480
–
40
7,615
2018
£’000
–
27
45
10
2,115
789
3,128
1,748
–
–
7,862
Trading balances arise from transactions of goods and services carried out under normal commercial terms. The Company has loan
balances due from Lightronics Participaties B.V. of €8,493,000 (£7,611,000) (2018: €8,181,000 (£7,242,00) and Thorlux Lighting L.L.C.
£937,000 (2018: £100,000). The Company has made provisions for receivables due from Thorlux Australasia PTY Limited of £418,000
and £483,000 due from Thorlux Lighting L.L.C. following the adoption of IFRS 9.
110
Annual Report and Accounts for the year ended 30 June 2019 31 Related Party Transactions continued
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 52 to 55. There are 3 employees who are related parties (2018: 4). Total remuneration for the year was £87,000 (2018: £77,000).
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 £6,000 (2018: £28,000), purchased goods and services amounting to £288,000 (2018: £65,000),
and sold services of £nil (2018: £nil). At the year end there were trade balances due to Luxintec S.L. of £69,000 (2018: £1,000) and
£190 due from Luxintec S.L. (2018: £1,000).
32 Group Companies
The parent Company has the following investments as at 30 June 2019 and 30 June 2018:
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.
Thorlux Lighting GmbH
Thorlux Australasia PTY Limited
Thorlux Lighting L.L.C.
Famostar Emergency Lighting B.V.
(investment held by Lightronics Participaties B.V.)
Luxintec S.L.
Country of
incorporation
England
England
England
England
England
Netherlands
Netherlands
Germany
Australia
Description of
shares held
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
Proportion of nominal value
of issued shares held by
Group and Company
30 June
2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
49%
30 June
2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
49%
Netherlands
Spain
Ordinary €100 shares
Ordinary €1 shares
100%
40%
100%
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.
Thorlux Lighting GmbH
Thorlux Australasia PTY Limited
Thorlux Lighting L.L.C.
Famostar Emergency Lighting B.V.
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
Florijnweg 8 6883JP Velp, Netherlands
Polígono Industrial La Encomienda, C/ Atlas 12-14, 47195 Arroyo de la Encomienda,
Valladolid, Spain
111
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Notes to the Financial Statements continued
For the year ended 30 June 2019
32 Group Companies continued
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.
Thorlux Lighting GmbH
Thorlux Australasia PTY Limited
Thorlux Lighting L.L.C.
Famostar Emergency Lighting B.V.
Luxintec S.L.
– non-trading entity
– 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
– sales support function
– sale of lighting equipment to industrial and commercial markets
– sale of lighting equipment to industrial and commercial markets
– design and manufacture of illuminated signs
– design and manufacture of LED luminaires and lenses
For the year ended 30 June 2019, Compact Lighting Limited, is exempt from the requirements of the Companies Act 2006 relating to
the audit of individual financial statements by virtue of section 479A. As a result, the Group guarantees all outstanding liabilities to
which the subsidiary company is subject. The Company registration number for Compact Lighting Limited is 02649528.
33 Events after the Statement of Financial Position date
Subsequent to the date of the statement of financial position date and before the approval of these financial statements the Group
purchased the property occupied by Famostar Emergency Lighting B.V. for €2,547,000 (£2,283,000) in the Netherlands.
112
Pictured right: Coventry University, Coventry
Annual Report and Accounts for the year ended 30 June 2019 113
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials 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 19 November
2019 (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 19 November 2019
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.
Notice of Meeting
Notice is hereby given that the Annual General Meeting of
FW Thorpe Plc will be held at Merse Road, North Moons Moat,
Redditch, Worcestershire, B98 9HH on 21 November 2019 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 2019.
2. To declare a final dividend.
3. To re-elect Mr I A Thorpe as a director.
4. To re-elect Mr D Taylor as a director.
5. To re-elect Mr J E Thorpe as a director.
6.
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. That the directors’ remuneration report (as set out on pages
52 to 55 of the Annual Report and Accounts) for the year
ended 30 June 2019 be approved.
8. 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
c.
is 1p;
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;
e.
d. the authority hereby conferred shall expire on the date
of the Annual General Meeting of the Company in 2020;
and
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.
114
Annual Report and Accounts for the year ended 30 June 2019 7.
8.
As at 18 October 2019 (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 2,774,932 shares held in treasury, the
total voting rights in the Company as at 18 October 2019 are
116,160,658.
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
Joint Chief Executive, Group Financial
Director and Company Secretary
Registered Office:
Merse Road
North Moons Moat
Redditch
Worcestershire
B98 9HH
18 October 2019
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 19 November 2019 (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).
115
Business OverviewOur GovernanceStock Code: TFW www. fwthorpe.co.ukStrategic ReportOur Financials Financial Calendar
2019
24 October
Posting of the Annual Report and Accounts
21 November
Annual General Meeting
29 November
Payment of final dividend
2020
March
April
Announcement of interim results
Payment of interim dividend
September
Announcement of results for the year
116
Annual Report and Accounts for the year ended 30 June 2019
Merse Road
North Moons Moat
Redditch
Worcestershire
B98 9HH
England
Tel: + 44 (0)1527 583200
Fax: + 44 (0)1527 584177
www.fwthorpe.co.uk
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