FW Thorpe profits as challenges mount

Ahead of its full-year figures, FW Thorpe (TFW) announced that it had broadened its commercial offering through a deal to acquire Spain-based Electrozemper SA, a specialist in emergency lighting, for €20.3m (£17.3m), plus €1.1m in contingent fees. The deal is expected to be earnings-enhancing through to the 2022 year-end, “providing potential growth opportunities and synergies”.

The Worcestershire-based lighting group delivered a 17.7 per cent increase in adjusted operating profit for its June year-end, achieved despite operational problems and periodic disruption to its end markets. A reduced pool of labour and initial logistical delays due to Brexit, along with global supply-chain issues and the pandemic, all hampered performance, though the group exited FY 2021 with an order book that exceeded expectations.

Thorlux Lighting was the standout performer, both in terms of new orders and sales growth. However, it has been operating longer lead times than normal, as suppliers have often been unable to give reliable delivery dates “even for goods planned months in advance”.

The group has also struggled to keep stock levels at an optimal level due to the global components shortage, with the corollary of rising costs providing another drag on profitability. If all that wasn’t enough, in Sept. 2020, the group’s Lightronics business had to contend with a fire at its facility in the Netherlands, resulting in insurance claims of £1.6m.

Certainly, an admirable operating performance despite mounting adversity; a positive sign assuming the worst of the disruption is behind it. At any rate, you may find it difficult to get on board given the extent of insider and institutional ownership. Hold.

Last IC View: Hold, 300p, 24 Sep 2018