18 May 2020
By Maynard Paton
Results summary for FW Thorpe (TFW):
- Acceptable 7-9% first-half growth, although profitability has essentially stalled for the last 2-3 years as the LED mini-boom subsides.
- A 2% dividend lift, net cash and investments of £47m, a “strong” order book plus an outstanding response to government assistance do not imply immediate Covid-19 problems.
- However, trading is not perfect, as margins at the largest division continue to decline while overseas cross-selling progress remains slow and small.
- The SmartScan light-monitoring system could be a ‘hidden gem’, with sales up 50% last year to represent 20% of total revenue.
- A P/E of 22-25 feels warm, but may reflect the ‘pandemic-proof’ balance sheet, SmartScan potential and/or resilient profit history. I continue to hold.