TLG delivers on promises: The Investment Column

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The Independent Online
TLG, the buyout of Thorn's lighting equipment operation, has delivered on its promises since its flotation at 115p in November 1994. Sold on the back of a strong UK market for lighting products, it has continued to prosper against the background of enduring recession in the rest of Europe.

Yesterday, in its first full set of results since its stock market debut, TLG announced pre-tax profits up 50 per cent to pounds 28.6m for the year to March. Interest charges cut from pounds 6.7m to pounds 900,000 as a result of the repayment of huge buyout borrowings following the float was the main propellant behind the figures. More illuminating of the underlying picture was the 11 per cent rise in pre-exceptional operating profits to pounds 29.5m.

That was an impressive performance given a halving of the rate of growth in the UK lighting market last year, a reversal from 3 per cent growth to a near 4 per cent fall in France and another 7 per cent slump in Germany. TLG has won market share without apparently conceding margin - gross return on sales held at 30.7 per cent.

Continued attention to production efficiency and new products are part of the group's secret of success. But while there is plenty to go for in western Europe, the real excitement lies elsewhere. Sales in Hong Kong and into China jumped 30 per cent last year, earning margins of 9 per cent compared with 7.8 per cent for the group. Yesterday's pounds 2m buyout of the rest of the DNT Europhane associate in Australia will help cement TLG's leading position in airport lighting in the Far East. Meanwhile continued expansion in eastern Europe, growing at double the rate of the UK offers interesting prospects closer to home. A new pounds 65m loan facility also raises the prospect of chunkier acquisitions than hitherto.

Profits of pounds 31.5m would put the shares, down 3.5p to 160p, on a forward multiple of 14. Good value.