FW Thorpe Plc Annual Report 2005

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FY2005 Annual Report · FW Thorpe Plc

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F W Thorpe Plc

Designers, manufacturers
and suppliers of professional
lighting systems

Annual Report
and Accounts 2005

INDUSTRIAL (cid:2) COMMERCIAL (cid:2) ARCHITECTURAL (cid:2)

ILLUMINATED SIGNS (cid:2) EMERGENCY (cid:2)

LOW ENERGY (cid:2) HERITAGE (cid:2) ENERGY CONSERVING SYSTEMS

F W Thorpe Plc

Professional
Lighting Solutions

Contents
Chairman’s Statement
Directors and Advisers
Report of the Directors
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Consolidated Profit and Loss Account
Consolidated and Company Balance Sheets
Consolidated Cash Flow Statement
Notes to the Accounts
Notice of Meeting
Form of Proxy
Five Year Financial Record
Financial Calendar

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IBC
IBC

“Your Company will continue to
drive forward and continue to try
and please its customers with
service and products”

F W Thorpe Group designs and manufactures a comprehensive range of interior
and exterior lighting, which is produced in the UK and sold throughout the world.
Our quality products enhance the lives of people every day.

The Group management team is passionate about developing the business for the
benefit of shareholders, employees and customers. With the energy and ability of
our staff we look to the future with enthusiasm.

Financial Highlights

Turnover

Operating Profit

Earnings per share

£41.6m

£5.4m

£37.3m

£32.7m

£5.0m

£3.5m

36.9p

33.1p

22.4p

2003

2004

2005

2003

2004

2005

2003

2004

2005

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Chairman’s Statement

“Trading has remained encouraging
for the year as a whole”

In the financial year to 30 June 2005 your Company
produced a turnover of £41.6m, an increase of 12% on
last year’s turnover of £37.2m, with a resulting operating
profit before exceptional items of £5.8m being a 16%
increase on the previous year’s £5.0m. The operating profit
for the Group was £5.4m after accounting for exceptional
costs at Sugg Lighting, an increase of 8% over the
previous year. Investment income rose by 29% arising
from the investment of cash generated from operations
during the year and resulting in a profit before tax of
£5.8m, up 9% on last year.

The pattern of trading through the year varied
unexpectedly from previous years, probably due to the
economic effects of the UK national election. These
variations were marked but differently felt by different
Group member companies. Some Group members
experienced a noticeable drop in orders and activity over
the election period whilst others did not or only sustained
mild effects. The effect appeared to be in proportion to
project size with smaller jobs being more easily suspended
over the election period than larger projects, which are
carried forward by their own inertia. These effects have
probably led to some loss of business during the year.
Generally, however, as can be seen and understood from
the Group performance figures, overall trading has
remained encouraging for the year as a whole.

This year there have been no single large investments in
plant, buildings, equipment or systems, but your Company
has continued to invest substantial amounts of money
back into the business in a myriad of smaller projects
involving both manufacturing plant and IT systems. One of
the larger projects has been to strengthen Group IT
infrastructure which, with the increase in business levels in
recent years, had been left lacking in both capacity and
speed of operation. We now enjoy the benefits of the
improved IT capability which in itself will allow us to
develop and upgrade our operational system software.

The Company has, as usual, derived the majority of its
business from within the UK but this result should not
cloud the determination expressed last year to increase
the proportion of business obtained from overseas mature

markets especially within the EU. Group exports this year
were 14% of total turnover, an increase of 17% on the last
financial year.

At the halfway stage I made some comment in regard to
mixed performance within the Group and whilst in
hindsight some of that performance may well have been
due to the effects of the election period, reviews prompted
in certain areas of the business have, in themselves, been
very useful; for example, in bringing Thorlux back to the
high level of productivity previously enjoyed but which had
been reducing due to the pressure of rapid output growth
in very recent years. These reviews also helped in
refocusing product direction at Mackwell Electronics and
crystallising a new forward plan for Sugg Lighting.

The above results have prompted your Board to
recommend a final dividend of 7.5p which, taken with the
already paid interim dividend, makes a total for the year of
10.0p being a 16% increase compared to last year.

Review of Divisions
Thorlux Lighting
Thorlux, the Group’s manufacturer of commercial, flood
and industrial lighting products and systems, has again
enjoyed buoyant trading throughout the year and, with a
“close eye” on operations, Thorlux has returned a turnover
up 16% on 2004 resulting in an operating profit up 26%
over that period. Few new products were introduced
during this financial year but a high proportion of sales
emanated from those new products added within the very
recent years. Product design, however, continued apace
so that 2005/6 will see further exciting new products
added to the Thorlux portfolio. On the “heaviest end” the
Thorlux tunnel luminaire range and its associated remote
control systems have enjoyed further success with new
tunnel lighting projects having been gained within the UK.

On the export front, whilst Thorlux sales to traditional
export markets via a traditional agency network have been
maintaining in value, the proportion of total turnover has
continued to decline. The wish to carve out a substantial
market under the trade name Thorlux in the sophisticated
EU area remains, and the Company’s spearhead Munich-

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Chairman’s Statement

based operation in Germany has enjoyed an encouraging
year giving the confidence to double the staff to two. The
root foundations, as mentioned last year, have been laid
and the current mission is to find quality customers who
are willing to try products from the “new kid on the block”.
On the same theme Thorlux will also be reverting to
Company employed staff to cover the Republic of Ireland.

Mackwell Electronics
Mackwell, the Group’s manufacturer of electronic
emergency lighting control gear and systems, undertook a
product review during the year and subsequently withdrew
from one area of business that showed little future profit
potential and one that would require substantial investment
but which could well fall prey to high volume competition
from the Far East. These actions caused a loss of turnover
and some profit but I am pleased to report that virtually all
of the vacated capacity has been taken up reducing lead
times and improving service to existing customers and for
the manufacture of a new emergency lighting system.
Despite these events, Mackwell’s turnover ended the year
up 7% with a profit up 6% over last year.

Compact Lighting
Compact Lighting, supplier of display lighting to the retail
trade, enjoyed a busy year with mixed success, producing
a turnover up 15% on last year but with a 26% reduction
in profit level. Certain well-known High Street names on
Compact’s client list delayed refurbishment programmes
due to uncertainty in the retail market and although new
customers were gained, some of the new business proved
more difficult than expected.

Philip Payne
Philip Payne, the Group’s manufacturer of quality specialist
and bespoke exit signage, has enjoyed a mixed trading
year with a patch of poor business over the election
period, although it is difficult to understand why this
occurred in the case of Philip Payne. Opportunity was
taken, however, during that time to reappraise the
Company structure and instigate changes to enable future
growth. This appraisal resulted in strengthening human
resources from fourteen to seventeen people and Payne is
now well set to resume growth well beyond current levels.

The result of this unusual pattern of trading and the
reappraisal left Philip Payne some 6% down on turnover
and 24% down on profit. Profit to sales ratio was still
perfectly respectable and I am pleased to report that at,
this time, trading at Payne’s is back to, if not in excess of,
previous levels.

Sugg Lighting
Sugg Lighting, manufacturer and refurbisher of heritage
lighting, suffered a severe downturn in business for some
five months over the election period which caused an
unfortunate return to losses after a period of five months of
profitability. Sales order input has now returned to that of
last year’s levels but the increase in sales required to put
Sugg on a firm footing is still elusive. Your Board is
currently considering a number of options.

People
It has been said that a business runs on its people. Well,
a short number of years ago the Company found it very
difficult to recruit people at all. Over the last year or so, a
fresh wind has been blowing from the direction of Central
Europe bringing with it many of our current workforce. It is
rewarding to find people who want to work and accept our
offer of jobs. To these new arrivals and to our more long-
standing employees may I, again, offer our thanks for their
loyalty and diligence over the last year.

The Future
The cautionary tune mentioned in earshot last year did not
bring great tides of woe. However, some of the words of
the song still hang in the air and those involving house
prices, retail sales, pressures on government budgets
seem to give more concern now than twelve months ago.
I must say again, therefore, that your Company will
continue to drive forward, continue to try and please its
customers with service and products and we must still
trust that our markets will stay fair.

Andrew Thorpe
Chairman
20 September 2005

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Directors and Advisers

Directors
A B Thorpe
Chairman and Joint Chief Executive

P D Mason BSc Eng FCA MIEE
Financial Director and Joint Chief Executive

M Allcock FIEE
Technical Director and
Managing Director of Thorlux Lighting

D A Dimeloe BSc PhD
Managing Director of Mackwell Electronics

D M Lippold BSc ACA
Managing Director of Compact Lighting

Auditors
PricewaterhouseCoopers LLP, Cornwall Court,
19 Cornwall Street, Birmingham, B3 2DT

Bankers
Lloyds TSB, Church Green East,
Redditch, Worcestershire, B98 8BZ

Solicitors
Martineau Johnson, No 1 Colmore Square
Birmingham, B4 6AA

Registrars
Lloyds TSB Registrars, The Causeway, Goring-by-Sea,
Worthing, West Sussex, BN99 6DA

C M Brangwin BSc CEng MIEE (aged 67)
Non-executive Director
After joining the Company in 1963, he was appointed a
Director in 1969, later as joint Managing Director and in
1995 was appointed Chairman. He became non-executive
Chairman in 2000, resigning from this role on 30 June
2003.

I A Thorpe (aged 59)
Non-executive Director
Manufacturing Director of Thorlux Lighting from 1978 until
1993 when he became Personnel Director. He became a
non-executive Director on 1 October 1997.

Secretary
P D Mason BSc Eng FCA MIEE

Registered Office
Merse Road, North Moons Moat,
Redditch, Worcestershire, B98 9HH

Registered No.
317886

Web Sites
www.thorlux.com
www.thorlux.de
www.mackwell.co.uk
www.compact-lighting.co.uk
www.p-payne.co.uk
www.sugglighting.co.uk

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Report of the Directors

The Directors have pleasure in submitting their annual
report and the audited accounts of the Group for the year
ended 30 June 2005.

Principal activity and business review
The main activity of the Group continues to be the
manufacture of industrial and commercial lighting
equipment. A review of the business is included in the
Chairman’s Statement on page 2.

Results and dividends
The results for the year are set out in detail on page 16.

On 10 May 2005 the Company paid an interim dividend of
2.5p per share (2004: 2.2p). A final dividend of 7.5p (2004:
6.4p) per ordinary share is proposed and, if approved, will
be paid on 17 November 2005.

Directors
The Directors of the Company at the date of this report are
set out on page 4.

The Directors retiring by rotation are I A Thorpe and P D
Mason who, being eligible, offer themselves for re-election.
The contract for P D Mason is terminable on three years’
notice. I A Thorpe does not have a service contract.

Directors’ share interests
The details of the Directors’ share interests are set out in
the Directors’ Remuneration Report on pages 9 to 13.

Substantial shareholdings
At 13 October 2005 the Company had received
notification of the following interests in 3 per cent or more
of the issued share capital, excluding holdings of Directors:

Rights and Issues Trust Plc
E G Thorpe

500,000 shares
661,530 shares

(4.2 per cent)
(5.6 per cent)

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.

Fixed assets

The Directors are of the opinion that the market value of
the freehold land and buildings cannot be reliably
estimated to be significantly different to the net book value.

Charitable gifts

During the year the Group gave £2,260 (2004: £1,972) for
charitable purposes. The Company allocates an annual
amount for charitable giving which is based on the
previous year’s profitability, and is considered appropriate
in order to help foster its business relationships including
those with its customers, suppliers, employees and the
local community. The Company made one donation over
£200 during the year. This donation was made to support
the work of the Engineering Education Scheme which
aims to give young people invaluable experience and
insight into the world of engineering. This donation is
consistent with the charitable giving policy.

Creditor payment policy

The Group’s policy concerning the payment of its trade
creditors is to accept and follow the normal terms of payment
amongst 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 and the Group’s year end trade creditors is
42 and 49 respectively (2004: 50 and 53).

Employee policies

Employees are kept informed of matters of concern to
them as employees by publication and distribution of a
Company newsletter and other notices, or by specially
convened meetings.

Committees representing the different groups of
employees meet regularly to ensure the views of
employees are taken into account in making decisions that
are likely to affect their interests.

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Report of the Directors

The involvement of employees in the Group’s performance
is encouraged by various incentive schemes including a
profit-related bonus scheme.

Information on the financial and economic factors affecting
the performance of the Group is made available twice
yearly at the time of publication of the interim and annual
statements to shareholders.

The Group is committed to developing a safe and healthy
working environment for all employees consistent with the
requirements of the Health and Safety at Work Act. Within
the constraints of health and safety, disabled people are
given full and fair consideration for job vacancies.
Depending on their skills and abilities, disabled people
enjoy the same career prospects as other employees, and
if employees become disabled every effort is made to
ensure their continued employment, with appropriate
training where necessary.

Policies for recruiting employees are designed to ensure
equal opportunities irrespective of colour, ethnic or national
origin, nationality, sex or marital status.

Auditors

A resolution to reappoint PricewaterhouseCoopers LLP as
auditors to the Company will be proposed at the annual
general meeting.

Directors’ Authority to Issue Shares

The UK Listing Authority no longer requires the consent of
shareholders to each issue by the Company of equity
share capital for cash made otherwise than to existing
shareholders in proportion to their existing shareholdings.
This relaxation is subject to the Company obtaining the
authority of shareholders under Section 95 of the
Companies Act 1985 to disapply generally the provisions
of Section 89 of that Act. Ordinary resolution number 7
and special resolution number 8 would give the Directors
the authority to allot ordinary shares up to an aggregate
nominal amount of £312,912, and would further empower
them to allot ordinary shares for cash up to a maximum of
£59,390 (representing 5% of the issued equity share

capital of the Company) other than pro rata to existing
members as if section 89(1) of the Companies Act did not
apply. These authorities, if approved, would expire at the
conclusion of the next Annual General Meeting, save that
the authority relating to Section 89(1) would expire 15
months after being passed, if earlier.

Purchase of Own Shares

Resolution 9 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 London Stock Exchange 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 1,183,888 ordinary
shares representing 10% of the Company’s issued ordinary
share capital and a nominal value of £118,781 at
13 October 2005. The minimum price per ordinary share
payable by the Company (exclusive of expenses) will be
10p. 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 London Stock Exchange Daily Official List for the
five business days immediately preceding the date of each
purchase. Any shares purchased by the Company will be
cancelled and the number of shares in issue will be
reduced accordingly. 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 2006. However, in order to

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Report of the Directors

maintain the Board’s flexibility of action it is envisaged that it
will be renewed at future Annual General Meetings.

Corporate governance

The listing rules of the UK Listing Authority require listed
companies to explain how they have applied the principles
of the code of practice known as the Combined Code.
This statement explains how the Company has applied the
principles set out in Section 1 of the Combined Code.

The Directors have examined carefully how far the current
practice of the Company conforms with the
recommendations made in the Combined Code and fully
endorse the principles of openness, integrity and
accountability of the Code. The Directors consider the
Company to be compliant with the principles of best
practice with the exception of the matters listed below.

The Board does not have an independent audit
committee.

At least half the Board does not comprise independent
non-executive Directors and the Board has not
appointed a senior independent Director.

The terminable period of the service contracts for A B
Thorpe and P D Mason exceeds one year.

The pensionable salary includes benefits in kind and/or
profit bonus for those Directors who are members of
the defined benefit scheme.

The Board has combined the roles of Joint Chief
Executive and Chairman.

audit and nomination committees, as recommended by
the Code, 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:

C M Brangwin
Non-executive Director and Chairman of the committee

I A Thorpe
Non-executive Director

Terms and conditions for the operation of this committee
are in place and it meets as and when required. The
committee’s report is presented on pages 9 to 13.

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.

Nomination committees are formed when it is felt to be
appropriate for senior personnel and subsidiary Board
appointments. Any appointment to a Group Board position
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.

Relations with shareholders

The Directors believe that the exceptions, which are more
fully explained in the sections relating to the Board
constitution and the Directors’ remuneration report, are
appropriate for the size and context of the Group’s business.

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.

Board constitution

Internal control

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

The Board of Directors has overall responsibility for the
system of internal control and for reviewing its
effectiveness throughout the Group. The internal controls
systems are designed to meet the Group’s particular

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Report of the Directors

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.

Internal financial control
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.

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
non-compliance has been reported to the Group Board.
Significant 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 budgets, rolling
forecasts and monthly financial reports comparing
performance against plan. These reports are reviewed
locally with a Group representative and monitored by the
Group Board. Accordingly, the Directors do not consider
that an internal audit department is required.

Other areas of control
The Combined Code introduced a requirement that
Directors review the effectiveness of the Group’s systems
of internal controls on an annual basis. This requirement
extends the Directors’ review to cover all controls,
including operational, compliance and risk management as
well as financial.

During the year and continuing after the year end the Board
has operated a formal risk identification and evaluation
programme as part of a continuous review of the Group’s
internal controls. This programme 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.

Adoption of International
Financial Reporting Standards

Under present regulation, the Company is required to
adopt International Financial Reporting Standards for the
financial year ending 30 June 2006. A preliminary review
has shown that the major impact of the first time adoption
of the new accounting standards will arise from the
introduction of IAS 19 relating to pension costs. The
current effects of adoption of FRS 17 relating to pension
costs are disclosed in note 24.

Going concern

The Directors confirm that they are satisfied that the Group
has adequate resources to continue in business for the
foreseeable future, and for this reason, they continue to
adopt the going concern basis in preparing the accounts.

By order of the Board

P D Mason
Company Secretary
13 October 2005

Registered Office:
Merse Road
North Moons Moat
Redditch
Worcestershire
B98 9HH

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Directors’ Remuneration Report

The Board has prepared this report to the shareholders, taking into account the provisions in Schedule B of the Combined
Code on Corporate Governance and Directors’ Remuneration Report Regulations 2002. 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 condition of
employment.

Remuneration committee
The current members of the remuneration committee are the non-executive Directors, C M Brangwin (Chairman of the
committee) and I A Thorpe. The committee has met as and when required during the financial year. No member of the
committee has any personal financial interest in the matters to be decided other than as shareholders. There are no
conflicts of interest arising from cross-directorships or day-to-day involvement in running the business. The committee has
access to market data provided by Monks Partnership 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. The performance related
remuneration is linked to both short-term and long-term goals.

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. Share options. There are currently two executive share option schemes, and options were granted to Directors on

6 May 1999 — the majority of which are provided as part of an Inland Revenue approved scheme. Both schemes allow
the executives to participate in share price growth and are normally exercisable between 3 and 10 years after grant
provided certain performance criteria are met.

Remuneration policy — non-executive Directors
The Board as 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 or participate in the executive share option scheme. Their benefits in kind consist of the provision of health
insurance.

Directors’ service contracts
The policy for Directors’ service contracts is to follow the Code for new appointments. However, for contracts in existence
prior to the date the Code became effective no amendment is expected to be made in view of the predicted service lives of
the people concerned. D A Dimeloe, D M Lippold and M Allcock have service contracts terminable on one year’s notice.

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Directors’ Remuneration Report

P D Mason and A B Thorpe have service contracts renewed annually in March, which are terminable on three years’ notice
immediately after renewal and two years’ notice one year later when the contracts are considered for renewal. These
contracts do not comply with the Code because they are in excess of one year. C M Brangwin and I A Thorpe do not have
service contracts with the Company.

Performance graph
The graph below shows the comparative data for the FTSE all share index and the FTSE electronic and electrical
equipment sector as these are considered to be the most appropriate comparative indices for the Company’s business.

e
c
i
r
P

400.0

350.0

300.0

250.0

200.0

150.0

100.0

50.0

F W Thorpe Plc

FTSE All Share Index

FTEE Share Index

June 00

June 01

June 02

June 03

June 04

June 05

Audited information
The audited information relating to Directors’ emoluments is set out below.

Directors’ emoluments

Executive Directors
A B Thorpe
P D Mason
M Allcock
D A Dimeloe
D M Lippold
Non-executive Directors
C M Brangwin
I A Thorpe

Total

2005
Salary/
fees
£’000

151
142
81
90
72

26
28

590

2005

2004

Bonus
£’000

Benefits
£’000

Total
£’000

48
48
37
55
16

—
—

204

14
14
11
11
10

3
2

213
204
129
156
98

29
30

859

162
153
116
147
98

28
30

734

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Benefits consist mainly of the provision of cars and fuel, or cash equivalent, and health insurance. The bonus for D A
Dimeloe includes a contribution of £27,000 to the pension scheme.

Directors’ Remuneration Report

Directors’ pension arrangements

A B Thorpe, P D Mason and I A Thorpe participate in the defined benefit section of the F W Thorpe Retirement Benefits
Scheme. M Allcock, D A Dimeloe and D M Lippold are members of the defined contribution section of the scheme.
M Allcock has a final salary guarantee as he was previously a member of the defined benefit section. C M Brangwin is a
retired member of the defined benefit section.

The F W Thorpe Retirement Benefits Scheme is a funded, Inland Revenue 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. Pensionable salary for P D Mason, A B Thorpe and I A
Thorpe includes profit bonus and benefits calculated on the average of the previous three years. M Allcock’s pensionable
salary includes an average of the previous three years’ profit bonus. These definitions do not comply with the Code;
however, the committee believes that they are appropriate when looking at the remuneration package as a whole. Defined
contribution members contribute up to 5% of basic salary and the Company contributes up to 14%.

All the executive Directors are covered by life assurance benefit of 4 times pensionable salary. In addition, the defined
benefit scheme members are entitled to a spouse’s pension on death.

The following Directors had accrued entitlements under the defined benefit section of the pension scheme.

Additional

Pension

Transfer

value of

Change

earned

additional

in value

in excess

pension

Increase in

transfer

Value of

of accrued

of inflation

(net of

Transfer

value over

Accrued

Director’s

pension

over

inflation)

value of

the year

Pensions at contributions

since

the year

less

pension at

net of

Normal

30 June

during

30 June

ended

Director’s

30 June

Director’s

Age at

pension

year end

55
56
37
59

age

60
60
65
60

2005

£pa

75,654
63,570
16,878
36,933

the year

6,690
6,740
4,455
—

2004

£pa

4,716
5,851
3,102
—

A B Thorpe
P D Mason
M Allcock
I A Thorpe

2005

2,517
4,062
2,675
—

30 June contributions

2005

2004 contributions

30,164 1,127,414 934,180 186,544
55,556 993,977 794,785 192,452
7,176
— 845,622 708,011 137,611

42,298

30,667

1,945

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Directors’ Remuneration Report

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.

D A Dimeloe
D M Lippold

2005
£

12,238
5,600

2004
£

11,480
5,304

Directors’ shareholdings
The Directors listed below were in office throughout the whole of the year. Directors’ interests in the share capital of the
Company at 30 June 2005 and 1 July 2004 were as follows:

A B Thorpe
P D Mason
M Allcock
D A Dimeloe
D M Lippold
C M Brangwin
I A Thorpe

Ordinary shares of 10p
Beneficial

2005

2004

2,785,009
171,978
12,700
11,189
16,400
773,155
2,504,712

2,785,009
171,978
7,900
7,189
1,400
773,155
2,504,712

In addition, C M Brangwin has a joint non-beneficial interest in 170,000 shares.

D M Lippold sold 4,500 shares on 20 September 2005, M Allcock sold 5,000 shares on 21 September 2005 and
D Dimeloe sold 3,000 shares on 23 September 2005.

Directors’ share options
Details of the share options at 30 June 2005 are as follows:

30 June
2004

Exercised
during year

Lapsed
during year

At 30 June
2005

Option
price

Date
Exercisable
from

Date
Exercisable
to

30,000
4,359
20,000
30,000
30,000

—
—
8,800
7,500
20,000

—
—
—
—
—

30,000
4,359
11,200
22,500
10,000

117p 7 May 2002 6 May 2009
117p 7 May 2002 6 May 2009
117p 7 May 2002 6 May 2009
117p 7 May 2002 6 May 2009
117p 7 May 2002 6 May 2009

A B Thorpe
P D Mason
M Allcock
D A Dimeloe
D M Lippold

The performance criteria for the exercise of the executive share options require that the growth in the annualised earnings
per share, adjusted to a pre-tax basis must exceed RPI by more than 3% when measured against a basis year. These
criteria have been met.

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Directors’ Remuneration Report

On 21 September 2004 share options were exercised by the Directors as follows:

Director

D A Dimeloe
D M Lippold
M Allcock

The following share options were exercised during September 2005:

Director

D A Dimeloe
M Allcock

Option
price
(pence
per share)

Market
price
(pence
per share)

117p
117p
117p

285p
285p
285p

Option
price
(pence
per share)

Date of
exercise

117p
117p

20 Sept 05
23 Sept 05

Number
of shares

7,500
20,000
8,800

Number
of shares

7,500
11,200

Gain
(£)

12,600
33,600
14,784

Market
price
(pence
per share)

346p
387.5p

The market price of the Company’s shares at the beginning and end of the financial year was 235p and 315p respectively
and the range of market prices during the year was from 225p to 421p.

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 2005 to 13 October 2005.

Approved by the Board and signed on its behalf by:

P D Mason
Company Secretary
13 October 2005

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Statement of Directors’ Responsibilities

Company law requires the Directors to prepare accounts

for each financial year which give a true and fair view of

The Directors confirm that they have complied with the
above requirements in preparing the financial statements.

the state of affairs of the Group and Company and of the

profit or loss of the Group for that period.

In preparing those accounts, the Directors are required to:

select suitable accounting policies and then apply them

consistently;

(cid:2) make judgements and estimates that are reasonable

and prudent;

state whether applicable accounting standards have

been followed, subject to any material departures

disclosed and explained in the accounts;

The Directors are responsible for keeping proper
accounting records that disclose with reasonable accuracy
at any time the financial position of the Company and the
Group and to enable them to ensure that the accounts
comply with the Companies Act 1985. They are also
responsible for safeguarding the assets of the Company
and the Group and hence for taking reasonable steps for
the prevention and detection of fraud and other
irregularities.

prepare the financial statements on the going concern

basis unless it is inappropriate to presume that the

Company and Group will continue in business:

P D Mason
Company Secretary
13 October 2005

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(cid:2)
(cid:2)
(cid:2)
Independent Auditor’s Report

We have audited the financial statements which comprise
the profit and loss account, the balance sheet, the cash
flow statement, and the related notes. We have also
audited the disclosures required by Part 3 of Schedule 7A
to the Companies Act 1985 contained in the Directors’
remuneration report (“the auditable part”).

Respective responsibilities of Directors and auditors
The Directors’ responsibilities for preparing the annual
report and the financial statements in accordance with
applicable United Kingdom law and accounting standards
are set out in the statement of Directors’ responsibilities.
The Directors are also responsible for preparing the
Directors’ remuneration report.

Our responsibility is to audit the financial statements and
the auditable part of the Directors’ remuneration report in
accordance with relevant legal and regulatory requirements
and United Kingdom Auditing Standards issued by the
Auditing Practices Board. This report, including the
opinion, has been prepared for and only for the
Company’s members as a body in accordance with
Section 235 of the Companies Act 1985 and for no other
purpose. We do not, in giving this opinion, 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.

We report to you our opinion as to whether the financial
statements give a true and fair view and whether the
financial statements and the auditable part of the Directors’
remuneration report have been properly prepared in
accordance with the Companies Act 1985. We also report
to you if, in our opinion, the Directors’ report is not
consistent with the financial statements, if the Company has
not kept proper accounting records, if we have not received
all the information and explanations we require for our audit,
or if information specified by law regarding Directors’
remuneration and transactions is not disclosed.

We read the other information contained in the annual report
and consider the implications for our report if we become
aware of any apparent misstatements or material
inconsistencies with the financial statements. The other
information comprises only the Directors’ report, the unaudited
part of the Directors’ remuneration report, the chairman’s
statement and the corporate governance statement.

we report if it does not. We are not required to consider
whether the Board’s statements on internal control cover all
risks and controls, or form an opinion on the effectiveness of
the Company’s or the Group’s corporate governance
procedures or its risk and control procedures.

Basis of audit opinion
We conducted our audit in accordance with auditing
standards issued by the Auditing Practices Board. An
audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial
statements and the auditable part of the Directors’
remuneration report. It also includes an assessment of the
significant estimates and judgements made by the
Directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to
the Company’s circumstances, consistently applied and
adequately disclosed.

We planned and performed our audit so as to obtain all
the information and explanations which we considered
necessary in order to provide us with sufficient evidence to
give reasonable assurance that the financial statements
and the auditable part of the Directors’ remuneration
report are free from material misstatement, whether
caused by fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements.

Opinion
In our opinion:

the financial statements give a true and fair view of the
state of the state of affairs of the Company and the
Group at 30 June 2005 and of the profit and cash
flows of the Group for the year then ended;

the financial statements have been properly prepared
in accordance with the Companies Act 1985; and

those parts of the Directors’ remuneration report
required by Part 3 of Schedule 7A to the Companies
Act 1985 have been properly prepared in accordance
with the Companies Act 1985.

We review whether the corporate governance statement
reflects the Company’s compliance with the nine provisions
of the 2003 FRC Combined Code specified for our review
by the Listing Rules of the Financial Services Authority, and

PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Birmingham
13 October 2005

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(cid:2)
(cid:2)
(cid:2)
Consolidated Profit and Loss Account
for the year ended 30 June 2005

Turnover
Cost of sales

Gross profit
Net operating expenses

Operating profit before exceptional items
Exceptional items — Sugg

Operating profit
Interest receivable and similar income

Profit before tax

Taxation on profit on ordinary activities

Profit for the year
Dividends

Retained profit for the year

Earnings per ordinary share
— ordinary

— diluted

Notes

9
9

2005
£’000

41,572
(25,067)

16,505
(11,105)

5,822
(422)

5,400
440

5,840

(1,479)

4,361
(1,187)

3,174

2004
£’000

37,258
(22,878)

14,380
(9,360)

5,020
—

5,020
342

5,362

(1,479)

3,883
(1,014)

2,869

36.9p

36.5p

33.1p

32.5p

All of the above results were from continuing operations.

There is no difference between the result as disclosed in the profit and loss account and the result on a historical
cost basis.

There are no recognised gains or losses other than the results for the period as stated above.

The notes on pages 19 to 32 form part of these accounts.

The report of the auditors is on page 15.

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Consolidated and Company Balance Sheets
as at 30 June 2005

Fixed assets
Tangible assets

Investments

Current assets
Stocks
Debtors
Investments

Cash at bank and in hand

Note

14
15
16

Creditors: amounts falling due within one year

Net current assets

Total assets less current liabilities
Provisions for liabilities and charges

Onerous lease obligation

Deferred taxation

Net assets

Capital and reserves
Called up share capital
Capital Redemption Reserve
Share premium account

Profit and loss account

Equity shareholders’ funds

18(a)

18(b)

19
20
20

Group

Company

2005

£000

9,335

258

9,593

7,267
10,622
70

8,414

26,373

(7,056)

19,317

28,910

(200)

(711)

2004

£000

9,343

281

9,624

6,599
8,355
70

7,554

22,578

(7,053)

15,525

25,149

—

(403)

2005

£000

8,007

861

8,868

5,189
8,769
70

8,504

22,532

(4,999)

17,533

26,401

—

(782)

2004

£000

8,086

884

8,970

4,529
6,827
70

7,542

18,968

(4,552)

14,416

23,386

—

(439)

27,999

24,746

25,619

22,947

1,184
135
545

26,135

27,999

1,177
135
473

22,961

24,746

1,184
135
545

23,755

25,619

1,177
135
473

21,162

22,947

These accounts were approved by the Board on 13 October 2005.

A B Thorpe

P D Mason

}

Directors

The notes on pages 19 to 32 form part of these accounts.

The report of the auditors is on page 15.

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Consolidated Cash Flow Statement
for the year ended 30 June 2005

Net cash inflow from operating activities

Returns on investments and servicing of finance
Interest received
Other investment income

Taxation
UK corporation tax paid

Capital expenditure and financial investment
Purchase of tangible fixed assets
Sale of tangible fixed assets
Sale/(Purchase) of fixed asset investments

Net cash outflow for capital expenditure and financial investments

Equity dividends paid

Cash inflow before financing

Financing
Issue of shares
Repayment of hire purchase and finance leases

Cash inflow from financing

Increase in cash in the period

Notes

21(a)

21(b)

2005
£’000

4,239

371
69

2004
£’000

4,379

281
61

(1,758)

(1,230)

(1,170)
56
28

(1,086)

(1,054)

781

79
—

860

(1,958)
66
(37)

(1,929)

(811)

751

68
(7)

812

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Notes to the Accounts
for the year ended 30 June 2005

Accounting policies

1
Basis of accounting

These consolidated financial statements have been prepared under the historical cost convention, as modified by the
valuation of investment properties. The accounting policies are set out below and are in accordance with applicable
UK accounting standards.

Basis of consolidation

The consolidated accounts include the accounts of the Company and its subsidiaries, which are prepared to
30 June. The results of the entities acquired are included in the consolidated profit and loss account from the date of
acquisition.

Property, plant and equipment

Land and buildings, plant, equipment, furniture and fittings are stated at historical cost less depreciation.

Depreciation is calculated on the straight-line method to write off the cost of each asset to its residual value over its
estimated useful life as follows:

Freehold land
Freehold buildings
Plant, equipment, fixtures and fittings

Nil
25–50 years
2–15 years

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in
operating profit.

Leases

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of
the leased property or the present value of the minimum lease payments. Each lease payment is allocated between
the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The
corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element
of the finance cost is charged to the income statement over the lease period. The property, plant and equipment
acquired under finance leases is depreciated over the shorter of the useful life of the asset or the lease term.

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases are charged to the income statement on a straight-line
basis over the period of the lease.

Investment property
Investment properties are stated at open market value. Depreciation is not provided on investment properties. The
requirement of the Companies Act 1985 is to depreciate all fixed assets, but this conflicts with the generally
accepted principle set out in SSAP 19. These properties are held for investment rather than consumption and the
Directors consider that systematic depreciation would be inappropriate. The accounting policy adopted is therefore
necessary for the accounts to give a true and fair view.

Other investments
Shares in subsidiaries and listed investments are stated at cost less any provision necessary for any permanent
diminution in value.

Goodwill
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. In accordance with Financial Reporting Standard 10
(FRS 10), goodwill arising from acquisitions after 1 July 1998 is amortised over its useful economic life, up to a
maximum of 20 years.

Where an indication of impairment exists, the carrying amount of any goodwill is assessed and written down
immediately to its recoverable amount. To the extent that any further impairment is required, provision is made for
any onerous leases.

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Notes to the Accounts
for the year ended 30 June 2005

Accounting policies (continued)

1
Stocks

Stocks 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 stock lines based on the estimated recoverable amounts.

Debtors

Trade debtors are carried at original invoice amount less an estimate made for doubtful debts based on a review of
all outstanding amounts at the year end. Bad debts are written off when identified.

Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, term deposits and
deposits held at call with banks.

Deferred taxes

Deferred 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 financial statements. Tax rates enacted or substantively
enacted by the balance sheet date are used to determine deferred income tax. Balances are not discounted.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it
is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount
can be made.

Warranty

The Group recognises the estimated liability to repair or replace products still under warranty at the balance sheet
date. This provision is calculated based on past history of the level of repairs and replacements.

Revenue recognition

Sales are recognised upon delivery of products. Sales are shown net of value added tax and discounts, and after
eliminating sales within the Group.

Interest receivable and similar income

Interest income is recognised when earned. Investment income is only recognised when the funds have been
received by the Group.

Pension obligations

In accordance with the provisions of SSAP 24, the cost of providing pensions is charged to the income statement so
as to spread the regular cost over the service lives of employees in accordance with the advice of the actuaries. The
Group’s contributions to defined contribution pension plans are charged to the profit and loss account in the period
to which the contributions relate. Additional disclosures relating to the pension fund deficit are given in note 24 in
accordance with the requirements of FRS17.

Foreign currency translation

Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions;
gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and
liabilities denominated in foreign currencies, are recognised in the income statement.

Research and development

Research and development expenditure is recognised as an expense as incurred. Development costs previously
recognised as an expense are not recognised as an asset in a subsequent period.

Policy on derivatives and financial instruments

The Group does not hold any derivatives other than exchange swaps. Where these exist at the year end they are not
valued in the balance sheet as they are used to hedge currency movements. If foreign currency debtors and creditors
exist at the year end which have been hedged in this way the contracts and swap values are considered in valuing
these items.

Financial instruments are valued at historical cost.

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Analysis of turnover

2
The turnover attributable to each of the Group’s geographical markets is:

United Kingdom
Other European Countries
Africa
North and South America
Middle East
India, Australia and Far East

2005
£’000

36,501
3,485
35
146
811
594

41,572

2004
£’000

32,928
2,679
49
243
766
593

37,258

All turnover, profit before taxation and net assets originate in the United Kingdom.

The business of the parent Company and its subsidiaries all relate to one business segment, being designers,
manufacturers and suppliers of professional lighting systems.

Net operating expenses

Distribution costs
Administrative expenses
Exceptional items — Sugg

2005
£’000

2,597
8,086
422

11,105

2004
£’000

2,389
6,971
—

9,360

Exceptional items — Sugg
Due to the trading difficulties in the year experienced at Sugg Lighting Ltd (“Sugg”), management has undertaken a
review of the Sugg business. This has resulted in an exceptional stock provision of £195,000 and an impairment of
£227,000. In calculating the impairment the Directors applied the value in use method to the projected cash flows
after allowance for appropriate contingencies and a discount rate of 6.5% which represents a risk free post-tax
interest rate. The analysis indicates that the total impairment provision required is £227,000 of which £200,000 is
treated as an onerous lease provision and the remaining impairment of £27,000 relates to fixed assets.

Profit on ordinary activities before taxation

4
Profit on ordinary activities before taxation is stated after charging/(crediting):

Depreciation of tangible assets — owned assets
Impairment of Sugg fixed assets
Auditors’ remuneration (Company £27,000; 2004: £26,000)
Leasehold land and buildings — operating leases
Hire of plant and machinery
Research and development
Profit on sale of fixed assets
Profit on sale of fixed asset investments
Rental income from investment property

2005
£’000

1,121
27
49
176
46
1,030
(26)
(5)
(5)

2004
£’000

1,126
42
47
176
39
1,134
(18)
—
(3)

Remuneration of the Group’s auditors for provision of non-audit services to the Company and its subsidiaries was:

Accountancy services
Tax compliance
Other services

2005
£’000

2004
£’000

5
6
3

5
9
4

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Notes to the Accounts
for the year ended 30 June 2005

Directors’ emoluments

Aggregate emoluments
Contributions to Money Purchase pension scheme

2005
Total
£’000

859
18

877

2004
Total
£’000

734
17

751

Any gains by Directors on the exercise of share options in the year, and the number of Directors to whom benefits
are are accruing under defined benefit and defined contribution schemes are included in the Directors’
Remuneration Report on pages 9 to 13.

Employee information

The average number of employees employed by the Group (including executive Directors) during the year is
analysed below:

Production
Selling and distribution
Administration

Employment costs of all employees (including executive Directors):

Aggregate gross wages and salaries
Employers’ national insurance contributions
Employers’ pension and related charges

Total direct costs of employment

Interest receivable and similar income

Interest from cash and bank balances
Income from fixed asset investments

Income from investments includes £7,000 (2004: £4,000) from listed investments.

2005
Number

2004
Number

304
84
131

519

2005
£’000

10,939
1,038
907

12,884

2005
£’000

371
69

440

283
82
125

490

2004
£’000

9,152
886
746

10,784

2004
£’000

281
61

342

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Taxation on profit on ordinary activities

Current tax:
UK corporation tax on profits for the period
Adjustment in respect of previous periods

Total current tax

Deferred tax:
Origination and reversal of timing differences
Adjustment in respect of previous periods

Total deferred tax

Taxation on profit on ordinary activities

2005
£’000

1,485
(314)

1,171

321
(13)

308

2004
£’000

1,644
(140)

1,504

(25)
—

(25)

1,479

The tax assessed for the year is lower than the standard rate of Corporation Tax in the UK (30%). The differences
are explained below:

Profit on ordinary activities

Profit on ordinary activities multiplied by the standard rate in the UK 30% (2004: 30%)
Effects of:
Expenses not deductible for tax purposes
Accelerated tax allowances and other timing differences
Profits taxed at small companies rate
Adjustments to tax charge in respect to previous period

Current tax charge

Profit for the year and dividends

Profit for the year

2005
£’000

5,840

2004
£’000

5,362

1,752

1,609

(69)
(194)
(4)
(314)

12
30
(7)
(140)

1,171

1,504

As permitted by Section 230 of the Companies Act 1985, the holding Company has not published a separate profit
and loss account. The Group profit for the year of £4,361,000 (2004: £3,883,000) includes a profit of £3,780,000
(2004: £3,757,000) in respect of the holding Company.

Dividends
Interim paid of 2.5p per share (2004: 2.2p per share)
Final proposed of 7.5p per share (2004: 6.4p per share)

2005
£’000

299
888

2004
£’000

260
754

1,187

1,014

10 Earnings per share

Ordinary earnings per share is calculated by dividing the net profit attributable to shareholders of £4,361,000 (2004:
£3,883,000) by the weighted average number of ordinary shares in issue during the year of 11,825,715 (2004:
11,743,094).

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume
conversion of all dilutive potential ordinary shares. The weighted average number of ordinary shares is calculated at
11,943,559 (2004: 11,943,559).

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Notes to the Accounts
for the year ended 30 June 2005

Intangible fixed assets

Group

Cost
At 1 July 2004 and 30 June 2005

Aggregate amortisation
At 1 July 2004 and 30 June 2005

Net book value at 1 July 2004 and 30 June 2005

Goodwill
£’000

600

—

The goodwill arising on the acquisition of Sugg Lighting Limited was impaired in 2002.

Goodwill of £577,000 arising on the acquisition of subsidiaries before 1 July 1999 had been written off to reserves
in prior years.

Tangible fixed assets

Freehold
land and
buildings
£’000

Group

Plant
and
equipment
£’000

Cost
At 1 July 2004
Additions
Group transfer
Disposals

At 30 June 2005

Accumulated depreciation
At 1 July 2004
Charge for the year
Impairment at Sugg (note 3)
Disposals

At 30 June 2005

Net book value
At 30 June 2005

At 30 June 2004

7,024
42
—
—

7,066

1,160
122
—
—

1,282

5,784

5,864

Freehold
land and
buildings
£’000

Company

Plant
and
equipment
£’000

6,876
42
—
—

6,918

1,038
113
—
—

1,151

5,767

5,838

7,668
552
1
(221)

8,000

5,420
543
—
(203)

5,760

2,240

2,248

Total
£’000

14,544
594
1
(221)

14,918

6,458
656
—
(203)

6,911

8,007

8,086

Total
£’000

18,290
1,170
—
(372)

11,266
1,128
—
(372)

12,022

19,088

7,787
999
27
(342)

8,471

3,551

3,479

8,947
1,121
27
(342)

9,753

9,335

9,343

Depreciation has not been charged on freehold land that is stated at its cost of £1,218,000 (2004: £1,218,000).

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Fixed asset investments

Group

Listed on
the Stock
Exchange
£’000

Investment
property
£’000

At 1 July 2004
Disposals

At 30 June 2005

Provisions for
diminution in value
At 1 July 2004 and
30 June 2005

Net book value
At 30 June 2005

At 30 June 2004

219
—

219

—

219

62
(23)

—

Total
£’000

281
(23)

258

—

258

281

Company

Investment
property
£’000

Listed on
the Stock
Exchange
£’000

Investments
in
subsidiaries
£’000

219
—

219

—

219

62
(23)

—

Total
£’000

2,454
(23)

2,431

2,173
—

2,173

1,570

603

861

884

Investment property open market value has been determined by the directors. There is no material difference
between original cost and open market value.

The aggregate market value of the investments listed on the London Stock Exchange as at 30 June 2005 was
£87,000 (2004: £108,000).

Details of the investments in subsidiaries are set out in note 25.

14 Stocks

Raw materials, components and consumables
Work in progress
Finished goods

15 Debtors

Trade debtors
Amounts owed by subsidiary undertakings
Other debtors
Prepayments and accrued income

16 Current asset investments

Group

Company

2005
£’000

3,049
1,316
2,902

7,267

2004
£’000

2,957
1,409
2,233

6,599

2005
£’000

1,813
1,070
2,306

5,189

Group

Company

2005
£’000

9,613
—
40
969

10,622

2004
£’000

7,522
—
74
759

8,355

2005
£’000

6,690
1,265
40
774

8,769

2004
£’000

1,795
971
1,763

4,529

2004
£’000

4,728
1,457
53
589

6,827

Units in cash fund — aggregate market value £333,000 (2004: £320,000)

Group and Company
2004
Cost
£’000

2005
Cost
£’000

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Notes to the Accounts
for the year ended 30 June 2005

17 Creditors: amounts falling due within one year

Trade creditors
Corporation tax
Other taxation and social security
Other creditors
Accruals
Dividends payable

18(a) Onerous lease provision

Onerous lease provision in respect of Sugg Lighting Ltd

Group

Company

2005
£’000

3,357
464
1,205
734
408
888

7,056

2004
£’000

3,208
1,051
935
624
481
754

7,053

2005
£’000

1,833
493
919
711
155
888

4,999

Group

Company

2005
£’000

200

2004
£’000

—

2005
£’000

—

18(b) Deferred taxation
Deferred taxation provided in the financial statements is as follows:

Tax effect of timing differences
Capital allowances
Other

Group

Company

2005
£’000

492
219

711

2004
£’000

432
(29)

403

2005
£’000

525
257

782

2004
£’000

1,579
822
662
550
185
754

4,552

2004
£’000

—

2004
£’000

451
(12)

439

There is no difference between the full potential liability for deferred taxation and the provision made in the financial
statements.

Movement in the provision
At 1 July 2004
(Decrease)/Increase in provision

At 30 June 2005

19 Share capital

Ordinary shares of 10p per share
Authorised (15,000,000 shares)

Allotted and fully paid
At 1 July 2004
Shares issued
At 30 June 2005 11,838,876 shares (2004: 11,772,000 shares)

Group

Company

2005
£’000

403
308

711

2004
£’000

428
(25)

403

2005
£’000

439
343

782

2004
£’000

437
2

439

Group and Company
2004
£’000

2005
£’000

1,500

1,177
7
1,184

1,171
6
1,177

During the year options were exercised for 66,876 ordinary shares with a nominal value of 10 pence per share and
a consideration of 117 pence per share.

Options that have been granted for 10p ordinary shares remaining outstanding at 30 June 2005 are as follows:

Number of shares

Subscription price per share

Period of option

104,683

117p

7 May 2002 to 6 May 2009

Details of the Directors’ share options are given in the Directors’ Report.

Since the year end, options for 39,200 shares have been exercised.

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20 Reserves

At 1 July 2004
Shares issued
Profit for the year

At 30 June 2005

Group

Capital
premium Redemption
Reserve
account
£’000
£’000

473
72
—

545

135
—
—

135

Profit
and Loss
£’000

22,961
—
3,174

26,135

Company

Capital
premium Redemption
Reserve
account
£’000
£’000

473
72
—

545

135
—
—

135

21 Notes to the cash flow statement
(a) Reconciliation of operating profit to net cash inflow from operating activities

Operating profit
Depreciation and impairment
Profit on sale of fixed assets and fixed asset investments
(Increase) in stocks
(Increase) in debtors
Increase in creditors

Net cash inflow from operating activities

(b) Reconciliation of movement in net funds

Cash at bank and in hand
Liquid resources

Net funds

Net funds at 1 July 2004
Increase in net cash
Movement in borrowings

Net funds at 30 June 2005

2005
£’000

5,400
1,148
(31)
(668)
(2,267)
657

4,239

1 July 2004
£’000

Cash flow
£’000

7,554
70

7,624

860
—

860

2005
£’000

7,624
860
—

8,484

Profit
and Loss
£’000

21,162
—
2,593

23,755

2004
£’000

5,020
1,168
(18)
(403)
(2,052)
664

4,379

30 June
2005
£’000

8,414
70

8,484

2004
£’000

6,805
812
7

7,624

22 Capital commitments
Commitments for future capital expenditure at 30 June 2005 were as follows:

Authorised and contracted for

Group

Company

2005
£’000

2004
£’000

132

2005
£’000

2004
£’000

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Notes to the Accounts
for the year ended 30 June 2005

23 Operating leases
Annual commitments on operating leases, which all relate to land and buildings, expire:

In two to five years
Over five years

Group

Company

2005
£’000

173
—

173

2004
£’000

25
148

173

2005
£’000

—
—

—

2004
£’000

—
—

—

24 Pension scheme
The Group operates a funded combined Defined Benefits/Defined Contribution scheme for employees in the UK.
Entrants who joined after 1 October 1995 join a Defined Contribution section. 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 assets of the Scheme are held separately from the assets of the Company, being invested in Managed Funds.
Contributions by the Company to the Scheme during the year ended 30 June 2005 amounted to £1,132,000
(2004: £1,095,000) which included a lump sum payment of £500,000, (2004: £500,000) of which £677,000 (2004:
£435,000) was included in prepayments at the end of the year. Contributions are determined by an independent
qualified actuary on the basis of triennial valuations using the Projected Unit Method. The Company is committed to
making future payments to the scheme and has agreed a future schedule of contributions with the trustees.

The date of the most recent actuarial valuation was 1 July 2004, and the value of the fund at this date was
£7,805,000. This was sufficient to cover 75% 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
Pension increases in payment of 5% pa or RPI if less

3.00%
4.78%
5.70%
3.00%
2.80%

The figures at 1 July 2004 have been updated in order to assess the additional disclosures required under FRS17
as at 30 June 2005 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 2.5% pa or RPI if less

30 June
2005

30 June
2004

30 June
2003

2.70%
4.57%
5.00%
2.70%
2.70%
2.00%

3.00%
4.78%
5.70%
3.00%
2.80%
n/a

2.50%
4.28%
5.25%
2.50%
2.50%
n/a

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24 Pension scheme (continued)
On this basis, the illustrative balance sheet figures required under FRS17 are as follows:

30 June 2005

30 June 2004

30 June 2003

Expected long-
term rate of
return

Value
£’000

8.00%
5.00%
7.50%
4.50%

Equities
Bonds
Property
Other

7.25%
4.60%
7.00%
4.50%

Total market value of assets
Present value of scheme liabilities

Deficit in the scheme
Related tax asset

Net pension deficit

Movement in deficit during the year

6,451
1,917
5
1,770

10,143
14,852

(4,709)
1,413

(3,296)

Expected long-
term rate of
return

8.00%
5.00%
7.50%
3.75%

Value
£’000

5,290
1,553
2
941

7,786
11,057

(3,271)
981

(2,290)

Value
£’000

4,281
1,395
239
164

6,079
(10,190)

(4,111)
1,233

(2,878)

Deficit in scheme at beginning of the year
Current service cost
Contributions
Other finance income
Actuarial gain/(loss) on pension scheme

Deficit in scheme at end of year
Related tax asset

Net pension deficit

30 June
2005
£’000

30 June
2004
£’000

(3,271)
(517)
1,132
(62)
(1,991)

(4,709)
1,413

(3,296)

(4,111)
(488)
1,095
(89)
322

(3,271)
981

(2,878)

Analysis of amount that would be charged to operating profit in respect of defined benefit scheme

Current service cost

30 June
2005
£’000

517

30 June
2004
£’000

488

The current service cost for final salary guarantee members is expected to rise from year to year as the final salary
section is closed to new entrants.

Analysis of amount that would be credited to other financial income

Expected return on pension scheme assets
Interest on pension scheme liabilities

Net return

30 June
2005
£’000

30 June
2004
£’000

582
(644)

(62)

460
(549)

(89)

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5

Notes to the Accounts
for the year ended 30 June 2005

24 Pension scheme (continued)
Analysis of amount that would be recognised in the Statement of Total Recognised Gains and Losses (STRGL)

Actual return less expected return on pension scheme assets
Experience gains and losses arising on the scheme liabilities
Changes in assumptions underlying the resent value on the scheme liabilities

Actuarial loss which would have been recognised in the STRGL

30 June
2005
£’000

680
(1,070)
(1,601)

(1,991)

30 June
2004
£’000

65
495
(238)

322

History of experience gains and losses that would have been recognised in the Statement of Total
Recognised Gains and Losses (STRGL)

30 June 2005
£’000 Percentage

30 June 2004

£’000

Percentage

Difference between the expected and actual
return on scheme assets
Percentage of scheme assets
Experience gain/(loss) 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
Total amount which would have been recognised in STRGL
Percentage of the present value of the scheme liabilities

680

(1,070)

(1,601)

(1,991)

11%

13%

495

(238)

322

Changes to net assets and profit and loss reserve

If the amounts had been recognised in the financial statements, the Group’s net assets and profit and loss reserve
at 30 June 2005 would have been as follows:

Net assets excluding pension deficit
Pension prepayment (net)
Pension deficit

Net assets including pension deficit

Profit and loss account excluding pension deficit
Pension prepayment (net)
Pension deficit

Profit and loss account including pension deficit

2005
£’000

27,999
(474)
(3,296)

2004
£’000

24,746
(305)
(2,290)

24,229

22,151

26,135
(474)
(3,296)

22,961
(305)
(2,290)

22,365

20,366

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Proportion of
nominal value of
issued shares held
by Group and
Company

100%
100%
100%
100%
100%

Interests in Group undertakings

Name of undertaking

Country of incorporation

Description of shares held

Mackwell Electronics Limited
Compact Lighting Limited
Philip Payne Limited
Sugg Lighting Limited
Axis Lighting Limited

England
England
England
England
England

Ordinary £1 shares
Ordinary £1 shares
Ordinary £1 shares
Ordinary £1 shares
Ordinary £1 shares

All of the above companies operated in their country of incorporation and registration.

The principal activities of these subsidiaries are:

Mackwell Electronics Limited — design and manufacture of lighting components
Compact Lighting Limited — design and manufacture of low energy lighting equipment
Philip Payne Limited
Sugg Lighting Limited
Axis Lighting Limited

— design and manufacture of illuminated signs
— design and manufacture of traditional architectural lighting.
— non-trading

26 Reconciliation of movements in equity shareholders’ funds

Profit for the year
Dividends

Net increase in equity shareholders’ funds
Issue of shares
Opening equity shareholders’ funds

Closing equity shareholders’ funds

Group

Company

Year ended
30 June
2005
£’000

Year ended Year ended
30 June
2005
£’000

30 June
2004
£’000

Year ended
30 June
2004
£’000

4,361
(1,187)

3,174
79
24,746

27,999

3,883
(1,014)

2,869
68
21,809

24,746

3,780
(1,187)

2,593
79
22,947

25,619

3,757
(1,014)

2,743
68
20,136

22,947

27 Related party transactions and balances

The Company has taken advantage of the exemption allowed by FRS8 not to disclose transactions and balances
with related Company undertakings, 90% or more of whose voting rights are controlled within the Group.

During the year, M Allcock purchased a computer under the Home Computing Initiative Scheme for £699 at terms
available to other members of staff. At the end of the year an amount of £408 was outstanding.

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Notes to the Accounts
for the year ended 30 June 2005

Financial instruments

The Group has a policy of maintaining cash resources arising from its operations by balancing the day-to-day cash
requirements with those resources and by not undertaking any long-term borrowings. This policy enables the Group
to fund its future operations. To assist with this the Group has a system of overall Group treasury management,
coupled with individual banking arrangements held by each of the Group’s subsidiaries. The Group also has a small
overdraft facility on its current account to ensure that cash is available in the current account in the event that an
unforeseen requirement arises. The Group has a policy not to trade derivatives, and this has been observed
throughout the period.

The Group’s financial instruments comprise cash and liquid resources, small amounts of listed investments, and
various other items such as trade debtors, trade creditors that arise directly from its operations. The main purpose of
these financial instruments is to manage the cash available for the Group’s operations. The Group has occasionally
used forward foreign exchange contracts in order to hedge currency movements when customers pay in or suppliers
require foreign currency. The value of these contracts has not been significant.

The Group treasury function reviews the cash holding of the Group as a whole on a daily basis and considers the
future cash requirements in both £ sterling and foreign currency. Based on this assessment, cash will be placed on
short-term deposit or kept available to meet day-to-day requirements throughout the Group.

The policies for managing foreign currency risk are highlighted above. At 30 June 2005, after taking account of the
effects of foreign exchange contracts held, the Group had no significant currency exposures.

In the financial instruments disclosures made in the accounts, the Group has taken advantage of the exemption
conferred by FRS13 to exclude short term debtors and creditors.

Financial assets

The Group has no financial assets, other than cash at bank and in hand unitised cash funds and an immaterial
amount of listed investments.

Financial liabilities

The Group does not use finance leases to manage risk and the majority of these have been acquired as part of
business acquisitions.

The Group holds currency bank accounts, which are used for receipts from customers and payments to suppliers.
The Group occasionally uses forward currency swap arrangements to manage obligations on a short-term basis. The
Group had no forward currency swap arrangements at the year end because the currency available in those bank
accounts broadly matched currency obligations at that time (2004: £nil). The related average data has not been
produced because there were no contracts in place at the time.

Other than as disclosed in note 16, there is no material difference between the book value and fair values of financial
assets and financial liabilities.

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Notice of Meeting

Notice is hereby given that the sixty-ninth Annual General
Meeting of F W Thorpe Plc will be held at Merse Road,
North Moons Moat, Redditch, Worcestershire, B98 9HH
on 10 November 2005 at 3.15 pm to transact the
following business:

Ordinary business
1.

To receive and adopt the Directors’ Report and
Accounts for the year ended 30 June 2005.

To declare a dividend.

To re-elect I A Thorpe as a Director.

To re-elect P D Mason as a Director.

To re-appoint PricewaterhouseCoopers LLP as
auditors of the Company, to hold office until the
conclusion of the next General Meeting at which
accounts are laid before the Company and to
authorise the Directors to fix the auditors’
remuneration.

Special business
To consider and, if thought fit, to pass the following
resolutions which will be proposed, in the case of 6 and 7
as ordinary resolutions, and in the case of 8 and 9 as
special resolutions.

That the Directors’ remuneration report (as set out on
pages 9 to 13 of the Annual Report and Accounts)
for the year ended 30 June 2005 be approved.

That the authority to allot relevant securities (within
the meaning of Section 80 of the Companies Act
1985) conferred on the Directors by Article 15 of the
Articles of Association of the Company be and
hereby is renewed for the period ending at the
conclusion of the Annual General Meeting of the
Company to be held in 2006 and that for such period
the Section 80 Amount (as defined in said Article 15)
shall be £312,192.

That the power to allot equity securities (within the
meaning of Section 94 of the Companies Act 1985)

conferred on the Directors by Article 15 of the
Articles of Association of the Company be and
hereby is renewed for the period ending at the earlier
of the conclusion of the Annual General Meeting of
the Company to be held in 2006 and the expiry of
the period of 15 months following the passing of this
resolution and that for such period the Section 89
Amount (as defined in the said Article 15) shall be
£59,390.

That the Company be generally and unconditionally
authorised to make market purchases (within the
meaning of Section 163(3) of the Companies Act
1985) of ordinary shares of 10p each of the
Company provided that:

The maximum number of ordinary shares
hereby authorised to be acquired is 1,187,808.

The minimum price which may be paid for any
such share is 10p.

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 London Stock Exchange Daily Official List
for the five business days immediately
preceding the day on which such share is
contracted to be purchased.

The authority hereby conferred shall expire on
the date of the Annual General Meeting of the
Company in 2006.

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.

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Notice of Meeting

Notes
a)

A member entitled to attend and vote at the meeting
may appoint one or more proxies, whether a member
of the Company or not, to attend and, on a poll, vote
on the members behalf. A form of proxy
accompanies this notice.

The register of Directors’ share interests pursuant to
Section 325 of the Companies Act 1985 and copies
of the Directors’ service contracts will be available for
inspection at the Annual General Meeting.

By order of the Board

P D Mason
Company Secretary

Merse Road
North Moons Moat
Redditch
Worcestershire
B98 9HH

13 October 2005

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Form of Proxy
(for shareholders use only)

I/We . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Block letters please)

of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
being a member of F W Thorpe Plc, hereby appoint

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

or failing him the Chairman of the meeting, as my/our proxy to vote for me/us and on my/our behalf at the annual General
Meeting of the Company to be held at the Registered Office of the Company on 10 November 2005 and at every
adjournment thereof.

Please indicate with a cross in the appropriate space how you wish your vote to be cast. If no specific direction as to voting
is given your proxy will vote or abstain at his/her discretion.

FOR

AGAINST

ORDINARY BUSINESS

1 To adopt the Directors’ Report and Accounts

2 To declare a final dividend

3 To re-elect I A Thorpe as a Director

4 To re-elect P D Mason as a Director

5 To re-appoint PricewaterhouseCoopers LLP as Auditors of the Company

SPECIAL BUSINESS

6 To approve the Directors’ remuneration report

7 To give the Directors authority to allot relevant securities (Section 80 C.A. 1985)

8 To give the Directors authority to allot equity securities (Section 94 C.A. 1985)

9 To give the Company authority to make market purchases of its ordinary shares

Dated this . . . . . . . . . . . . . . . . . . . .day of . . . . . . . . . . . . . . . . .2005 Signature . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes:
This proxy must reach the Company’s registered office not less than forty-eight hours before the time appointed for the meeting.

Any alteration made to this form of proxy should be initialled.

If you wish to appoint a proxy other than the Chairman of the meeting please insert the name and address of your proxy (who need not be
a member of the Company).

In the case of joint holders the signature of one holder will be accepted.

In the case of joint holders, the vote of the senior who tenders a vote whether in person or by proxy shall be accepted to the exclusion of
votes of the other joint holders and for this purpose seniority will be determined by the order in which the names stand in the register of
members in respect of the joint holding.

In the case of a corporation this proxy should be under its common seal or under the hand of an officer or attorney or other person duly
authorised.

Completion of the proxy form will not prevent a shareholder attending and voting in person.

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✄
Second fold

BUSINESS REPLY SERVICE
Licence No. SEA 10846

Lloyds TSB Registrars
The Causeway
Worthing
West Sussex
BN99 6ZL

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Third fold
and tuck in flap opposite

Five Year Record

2001
£’000

2002
£’000

2003
£’000

2004
£’000

2005
£’000

Turnover

33,054

29,452

32,677

37,258

41,572

Operating profit
Interest receivable and similar income

Profit before taxation
Taxation

Profit after taxation

Dividends

Net assets

Earnings per share — ordinary

Dividends per share

Net assets per share

3,077
153

3,230
(899)

2,331

700

1,046
196

1,242
(513)

729

701

3,487
245

3,732
(1,110)

2,622

773

5,020
342

5,362
(1,479)

3,883

1,014

5,400
440

5,840
(1,479)

4,361

1,187

19,876

19,904

21,809

24,746

27,999

19.8p

6.0p

170p

6.3p

6.0p

171p

22.4p

6.6p

186p

33.1p

8.6p

210p

36.9p

10.0p

236p

Financial Calendar

2005

17 October
10 November
17 November

2006

March
May
September

Posting of Report and Accounts
Annual General Meeting
Payment of final dividend

Announcement of half year results
Payment of interim dividend
Announcement of results for the year

Designed and Printed by

Jones & Palmer Limited, Birmingham. tel: (0121) 236 9007

F W Thorpe Plc

- Thorlux Lighting
- Compact Lighting
- Sugg Lighting
- Mackwell Electronics
- Philip Payne

Merse Road
North Moons Moat
Redditch
Worcestershire
B98 9HH

INDUSTRIAL (cid:2) COMMERCIAL (cid:2) ARCHITECTURAL (cid:2)

ILLUMINATED SIGNS (cid:2) EMERGENCY (cid:2)

LOW ENERGY (cid:2) HERITAGE (cid:2) ENERGY CONSERVING SYSTEMS