FW Thorpe Plc Merse Road North Moons Moat Redditch Worcestershire B98 9HH England Tel: +44 (0)1527 583200 Fax: +44 (0)1527 584177 Incorporating Thorlux Lighting Compact Lighting Philip Payne Sugg Lighting Solite Europe Portland Lighting TRT Lighting F W T h o r p e P c A n n u a l l R e p o r t a n d A c c o u n t s 2 0 1 2 www.fwthorpe.co.uk 015702_FW_Thorpe_Cover_v4.indd 2 Annual Report and Accounts 2012 12/10/2012 14:54 FInancIal calendar 2012 19 October Posting of the Annual Report and Accounts 15 November Annual General Meeting 22 November Payment of final dividend 2013 March May Announcement of interim results Payment of interim dividend September Announcement of results for the year FW Thorpe Plc annual report and accounts 2012 Business review IntrOdUctIOn We specialise in designing and manufacturing professional lighting equipment. We currently employ approximately 470 people and although each company works autonomously, our skills and markets are complementary. Our focus is for long-term growth and stability achieved by developing market leading products backed by excellent customer service. 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. In this report Business review 01 How we have performed 02 FW Thorpe Plc at a glance 04 Our geographic reach 05 Chairman’s statement 08 New LED product ranges 10 TRT Lighting 12 Portland Lighting 14 Carbon offsetting project Governance Accounts Additional information 16 Directors 17 Advisers and Company information 18 Report of the directors 22 Directors’ remuneration report 25 Statement of directors’ responsibilities 26 Independent auditors’ report 65 Notice of meeting 67 Shareholder notes IBC Financial calendar 27 Consolidated income statement 28 Consolidated statement of comprehensive income 29 Consolidated and company balance sheets 30 Consolidated statement of changes in equity 31 Company statements of changes in equity 32 Consolidated and Company statements of cash flows 33 Notes to the consolidated financial statements Using your smartphone, scan this code to access further content. Or visit: www.fwthorpe.co.uk Designed and produced by Radley Yeldar www.ry.com using the paperless proofing system Wizardry. This material used in the publication of this document is carbon balanced. Printed on FSC certified paper. This document is printed on material manufactured at a mill which is ISO14001 accredited. FSC logo 015702_FW_Thorpe_Cover_v4.indd 3 12/10/2012 14:55 Business Review How we HAve peRfoRmed Turnover £m +5% Operating profit £m +5% 2008 2009 2010 2011 2012 42.5 44.6 47.0 52.8 55.6 2008 2009 2010 2011 2012 8.8 9.5 10.6 11.3 11.9 Earnings per share Pence (continuing operations) +18% Dividend per share Pence +10% 2008 2009 2010 2011 2012 61.9 63.8 66.1 71.8 84.8 2008 2009 2010 2011 2012 13.9 16.2 16.7 17.6 19.4 operational highlights –– –Strong–export–performance,–47%–increase–to–£7.8m –– –Investment–in–new–LED–street–lighting–division–– TRT Lighting –– Successful–integration–of–Portland–Lighting –– –Continued–investment–in–LED–products–across–the group FW Thorpe Plc Annual Report and Accounts 2012 01 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_1-17_V6.indd 1 11/10/2012 12:32 02 FW Thorpe Plc Annual Report and Accounts 2012 Business Review fw THoRpe AT A GlAnce Thorlux lighting 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–14,410–square–metre–self-contained–factory– in–Redditch,–Worcestershire,–central–England. compact lighting Compact–manufactures–and–supplies–professional– lighting–systems–to–retailers.–Its–focus–on this–market– enables–it–to–produce–cost-effective–products– designed–specifically–for–today’s–retail–environment. Its–aim–is–to–enable–retailers–to–design–and–test–new– lighting–concepts,–control–their–implementation– and manage–the–roll-out–to–a–budget.–Compact– employs–both–lighting–and project–management– professionals–and–already–supplies–lighting–to–many– of the UK’s–top–100–retailers. philip payne 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–encourage– direct–dialogue–with architects–and–designers– to ensure–via–product–variation–or–bespoke–work– aesthetic–aspirations–and–requirements–are–fully met. 015702_FW_Thorpe_1-17_V6.indd 2 11/10/2012 12:33 FW Thorpe Plc Annual Report and Accounts 2012 03 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A sugg lighting Established–in–1837,–Sugg–Lighting–is renowned– as the–leading–name–in decorative–and heritage– lighting. Ornate–Sugg–Lighting–columns–and decorative– lanterns–are–in–use–throughout–the–world,–with–many– nineteenth–century–installations–still in excellent– working–order. The–historic–skills–and–traditions–behind this–unique– pedigree–remain–the–cornerstone–of–the–Sugg– Lighting–success–story. solite europe Solite–Europe–is–a–leading–manufacturer–and–supplier– of–cleanroom–lighting–equipment–and luminaires– within–the–UK–and Europe. It–provides–luminaires–for–laboratories,– pharmaceutical–and semi-conductor–manufacturing– areas–including–hospitals,–kitchens–and–food– preparation–applications. portland lighting Portland–Lighting–design,–manufacture–and–supply– innovative–lighting–products–to–the–brewery,–retail– and–sign–lighting–industries. The–company–operates–from–a–modern–1,300–square– metre–facility–in–Walsall–that–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–their–sector. *using your smartphone, scan this code to access further content, or visit: www.fwthorpe.co.uk 015702_FW_Thorpe_1-17_V6.indd 3 11/10/2012 12:33 04 FW Thorpe Plc Annual Report and Accounts 2012 Business Review OuR geOgRAphic ReAch We focus on long-term growth and stability, achieved by developing market leading products, backed by excellent customer service. We operate as separate companies and although each company works autonomously, our skills and markets are complementary. united Kingdom Thorlux Lighting TRT Lighting Redditch Philip Payne Solihull Solite Europe Manchester Sugg Lighting Horsham Compact Lighting Portsmouth Portland Lighting Walsall germany Thorlux Lighting Munich ireland Thorlux Lighting Dublin Australia Thorlux Lighting Australasia Melbourne 015702_FW_Thorpe_1-17_V7.indd 4 12/10/2012 13:06 Business Review cHAiRmAn’s sTATemenT FW Thorpe Plc Annual Report and Accounts 2012 05 5%–is,–however,–5%–and–marks–another– group record–operating–profit. Investment–in–the–group–has–continued– during–the–year–and–has–centred–around– four majors,–being–the–installation–of–the– £1m sheet–metal–laser–punching–machine–at– Thorlux,–the–purchase–of–a–new–1,000–square– metre–factory,–the–starting–of–a–new–venture,– TRT–Lighting,–and–the–purchase–of–Portland– Lighting–Ltd–in–Walsall,–West–Midlands.– More detail–will–be–given–on–these– investments–later–in–the–report. Export–sales–excluding–the–previous–sizeable– contribution–from–Mackwell–Electronics–Ltd– increased–47%–during–the–financial–year–in– question.–Thorlux–contributed–a–42%–increase– with–notable–“one–off”–order–contributions– from–Solite–Europe–Ltd–and–Compact– Lighting–Ltd. The–financial–performance–outlined–at–the– beginning–of–this–report–allows–your–Board– to recommend–a–final–dividend–of–14.6p–per– share–(2011:–13.3p)–which–together–with–the– interim–dividend–paid–in–April–2012–makes– a total–dividend–for–the–year–of–19.4p– (2011: 17.6p)–an–increase–of–10%. The–financial–year–ended–30–June–2012– provided–your–company–with–revenue– of £55.6m–being–an–increase–on–the– corresponding–period–of–5%.–Operating–profit– increased–to–£11.9m–which–combined–with–an– increase–in–net–financial–income–resulted–in–a– group–profit–before–tax–expense–of–£12.7m,– up–9%–compared–to–the–2010/2011–figure. The–above–represents–the–results–of–our– continuing–operations–and–excludes–the– profit–on–sale–of–Mackwell–Electronics–Ltd–and– any–contribution–prior–to–the–business–leaving– the–group–in–December–2011. A–5%–rise–in–operating–profit–is–perhaps– not what–some–commentators–may–have– expected–looking–at–our–half–year–figures.– Times–are–strange,–however,–and–some–of– our subsidiaries–as–well–as–our–largest–firm,– Thorlux,–experienced–a–noticeable–downturn– in–orders–during–May–and–June–2012,–the–two– final–months–of–our–financial–year–and–those– which–normally–provide–the–“fruit–on–the– sideboard”–in–the–way–of–a–good–finale–to– the year. The–reasons–for–this–occurrence–are–not–clear– especially–as–the–first–two–months–of–the–new– financial–year,–July–and–August,–have–seen– trading–for–those–companies–affected,–return– to–the–levels–of–last–year.–Indeed,–the–recently– published–UK–Manufacturing–Purchasing– Managers–Index–which–had–been–falling–– in–recent–months,–showed–a–sharp–rise–in– August–and–somewhat–correlates–with–our– experiences.–Elements–within–the–group–– have–also–reported–a–notable–slowdown–in– business–from–the–areas–affected–by–the– Olympic–Games. A B Thorpe Chairman “ 5% is, however, 5% and marks another group record operating profit.” i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_1-17_V6.indd 5 11/10/2012 12:33 06 FW Thorpe Plc Annual Report and Accounts 2012 Business Review cHAiRmAn’s sTATemenT conTinued “ Continuing investment in design and introduction of new products, the bulk of which are for the LED light source” Thorlux Lighting Industrial–and–commercial–lighting–systems– maker,–Thorlux,–entered–the–financial–year– with–a–healthy–backlog–of–orders.–This–and– ongoing–business–resulted–in–a–busy–first–– half–after–which,–however,–orders–slowed– marginally–followed–by–a–dip–in–May–and–June– 2012.–This–phenomenon–within–the–group– was–most–noticed–at–Thorlux–which,–as– mentioned–earlier,–is–now–trading–at–levels– akin–to–last–year. Notwithstanding–the–continuing–investment– in–design–and–introduction–of–new–products,– the–bulk–of–which–are–for–the–LED–light–source,– the–main–investment–at–Thorlux–has–been–the– actual–installation–of–the–£1m–sheet–metal– laser–cutting–and–punching–machine.– The machine–which–takes–up–a–similar–space– as–a–single–tennis–court,–punches–holes–in– sheet–metal–to–the–shape–of–the–individual– tool–selected–for–the–particular–punching– stroke.–This–part–of–the–operation–is–the–same– as–with–other–existing–similar–machines– at Thorlux,–except–that–it–is–much–quicker.– The laser–cutting–function–allows–the–cutting– of–shapes–in–the–sheet–metal–without–the– need–for–expensive–tooling;–this–latter– function–means–that–sheet–metal–blanks– with complicated–profiles–can–be–produced– on–a–“one–stop–shop”–basis–on–this–machine.– In addition–a–finished–component–picking– and–stacking–facility–negates–the–need–for– manual–separation–and–stacking–of– finished profiles. The–year–2010/11–severely–strained–current– manufacturing–capacity–and–so–to–free– further–manufacturing–space–in–the–required– areas,–Thorlux–will–be–building–a–new–2,400– square–metre–high–roof–warehouse–on– existing–spare–land–adjacent–to–the–main– factory.–The–new–facility–will–house–some–90%– more–finished–goods–per–square–metre–than– the–current–facility–and–be–equipped–with– more–appropriate–product–picking– equipment–than–currently–installed.– The–export–effort–continues–with–an–increase– of–42%–on–last–year.–Virtually–all–areas–have– performed–well–with–a–caveat–that–our–office– in–Munich–though–not–contributing–an– increase–this–year,–has–substantially–modified– its–sales–platform–to–one–which–we–are– confident–will–provide–noticeable–growth– in the–coming–financial–year.– Compact Lighting Ltd Compact–Lighting,–our–Portsmouth–retail– and display–lighting–company,–has–seen–a–flat– year–as–the–sector–as–a–whole–has–not–been– buoyant.–New–sales–staff–brought–in–due–to– the–retirement–of–a–successful–long–running– Sales–Manager–last–year–and–the–imminent– retirement–of–another–have–not–produced– the required–results.–A–new–high–calibre–Sales– Director–has,–therefore,–just–been–engaged– with–a–view–to–improving–the–situation.– Compact–is–continuing–to–follow–the–group– directive–to–increase–its–already–now– significant–range–of–tooled–display–lighting– luminaires.–These–highly–tooled–ranges–of– product–have–played–an–important–role–in– Compact–specification–lighting–during–the– last–financial–year–and–they–will–be–at–the– forefront–of–our–improved–sales–initiative.– Philip Payne Ltd Philip–Payne–Ltd,–the–group’s–manufacturer– of specification–exit–signage,–experienced– a patchy–year–struggling–to–match–last–year’s– volumes–and,–no–doubt,–suffering–from–the– general–reduction–in–construction–activity.– Saying–this,–Payne–still–managed–to–present– a profit–to–sales–ratio–which–would–be– considered–most–satisfactory–for–many– organisations.– Notable–projects–supplied–during–the–year– include–the–provision–of–exit–signage–for–the– Jacobean–Theatre–at–the–Globe–complex–and– exit–lighting–for–the–shell–and–core–areas–of– the Shard–in–London. 015702_FW_Thorpe_1-17_V6.indd 6 11/10/2012 12:33 FW Thorpe Plc Annual Report and Accounts 2012 07 Sugg Lighting Ltd TRT Lighting The future Heritage–lighting–maker–and–refurbisher,– Sugg,–endured–another–fairly–stand-still–year– in–financial–performance–terms–despite– producing,–again,–some–fine–quality–work– such–as–the–manufacture–and–supply–of– exterior–lighting–for–the–Bomber–Command– Memorial–which–included–a–series–of–special– lanterns–mounted–on–bespoke–eight–metre– columns. A–proportion–of–Sugg’s–product–offering–is– the–supply–of–complete–heritage–lanterns–of– traditional–but–fairly–standard–patterns–and– in this–sector–of–the–market–there–are–a– number–of–small–similar–“family-style”–firms– producing–similar–products–and–whose– existence–continues–mainly–due–to–their– small and–parochial–make–up.– It–is–hard–for–Sugg–to–compete–in–this–sector– and–make–the–required–profit,–and–there–is,– therefore,–a–current–project–of–“blue–sky”– thinking–in–regard–to–Sugg–Lighting–and–its– forward–strategy. Solite Europe Ltd A–specialist–in–“clean–room”–lighting,–Solite,– performed–well–in–its–first–year–with–new– Managing–Director–Mr–Phil–Myles.– Solite,–as–with–Compact–Lighting,–has–been– lacking–the–market–penetration–deserved– of its–product–range–and–expertise–and–I–can– report–that,–at–this–time,–a–new–Sales–Director– with–a–deal–of–successful–clean–room–lighting– experience–has–just–been–appointed. Portland Lighting Ltd Portland,–a–specialist–in–external–sign–lighting,– joined–the–group–as–stated–earlier–in–July–2011,– and–so–may–I–take–this–opportunity–to– officially–welcome–Portland–and–Managing– Director–Mr–Andy–Truelove–and–his–team–to– the–group.–The–change–of–ownership–does– not–seem–to–have–dampened–enthusiasm– at Portland–and,–I–am–pleased–to–report,–that– they–have–put–Thorlux,–for–once,–in–number– two–slot–in–regard–to–operational–profit–to– sales–ratio!– Portland,–which–is–based–in–Walsall,–West– Midlands,–makes–lights–for–signs–and,–though– you–may–not–know–it–you–will–be–seeing–their– products–most–days. Initially–a–division–of–Thorlux,–TRT–has–been– established–to–concentrate–on–the–design,– manufacture–and–supply–of–LED–outdoor– lighting–systems.–It–is–currently–in–its–one–year– design–and–establishment–phase.–Thorlux–has– in–recent–years–successfully–concentrated– on commercial–indoor–lighting–systems– somewhat–to–the–detriment–of–its–outdoor– offering–and–the–complexity–of–modern– lighting–renders–it–hard–for–one–company–to– concentrate–100%–on–very–many–aspects–at– the–same–time.– The–inauguration–of–TRT–will–not–only–allow– 100%–group–concentration–on–both–areas– of lighting–but–also–a–move–into–LED–street– lighting,–an–area–new–to–the–group,–and–one– which–is–no–longer–in–the–commodity–sector– due–to–the–shift–over–to–LED–light–sources– for these–applications.– The–almost–new–factory–purchased–for– around–£0.75m–is–close–to–the–group–HQ–in– Redditch–and–has–been–purchased–on–a– 999 year–lease,–a–period–which–is–considered– sufficient–by–the–current–management. Carbon Offsetting Project The–FW–Thorpe–Plc–Carbon–Offsetting–Project– at–Devauden–in–Monmouthshire–has now– 35,000–trees–planted.–Ahead–of–the schedule– required–for–group–carbon–offsetting–but–as– required–to–take–advantage–of–grants– available–from–the–Forestry–Commission– Wales.–In–November–2011–the–company–was– awarded–the–accolade–of–being–the–first– company–to–be–successfully–assessed–to–the– “Woodland–Carbon–Code”–of– Wales. A–press–day–was–held–on–site–during–which– a “celebration–tree”–was–planted–by–Welsh– Minister–of–Environment–and–Sustainability,– Mr–John–Griffiths;–Mr–Jon–Owen–Jones–of– Forestry–Commission–Wales,–and–FW–Thorpe– Plc–Joint–Managing–Director,–Mr–Mike–Allcock. People Once–again–I–would–like–to–thank–all–those– within–FW–Thorpe–Plc–for–their–loyalty–and– hard–work–throughout–this–slightly–up–and– down–year.–I–am–pleased–that–the–company– has–once–again–been–able–to–supply–a–stable– work-place–and–I–would–like–to–express–my– appreciation–for–the–most–cooperative– attitude–shown–by–so–many–and–which– makes–heading–the–group–a–pleasure. In–lighting–terms–the–future–now–definitely– includes–LED–for–general–lighting– applications.–The–amount–of–light–output– from–an–LED–per–watt–of–electricity–can–now– match–or–even–surpass–more–traditional–light– sources–such–as–high–intensity–discharge– or fluorescent–lamps.–That–is–not–to–say,– however,–that–an–LED–lighting–solution– should–be–the–only–consideration,–as–the– “fluorescent–boys”–have–not–been–asleep– to the–challenge.–Fifty–thousand–hour– fluorescent–lamps–are–now–available–at– reasonable–prices–and–these–match–the–life– expectancy–of–an–LED–product. LED–technology–is–currently–expensive–and– although–this–will–change,–conventional– technology–may–still–give–a–better–economic– outcome–when–considering–initial–cost,– energy–savings,–longevity–and–ease–of– maintenance. The–new–technology–has–created–an–entry– point–for–many–new–small–start-up– companies–and–some–users–are–being– tempted–by–the–“pot–of–gold”–in–energy– savings–that–are–possible–using–LED–products.– Unfortunately–the–temptation–of–the–“pot–of– gold”–often–clouds–the–judgement–in–regard– to–the–selection–of–a–quality–supplier.– Behind–an–LED–product–there–are–electronic– circuits–which–have–to–be–designed–properly,– circuit–boards–which–have–to–be–made– properly,–LED–chips–which–have–to–be–placed– and–cooled–properly–otherwise–failures–will– be–frequent–and–a–great–deal–more–costly–to– put–right–than–with–conventional–technology.– Your–company–has–availed–itself–of–the– expertise–in–all–these–areas–and–sees–no– long-term–threat–from–these–new–starters. The–rest–just–depends–on–our–ability–to–sell– and–a–reasonable–market–prevailing. A B Thorpe Chairman 20–September–2012 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_1-17_V6.indd 7 11/10/2012 12:33 08 FW Thorpe Plc Annual Report and Accounts 2012 New–LED–– product–ranges Advanced LED Luminaire Technology In–the–last–six–months,–LEDs–have–developed– significantly–and–sometimes–exceed–the– performance–of–the–best–fluorescent– solutions.–Volume–increases–have–reduced– costs,–making–LEDs–the–ideal–choice–in–many– more–applications. Not–all–LED–solutions–are–the–same,–however,– and–not–all–will–provide–customers–with–long– lasting,–efficient–installations–often–promised– by–some–competitors.–Thorlux–has–invested– heavily–in–technology–to–be–at–the–forefront– of the–industry,–providing–excellent–technical– lighting–solutions.–Thorlux–designs,– manufacturers–and–tests–the–vast–majority– of its–own–LED–electronic–circuits–and–lenses– ––the–latter–for–precise–optical–control. The–company’s–76-year–history,–running–into– thousands–of–years–of–combined–experience,– ensures–every–aspect–of–lighting–a–space–is– carefully–considered–––a–requirement–all–the– more–important–as–system–lifetimes–are–now– expected–to–reach–50,000–to–100,000–hours– or even–more.–Thorlux–carefully–considers– end-of-life–scenarios–––for–example–LED– failures,–solder–joint–failures–and–isolated– component–failures–––to–ensure–new–designs– have–on-going–system–reliability–even–when– individual–components–fail. Solow–LED In–2011/2012–Thorlux–launched–more–new– products–than–ever–before.–Late–in–2012–the– company–will–launch–a–significant–number– of new–products,–several–with–patents– applied–for,–and–all–LED–based.–Thorlux– expects–to–see–significant–growth–in–LED– luminaire–sales–in–2013. Group–technical–capabilities–will–drive– increasing–LED–market–penetration– and increased–revenue–potential–whilst– presenting–a–serious–technical–challenge– to others–in–the–marketplace. 015702_FW_Thorpe_1-17_V6.indd 8 11/10/2012 12:35 FW Thorpe Plc Annual Report and Accounts 2012 09 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A lighting–applications.–They–can–be–switched– on–and–off–without–the–warm-up–time– associated–with–conventional–discharge–light– sources,–and–can–be–dimmed–to–save–energy.– The LED luminaires–use–approximately–half– of–the–energy–required–for–an–equivalent– fluorescent–scheme.– Initial–monitoring–studies–conducted–during– September–2012–indicate–that–the–installation– will–provide–savings–of–approximately–80%– compared–with–LED–luminaires–remaining– on at–full–brightness–all–night. ) A ( t n e r r u C 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Luminaires go to full output when movement is detected Background Security Lighting from dusk until dawn 0 0 0 0 . 0 0 2 0 . 0 0 4 0 . 0 0 6 0 . 0 0 8 0 . 0 0 0 1 . 0 0 2 1 . 0 0 4 1 . 0 0 6 1 . 0 0 8 1 . 0 0 0 2 . 0 0 2 2 . 0 0 0 0 . Smart External Monitored Installation The–car–park–lighting–at–FW–Thorpe’s–head– office–in–Redditch–has–been–upgraded–to– demonstrate–the–savings–that–can–be–made– by–using–the–latest–in–lighting–technology––– a Smart–External–control–system–with–Realta– LED–luminaires. Smart–External–is–an–innovative–control– system–developed–specifically–for–use–with– external–LED–lighting.–It–utilises–the–instant– switching–and–dimming–capability–of–LEDs– to–produce–substantial–energy–savings.– The system–is–configured–so–that–the– luminaires–in the–office–car–park–switch–on– at–a–low–output–level–at–dusk–and–remain–on– at–that–level–until–dawn–to–provide–security– lighting.–If a person–drives–or–walks–into–the– car–park,–the–luminaires–go–to–full–output–then– dim–down–again–five–minutes–after–the–last– movement–detection.–This–is–a–convenient– feature–for–early–starters–and–those–working– late,–and–it–also–deters–intruders.– Realta–LED–luminaires–have–been–installed– to–reduce–energy–consumption,–improve– the–lighting–level–and–improve–the–quality– of–light,–providing–better–security.–LEDs–offer– very–long–life–and–are–ideally–suited–to–exterior– Luminaires go to full output when movement is detected 0.7 0.6 0.5 0.4 ) A ( t n e r r u C 0.3 015702_FW_Thorpe_1-17_V6.indd 9 11/10/2012 12:36 0.2 0.1 0 0 0 . 0 0 Background Security Lighting from dusk until dawn 0 0 . 2 0 0 0 . 4 0 0 0 . 6 0 0 0 . 8 0 0 0 . 0 1 0 0 . 2 1 0 0 . 4 1 0 0 . 6 1 0 0 . 8 1 0 0 . 0 2 0 0 . 2 2 0 0 . 0 0 10 FW Thorpe Plc Annual Report and Accounts 2012 TRT Lighting TRT–(Thorlux–Road–and–Tunnel)–Lighting,– an independent–specialist–division–which–has– evolved–from–Thorlux–Lighting,–is–the–latest– venture–within–the–FW–Thorpe–Plc–group.– Building–on–76–years–of–lighting–experience,– TRT–is–dedicated–to–the–design,–manufacture– and–supply–of–LED–road–and–tunnel– luminaires.–The–target–for–TRT–is–to–produce– quality,–efficient,–stylish,–high–performance– LED–products–that–are–manufactured–in– the UK. Historically,–Thorlux–supplied–products–to– many–major–road–tunnel–projects–within– the UK–and–the–Far–East,–with–a–global– supply in–excess–of–30,000–luminaires.– With this–specialist–knowledge,–TRT–can– provide–unique–tunnel–lighting–and–control– systems–using–the–Scanlight–DALI–based– lighting–control–system.– The–group–has–invested–in–a–new–facility,– a few–miles–from–Thorlux’s–main– manufacturing–site,–to–enable–TRT–to– concentrate–on–the–fast-track–development– of–new–products–and–control–systems–for– the road–and–tunnel–lighting–market.– TRT–is–developing–a–range–of–LED-based– road-lighting–luminaires–for–residential– S-lighting-class–and–up–to–ME3-lighting-class– roads.–The–products–take–full–advantage– of LED–technology–by–providing–instant– white–light,–reduced–running–costs–and–long– lifetimes,–promoting–minimum–maintenance.– Additional–road–lighting–controls,–via–some– of the–latest–command–and–monitoring– systems–(CMSs),–will–provide–enhanced–user– benefits–such–as–lamp–failure–feedback–and– operational–statistics,–while–optimising– energy–usage–and–reducing–the–carbon– footprint. The–new–TRT–premises,–currently–being– used for–the–initial–design–and–development– phase,–will–shortly–be–furnished–with–an– interactive–showroom–facility–and–a– production–capability. 015702_FW_Thorpe_1-17_V6.indd 10 11/10/2012 12:36 FW Thorpe Plc Annual Report and Accounts 2012 11 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A Factory The–1,000–square–metre–factory–is–close–to– the group’s–main–manufacturing–unit–and– head–office. The–relatively–new–building–will–enable–the– factory–layout–to–be–effective–and–efficient.– Tunnel Luminaires A–very–successful–range,–adopted–from–that–of– Thorlux–Lighting,–provides–extensive–product– lifetimes–and–exceptionally–high–performance– for–the–most–challenging–environments. TRT–has–introduced–LED–variations–of–existing– luminaires.–Also,–a–new–product,–designed– with–LED–technology–at–the–core,–will–soon– be launched. LED Road Luminaires A–range–of–road–luminaires–targeted–at– specific–road–classes–is–in–the–later–stages– of development.– Products–embrace–LED–technology–and– use two–head–sizes–and–numerous–optical– arrays–and–power–ratings.–All–accommodate– the–latest–CMS-based–wireless– communication–systems.– 015702_FW_Thorpe_1-17_V6.indd 11 11/10/2012 12:36 12 FW Thorpe Plc Annual Report and Accounts 2012 Portland Lighting Established–in–1994,–Portland–Lighting–is– among–the–leading–brands–in–the–external– sign–lighting–industry.–Portland–has– differentiated–itself–by–providing–excellent– customer–service–and–continuing– enthusiastically–to–embrace–ever-changing– technology. Together–with–fluorescent–options,–Portland– offers–a–range–of–fully–CE-compliant–sign– lighting–for–all–budgets–and–every–installation.– The–advent–of–LED–technology,–which–has– reduced–energy–consumption–and–enhanced– life–expectancy,–has–given–Portland–the– opportunity–to–enhance–its–product–range.– (For–many–years,–advertising–billboards,– hoardings–and–shop–fronts–have–been– illuminated–using–conventional–tungsten– or fluorescent–light–sources.)–The–LED–Ecolux– trough–light,–with–its–specialist–lens,–now– generates–30%–of–revenue.–Portland–also– offer a–range–of–floodlights–for–signs,–and– its Uni–Bracket–System–for–trough–lighting– provides–a–solution–to–all–fixing–situations. Affiliation–to–FW–Thorpe–Plc–gives–Portland– access–to–the–development–resources–and– expertise–of–the–group–and–affords–new–and– greater–opportunities–to–improve–the– product–portfolio.–After–a–successful–first–year,– Portland–looks–to–develop–its–LED–product– range–further–and–improve–its–export– business. Portland–designs–and–manufactures–all– products–in–a–purpose-built–facility–in–Walsall,– from–where–products–are–distributed.– Portland’s–modern–manufacturing– techniques–and–in-house–powder-coating– plant–enable–a–fast–turnaround–for–standard– and–special–colour–variations.–Raw–materials– are–held–in–stock–and,–following–a–customer’s– order,–products–can–be–cut–to–length–and– powder–coated–to–meet–special–needs,– and then–assembled–and–despatched. Customers–are–from–a–variety–of–business– sectors–including–retail,–brewing,–advertising– and–commercial.–Projects–often–include– rebranding–an–entire–estate–portfolio.–Last– year’s–acquisition–of–Tote–by–Betfred–gave– Portland–the–opportunity–to–help–rebrand– many–of–Tote’s–500–high–street–outlets. 015702_FW_Thorpe_1-17_V6.indd 12 11/10/2012 12:37 FW Thorpe Plc Annual Report and Accounts 2012 13 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A Factory Portland’s–1,300–square–metre–factory– is located–near–the–motorway–network– in Walsall,–West–Midlands. The–purpose-built–facility–includes– an automated–powder-coating–plant. Key Products • –LED–and–fluorescent–trough–lights–for–signs– and–billboards–of–various–dimensions • –Traditional–bullet-style–lights–and–menu– cases–for–the–hospitality–sector • –Decorative–lanterns–and–globe–lights,– as well–as–a–range–of–brackets Ecolux Key features: • –Latest–high–power–chip–technology–gives– 85–lumens–per–watt–output • Over–1,000–lumens–per–metre–of–LED–output • –Only–12.5–watts–per–metre–power– consumption;–energy–saving–of–75%– compared–with–fluorescent • IP67–rating;–50,000–hours–or–more–of–lamp–life 015702_FW_Thorpe_1-17_V6.indd 13 11/10/2012 12:37 14 FW Thorpe Plc Annual Report and Accounts 2012 The–first–site–in–Wales–to– be–certified–against–the– Woodland–Carbon–Code FW–Thorpe–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. MONMOUTH WOLVESNEWTON Oak,–Sweet–Chestnut,–Beech Alder,–Ash Ash,–Field–Maple Oak,–Ash,–Hazel European–Larch,–Ash Douglas–Fir,–Ash River Path Road B4293 MONMOUTH WOLVESNEWTON DEVAUDEN B4293 CHEPSTOW DEVAUDEN CHEPSTOW 015702_FW_Thorpe_1-17_V6.indd 14 11/10/2012 12:38 FW Thorpe Plc Annual Report and Accounts 2012 15 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A The–project–has–been–designed–and–is– managed–by–a–silviculturalist–(an–expert– in the development–and–management–of– forests).–The–woodland–has–the–backing– of the–Forestry–Commission–Wales–and–is– the first–site–in–Wales–to–meet–the–Woodland– Carbon–Code,–a–voluntary–standard–for– woodland–creation–projects–in–the–UK– to monitor–and–assess–claims–about–the– CO2 sequestered. www.forestry.gov.uk/carboncode FW–Thorpe–has–chosen–to–plant–trees.– Why trees?–Trees–and–other–plants–absorb– CO2 during–photosynthesis.–One–tree– grown to–maturity–in–open–space–can– absorb approximately–1–tonne–of–CO2–over– its lifetime.–A–forest–covering–many–acres– can effectively–lock–up–CO2,–creating–a– carbon sink. On–215–acres–of–land–in–Cwm–Fagor,–near– Devauden–in–Monmouthshire,–FW–Thorpe– plans–to–plant–enough–trees–to–offset–group– emissions–each–year.–Between–2009–and–2012,– a–total–of–35,000–trees–have–been–planted.– Native–broadleaf–species–will–maximise–the– potential–of–the–site–and–link–up–adjoining– ancient–woodlands,–improving–the–local– environment.–Sustainable–forest– management–will–ensure–that–the–trees–thrive– and–are–harvested–at–appropriate–times–to–be– used–in–wood-related–products,–ensuring–that– the–carbon–is–held–within–the–wood–well–past– the–lifetime–of–the–tree. left: Jon–Owen–Jones–––(Forestry–commission’s– Commissioner–for–Wales),–middle:–John–Griffiths– (Minister–for–Environment–and–Sustainable– Development),–Right:–Mike–Allcock–––(Managing– Director–of–Thorlux–Lighting). 015702_FW_Thorpe_1-17_V6.indd 15 11/10/2012 12:38 16 FW Thorpe Plc Annual Report and Accounts 2012 GoveRnAnce diRecToRs mike Allcock Joint Group chief executive and managing director, Thorlux lighting 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,– Managing–Director–of–Thorlux–Lighting– in 2003–and–Joint–Group–Chief–Executive– in 2010.–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. Tony cooper manufacturing director, Thorlux lighting 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. Andrew Thorpe chairman and Joint Group chief executive 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. craig muncaster financial director and company secretary After–graduating–in–Business– Administration,–Craig–qualified–as–a– Chartered–Management–Accountant– in 2000.–He–has–spent–time–in–the– manufacturing–and–engineering–sectors,– more–recently–as–UK–Financial–Director–for– Durr,–which–included–a–number–of– overseas–ventures–and–projects–for–the– wider–group. david Taylor managing director, philip payne David–joined–FW–Thorpe–Plc–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. 015702_FW_Thorpe_1-17_V6.indd 16 11/10/2012 12:39 FW Thorpe Plc Annual Report and Accounts 2012 17 peter mason non-executive director 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–Group–in–1987–as–Finance– Director.–He–became–Joint–Chief–Executive– in–July–2000.–He–became–a non-executive– director–in–June–2010,–and is the–Chairman– of–the–remuneration–committee. ian Thorpe non-executive director 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. colin Brangwin non-executive director After–joining–the–company–in–1963,–Colin– 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. Nominated Adviser n+1 Brewin 12–Smithfield–Street, London–EC1A–9BD Registrars equiniti Aspect–House,–Spencer–Road, Lancing–BN99–6DA company information Registered Office Merse–Road,–North–Moons–Moat, Redditch,–Worcestershire–– B98–9HH Registered No. F–W–Thorpe–Plc–is–registered–in– England and Wales–No.–317886 Advisers Auditors pricewaterhousecoopers llp Cornwall–Court,– 19 Cornwall Street, Birmingham–B3–2DT Bankers lloyds TsB Church–Green–East,–Redditch, Worcestershire–B98–8BZ Solicitors martineau No–1–Colmore–Square, Birmingham–B4–6AA Websites www.fwthorpe.co.uk www.thorlux.com www.thorluxdesign.com www.thorlux.com.au www.thorlux.de www.thorlux.ie www.thorlux.es www.thorlux.se www.compact-lighting.co.uk www.philippayne.co.uk www.solite-europe.com www.sugglighting.co.uk www.portlandlighting.co.uk www.trtlighting.co.uk i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_1-17_V6.indd 17 11/10/2012 12:39 18 FW Thorpe Plc Annual Report and Accounts 2012 GOVERNANCE REPORT OF THE DIRECTORS GOVERNANCE The directors have the pleasure in submitting their annual report and the audited consolidated financial statements of the group and the company for the year ended 30 June 2012. Principal activity and business review 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 A review of the business and future developments is included in the Chairman’s statement on pages 5 to 7. Key performance indicators The directors consider the main financial key performance indicators (KPIs) to be those disclosed within page 1 of the financial highlights. The two most important KPIs to the business are turnover 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. Principal risks and uncertainties We have detailed below what we consider to be the principal risks and uncertainties to the business, and how we seek to manage and mitigate these risks. The group’s revenue and profit could be affected by spending reductions and inflationary pressures, particularly concerning the current global economic challenges. Adverse economic conditions can defer or reduce capital investment plans which our products are supplied into and are key sources of revenue for the group. We seek to manage and mitigate these risks by ensuring we have a broad range of customers in differing sectors, and also ensuring we offer high quality, technically advanced products, to differentiate the group from competitors. In addition, we actively seek to identify new opportunities to ensure we maximise our potential of winning new business. Changes in government policy, laws and regulation are constantly evolving, with continuing pressures on government spending plans. Reductions in spending and changing policy increases the risk to our order book; we have sought and 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. The group operates within a competitive environment with threats from existing competitors, potential new entrants and the continued evolution of existing technologies within the lighting industry. The group seeks to minimise these risks by offering innovative products and service solutions. We seek to manage and mitigate these risks by offering technologically advanced products to enable us to differentiate ourselves from our competitors, investing in our research and development activities to produce new and evolving product ranges for the future, to maintain and enhance our market position. The financial risks which impact the company are covered in the following paragraphs. 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 loss of market share from lack of competitiveness. 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. The group offers credit terms to the majority of its customers and this activity carries financial risks of default and slow payment. There is a credit policy, which includes an assessment of the risk of bad debt and management of higher risk customers. The group has underwritten a significant part of its customer debt risk with a credit insurance policy. Details of other risk management procedures are included within the internal control section of this report. 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 which 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 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 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 2012 or 30 June 2011. 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. 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 Creditor payment policy environment for all employees consistent with the requirements The group’s policy concerning the payment of its trade creditors 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 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 abilities, disabled people enjoy the same career prospects as other month following the month in which delivery of goods or services employees, and if employees become disabled every effort is made is made. Where reasonable settlement discount terms are offered to ensure their continued employment, with appropriate training for early payment, these terms are usually taken up. The number where necessary. of days represented by the company’s year end trade payables is Policies for recruiting employees are designed to ensure equal opportunities irrespective of colour, ethnic or national origin, nationality, sex or marital status. Pension scheme position and funding The pension scheme position as shown in the balance sheet remains in surplus although there has been a decline during the year, which is primarily due to changes in actuarial assumptions. This may continue to adversely affect the surplus. A triennial actuarial valuation at 30 June 2012 is currently in progress. Following the previous valuation at 30 June 2009, a funding level 44 (2011: 42). 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 £1,052,000 on capitalised development costs which includes internal labour. for the future has been agreed between the trustees of the scheme Property, plant and equipment and the directors of the company. The directors consider it unlikely The directors are of the opinion that the market value of the that any changes to the present funding levels will have any freehold land and buildings is in excess of their net book value. significant effect on the strength of the company’s balance sheet. Whilst it is considered that the market value is significantly greater Results and dividends The results for the year are set out in detail on page 27. On 8 May 2012 the company paid an interim dividend of 4.6p per share (2011: 4.3p) amounting to £563,000 (2011: £504,000). A final dividend of 14.6p (2011: 13.3p) per ordinary share is proposed amounting to £1,712,000 (2011: £1,559,000) and, if approved, will be paid on 22 November 2012. Total dividends paid during the year amounted to £2,122,000 in aggregate (2011: £1,981,000). Directors on page 16. than the net book value for many of the group’s properties as a result of being acquired between six months and 23 years ago, management consider that undertaking formal valuation exercises would be costly for limited value and consequently no formal exercise has been undertaken. Charitable gifts During the year the group gave £21,910 (2011: £4,714) for charitable purposes. This is made up of donations to UK charities for children’s welfare of £2,640, cancer care of £70, healthcare of £150, emergency aid of £150, armed forces welfare of £17,500 and local causes of £1,400. Substantial shareholdings The directors of the company at the date of this report are set out The directors retiring by rotation are A B Thorpe, M Allcock and C the following interests in 3% or more of the issued share capital, M Brangwin who, being eligible, offer themselves for re-election. excluding holdings of directors: At 12 October 2012 the company had received notification of The contracts for A B Thorpe and M Allcock are terminable on 24 months’ notice. C M Brangwin does not have a service FMR LLC E G Thorpe 636,000 shares (5.3%) 655,698 shares (5.5%) contract with the company. Directors’ share interests The details of the directors’ share interests are set out in the Directors’ remuneration report on pages 22 to 24. 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. Statement on the provision of information to auditors Each of the directors confirms that, as far as he is aware, there is no relevant audit information of which the group’s auditors are unaware, and that he has taken all the steps he ought to have as a director to make himself aware of any relevant audit information, and to establish that the auditors are aware of that information. The above is in accordance with the provisions of section 418 of the Companies Act 2006. 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. 015702_FW_Thorpe_18-68.indd 18 10/10/2012 15:49 GOVERNANCE REPORT OF THE DIRECTORS The directors have the pleasure in submitting their annual report enhance our market position. The financial risks which impact the and the audited consolidated financial statements of the group company are covered in the following paragraphs. and the company for the year ended 30 June 2012. Principal activity and business review The main activity of the group continues to be the design, 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 loss of market share from lack of competitiveness. manufacture and supply of professional lighting equipment. The group has financial risks and seeks to minimise and manage Each company within the group operates in a different market these by incorporating controls into key functions as part of the of the lighting sector. Business review A review of the business and future developments is included in the Chairman’s statement on pages 5 to 7. normal business operation. The group offers credit terms to the majority of its customers and this activity carries financial risks of default and slow payment. There is a credit policy, which includes an assessment of the risk of bad debt and management of higher risk customers. The group has underwritten a significant part of its customer debt risk with a credit Key performance indicators The directors consider the main financial key performance insurance policy. indicators (KPIs) to be those disclosed within page 1 of the financial Details of other risk management procedures are included within highlights. The two most important KPIs to the business are the internal control section of this report. turnover 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 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 which are maturing on a rolling cycle in order to meet regular business payments with a margin monitored regularly at local and group Board level, during the year for larger regular and one-off payments as well as seasonal the majority of objectives were achieved or substantially achieved. variation in cash requirements. Principal risks and uncertainties We have detailed below what we consider to be the principal risks and uncertainties to the business, and how we seek to manage and mitigate these risks. 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 and Euros. The activities of buying and selling in foreign currency are broadly matched with currencies bought and sold as required in order The group’s revenue and profit could be affected by spending to minimise currency exposures. Larger exposures would be reductions and inflationary pressures, particularly concerning the hedged in order to reduce the risk of adverse exchange rate current global economic challenges. Adverse economic conditions movement. There were no currency hedging derivatives in place can defer or reduce capital investment plans which our products at 30 June 2012 or 30 June 2011. are supplied into and are key sources of revenue for the group. We seek to manage and mitigate these risks by ensuring we have a Employee policies broad range of customers in differing sectors, and also ensuring we Employees are kept informed of matters of concern to them offer high quality, technically advanced products, to differentiate as employees by publication and distribution of a company the group from competitors. In addition, we actively seek to identify newsletter and other notices, or by specially convened meetings. new opportunities to ensure we maximise our potential of winning new business. Committees representing the different groups of employees meet regularly to ensure the views of employees are taken into account Changes in government policy, laws and regulation are constantly in making decisions that are likely to affect their interests. evolving, with continuing pressures on government spending plans. Reductions in spending and changing policy increases the risk to our order book; we have sought and 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. The group operates within a competitive environment with threats from existing competitors, potential new entrants and the continued evolution of existing technologies within the lighting industry. The group seeks to minimise these risks by offering innovative products and service solutions. We seek to manage and mitigate these risks by offering technologically advanced products to enable us to differentiate ourselves from our competitors, investing in our research and development activities to produce new and evolving product ranges for the future, to maintain and 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. FW Thorpe Plc Annual Report and Accounts 2012 19 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. Pension scheme position and funding The pension scheme position as shown in the balance sheet remains in surplus although there has been a decline during the year, which is primarily due to changes in actuarial assumptions. This may continue to adversely affect the surplus. A triennial actuarial valuation at 30 June 2012 is currently in progress. Following the previous valuation at 30 June 2009, 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 balance sheet. Results and dividends The results for the year are set out in detail on page 27. On 8 May 2012 the company paid an interim dividend of 4.6p per share (2011: 4.3p) amounting to £563,000 (2011: £504,000). A final dividend of 14.6p (2011: 13.3p) per ordinary share is proposed amounting to £1,712,000 (2011: £1,559,000) and, if approved, will be paid on 22 November 2012. Total dividends paid during the year amounted to £2,122,000 in aggregate (2011: £1,981,000). Directors The directors of the company at the date of this report are set out on page 16. The directors retiring by rotation are A B Thorpe, M Allcock and C M Brangwin who, being eligible, offer themselves for re-election. The contracts for A B Thorpe and M Allcock are terminable on 24 months’ notice. C M Brangwin does not have a service contract with the company. Directors’ share interests The details of the directors’ share interests are set out in the Directors’ remuneration report on pages 22 to 24. 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. 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 year end trade payables is 44 (2011: 42). 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 £1,052,000 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. Whilst 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 six months and 23 years ago, management consider that undertaking formal valuation exercises would be costly for limited value and consequently no formal exercise has been undertaken. Charitable gifts During the year the group gave £21,910 (2011: £4,714) for charitable purposes. This is made up of donations to UK charities for children’s welfare of £2,640, cancer care of £70, healthcare of £150, emergency aid of £150, armed forces welfare of £17,500 and local causes of £1,400. Substantial shareholdings At 12 October 2012 the company had received notification of the following interests in 3% or more of the issued share capital, excluding holdings of directors: FMR LLC E G Thorpe 636,000 shares (5.3%) 655,698 shares (5.5%) Statement on the provision of information to auditors Each of the directors confirms that, as far as he is aware, there is no relevant audit information of which the group’s auditors are unaware, and that he has taken all the steps he ought to have as a director to make himself aware of any relevant audit information, and to establish that the auditors are aware of that information. The above is in accordance with the provisions of section 418 of the Companies Act 2006. 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. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 19 10/10/2012 15:49 20 FW Thorpe Plc Annual Report and Accounts 2012 GOVERNANCE REPORT OF THE DIRECTORS CONTINUED GOVERNANCE Directors’ authority to issue shares There is no longer a requirement to obtain 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 571 of the Companies Act 2006 to disapply generally the statutory pre-emption rights conferred by section 561 of the Companies Act 2006. Ordinary resolution number 8 would give the directors the authority to allot shares in the company or to grant rights to subscribe for, or to convert any security into, shares in the company up to an aggregate nominal amount of £310,644 (which represents approximately 26% of the company’s issued ordinary shares, excluding treasury shares, as at 12 October 2012). Special resolution number 9 would further allow the directors to allot equity securities or sell treasury shares for cash without first offering them to existing shareholders, in proportion to existing holdings, up to the same maximum nominal amount of £310,644 (which represents approximately 26% of the company’s issued ordinary shares, excluding treasury shares) as at 12 October 2012. This authority would, however, only allow the directors to do so in connection with a pre-emptive rights issue and, in any other case, the maximum nominal amount of equity securities which may be so allotted is £58,618 (which represents approximately 5% of the company’s issued ordinary shares (excluding treasury shares) as at 12 October 2012. These authorities, if approved, would expire at the conclusion of the next Annual General Meeting, save that the authority relating to section 561 would expire 15 months after being passed, if earlier. Purchase of own shares Resolution number 10 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 1,189,356 ordinary shares representing 10% of the company’s issued ordinary share capital at 12 October 2012 and a nominal value of £118,936. 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 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 2013. 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 As a company whose shares are traded on the Alternative Investment Market of the London Stock Exchange Plc, the company is not required to comply with the Principles of Good Governance and Code of Best Practice (“The UK Corporate Governance Code”, or the “Code”). However, the Board supports the standards required by the Code and fully endorses the principles of openness, integrity and accountability of the Code. The directors consider that the company applies 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 contract for A B Thorpe and M Allcock exceeds one year. • The pensionable salary includes 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. • There are no independent Board members. 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. 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 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: P D Mason 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 22 to 24. 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. Where there is a requirement for a senior personnel or subsidiary Going concern board appointment a sub-committee is formed. Any appointment The directors confirm that they are satisfied that the group and to the group board would involve all board members in the company have adequate resources, with £14.1m cash and £17.1m 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. By order of the Board 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. C Muncaster Company Secretary 12 October 2012 Registered Office: Merse Road North Moons Moat Redditch Worcestershire B98 9HH Company Registration Number: 317886 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. 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. 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 non-compliance has been 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. 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. 015702_FW_Thorpe_18-68.indd 20 10/10/2012 15:49 GOVERNANCE REPORT OF THE DIRECTORS CONTINUED Directors’ authority to issue shares There is no longer a requirement to obtain the consent of shareholders to each issue by the company of equity share The authority will lapse on the date of the Annual General Meeting of the company in 2013. However, in order to maintain the Board’s flexibility of action it is envisaged that it will be renewed at future capital for cash made otherwise than to existing shareholders in Annual General Meetings. proportion to their existing shareholdings. This relaxation is subject to the company obtaining the authority of shareholders under Corporate governance section 571 of the Companies Act 2006 to disapply generally the As a company whose shares are traded on the Alternative statutory pre-emption rights conferred by section 561 of the Investment Market of the London Stock Exchange Plc, the Companies Act 2006. Ordinary resolution number 8 would give the company is not required to comply with the Principles of Good directors the authority to allot shares in the company or to grant Governance and Code of Best Practice (“The UK Corporate rights to subscribe for, or to convert any security into, shares in the Governance Code”, or the “Code”). However, the Board supports company up to an aggregate nominal amount of £310,644 (which the standards required by the Code and fully endorses the represents approximately 26% of the company’s issued ordinary principles of openness, integrity and accountability of the Code. shares, excluding treasury shares, as at 12 October 2012). Special The directors consider that the company applies the principles of resolution number 9 would further allow the directors to allot best practice with the exception of the matters listed below. equity securities or sell treasury shares for cash without first offering them to existing shareholders, in proportion to existing holdings, • The Board does not have an independent audit committee. up to the same maximum nominal amount of £310,644 (which • At least half the Board does not comprise independent represents approximately 26% of the company’s issued ordinary non-executive directors and the Board has not appointed shares, excluding treasury shares) as at 12 October 2012. a senior independent director. This authority would, however, only allow the directors to do so in connection with a pre-emptive rights issue and, in any other case, the maximum nominal amount of equity securities which may be so allotted is £58,618 (which represents approximately 5% of the company’s issued ordinary shares (excluding treasury shares) as at 12 October 2012. • The terminable period of the service contract for A B Thorpe and M Allcock exceeds one year. • The pensionable salary includes profit bonus for those directors who are members of the defined benefit scheme. • The Board has combined the roles of Joint Chief Executive These authorities, if approved, would expire at the conclusion of and Chairman. the next Annual General Meeting, save that the authority relating • There are no independent Board members. to section 561 would expire 15 months after being passed, if earlier. Purchase of own shares Resolution number 10 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 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. 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 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: The proposed authority will be limited by the terms of the special resolution to the purchase of 1,189,356 ordinary shares representing 10% of the company’s issued ordinary share capital at P D Mason 12 October 2012 and a nominal value of £118,936. Non-executive director and Chairman of the committee. The minimum price per ordinary share payable by the company I A Thorpe (exclusive of expenses) will be 10p. The maximum to be paid will Non-executive director. 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 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 22 to 24. The auditors have direct access to all members of the Board and attend and present their reports at appropriate Board meetings. or transfer them out of treasury or cancel them. The maximum The Board considers, at least annually, the relationships and number of shares and the permitted price range are stated in order fees in place with the auditors to confirm their independence to comply with statutory and Stock Exchange requirements and is maintained. should not be taken as representative of the number of shares (if any) which may be purchased, or the terms of such a purchase. FW Thorpe Plc Annual Report and Accounts 2012 21 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. Going concern The directors confirm that they are satisfied that the group and company have adequate resources, with £14.1m cash and £17.1m 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. By order of the Board C Muncaster Company Secretary 12 October 2012 Registered Office: Merse Road North Moons Moat Redditch Worcestershire B98 9HH Company Registration Number: 317886 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. 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. 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 non-compliance has been 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. 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. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 21 10/10/2012 15:49 22 FW Thorpe Plc Annual Report and Accounts 2012 GOVERNANCE DIRECTORS’ REMUNERATION REPORT Remuneration policy – 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 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. A B Thorpe and M Allcock have service contracts terminable on two years’ notice. These contracts do not comply with the Code because they are in excess of one year. A M Cooper and D Taylor have service contracts terminable on one year’s notice. C Muncaster has a service contract which is terminable on six months’ notice. P D Mason, C M Brangwin 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 Plc AIM All Share FTSE Fledgling 29/6/08 29/6/09 29/6/10 29/6/11 29/6/12 The Board has prepared this report to the shareholders, taking into account the provisions in the UK Corporate Governance Code and sections 420 to 422 of the Companies Act 2006. 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) 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 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. 200 150 100 50 0 29/6/07 GOVERNANCE Directors’ emoluments Executive directors A B Thorpe M Allcock D Taylor A M Cooper C Muncaster C M Brangwin I A Thorpe P D Mason Total emoluments D A Dimeloe – resigned 2 December 2011 N A Brangwin – resigned 2 December 2011 Non-executive directors 2012 Salary/fees £’000 2012 Bonus £’000 2012 Benefits £’000 2012 Total £’000 2011 Total £’000 178 178 78 89 89 46 27 24 24 24 89 89 30 62 75 – – – – – 25 23 14 11 11 5 4 10 12 4 292 290 122 162 175 51 31 34 36 28 285 272 118 157 156 255 94 34 35 114 757 345 119 1,221 1,520 In addition to the above emoluments, payments were made to D A Dimeloe of £48,000 and N A Brangwin of £5,000 in respect of compensation for loss of office. The total directors’ emoluments including compensation for loss of office amounted to £1,274,000. Directors’ pension arrangements M Allcock, A M Cooper and D Taylor are members of the defined The defined benefit section aims to provide a maximum pension contribution section of the FW Thorpe Retirement Benefits Scheme. of two-thirds of pensionable salary at normal retirement date. M Allcock and D Taylor have a final salary guarantee as they were M Allcock’s and D Taylor’s pensionable salary includes an average previously members of the defined benefit section. C Muncaster of the previous three years’ profit bonus. These definitions do not has a personal pension to which the company contributes. comply with the Code; however, the committee believes that they C M Brangwin, 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, 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. 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 four times pensionable salary. In addition, the defined benefit scheme members are entitled to a spouse’s pension on death. The following directors, excluding those classified as pensioners, had 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. M Allcock D Taylor D A Dimeloe N A Brangwin A M Cooper Value of accrued Director’s contributions Change in value of accrued Age at Normal 30 June 2012 year 30 June 2011 year end pension age £pa £ £pa pension at during the pension since 44 50 65 65 61,005 40,112 8,650 4,848 5,364 6,439 2012 £ 6,304 1,291 4,320 2011 £ 14,688 3,008 4,000 015702_FW_Thorpe_18-68.indd 22 10/10/2012 15:49 GOVERNANCE DIRECTORS’ REMUNERATION REPORT The Board has prepared this report to the shareholders, taking Remuneration policy – non-executive directors into account the provisions in the UK Corporate Governance Code The Board as a whole determines the remuneration of the and sections 420 to 422 of the Companies Act 2006. The Board non-executive directors. The Board takes into account the has delegated the responsibility for the executive directors’ contribution made and the relative time spent on the company’s remuneration to the remuneration committee. The scope of their affairs. The non-executive directors do not receive bonuses. responsibilities includes the executive directors’ service contracts, Their benefits in kind consist of the provision of health insurance. 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) 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 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. A B Thorpe and M Allcock have service contracts terminable on two years’ notice. These contracts do not comply with the Code because they are in excess of one year. A M Cooper and D Taylor have service contracts terminable on one year’s conflicts of interest arising from cross-directorships or day-to-day notice. C Muncaster has a service contract which is terminable on involvement in running the business. The committee has access six months’ notice. P D Mason, C M Brangwin and I A Thorpe do not to market data when considering the remuneration of the have formal service contracts with the company. executive directors. Remuneration policy – executive directors The graph below shows the comparative data for the FTSE AIM The aim of the committee is to ensure that the executive directors share index and the FTSE Fledgling share index, rebased to 100, are fairly rewarded for their responsibilities and contribution to the as these are considered to be the most appropriate comparative performance of the group. The committee seeks to achieve this indices for the company’s business. with a combination of performance and non-performance related remuneration designed to attract, retain and motivate the directors. Total shareholder return Performance graph FW Thorpe Plc AIM All Share FTSE Fledgling 29/6/07 29/6/08 29/6/09 29/6/10 29/6/11 29/6/12 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. 200 150 100 50 0 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. FW Thorpe Plc Annual Report and Accounts 2012 23 Directors’ emoluments Executive directors A B Thorpe M Allcock D Taylor A M Cooper C Muncaster D A Dimeloe – resigned 2 December 2011 N A Brangwin – resigned 2 December 2011 Non-executive directors C M Brangwin I A Thorpe P D Mason 2012 Salary/fees £’000 2012 Bonus £’000 2012 Benefits £’000 2012 Total £’000 2011 Total £’000 178 178 78 89 89 46 27 24 24 24 89 89 30 62 75 – – – – – 25 23 14 11 11 5 4 10 12 4 292 290 122 162 175 51 31 34 36 28 285 272 118 157 156 255 94 34 35 114 Total emoluments 757 345 119 1,221 1,520 In addition to the above emoluments, payments were made to D A Dimeloe of £48,000 and N A Brangwin of £5,000 in respect of compensation for loss of office. The total directors’ emoluments including compensation for loss of office amounted to £1,274,000. Directors’ pension arrangements M Allcock, A M Cooper and D Taylor are members of the defined contribution section of the FW Thorpe Retirement Benefits Scheme. M Allcock and D Taylor have a final salary guarantee as they were previously members of the defined benefit section. C Muncaster has a personal pension to which the company contributes. C M Brangwin, 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, 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. M Allcock’s and D Taylor’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 four times pensionable salary. In addition, the defined benefit scheme members are entitled to a spouse’s pension on death. The following directors, excluding those classified as pensioners, had accrued entitlements under the defined benefit section of the pension scheme. M Allcock D Taylor Value of accrued pension at 30 June 2012 £pa Director’s contributions during the year £ Change in value of accrued pension since 30 June 2011 £pa Age at year end Normal pension age 44 50 65 65 61,005 40,112 8,650 4,848 5,364 6,439 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 N A Brangwin A M Cooper 2012 £ 6,304 1,291 4,320 2011 £ 14,688 3,008 4,000 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 23 10/10/2012 15:49 24 FW Thorpe Plc Annual Report and Accounts 2012 GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED GOVERNANCE STATEMENT OF DIRECTORS’ RESPONSIBILITIES C Muncaster has a personal pension which is not part of the company scheme, and the following contributions have been made during the year. and regulations. The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law C Muncaster 2012 £ 2011 £ 7,828 8,480 Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group and parent 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 the affairs of the group and the company and of the profit or loss of the group for that period. Directors’ shareholdings The directors listed below were in office during the year. Directors’ interests in the share capital of the company at 30 June 2012 and 1 July 2011 were as follows: Executive directors A B Thorpe M Allcock D Taylor A M Cooper C Muncaster Non-executive directors C M Brangwin I A Thorpe P D Mason Ordinary shares of 10p Beneficial 2012 2011 2,789,984 2,805,841 11,400 5,022 8,400 – 11,400 5,022 8,400 – 773,155 773,155 2,504,712 2,504,712 165,137 162,637 In addition, C M Brangwin has a joint non-beneficial interest in 170,000 shares (2011: 170,000 shares). The market price of the company’s shares at the beginning and end of the financial year was 797.5p and 1035p respectively and the range of market prices during the year was from 749p to 1090p. 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 2012 to 12 October 2012. Approved by the Board and signed on its behalf by: C Muncaster Company Secretary 12 October 2012 015702_FW_Thorpe_18-68.indd 24 10/10/2012 15:49 In preparing those accounts, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether applicable IFRS’s as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statement; business. • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with the Companies Act 2006. 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. 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. By order of the Board C Muncaster Company Secretary 12 October 2012 GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED GOVERNANCE STATEMENT OF DIRECTORS’ RESPONSIBILITIES FW Thorpe Plc Annual Report and Accounts 2012 25 The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group and parent 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 the affairs of the group and the 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; • make judgements and accounting estimates that are reasonable and prudent; • state whether applicable IFRS’s as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statement; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with the Companies Act 2006. 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. 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. In addition, C M Brangwin has a joint non-beneficial interest in 170,000 shares (2011: 170,000 shares). The market price of the company’s shares at the beginning and end of the financial year was 797.5p and 1035p respectively and the range of market prices during the year was from 749p to 1090p. 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 2012 to 12 October 2012. Approved by the Board and signed on its behalf by: By order of the Board C Muncaster Company Secretary 12 October 2012 C Muncaster has a personal pension which is not part of the company scheme, and the following contributions have been made during The directors listed below were in office during the year. Directors’ interests in the share capital of the company at 30 June 2012 and 1 July 2012 £ 2011 £ 7,828 8,480 Ordinary shares of 10p Beneficial 2012 2011 2,789,984 2,805,841 11,400 5,022 8,400 – 11,400 5,022 8,400 – 773,155 773,155 2,504,712 2,504,712 162,637 165,137 the year. C Muncaster Directors’ shareholdings 2011 were as follows: Executive directors A B Thorpe M Allcock D Taylor A M Cooper C Muncaster C M Brangwin I A Thorpe P D Mason Non-executive directors C Muncaster Company Secretary 12 October 2012 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 25 10/10/2012 15:49 26 FW Thorpe Plc Annual Report and Accounts 2012 GOVERNANCE INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF FW THORPE PLC ACCOUNTS CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2012 Continuing operations Revenue Cost of sales Gross profit Distribution costs Administrative expenses Operating profit Net finance income Share of loss of joint venture Profit before income tax Income tax expense Profit for the year from continuing operations Profit for the year from discontinued operations* Profit for the year operations. year (expressed in pence per share). Basic and diluted earnings per share – Basic – Diluted – Basic – Diluted – Basic – Diluted Note 2012 £’000 2011 £’000 2 55,559 (30,674) 52,833 (29,635) 24,885 (4,128) (8,907) 23,198 (3,994) (7,952) 11,850 11,252 831 (23) 372 (11) 12,658 (2,718) 11,613 (3,201) 9,940 1,377 8,412 999 11,317 9,411 3 6 32 7 Note 23 23 23 23 23 23 Continuing operations Continuing operations Discontinued operations Discontinued operations Total Total 2012 pence 84.8 84.8 11.7 11.7 96.5 96.5 2011 pence 71.8 71.8 8.5 8.5 80.3 80.3 *Profit for the year from discontinued operations in 2012 includes the exceptional item of profit on sale from disposal of a subsidiary. There is no other income from discontinued Earnings per share from continuing and discontinued operations attributable to the equity holders of the company during the The notes on pages 33 to 64 are an integral part of these consolidated financial statements and parent company financial statements. The company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company income statement. The profit for the parent company for the year was £16,525,000 (2011: £8,376,000) inclusive of exceptional profit on disposal of Mackwell Electronics Limited amounting to £5,578,000. We have audited the group and parent company financial statements (the “financial statements”) of FW Thorpe Plc for the year ended 30 June 2012 which comprise the consolidated income statement, consolidated statement of comprehensive income, consolidated and company balance sheets, consolidated and company statement of changes in equity, consolidated and company statements of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities set out on page 25, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. 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. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 June 2012 and of the group’s profit and group’s and parent company’s cash flows for the year then ended; • the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the report of the directors for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you, if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Andrew Hammond (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Birmingham 12 October 2012 015702_FW_Thorpe_18-68.indd 26 10/10/2012 15:49 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GOVERNANCE FW THORPE PLC ACCOUNTS CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2012 Continuing operations Revenue Cost of sales Gross profit Distribution costs Administrative expenses Operating profit Net finance income Share of loss of joint venture Profit before income tax Income tax expense Profit for the year from continuing operations Profit for the year from discontinued operations* Profit for the year FW Thorpe Plc Annual Report and Accounts 2012 27 Note 2012 £’000 2011 £’000 2 55,559 (30,674) 52,833 (29,635) 3 6 32 7 24,885 (4,128) (8,907) 11,850 831 (23) 12,658 (2,718) 9,940 1,377 23,198 (3,994) (7,952) 11,252 372 (11) 11,613 (3,201) 8,412 999 11,317 9,411 *Profit for the year from discontinued operations in 2012 includes the exceptional item of profit on sale from disposal of a subsidiary. There is no other income from discontinued operations. Earnings per share from continuing and discontinued 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 – Basic – Diluted – Basic – Diluted Continuing operations Continuing operations Discontinued operations Discontinued operations Total Total Note 23 23 23 23 23 23 2012 pence 84.8 84.8 11.7 11.7 96.5 96.5 2011 pence 71.8 71.8 8.5 8.5 80.3 80.3 The notes on pages 33 to 64 are an integral part of these consolidated financial statements and parent company financial statements. The company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company income statement. The profit for the parent company for the year was £16,525,000 (2011: £8,376,000) inclusive of exceptional profit on disposal of Mackwell Electronics Limited amounting to £5,578,000. We have audited the group and parent company financial statements (the “financial statements”) of FW Thorpe Plc for the year ended 30 June 2012 which comprise the consolidated income statement, consolidated statement of comprehensive income, consolidated and company balance sheets, consolidated and company statement of changes in equity, consolidated and company statements of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities set out on page 25, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. 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. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 June 2012 and of the group’s profit and group’s and parent company’s cash flows for the year then ended; • the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the report of the directors for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception in our opinion: from branches not visited by us; or We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you, if, • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Andrew Hammond (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Birmingham 12 October 2012 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 27 10/10/2012 15:49 28 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2012 ACCOUNTS AS AT 30 JUNE 2012 CONSOLIDATED AND COMPANY BALANCE SHEETS Profit for the year: Other comprehensive income Actuarial (loss)/gain on pension scheme Movement on unrecognised pension scheme surplus Movement on associated deferred tax asset relating to the pension scheme Revaluation of available-for-sale financial assets Movement on associated deferred tax Impact of deferred tax rate change Exchange rate movement on investment in joint venture Other comprehensive income for the year, net of tax Total comprehensive income for the year Total comprehensive income attributable to equity shareholders arises from: – Continuing operations – Discontinued operations Note 2012 £’000 2011 £’000 11,317 9,411 30 30 22 22 22 (1,410) 468 – 29 (8) 56 (2) 1,054 (483) (148) 37 (10) (24) (9) (867) 417 10,450 9,828 9,073 1,377 10,450 8,829 999 9,828 All comprehensive income is attributable to the owners of the company. The notes on pages 33 to 64 are an integral part of these consolidated financial statements and parent company financial statements. Other financial assets at fair value through profit or loss Short-term financial assets – deposits Cash and cash equivalents Total current assets (excluding non-current assets and disposal groups held for sale) Non-current assets and disposal groups held for sale Total current liabilities (excluding liabilities directly associated with non-current assets and disposal groups for sale) Liabilities directly associated with non-current assets and disposal groups Assets Non-current assets Property, plant and equipment Intangible assets Investment in subsidiaries Investment property Loans and receivables Investment in joint venture Available-for-sale financial assets Deferred tax assets Current assets Inventories Trade and other receivables Total assets Liabilities Current liabilities Trade and other payables Current tax liabilities held for resale Total current liabilities Net current assets Non-current liabilities Retirement benefit deficit Provisions for liabilities and charges Deferred tax liabilities Total liabilities Net assets Called up share capital Share premium account Capital redemption reserve Retained earnings Total equity Equity attributable to owners of the company Group 2012 £’000 Company 2011 £’000 2012 £’000 2011 £’000 Note 10 9 31 13 29 32 14 22 17 18 19 15 16 29 20 29 30 21 22 24 25 25 23,064 15,947 23,067 15,830 11,204 5,984 – 2,081 1,828 111 1,841 15 11,144 10,942 387 17,108 14,120 53,701 – 53,701 11,109 2,533 – – 1,037 136 1,105 27 11,297 11,377 387 11,616 14,236 48,913 5,823 54,736 10,491 2,502 4,168 2,081 1,828 156 1,841 – 9,257 11,042 387 17,108 14,081 10,429 2,014 1,008 1,037 – 156 1,105 81 9,149 12,116 387 11,616 14,260 51,875 47,528 – – 51,875 47,528 76,765 70,683 74,942 63,358 (7,677) (1,395) (8,199) (1,564) (8,696) (1,121) (10,235) (1,486) (9,072) (9,763) (9,817) (11,721) – (9,072) (1,634) (11,397) – – (9,817) (11,721) 44,629 43,339 42,058 35,807 – (102) (778) – (102) (699) – (102) (723) – (102) (769) (9,952) (12,198) (10,642) (12,592) 66,813 58,485 64,300 50,766 1,189 656 137 1,189 656 137 1,189 656 137 64,831 56,503 62,318 1,189 656 137 48,784 66,813 58,485 64,300 50,766 The notes on pages 33 to 64 form part of these financial statements. The financial statements on pages 27 to 64 were approved by the Board on 12 October 2012 and signed on its behalf by A B Thorpe C Muncaster Company Registration Number: 317886 015702_FW_Thorpe_18-68.indd 28 10/10/2012 15:49 ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2012 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ACCOUNTS CONSOLIDATED AND COMPANY BALANCE SHEETS AS AT 30 JUNE 2012 FW Thorpe Plc Annual Report and Accounts 2012 29 Profit for the year: Other comprehensive income Actuarial (loss)/gain on pension scheme Movement on unrecognised pension scheme surplus Movement on associated deferred tax asset relating to the pension scheme Revaluation of available-for-sale financial assets Movement on associated deferred tax Impact of deferred tax rate change Exchange rate movement on investment in joint venture Other comprehensive income for the year, net of tax Total comprehensive income for the year Total comprehensive income attributable to equity shareholders arises from: – Continuing operations – Discontinued operations All comprehensive income is attributable to the owners of the company. Note 2012 £’000 2011 £’000 11,317 9,411 30 30 22 22 22 (1,410) 468 – 29 (8) 56 (2) (867) 1,054 (483) (148) 37 (10) (24) (9) 417 10,450 9,828 9,073 1,377 10,450 8,829 999 9,828 Assets Non-current assets Property, plant and equipment Intangible assets Investment in subsidiaries Investment property Loans and receivables Investment in joint venture 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 – deposits Cash and cash equivalents Total current assets (excluding non-current assets and disposal groups held for sale) Non-current assets and disposal groups held for sale The notes on pages 33 to 64 are an integral part of these consolidated financial statements and parent company financial statements. Total assets Liabilities Current liabilities Trade and other payables Current tax liabilities Total current liabilities (excluding liabilities directly associated with non-current assets and disposal groups for sale) Liabilities directly associated with non-current assets and disposal groups held for resale Total current liabilities Net current assets Non-current liabilities Retirement benefit deficit Provisions for liabilities and charges Deferred tax liabilities Total liabilities Net assets Equity attributable to owners of the company Called up share capital Share premium account Capital redemption reserve Retained earnings Total equity Group 2012 £’000 2011 £’000 Company 2012 £’000 2011 £’000 Note 10 9 31 13 29 32 14 22 17 18 19 15 16 29 20 29 30 21 22 24 25 25 11,204 5,984 – 2,081 1,828 111 1,841 15 23,064 11,144 10,942 387 17,108 14,120 53,701 – 53,701 11,109 2,533 – 1,037 – 136 1,105 27 15,947 11,297 11,377 387 11,616 14,236 48,913 5,823 54,736 10,491 2,502 4,168 2,081 1,828 156 1,841 – 23,067 9,257 11,042 387 17,108 14,081 51,875 – 51,875 10,429 2,014 1,008 1,037 – 156 1,105 81 15,830 9,149 12,116 387 11,616 14,260 47,528 – 47,528 76,765 70,683 74,942 63,358 (7,677) (1,395) (8,199) (1,564) (8,696) (1,121) (10,235) (1,486) (9,072) (9,763) (9,817) (11,721) – (9,072) (1,634) (11,397) – (9,817) – (11,721) 44,629 43,339 42,058 35,807 – (102) (778) – (102) (699) – (102) (723) – (102) (769) (9,952) (12,198) (10,642) (12,592) 66,813 58,485 64,300 50,766 1,189 656 137 64,831 1,189 656 137 56,503 1,189 656 137 62,318 1,189 656 137 48,784 66,813 58,485 64,300 50,766 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A The notes on pages 33 to 64 form part of these financial statements. The financial statements on pages 27 to 64 were approved by the Board on 12 October 2012 and signed on its behalf by A B Thorpe C Muncaster Company Registration Number: 317886 015702_FW_Thorpe_18-68.indd 29 10/10/2012 15:49 30 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012 ACCOUNTS COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012 Balance at 1 July 2010 Comprehensive income Profit for the year to 30 June 2011 Actuarial gain on pension scheme Movement on unrecognised pension scheme surplus Movement on associated deferred tax asset relating to the pension scheme Revaluation of available-for-sale financial assets Movement on associated deferred tax Impact of deferred tax rate change Exchange rate movement on joint venture Total comprehensive income Transactions with owners Dividends paid to shareholders Total transactions with owners Balance at 30 June 2011 Comprehensive income Profit for the year to 30 June 2012 Actuarial loss on pension scheme Movement on unrecognised pension scheme surplus Revaluation of available-for-sale financial assets Movement on associated deferred tax Impact of deferred tax rate change Exchange rate movement on joint venture Total comprehensive income Transactions with owners Dividends paid to shareholders Total transactions with owners Balance at 30 June 2012 The notes on pages 33 to 64 form part of these financial statements. Note Share capital £’000 1,189 Share premium £’000 Capital redemption reserve £’000 Retained earnings £’000 Total equity £’000 656 137 48,656 50,638 30 30 22 22 30 30 22 22 – – – – – – – – – – – – – – – – – – – – – – – – – – – 9,411 1,054 (483) (148) 37 (10) (24) (9) 9,828 9,411 1,054 (483) (148) 37 (10) (24) (9) 9,828 – – 1,189 – – 656 – – 137 (1,981) (1,981) 56,503 (1,981) (1,981) 58,485 – – – – – – – – – – – – – – – – – – – – – – – – 11,317 (1,410) 468 29 (8) 56 (2) 10,450 11,317 (1,410) 468 29 (8) 56 (2) 10,450 – – 1,189 – – 656 – – 137 (2,122) (2,122) 64,831 (2,122) (2,122) 66,813 Balance at 1 July 2010 Comprehensive income Profit for the year to 30 June 2011 Actuarial gain on pension scheme Movement on unrecognised pension scheme surplus Movement on associated deferred tax asset relating to the pension scheme Revaluation of available-for-sale financial assets Movement on associated deferred tax Impact of deferred tax rate change Exchange rate movement on joint venture Total comprehensive income Transactions with owners Dividends paid to shareholders Total transactions with owners Balance at 30 June 2011 Comprehensive income Profit for the year to 30 June 2012 Actuarial loss on pension scheme Movement on unrecognised pension scheme surplus Revaluation of available-for-sale financial assets Movement on associated deferred tax Impact of deferred tax rate change Total comprehensive income Transactions with owners Dividends paid to shareholders Total transactions with owners Balance at 30 June 2012 Note Share capital £’000 1,189 Share redemption Capital reserve £’000 premium £’000 Retained earnings £’000 Total equity £’000 656 137 41,937 43,919 30 30 22 22 30 30 22 22 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 8,376 1,054 (483) (148) 37 (10) 11 (9) 8,376 1,054 (483) (148) 37 (10) 11 (9) 8,828 8,828 (1,981) (1,981) (1,981) (1,981) 16,525 (1,410) 468 29 (8) 52 16,525 (1,410) 468 29 (8) 52 15,656 15,656 (2,122) (2,122) (2,122) (2,122) 1,189 656 137 48,784 50,766 The notes on pages 33 to 64 form part of these financial statements. 1,189 656 137 62,318 64,300 015702_FW_Thorpe_18-68.indd 30 10/10/2012 15:49 ACCOUNTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012 ACCOUNTS COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012 FW Thorpe Plc Annual Report and Accounts 2012 31 Balance at 1 July 2010 Comprehensive income Profit for the year to 30 June 2011 Actuarial gain on pension scheme Movement on unrecognised pension scheme surplus Movement on associated deferred tax asset relating to the pension scheme Revaluation of available-for-sale financial assets Movement on associated deferred tax Impact of deferred tax rate change Exchange rate movement on joint venture Total comprehensive income Transactions with owners Dividends paid to shareholders Total transactions with owners Balance at 30 June 2011 Comprehensive income Profit for the year to 30 June 2012 Actuarial loss on pension scheme Movement on unrecognised pension scheme surplus Revaluation of available-for-sale financial assets Movement on associated deferred tax Impact of deferred tax rate change Exchange rate movement on joint venture Total comprehensive income Transactions with owners Dividends paid to shareholders Total transactions with owners Balance at 30 June 2012 Note Share capital £’000 1,189 Share redemption Capital reserve £’000 premium £’000 Retained earnings £’000 Total equity £’000 656 137 48,656 50,638 30 30 22 22 30 30 22 22 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 9,411 1,054 (483) (148) 37 (10) (24) (9) 9,411 1,054 (483) (148) 37 (10) (24) (9) 9,828 9,828 (1,981) (1,981) (1,981) (1,981) 11,317 (1,410) 468 11,317 (1,410) 468 29 (8) 56 (2) 29 (8) 56 (2) 10,450 10,450 (2,122) (2,122) (2,122) (2,122) 1,189 656 137 56,503 58,485 Balance at 1 July 2010 Comprehensive income Profit for the year to 30 June 2011 Actuarial gain on pension scheme Movement on unrecognised pension scheme surplus Movement on associated deferred tax asset relating to the pension scheme Revaluation of available-for-sale financial assets Movement on associated deferred tax Impact of deferred tax rate change Exchange rate movement on joint venture Total comprehensive income Transactions with owners Dividends paid to shareholders Total transactions with owners Balance at 30 June 2011 Comprehensive income Profit for the year to 30 June 2012 Actuarial loss on pension scheme Movement on unrecognised pension scheme surplus Revaluation of available-for-sale financial assets Movement on associated deferred tax Impact of deferred tax rate change Total comprehensive income Transactions with owners Dividends paid to shareholders Total transactions with owners Balance at 30 June 2012 Note Share capital £’000 1,189 Share premium £’000 Capital redemption reserve £’000 Retained earnings £’000 Total equity £’000 656 137 41,937 43,919 30 30 22 22 30 30 22 22 – – – – – – – – – – – – – – – – – – – – – – – – – – – 8,376 1,054 (483) (148) 37 (10) 11 (9) 8,828 8,376 1,054 (483) (148) 37 (10) 11 (9) 8,828 – – 1,189 – – 656 – – 137 (1,981) (1,981) 48,784 (1,981) (1,981) 50,766 – – – – – – – – – – – – – – – – – – – – – 16,525 (1,410) 468 29 (8) 52 15,656 16,525 (1,410) 468 29 (8) 52 15,656 – – 1,189 – – 656 – – 137 (2,122) (2,122) 62,318 (2,122) (2,122) 64,300 The notes on pages 33 to 64 form part of these financial statements. 1,189 656 137 64,831 66,813 The notes on pages 33 to 64 form part of these financial statements. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 31 10/10/2012 15:49 32 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2012 ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2012 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 Purchase of available-for-sale financial assets Property rental and similar income Dividend income Net (purchase)/sale of deposits Interest received Proceeds of disposal of subsidiary net of loan notes issued and direct costs Net cash (outflow)/inflow from investing activities Cash flows from financing activities Dividends paid to company’s shareholders Net cash outflow from financing activities Net (decrease)/increase in cash in the year Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Discontinued operations (note 29) Net cash generated from operating activities Net cash outflow from investing activities Net cash outflow from financing activities Cash and cash equivalents at the end of the year Note 26 Group 2012 £’000 2011 £’000 Company 2012 £’000 2011 £’000 12,691 (3,223) 9,468 9,861 (2,901) 6,960 10,298 (2,808) 7,490 (2,198) 120 (1,341) (2,502) (35) (706) 195 69 (5,492) 322 4,106 (7,462) (2,122) (2,122) (116) 14,236 14,120 (2,209) 112 (1,116) – (31) (990) 65 – 4,442 230 – 503 (1,993) 85 (1,259) (2,734) (35) (706) 390 1,769 (5,492) 322 4,106 (5,547) (1,981) (1,981) 5,482 8,754 14,236 (2,122) (2,122) (179) 14,260 14,081 2012 £’000 (8) – – – 7,800 (2,570) 5,230 (1,459) 88 (908) – (31) (990) 359 507 4,442 233 – 2,241 (1,981) (1,981) 5,490 8,770 14,260 2011 £’000 756 (366) (282) (101) The notes on pages 33 to 64 are an integral part of these consolidated financial statements and parent company financial statements. • Amendments to IAS 32 “Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities” 1 Accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements and parent company 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 which is listed on the Alternative Investment Market and is incorporated and domiciled in the UK. The address of its registered office is Merse Road, North Moons Moat, Redditch, Worcestershire B98 9HH. Basis of preparation The consolidated 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), IFRIC interpretations and the Companies Act 2006 applicable to Companies reporting under IFRS. The financial statements have been prepared on a going concern basis, under the historical cost convention, as modified by available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through the profit and loss. The company and group has adopted all IAS and IFRS adopted in the EU except for IAS 34, as AIM-listed companies are not required to adopt IAS 34. The company and group has not early adopted any other standards or interpretations not yet endorsed by the EU. The group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have been published but are only effective for our accounting periods beginning on or after 1 July 2012 or later periods. These new pronouncements are listed below: (effective 1 July 2012) • Amendments to IAS 12 “Income Taxes: Deferred Tax – Recovery of Underlying Assets” (effective 1 January 2012) • Amendments to IAS 1 “Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income” • IFRS 10 “Consolidated Financial Statements” (effective 1 January 2013) • IFRS 11 “Joint Arrangements” (effective 1 January 2013) • IFRS 12 “Disclosure of Interests in Other Entities” (effective 1 January 2013) • IFRS 13 “Fair Value Measurement” (effective 1 January 2013) • Amendment to IAS 19 “Employee Benefits” (effective 1 January 2013) • Amendment to IAS 27 “Separate Financial Statements” (effective 1 January 2013) • Amendment to IAS 28 “Investments in Associates and Joint Ventures” (effective 1 January 2013) • Amendment to IFRS 7 “Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities” (effective 1 January 2013) • Annual Improvements 2009-2011 Cycle (effective 1 January 2013) (effective 1 January 2014) • IFRS 9 “Financial Instruments” (effective 1 January 2015) The directors are currently evaluating the impact of the adoption of these standards, amendments and interpretations in future periods. The company has adopted the following new and amended standards as of 1 July 2011. IAS 12 (amendment) “Income taxes” on deferred tax – effective from annual periods beginning on or after IFRIC 14 and IAS 19 IAS 24 (revised) IFRS 1 (amendment) 1 January 2012 on or after 1 January 2011 after 1 July 2011. Prepayments of a minimum funding requirement – effective from annual periods beginning Related party disclosures – effective from annual periods beginning on or after 1 January 2011 First time adoption, on hyperinflation and fixed dates – effective from annual periods beginning on or Annual improvements 2010 Effective from annual periods beginning on or after 1 January 2011. The adoption of these accounting standards did not have a material impact on the company’s financial statements. 015702_FW_Thorpe_18-68.indd 32 10/10/2012 15:49 FW Thorpe Plc Annual Report and Accounts 2012 33 ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2012 CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 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 Purchase of available-for-sale financial assets Property rental and similar income Dividend income Net (purchase)/sale of deposits Interest received Cash flows from financing activities Dividends paid to company’s shareholders Net cash outflow from financing activities Net (decrease)/increase in cash in the year Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Discontinued operations (note 29) Net cash generated from operating activities Net cash outflow from investing activities Net cash outflow from financing activities Cash and cash equivalents at the end of the year Proceeds of disposal of subsidiary net of loan notes issued and direct costs Net cash (outflow)/inflow from investing activities Note 26 Group 2012 £’000 2011 £’000 Company 2012 £’000 2011 £’000 12,691 (3,223) 9,468 9,861 (2,901) 6,960 10,298 (2,808) 7,490 7,800 (2,570) 5,230 (2,198) 120 (1,341) (2,502) (35) (706) 195 69 (5,492) 322 4,106 (7,462) (2,122) (2,122) (116) 14,236 14,120 (2,209) (1,993) (1,459) 112 (1,116) – (31) (990) 65 – 4,442 230 – 503 85 (1,259) (2,734) (35) (706) 390 1,769 (5,492) 322 4,106 (5,547) 88 (908) – (31) (990) 359 507 4,442 233 – 2,241 (1,981) (1,981) 5,482 8,754 14,236 (2,122) (2,122) (179) 14,260 14,081 (1,981) (1,981) 5,490 8,770 14,260 2012 £’000 (8) – – – 2011 £’000 756 (366) (282) (101) 1 Accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements and parent company 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 which is listed on the Alternative Investment Market and is incorporated and domiciled in the UK. The address of its registered office is Merse Road, North Moons Moat, Redditch, Worcestershire B98 9HH. Basis of preparation The consolidated 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), IFRIC interpretations and the Companies Act 2006 applicable to Companies reporting under IFRS. The financial statements have been prepared on a going concern basis, under the historical cost convention, as modified by available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through the profit and loss. The company and group has adopted all IAS and IFRS adopted in the EU except for IAS 34, as AIM-listed companies are not required to adopt IAS 34. The company and group has not early adopted any other standards or interpretations not yet endorsed by the EU. The group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have been published but are only effective for our accounting periods beginning on or after 1 July 2012 or later periods. These new pronouncements are listed below: • Amendments to IAS 12 “Income Taxes: Deferred Tax – Recovery of Underlying Assets” (effective 1 January 2012) • Amendments to IAS 1 “Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income” (effective 1 July 2012) • IFRS 10 “Consolidated Financial Statements” (effective 1 January 2013) • IFRS 11 “Joint Arrangements” (effective 1 January 2013) • IFRS 12 “Disclosure of Interests in Other Entities” (effective 1 January 2013) • IFRS 13 “Fair Value Measurement” (effective 1 January 2013) • Amendment to IAS 19 “Employee Benefits” (effective 1 January 2013) • Amendment to IAS 27 “Separate Financial Statements” (effective 1 January 2013) • Amendment to IAS 28 “Investments in Associates and Joint Ventures” (effective 1 January 2013) • Amendment to IFRS 7 “Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities” (effective 1 January 2013) • Annual Improvements 2009-2011 Cycle (effective 1 January 2013) The notes on pages 33 to 64 are an integral part of these consolidated financial statements and parent company financial statements. • Amendments to IAS 32 “Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities” (effective 1 January 2014) • IFRS 9 “Financial Instruments” (effective 1 January 2015) The directors are currently evaluating the impact of the adoption of these standards, amendments and interpretations in future periods. The company has adopted the following new and amended standards as of 1 July 2011. IAS 12 (amendment) IFRIC 14 and IAS 19 IAS 24 (revised) IFRS 1 (amendment) Annual improvements 2010 “Income taxes” on deferred tax – effective from annual periods beginning on or after 1 January 2012 Prepayments of a minimum funding requirement – effective from annual periods beginning on or after 1 January 2011 Related party disclosures – effective from annual periods beginning on or after 1 January 2011 First time adoption, on hyperinflation and fixed dates – effective from annual periods beginning on or after 1 July 2011. Effective from annual periods beginning on or after 1 January 2011. The adoption of these accounting standards did not have a material impact on the company’s financial statements. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 33 10/10/2012 15:49 34 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ACCOUNTS 1 Accounting policies continued 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. 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. • For members joining post-1 October 1995, benefits provided are defined contribution in nature (the “pure defined contribution” Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. Joint venture Joint ventures are all entities over which the group exercised joint control. Investments in joint ventures are accounted for by the equity method of accounting and are initially recognised at cost. The group discloses its share of the revenue and the operating profits on the face of the income statement. The group also discloses its share of the gross assets and liabilities on the face of the balance sheet. The carrying amount of an investment in a joint venture is tested for impairment by comparing its recoverable amount with its carrying amount whenever there is an indication that the investment may be impaired. Revenue recognition The group recognises revenue when the amount of revenue can be reliably measured; it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the group’s activities. 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. Revenue is subsequently recognised based upon the goods and services provided, when these goods have been delivered to the customer or the service performed, excluding VAT and trade discounts. 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. 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, it is identified as the group Board that makes strategic decisions. The group is organised into six operating segments based on the products and customer base in the lighting market. The largest business is Thorlux. The five remaining operating segments have been aggregated into the “other companies” reportable segment based upon their size, comprising the entities Compact Lighting, Philip Payne, Sugg Lighting, Solite Europe and Portland Lighting. 015702_FW_Thorpe_18-68.indd 34 10/10/2012 15:49 1 Accounting policies continued Pension costs The group operates a hybrid defined benefit and defined contribution pension scheme. The basis of the groups’ 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); 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 recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet 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. 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 balance sheet date in accordance with prevailing exchange rates and resulting gains or losses are recognised in the income statement. The results of joint ventures and financial position of the joint ventures (which does not have the currency of a hyper-inflationary economy) that has a functional currency different from the presentational currency is translated into presentational currency as follows; assets and liabilities for the balance sheet presented are translated at the closing rate at the date of the balance sheet; and income and expenses for the income statement are translated at average exchange rates. All resulting exchange differences are recognised in other comprehensive income. ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 1 Accounting policies continued 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. 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. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. Joint venture Joint ventures are all entities over which the group exercised joint control. Investments in joint ventures are accounted for by the equity method of accounting and are initially recognised at cost. The group discloses its share of the revenue and the operating profits on the face of the income statement. The group also discloses its share of the gross assets and liabilities on the face of the balance sheet. The carrying amount of an investment in a joint venture is tested for impairment by comparing its recoverable amount with its carrying amount whenever there is an indication that the investment may be impaired. Revenue recognition The group recognises revenue when the amount of revenue can be reliably measured; it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the group’s activities. 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. Revenue is subsequently recognised based upon the goods and services provided, when these goods have been delivered to the customer or the service performed, excluding VAT and trade discounts. 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 is recognised when the right to receive payment is established. Dividend income 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, it is identified as the group Board that makes strategic decisions. The group is organised into six operating segments based on the products and customer base in the lighting market. The largest business is Thorlux. The five remaining operating segments have been aggregated into the “other companies” reportable segment based upon their size, comprising the entities Compact Lighting, Philip Payne, Sugg Lighting, Solite Europe and Portland Lighting. FW Thorpe Plc Annual Report and Accounts 2012 35 Intra-group transactions, balances, income and expenses are eliminated in preparing consolidated financial statements. • For members joining post-1 October 1995, benefits provided are defined contribution in nature (the “pure defined contribution” 1 Accounting policies continued Pension costs The group operates a hybrid defined benefit and defined contribution pension scheme. The basis of the groups’ 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); 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 recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet 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. 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 balance sheet date in accordance with prevailing exchange rates and resulting gains or losses are recognised in the income statement. The results of joint ventures and financial position of the joint ventures (which does not have the currency of a hyper-inflationary economy) that has a functional currency different from the presentational currency is translated into presentational currency as follows; assets and liabilities for the balance sheet presented are translated at the closing rate at the date of the balance sheet; and income and expenses for the income statement are translated at average exchange rates. All resulting exchange differences are recognised in other comprehensive income. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 35 10/10/2012 15:49 36 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ACCOUNTS 1 Accounting policies continued Taxation The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet 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 balance sheet 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. impairment in accordance with IAS 36. 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, vehicles and equipment Nil 2–4% 7–33% The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet 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. 1 Accounting policies continued 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, generally at 33.33% per annum, commencing when the asset is available for use within the business. Development assets 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; • 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; • Adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are 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 balance sheet date for Development assets are valued at cost less accumulated amortisation and any impairment losses. Fishing rights are stated at cost less accumulated impairment where applicable. The rights are not amortised, but assessed annually Fishing rights for impairment. Goodwill its recoverable amount. Software costs 20% and 50% per annum. Patent costs Other intangible assets 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 tested at least annually for impairment. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds 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 business combination in which the goodwill arose. 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 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%. 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 was valued using an income approach. The cost of intangible assets is amortised through the income statement on a straight line basis over their estimated economic life. 015702_FW_Thorpe_18-68.indd 36 10/10/2012 15:49 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 1 Accounting policies continued Taxation The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet 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 balance sheet date and are expected to apply when the related deferred income tax asset is realised or the Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the 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 deferred income tax liability is settled. temporary differences can be utilised. reverse in the foreseeable future. Dividend distribution 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, vehicles and equipment Nil 2–4% 7–33% The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet 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. Operating leases, and payments made under them are charged to the income statement on a straight-line basis over the term Leases of the lease. FW Thorpe Plc Annual Report and Accounts 2012 37 1 Accounting policies continued 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, generally at 33.33% per annum, commencing when the asset is available for use within the business. Development assets 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; • 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; • Adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are 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. Final dividend distribution to the company’s shareholders is recognised as a liability in the group’s financial statements in the period in 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 balance sheet 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 tested at least annually for 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 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%. 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 was valued using an income approach. The cost of intangible assets is amortised through the income statement on a straight line basis over their estimated economic life. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 37 10/10/2012 15:49 38 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ACCOUNTS 1 Accounting policies continued 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. Investments in subsidiaries and Joint Ventures Investments in subsidiaries are held at cost less impairment. Cost includes directly attributable costs of investment. The group has applied the equity method of accounting to recognise the interest in the joint venture. 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 their net realisable value. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, the amount of the loss is recognised in the income statement within “selling and distribution costs”. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against “selling and distribution costs” in the income statement. Financial assets at fair value through profit and loss Financial assets at fair value through profit and loss are financial assets held for trading and are measured at their fair values. 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. Available-for-sale financial assets The fair value of quoted investments is based on current bid prices. Changes to fair value are recognised in the statement of comprehensive income. 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 balance sheet 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 balance sheet 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. 1 Accounting policies continued Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. 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 Bluefin Corporate Consulting Ltd to ensure their appropriateness. Warranty provisions The group makes provisions for the warranty provided with the terms and conditions of sale to the customer based on past experience together with specific provisions for known issues. There are quality control procedures in place to ensure that products reaching customers are of a high standard. The technical support areas record all warranty issues in order that problems can be identified that may affect a wider customer base. Additionally, product failures are tested thoroughly to examine technical failures and strategies are developed to minimise and correct issues arising from that examination. The group works closely with its suppliers to ensure a low IFRS 3 requires the identification of acquired intangible assets as part of a business combination. The methods used to value such intangible assets require the use of estimates. Future results are impacted by the amortisation periods adopted and changes to the estimated useful lives would result in different effects on the income statement and balance sheet. Goodwill is not amortised but is tested annually for impairment. Tests for impairment are based on discounted cash flows and assumptions (including discount rates, timing and growth prospects) which are inherently subjective. 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 failure rate for components. Intangible assets Financial risk factors 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 and the UK pound. 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 denominated in currencies other than sterling. 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. (ii) Price risk The group is exposed to equity securities price risk because of investments held by the group and classified on the consolidated balance sheet either as available-for-sale 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 group has an exposure to the risk of commodity price changes, in particular, metals. The group seeks to minimise the risk by agreeing (iii) Commodity price risk 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. There are no borrowings and 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. 015702_FW_Thorpe_18-68.indd 38 10/10/2012 15:49 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Investment properties are recognised at cost, and then subsequently cost less accumulated depreciation and (if applicable) any 1 Accounting policies continued Investment properties accumulated impairment losses. Freehold land is not depreciated. Investments in subsidiaries and Joint Ventures Investments in subsidiaries are held at cost less impairment. Cost includes directly attributable costs of investment. The group has applied the equity method of accounting to recognise the interest in the joint venture. 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 their net realisable value. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, the amount of the loss is recognised in the income statement within “selling and distribution costs”. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against “selling and distribution costs” in the income statement. Financial assets at fair value through profit and loss Financial assets at fair value through profit and loss are financial assets held for trading and are measured at their fair values. 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 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 are defined as cash in hand, on demand deposits and short-term deposits with banks with an original term Current asset investments are valued at fair value. Changes in fair value are recognised in the income statement. The fair value of quoted investments is based on current bid prices. Changes to fair value are recognised in the statement Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Provisions are recognised in the balance sheet 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 balance sheet 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. and a sale is considered highly probable. Short-term financial assets Cash and cash equivalents less than three months. Current asset investments Available-for-sale financial assets of comprehensive income. Trade payables Provisions FW Thorpe Plc Annual Report and Accounts 2012 39 1 Accounting policies continued Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. 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 Bluefin Corporate Consulting Ltd to ensure their appropriateness. Warranty provisions The group makes provisions for the warranty provided with the terms and conditions of sale to the customer based on past experience together with specific provisions for known issues. There are quality control procedures in place to ensure that products reaching customers are of a high standard. The technical support areas record all warranty issues in order that problems can be identified that may affect a wider customer base. Additionally, product failures are tested thoroughly to examine technical failures and strategies are developed to minimise and correct issues arising from that examination. The group works closely with its suppliers to ensure a low failure rate for components. Intangible assets IFRS 3 requires the identification of acquired intangible assets as part of a business combination. The methods used to value such intangible assets require the use of estimates. Future results are impacted by the amortisation periods adopted and changes to the estimated useful lives would result in different effects on the income statement and balance sheet. Goodwill is not amortised but is tested annually for impairment. Tests for impairment are based on discounted cash flows and assumptions (including discount rates, timing and growth prospects) which are inherently subjective. 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 and the UK pound. 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 denominated in currencies other than sterling. 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. (ii) Price risk The group is exposed to equity securities price risk because of investments held by the group and classified on the consolidated balance sheet either as available-for-sale 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. (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. There are no borrowings and 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. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 39 10/10/2012 15:49 40 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 1 Accounting policies continued (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 15) on the basis of expected cash flow. All external current liabilities are expected to mature within four months. 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 regards the cash resources are 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 maintenance of the group’s cash position is also assessed against other assets of the business to allow investors the benefits of obtaining business property relief from investing within the group, which will continue to be a focus of the group due to our balance sheet position. 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. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. 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) iii) Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3) 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. 015702_FW_Thorpe_18-68.indd 40 10/10/2012 15:49 ACCOUNTS 2 Segmental analysis (a) Business segments Year to 30 June 2012 Revenue to external customers Revenue to other group companies Total revenue Operating profit Net finance income Share of loss of joint venture Profit before income tax Year to 30 June 2011 Revenue to external customers Revenue to other group companies Total revenue Operating profit Net finance income Share of loss of joint venture Profit before income tax group companies. (b) Geographical analysis UK Europe Other countries The segmental analysis is presented on the same basis as that used for internal reporting purposes. For internal reporting FW Thorpe is organised into six 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 five remaining operating segments have been aggregated into the “other companies” reportable segment based upon their size, comprising the entities Compact Lighting Limited, Philip Payne Limited, Sugg Lighting Limited, Solite Europe Limited and Portland Lighting Limited. 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 companies adjustments Other £’000 Inter- segment £’000 Total continuing operations £’000 £’000 44,869 10,690 – 55,559 80 44,949 10,740 507 11,197 828 (587) (587) 282 43,909 145 44,054 10,407 8,924 619 9,543 649 – (764) (764) 196 – 55,559 11,850 831 (23) 12,658 52,833 – 52,833 11,252 372 (11) 11,613 2012 £’000 47,806 4,704 3,049 55,559 2011 £’000 47,577 3,101 2,155 52,833 Inter segment adjustments to operating profit consist of property rentals on premises owned by FW Thorpe Plc, adjustments to profit related to stocks held within the group that were supplied by another segment and adjustments to investment provisions relating to The group’s business segments operate in three main areas, the UK, 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. The group’s revenue is generated mainly within the UK. All assets and consequently capital expenditure are in the UK, and cannot be split geographically in relation to the group’s revenues. ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 1 Accounting policies continued (c) Liquidity risk market positions. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the ability to close out Management monitors rolling forecasts of the group’s liquidity reserve which comprises cash and cash equivalents together with short-term financial assets (note 15) on the basis of expected cash flow. All external current liabilities are expected to mature within four months. 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 regards the cash resources are 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 maintenance of the group’s cash position is also assessed against other assets of the business to allow investors the benefits of obtaining business property relief from investing within the group, which will continue to be a focus of the group due to our balance sheet position. 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. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. 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) iii) Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3) 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. FW Thorpe Plc Annual Report and Accounts 2012 41 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 six 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 five remaining operating segments have been aggregated into the “other companies” reportable segment based upon their size, comprising the entities Compact Lighting Limited, Philip Payne Limited, Sugg Lighting Limited, Solite Europe Limited and Portland Lighting Limited. 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. Year to 30 June 2012 Revenue to external customers Revenue to other group companies Total revenue Operating profit Net finance income Share of loss of joint venture Profit before income tax Year to 30 June 2011 Revenue to external customers Revenue to other group companies Total revenue Operating profit Net finance income Share of loss of joint venture Profit before income tax Thorlux £’000 Other companies £’000 Inter- segment adjustments £’000 Total continuing operations £’000 44,869 80 44,949 10,740 10,690 507 11,197 828 – (587) (587) 282 43,909 145 44,054 10,407 8,924 619 9,543 649 – (764) (764) 196 55,559 – 55,559 11,850 831 (23) 12,658 52,833 – 52,833 11,252 372 (11) 11,613 Inter segment adjustments to operating profit consist of property rentals on premises owned by FW Thorpe Plc, adjustments to profit related to stocks held within the group that were supplied by another segment and adjustments to investment provisions relating to group companies. (b) Geographical analysis The group’s business segments operate in three main areas, the UK, 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. The group’s revenue is generated mainly within the UK. UK Europe Other countries 2012 £’000 47,806 4,704 3,049 55,559 2011 £’000 47,577 3,101 2,155 52,833 All assets and consequently capital expenditure are in the UK, and cannot be split geographically in relation to the group’s revenues. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 41 10/10/2012 15:49 42 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 3 Group operating profit Group operating profit is stated after charging/(crediting): Profit on sale of fixed assets Rental income from investment property Depreciation of tangible fixed assets (note 10): – owned assets Operating lease rentals: – plant and machinery – other Intangible amortisation (note 9) Foreign exchange losses/(gains) recognised in income statement Services provided by the company’s auditors During the year, the group obtained the following services from the company’s audit and its auditors: Group Fees payable to company’s auditors for the audit of parent company and consolidated financial statements Fee payable to the company’s auditor and its associates for other services: – the audit of company’s subsidiaries pursuant to legislation – tax services – Transactional services 2012 £’000 (71) (69) 1,062 31 118 993 141 2011 £’000 (48) (5) 914 43 46 733 (108) 2012 £’000 2011 £’000 41 34 6 – 81 38 26 – 15 79 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 Other gains – net Other financial assets at fair value through profit or loss (note 19). Fair value gains Other financial assets at fair value consist of units in a sterling cash fund. 2012 £’000 – – 2011 £’000 1 1 Aggregate emoluments Contributions to money purchase pension schemes Highest paid director Total of emoluments and amounts receivable The highest paid director is a pensioner of the retirement benefits scheme (2012 and 2011: accrued pension of £131,000). At the 30 June retirement benefits were accruing to M Allcock and D Taylor (2011: M Allcock and D Taylor) under the defined benefit scheme and to A M Cooper (2011: D Dimeloe, N A Brangwin and A M Cooper) under the defined contribution scheme. Further details are provided in the directors’ remuneration report on pages 22 to 24. The average monthly number of employees employed by the group (including executive directors) during the year is analysed below: ACCOUNTS 5 Employee information Production Sales and distribution Administration Total average headcount Employment costs of all employees (including executive directors). Aggregate gross wages and salaries Employers’ national insurance contributions Employers’ pension and related charges Employers’ pension related charges include life assurance of £51,000 (2011: £58,000), pension administration and professional charges of £91,000 (2011: £62,000), a pension paid to a former director, contributions to Sugg Lighting Ltd group personal pension plan and a private pension scheme amounting to £75,000 (2011: £68,000). Contributions to the defined contribution section amounted to £333,000 (2011: £311,000). Directors’ emoluments 2012 Number 2011 Number 230 95 142 467 2012 £’000 13,423 1,487 717 15,627 2012 £’000 1,274 20 1,294 2012 £’000 292 216 91 136 443 2011 £’000 12,854 1,425 610 14,889 2011 £’000 1,520 30 1,550 2011 £’000 285 015702_FW_Thorpe_18-68.indd 42 10/10/2012 15:49 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 3 Group operating profit Group operating profit is stated after charging/(crediting): Profit on sale of fixed assets Rental income from investment property Depreciation of tangible fixed assets (note 10): – owned assets Operating lease rentals: – plant and machinery – other Intangible amortisation (note 9) Foreign exchange losses/(gains) recognised in income statement Services provided by the company’s auditors During the year, the group obtained the following services from the company’s audit and its auditors: Fees payable to company’s auditors for the audit of parent company and consolidated financial statements Fee payable to the company’s auditor and its associates for other services: – the audit of company’s subsidiaries pursuant to legislation Group – tax services – Transactional services 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 Other gains – net Other financial assets at fair value through profit or loss (note 19). Fair value gains Other financial assets at fair value consist of units in a sterling cash fund. 2012 £’000 (71) (69) 1,062 31 118 993 141 41 34 6 – 81 2011 £’000 (48) (5) 914 43 46 733 (108) 38 26 – 15 79 2012 £’000 2011 £’000 2012 £’000 – – 2011 £’000 1 1 FW Thorpe Plc Annual Report and Accounts 2012 43 5 Employee information The average monthly number of employees employed by the group (including executive directors) during the year is analysed below: Production Sales and distribution Administration Total average headcount Employment costs of all employees (including executive directors). Aggregate gross wages and salaries Employers’ national insurance contributions Employers’ pension and related charges 2012 Number 2011 Number 230 95 142 467 2012 £’000 13,423 1,487 717 15,627 216 91 136 443 2011 £’000 12,854 1,425 610 14,889 Employers’ pension related charges include life assurance of £51,000 (2011: £58,000), pension administration and professional charges of £91,000 (2011: £62,000), a pension paid to a former director, contributions to Sugg Lighting Ltd group personal pension plan and a private pension scheme amounting to £75,000 (2011: £68,000). Contributions to the defined contribution section amounted to £333,000 (2011: £311,000). Directors’ emoluments Aggregate emoluments Contributions to money purchase pension schemes Highest paid director Total of emoluments and amounts receivable 2012 £’000 1,274 20 1,294 2012 £’000 292 2011 £’000 1,520 30 1,550 2011 £’000 285 The highest paid director is a pensioner of the retirement benefits scheme (2012 and 2011: accrued pension of £131,000). At the 30 June retirement benefits were accruing to M Allcock and D Taylor (2011: M Allcock and D Taylor) under the defined benefit scheme and to A M Cooper (2011: D Dimeloe, N A Brangwin and A M Cooper) under the defined contribution scheme. Further details are provided in the directors’ remuneration report on pages 22 to 24. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 43 10/10/2012 15:49 44 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 6 Net financial income Finance income Current assets Interest receivable Non-current assets Dividend income on available-for-sale financial assets Net rental income Net interest on pension scheme assets and liabilities 7 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 (note 22) Origination and reversal of temporary differences Total deferred tax Income tax expense 2012 £’000 2011 £’000 387 79 197 168 831 258 16 65 33 372 2012 £’000 2011 £’000 2,699 (57) 2,642 76 76 2,718 2,669 6 2,675 526 526 3,201 The tax assessed for the year is lower (2011: higher) than the standard rate of corporation tax in the UK of 25.5% (2011: 27.5%). The differences are explained below: Accumulated amortisation Profit before tax Profit on ordinary activities multiplied by the standard rate in the UK of 25.5% (2011: 27.5%) Effects of: Expenses not deductible for tax purposes Accelerated tax allowances and other timing differences Adjustments in respect of prior years Profits taxed at small companies rate Other Tax charge The weighted average applicable tax rate was 21.5% (2011: 27.6%). 2012 £’000 2011 £’000 12,658 11,613 3,228 3,194 18 (356) (57) (3) (112) 2,718 44 (116) 6 (2) 75 3,201 8 Dividends The dividends paid in 2012 and 2011 were £2,122,000 (18.1p per share) and £1,981,000 (16.9p per share) respectively. A final dividend in respect of the year ended 30 June 2012 of 14.6p per share, amounting to a total dividend of £1,712,000, is to be proposed at the Annual General Meeting on 15 November 2012. These financial statements do not reflect this dividend payable. Acquisition of subsidiary (note 28) Accumulated amortisation ACCOUNTS 9 Intangible assets Group 2012 Cost At 1 July 2011 Additions Write-offs At 30 June 2012 At 1 July 2011 Charge for the year Write-offs At 30 June 2012 Net book amount At 30 June 2012 Group 2011 Cost At 1 July 2010 Additions Write-offs At 30 June 2011 At 1 July 2010 Charge for the year Write-offs At 30 June 2011 Net book amount At 30 June 2011 2,903 2,278 249 116 120 182 5,984 Write-offs relate to development assets where no further economic benefits will be obtained. Development Goodwill £’000 costs £’000 Technology Brand name £’000 £’000 Software £’000 Patents £’000 Fishing rights £’000 Fishing rights £’000 35 147 150 182 Development Goodwill £’000 costs £’000 Technology Brand name £’000 £’000 Software £’000 Patents £’000 885 2,618 – – 3,503 600 – – 600 885 – – 885 600 – – 600 2,961 1,052 – (575) 3,438 982 753 (575) 1,160 3,561 930 (861) 3,630 1,320 884 (861) 1,343 – – – 311 311 – 62 – 62 – – – – – – – – – – – – – – 174 174 – 58 – 58 – – – – – – – – – – – 587 142 – – 729 503 90 – 593 136 584 36 – 620 462 63 – 525 95 (12) 83 150 – – – – 30 – 30 150 – – 150 – – – – 150 – 150 Total £’000 4,618 3,959 485 (575) 8,487 2,085 993 (575) 2,503 Total £’000 5,065 1,116 (861) 5,320 2,382 947 (861) 2,468 2,852 (319) 2,533 – – – – – – 35 – – 35 – – – – 35 – 35 Less intangible assets transferred to non-current assets and disposal groups held for sale at 30 June 2011 Net book amount at 30 June 2011 carried forward 285 2,287 – (307) 285 1,980 The group tests intangible assets annually for impairment, or more frequently if there are indications of impairment. A discounted cash flow analysis is computed to compare the discounted estimated future operating cash flows to the net carrying value of the goodwill and other intangible assets for each operating segment or business as appropriate. The tests are based on the following assumptions: • Cash flows for the 12 months are based upon the group’s annual budget; • Cash flows beyond the budget period are based on the annual budget cash flows with a growth rate of 2%; • The estimated cash flows are discounted using a pre-tax discounted rate based upon the group’s estimated weighted average cost Any impairments identified as a result of the analysis are expensed to the income statement. The test is dependent on management estimates and judgements, in particular in relation to the forecasting of future cash flows, and the discount rate applied to these of capital of 10%. cash flows. The group performed various sensitivity analyses which involved reducing future cash flows by up to 25%, reducing terminal growth rates by up to five percentage points, or increasing pre-tax discount rates by up to 100 bps. The results of these analyses showed that, despite significantly lower post-tax operating cash flows, or increased pre-tax discount rates, the carrying value of goodwill and other intangible assets continued to exceed their value in use. 015702_FW_Thorpe_18-68.indd 44 10/10/2012 15:49 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 6 Net financial income Finance income Current assets Interest receivable Non-current assets Net rental income Dividend income on available-for-sale financial assets Net interest on pension scheme assets and liabilities 7 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 (note 22) Total deferred tax Income tax expense The differences are explained below: Origination and reversal of temporary differences The tax assessed for the year is lower (2011: higher) than the standard rate of corporation tax in the UK of 25.5% (2011: 27.5%). Profit on ordinary activities multiplied by the standard rate in the UK of 25.5% (2011: 27.5%) Profit before tax Effects of: Other Tax charge 8 Dividends Expenses not deductible for tax purposes Accelerated tax allowances and other timing differences Adjustments in respect of prior years Profits taxed at small companies rate The weighted average applicable tax rate was 21.5% (2011: 27.6%). A final dividend in respect of the year ended 30 June 2012 of 14.6p per share, amounting to a total dividend of £1,712,000, is to be proposed at the Annual General Meeting on 15 November 2012. These financial statements do not reflect this dividend payable. 2012 £’000 2011 £’000 387 79 197 168 831 258 16 65 33 372 2012 £’000 2011 £’000 2,699 (57) 2,642 76 76 2,718 2,669 6 2,675 526 526 3,201 2012 £’000 2011 £’000 12,658 11,613 3,228 3,194 18 (356) (57) (3) (112) 2,718 44 (116) 6 (2) 75 3,201 FW Thorpe Plc Annual Report and Accounts 2012 45 9 Intangible assets Group 2012 Cost At 1 July 2011 Additions Acquisition of subsidiary (note 28) Write-offs At 30 June 2012 Accumulated amortisation At 1 July 2011 Charge for the year Write-offs At 30 June 2012 Net book amount At 30 June 2012 Goodwill £’000 Development costs £’000 Technology £’000 Brand name £’000 Software £’000 Patents £’000 885 2,618 – – 3,503 600 – – 600 2,961 1,052 – (575) 3,438 982 753 (575) 1,160 – – 311 – 311 – 62 – 62 – – 174 – 174 – 58 – 58 2,903 2,278 249 116 587 142 – – 729 503 90 – 593 136 Fishing rights £’000 35 147 – – 182 – – – – Total £’000 4,618 3,959 485 (575) 8,487 2,085 993 (575) 2,503 150 – – – 150 – 30 – 30 120 182 5,984 Write-offs relate to development assets where no further economic benefits will be obtained. Group 2011 Cost At 1 July 2010 Additions Write-offs At 30 June 2011 Accumulated amortisation At 1 July 2010 Charge for the year Write-offs At 30 June 2011 Net book amount At 30 June 2011 Less intangible assets transferred to non-current assets and disposal groups held for sale at 30 June 2011 Net book amount at 30 June 2011 carried forward Goodwill £’000 Development costs £’000 Technology £’000 Brand name £’000 Software £’000 Patents £’000 Fishing rights £’000 885 – – 885 600 – – 600 3,561 930 (861) 3,630 1,320 884 (861) 1,343 285 2,287 – (307) 285 1,980 – – – – – – – – – – – – – – – – – – – – – – 584 36 – 620 462 63 – 525 95 (12) 83 – 150 – 150 – – – – 150 – 150 35 – – 35 – – – – 35 – 35 Total £’000 5,065 1,116 (861) 5,320 2,382 947 (861) 2,468 2,852 (319) 2,533 The group tests intangible assets annually for impairment, or more frequently if there are indications of impairment. A discounted cash flow analysis is computed to compare the discounted estimated future operating cash flows to the net carrying value of the goodwill and other intangible assets for each operating segment or business as appropriate. The dividends paid in 2012 and 2011 were £2,122,000 (18.1p per share) and £1,981,000 (16.9p per share) respectively. The tests are based on the following assumptions: i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A • Cash flows for the 12 months are based upon the group’s annual budget; • Cash flows beyond the budget period are based on the annual budget cash flows with a growth rate of 2%; • The estimated cash flows are discounted using a pre-tax discounted rate based upon the group’s estimated weighted average cost of capital of 10%. Any impairments identified as a result of the analysis are expensed to the income statement. The test is dependent on management estimates and judgements, in particular in relation to the forecasting of future cash flows, and the discount rate applied to these cash flows. The group performed various sensitivity analyses which involved reducing future cash flows by up to 25%, reducing terminal growth rates by up to five percentage points, or increasing pre-tax discount rates by up to 100 bps. The results of these analyses showed that, despite significantly lower post-tax operating cash flows, or increased pre-tax discount rates, the carrying value of goodwill and other intangible assets continued to exceed their value in use. 015702_FW_Thorpe_18-68.indd 45 10/10/2012 15:49 46 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ACCOUNTS 9 Intangible assets continued 10 Property, plant and equipment Company 2012 Cost At 1 July 2011 Additions Write-offs At 30 June 2012 Accumulated amortisation At 1 July 2011 Charge for the year Write-offs At 30 June 2012 Net book amount At 30 June 2012 Company 2011 Cost At 1 July 2010 Additions Write-offs At 30 June 2011 Accumulated amortisation At 1 July 2010 Charge for the year Write-offs At 30 June 2011 Net book amount At 30 June 2011 Goodwill £’000 Development costs £’000 Software £’000 Patents £’000 Fishing rights £’000 600 – – 600 600 – – 600 2,618 979 (480) 3,117 846 670 (480) 1,036 – 2,081 442 135 – 577 385 73 – 458 119 600 – – 600 600 – – 600 2,301 740 (423) 2,618 699 570 (423) 846 – 1,772 424 18 – 442 346 39 – 385 57 Total £’000 3,845 1,261 (480) 4,626 1,831 773 (480) 2,124 Total £’000 3,360 908 (423) 3,845 1,645 609 (423) 1,831 150 – – 150 – 30 – 30 35 147 – 182 – – – – – 150 – 150 – – – – 35 – – 35 – – – – 150 35 2,014 120 182 2,502 Goodwill £’000 Development costs £’000 Software £’000 Patents £’000 Fishing rights £’000 Amortisation of £993,000 (2011: £733,000) is included in the administration costs. 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. 015702_FW_Thorpe_18-68.indd 46 10/10/2012 15:49 Cost At 1 July 2011 Additions Acquisition of subsidiary (note 28) Transferred to investment property Disposals At 30 June 2012 Accumulated depreciation At 1 July 2011 Charge for the year Transferred to investment property Disposals At 30 June 2012 Net book amount At 30 June 2012 Accumulated depreciation Cost At 1 July 2010 Additions Disposals At 30 June 2011 At 1 July 2010 Charge for the year Disposals At 30 June 2011 Net book amount At 30 June 2011 Group Company Freehold land and buildings Plant and equipment £’000 £’000 Freehold land and buildings Plant and equipment £’000 £’000 Total £’000 9,744 708 (1,245) – – 2,018 175 (257) – 12,766 1,438 69 (33) (340) 22,510 2,146 69 (1,278) (340) 9,744 708 10,094 1,230 (1,245) – – – (33) (257) 9,207 13,900 23,107 9,207 11,034 20,241 9,383 887 (12) (291) 11,401 1,062 (269) (291) 2,018 175 (257) – 1,936 7,391 651 (12) (216) 7,814 1,936 9,967 11,903 7,271 3,933 11,204 7,271 3,220 10,491 Freehold land and buildings £’000 Group Plant and equipment £’000 Freehold land and buildings £’000 Total £’000 Company Plant and equipment £’000 9,608 136 – 9,744 1,848 170 – 14,296 2,081 (620) 15,757 11,422 969 (556) 2,018 11,835 23,904 2,217 (620) 25,501 13,270 1,139 (556) 13,853 9,608 136 – 9,096 1,354 (356) 9,744 10,094 1,848 170 – 2,018 7,143 551 (303) 7,391 Total £’000 19,838 1,938 – (1,278) (257) 9,409 826 (269) (216) 9,750 Total £’000 18,704 1,490 (356) 19,838 8,991 721 (303) 9,409 Freehold land which was not depreciated at 30 June 2012 amounted to £947,000 (2011: £1,218,000) (group and company). Following the disposal of a subsidiary company which rented a group property, the company and group has reclassified this property as an investment property. Less property, plant and equipment transferred to non-current assets and disposal groups held for sale at 30 June 2011 Net book amount at 30 June 2011 carried forward 7,726 3,922 11,648 7,726 2,703 10,429 – 7,726 (539) 3,383 (539) 11,109 – 7,726 – – 2,703 10,429 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Accumulated amortisation Company 2012 Cost At 1 July 2011 Additions Write-offs At 30 June 2012 At 1 July 2011 Charge for the year Write-offs At 30 June 2012 Net book amount At 30 June 2012 Company 2011 Cost At 1 July 2010 Additions Write-offs At 30 June 2011 At 1 July 2010 Charge for the year Write-offs At 30 June 2011 Net book amount At 30 June 2011 Accumulated amortisation Total £’000 3,845 1,261 (480) 4,626 1,831 773 (480) 2,124 Total £’000 3,360 908 (423) 3,845 1,645 609 (423) 1,831 35 147 – 182 – – – – 35 – – 35 – – – – 150 – – 150 – 30 – 30 150 – – 150 – – – – 600 600 600 600 – – – – – 600 600 600 600 – – – – – 2,618 979 (480) 3,117 846 670 (480) 1,036 2,081 2,301 740 (423) 2,618 699 570 (423) 846 1,772 442 135 – 577 385 73 – 458 119 424 18 – 442 346 39 – 385 57 120 182 2,502 Development Goodwill £’000 costs £’000 Software £’000 Patents £’000 Fishing rights £’000 Amortisation of £993,000 (2011: £733,000) is included in the administration costs. 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. 150 35 2,014 9 Intangible assets continued 10 Property, plant and equipment Development Goodwill £’000 costs £’000 Software £’000 Patents £’000 Fishing rights £’000 Cost At 1 July 2011 Additions Acquisition of subsidiary (note 28) Transferred to investment property Disposals At 30 June 2012 Accumulated depreciation At 1 July 2011 Charge for the year Transferred to investment property Disposals At 30 June 2012 Net book amount At 30 June 2012 FW Thorpe Plc Annual Report and Accounts 2012 47 Freehold land and buildings £’000 Group Plant and equipment £’000 Company Freehold land and buildings £’000 Plant and equipment £’000 Total £’000 Total £’000 9,744 708 – (1,245) – 9,207 2,018 175 (257) – 1,936 12,766 1,438 69 (33) (340) 13,900 9,383 887 (12) (291) 9,967 22,510 2,146 69 (1,278) (340) 23,107 11,401 1,062 (269) (291) 11,903 9,744 708 – (1,245) – 9,207 2,018 175 (257) – 1,936 10,094 1,230 – (33) (257) 11,034 7,391 651 (12) (216) 7,814 19,838 1,938 – (1,278) (257) 20,241 9,409 826 (269) (216) 9,750 7,271 3,933 11,204 7,271 3,220 10,491 Freehold land which was not depreciated at 30 June 2012 amounted to £947,000 (2011: £1,218,000) (group and company). Following the disposal of a subsidiary company which rented a group property, the company and group has reclassified this property as an investment property. Cost At 1 July 2010 Additions Disposals At 30 June 2011 Accumulated depreciation At 1 July 2010 Charge for the year Disposals At 30 June 2011 Net book amount At 30 June 2011 Less property, plant and equipment transferred to non-current assets and disposal groups held for sale at 30 June 2011 Net book amount at 30 June 2011 carried forward Freehold land and buildings £’000 Group Plant and equipment £’000 Freehold land and buildings £’000 Total £’000 Company Plant and equipment £’000 9,608 136 – 9,744 1,848 170 – 2,018 14,296 2,081 (620) 15,757 11,422 969 (556) 11,835 23,904 2,217 (620) 25,501 13,270 1,139 (556) 13,853 9,608 136 – 9,744 1,848 170 – 2,018 9,096 1,354 (356) 10,094 7,143 551 (303) 7,391 Total £’000 18,704 1,490 (356) 19,838 8,991 721 (303) 9,409 7,726 3,922 11,648 7,726 2,703 10,429 – 7,726 (539) 3,383 (539) 11,109 – 7,726 – 2,703 – 10,429 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 47 10/10/2012 15:49 48 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ACCOUNTS 11 Commitments (a) Capital commitments Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows: Property, plant and equipment Group 2012 £’000 56 2011 £’000 648 Company 2012 £’000 56 2011 £’000 635 (b) Operating lease commitments The group leases premises under non-cancellable operating lease agreements. The lease terms are between five and twenty years (2011: five and twenty years), and the lease agreements are renewable at the end of the lease period at market rate. The future aggregate minimum lease payments under non-cancellable operating leases are as follows: Within one year Within two to five years Over five years Group Land and buildings 2012 £’000 Land and buildings 2011 £’000 Other 2012 £’000 Other 2011 £’000 124 321 102 547 46 80 – 126 – – – – – – – – 12 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 £2,228,000 (2011: £1,492,000) of fixed rate listed investments included in available-for-sale 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 2012 Assets as per balance sheet Loans and other receivables Available-for-sale financial assets Other financial assets at fair value through profit or loss Trade and other receivables Short-term financial assets – deposits Cash and cash equivalents Total Loans and receivables £’000 Available- for-sale £’000 Assets at fair value through the profit and loss £’000 1,828 – – 10,154 17,108 14,120 43,210 – 1,841 – – – – 1,841 – – 387 – – – 387 Total £’000 1,828 1,841 387 10,154 17,108 14,120 45,438 12 Financial instruments by category continued Group 30 June 2011 Assets as per balance sheet Available-for-sale financial assets Other financial assets at fair value through profit or loss Trade and other receivables Short-term financial assets – deposits Cash and cash equivalents Total Company 30 June 2012 Assets as per balance sheet Loans and other receivables Available-for-sale financial assets Other financial assets at fair value through profit or loss Trade and other receivables Short-term financial assets – deposits Short-term financial assets – cash and cash equivalents Total Company 30 June 2011 Assets as per balance sheet Available-for-sale financial assets Other financial assets at fair value through profit or loss Trade and other receivables Short-term financial assets – deposits Short-term financial assets – cash and cash equivalents Total The above analysis excludes prepayments. Liabilities as per balance sheet Trade and other payables (excluding statutory liabilities) Total £’000 1,105 387 10,748 11,616 14,236 38,092 Total £’000 1,828 1,841 387 10,493 17,108 14,081 45,738 Total £’000 1,105 387 11,674 11,616 14,260 39,042 Loans and receivables £’000 Available- for-sale £’000 Assets at fair value through the profit and loss £’000 – – 10,748 11,616 14,236 36,600 1,105 – – – – 387 – – – – 1,105 387 Loans and receivables £’000 Available- for-sale £’000 Assets at fair value through the profit and loss £’000 1,828 – – 10,493 17,108 14,081 43,510 1,841 – – – – – 387 – – – – – 1,841 387 Loans and receivables £’000 Available- for-sale £’000 Assets at fair value through the profit and loss £’000 1,105 – – – – 387 – – – – 1,105 387 – – 11,674 11,616 14,260 37,550 2012 £’000 6,659 6,659 Group Company 2011 £’000 7,036 7,036 2012 £’000 7,948 7,948 2011 £’000 9,271 9,271 The group and company did not have derivative financial instruments at 30 June 2012 or 30 June 2011. All assets and liabilities above are considered to be at fair value. 015702_FW_Thorpe_18-68.indd 48 10/10/2012 15:49 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 11 Commitments (a) Capital commitments Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows: Property, plant and equipment (b) Operating lease commitments The group leases premises under non-cancellable operating lease agreements. The lease terms are between five and twenty years (2011: five and twenty years), and the lease agreements are renewable at the end of the lease period at market rate. The future aggregate minimum lease payments under non-cancellable operating leases are as follows: Within one year Within two to five years Over five years 12 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 £2,228,000 (2011: £1,492,000) of fixed rate listed investments included in available-for-sale 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 Company 2012 £’000 56 2011 £’000 648 2012 £’000 56 2011 £’000 635 Group Land and buildings 2012 £’000 Land and buildings 2011 £’000 Other 2012 £’000 Other 2011 £’000 124 321 102 547 46 80 – 126 – – – – – – – – Loans and receivables £’000 Available- for-sale £’000 Assets at fair value through the profit and loss £’000 1,828 – – 10,154 17,108 14,120 43,210 1,841 – – – – – 387 – – – – – 1,841 387 Total £’000 1,828 1,841 387 10,154 17,108 14,120 45,438 Group 30 June 2012 Assets as per balance sheet Loans and other receivables Available-for-sale financial assets Trade and other receivables Short-term financial assets – deposits Cash and cash equivalents Total Other financial assets at fair value through profit or loss 12 Financial instruments by category continued Group 30 June 2011 Assets as per balance sheet Available-for-sale financial assets Other financial assets at fair value through profit or loss Trade and other receivables Short-term financial assets – deposits Cash and cash equivalents Total Company 30 June 2012 Assets as per balance sheet Loans and other receivables Available-for-sale financial assets Other financial assets at fair value through profit or loss Trade and other receivables Short-term financial assets – deposits Short-term financial assets – cash and cash equivalents Total Company 30 June 2011 Assets as per balance sheet Available-for-sale financial assets Other financial assets at fair value through profit or loss Trade and other receivables Short-term financial assets – deposits Short-term financial assets – cash and cash equivalents Total The above analysis excludes prepayments. Liabilities as per balance sheet Trade and other payables (excluding statutory liabilities) FW Thorpe Plc Annual Report and Accounts 2012 49 Loans and receivables £’000 Available- for-sale £’000 Assets at fair value through the profit and loss £’000 – – 10,748 11,616 14,236 36,600 1,105 – – – – 1,105 – 387 – – – 387 Loans and receivables £’000 Available- for-sale £’000 Assets at fair value through the profit and loss £’000 1,828 – – 10,493 17,108 14,081 43,510 – 1,841 – – – – 1,841 – – 387 – – – 387 Loans and receivables £’000 Available- for-sale £’000 Assets at fair value through the profit and loss £’000 – 387 – – – 387 – – 11,674 11,616 14,260 37,550 Group 2012 £’000 6,659 6,659 1,105 – – – – 1,105 2011 £’000 7,036 7,036 Company 2012 £’000 7,948 7,948 2011 £’000 9,271 9,271 Total £’000 1,105 387 10,748 11,616 14,236 38,092 Total £’000 1,828 1,841 387 10,493 17,108 14,081 45,738 Total £’000 1,105 387 11,674 11,616 14,260 39,042 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A The group and company did not have derivative financial instruments at 30 June 2012 or 30 June 2011. All assets and liabilities above are considered to be at fair value. 015702_FW_Thorpe_18-68.indd 49 10/10/2012 15:49 50 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 13 Investment property Group and company At 1 July Addition Transferred from property, plant and equipment At 30 June The following amounts have been recognised in the income statement: Group and company Rental income Direct operating expenses arising from investment properties that generate rental income 2012 £’000 1,037 35 1,009 2,081 2012 £’000 69 (8) 2011 £’000 1,006 31 – 1,037 2011 £’000 5 (12) The investment property and land 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. Investment property of £1,288,000 (2011: £992,000) is freehold land and therefore not depreciated; the property element includes accumulated depreciation of £269,000 (2011: £nil). The associated fishing rights for the property by the river Wye are included in intangible assets. A fair value exercise was undertaken in September 2011 of the land by the river Wye and the land in Monmouthshire which has resulted in a valuation of £1.2m. Each investment property generates rental income. 14 Available-for-sale financial assets Group and company Beginning of year Additions Revaluation End of year There were no impairment provisions on available-for-sale financial assets in 2012 or 2011. Available-for-sale financial assets comprise listed equity in the UK, and denominated in UK pounds. None of these assets is either past due or impaired. 15 Deposits Group and company Beginning of year Net additions/(disposals) End of year 2012 £’000 1,105 707 29 1,841 2011 £’000 78 990 37 1,105 2012 £’000 11,616 5,492 17,108 2011 £’000 16,058 (4,442) 11,616 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 are rated “A” by Fitch, with a specific rating of F1 for short-term funds. 16 Cash and cash equivalents Cash at bank and on hand Group 2012 £’000 2011 £’000 Company 2012 £’000 2011 £’000 14,120 14,236 14,081 14,260 The banks where the funds are held are rated “A” by Fitch, with a specific rating of F1 for short-term funds. 015702_FW_Thorpe_18-68.indd 50 10/10/2012 15:49 The cost of inventories recognised as an expense and included in cost of sales amounted to £22,733,000 (2011: £21,896,000). ACCOUNTS 17 Inventories Raw materials Work in progress Finished goods 18 Trade and other receivables Current Trade receivables Other debtors Prepayments and accrued income Amounts owed by subsidiaries Bad debts written off Bad debts recovered Net bad debt expense Due in £ sterling Due in € euro Due in Australian dollars Total trade receivables Group Company 2012 £’000 6,784 1,739 2,621 2011 £’000 6,832 1,561 2,904 11,144 11,297 2012 £’000 5,175 1,537 2,545 9,257 2011 £’000 4,845 1,376 2,928 9,149 Group 2012 £’000 Company 2011 £’000 2012 £’000 2011 £’000 9,752 10,687 8,021 402 788 – 61 629 – 402 549 2,070 11,042 10,942 11,377 8,929 84 442 2,661 12,116 Group Company 2012 £’000 299 2011 £’000 321 2012 £’000 98 2011 £’000 72 Group Company 2012 £’000 64 (58) 6 2011 £’000 78 (5) 73 2012 £’000 59 (58) 1 Group 2012 £’000 Company 2011 £’000 2012 £’000 9,409 10,337 7,690 244 99 198 152 232 99 9,752 10,687 8,021 2011 £’000 41 (5) 36 2011 £’000 8,605 172 152 8,929 Amounts owed by subsidiaries are unsecured, interest free and have no fixed date for repayment. Trade receivables past due date not provided 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 considered that there is no impairment and the trade receivables are therefore stated at their fair value, which equals their book value. Provisions are made for bad debt when an undisputed debt is three months past due date or earlier if an adverse event occurs. A significant proportion of the trade receivables are insured. The policy covers 90% of the debt in the event of a claim for default. The bad debt provision includes the remaining 10% of the default in the event of a potential claim. No bad debt provision is made in respect of trade receivables from government departments or agencies. At 30 June 2012 the bad debt provision for the group amounted to £53,000 (2011: £125,000) and for the company £52,000 (2011: £102,000). During the year the following amounts were written off: At 30 June 2012, trade receivables were due to the group and company in the following currency denominations. 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. ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Transferred from property, plant and equipment The following amounts have been recognised in the income statement: Direct operating expenses arising from investment properties that generate rental income The investment property and land 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. Investment property of £1,288,000 (2011: £992,000) is freehold land and therefore not depreciated; the property element includes accumulated depreciation of £269,000 (2011: £nil). The associated fishing rights for the property by the river Wye are included in A fair value exercise was undertaken in September 2011 of the land by the river Wye and the land in Monmouthshire which has resulted Each investment property generates rental income. 14 Available-for-sale financial assets There were no impairment provisions on available-for-sale financial assets in 2012 or 2011. Available-for-sale financial assets comprise listed equity in the UK, and denominated in UK pounds. None of these assets is either past due or impaired. 13 Investment property Group and company At 1 July Addition At 30 June Group and company Rental income intangible assets. in a valuation of £1.2m. Group and company Beginning of year Additions Revaluation End of year 15 Deposits Group and company Beginning of year Net additions/(disposals) End of year 2012 £’000 1,037 35 1,009 2,081 2012 £’000 69 (8) 2011 £’000 1,006 31 – 1,037 2011 £’000 5 (12) 2012 £’000 1,105 707 29 1,841 2011 £’000 78 990 37 1,105 2012 £’000 11,616 5,492 17,108 2011 £’000 16,058 (4,442) 11,616 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 are rated “A” by Fitch, with a specific rating of F1 for short-term funds. 16 Cash and cash equivalents Cash at bank and on hand Group 2012 £’000 Company 2011 £’000 2012 £’000 2011 £’000 14,120 14,236 14,081 14,260 The banks where the funds are held are rated “A” by Fitch, with a specific rating of F1 for short-term funds. FW Thorpe Plc Annual Report and Accounts 2012 51 17 Inventories Raw materials Work in progress Finished goods Group 2012 £’000 6,784 1,739 2,621 11,144 2011 £’000 6,832 1,561 2,904 11,297 Company 2012 £’000 5,175 1,537 2,545 9,257 2011 £’000 4,845 1,376 2,928 9,149 The cost of inventories recognised as an expense and included in cost of sales amounted to £22,733,000 (2011: £21,896,000). 18 Trade and other receivables Current Trade receivables Other debtors Prepayments and accrued income Amounts owed by subsidiaries Group 2012 £’000 9,752 402 788 – 10,942 2011 £’000 10,687 61 629 – 11,377 Company 2012 £’000 8,021 402 549 2,070 11,042 2011 £’000 8,929 84 442 2,661 12,116 Amounts owed by subsidiaries are unsecured, interest free and have no fixed date for repayment. Trade receivables past due date not provided Group 2012 £’000 299 2011 £’000 321 Company 2012 £’000 98 2011 £’000 72 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 considered that there is no impairment and the trade receivables are therefore stated at their fair value, which equals their book value. Provisions are made for bad debt when an undisputed debt is three months past due date or earlier if an adverse event occurs. A significant proportion of the trade receivables are insured. The policy covers 90% of the debt in the event of a claim for default. The bad debt provision includes the remaining 10% of the default in the event of a potential claim. No bad debt provision is made in respect of trade receivables from government departments or agencies. At 30 June 2012 the bad debt provision for the group amounted to £53,000 (2011: £125,000) and for the company £52,000 (2011: £102,000). During the year the following amounts were written off: Bad debts written off Bad debts recovered Net bad debt expense Group 2012 £’000 64 (58) 6 2011 £’000 78 (5) 73 At 30 June 2012, trade receivables were due to the group and company in the following currency denominations. Due in £ sterling Due in € euro Due in Australian dollars Total trade receivables Group 2012 £’000 9,409 244 99 9,752 2011 £’000 10,337 198 152 10,687 Company 2012 £’000 59 (58) 1 Company 2012 £’000 7,690 232 99 8,021 2011 £’000 41 (5) 36 2011 £’000 8,605 172 152 8,929 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. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 51 10/10/2012 15:49 52 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ACCOUNTS 19 Other financial assets at fair value through profit and loss The group and company have units in a sterling cash fund. At 30 June 2012 this amounted to £387,000 (2011: £387,000). 22 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: 20 Trade and other payables Current Trade payables Social security and other taxes Other creditors Accruals and deferred income Amounts owed to subsidiaries Group 2012 £’000 3,675 1,018 2,298 686 – 7,677 2011 £’000 4,733 1,163 1,745 558 – 8,199 Company 2012 £’000 2011 £’000 2,945 748 2,272 421 2,310 8,696 3,642 964 1,707 385 3,537 10,235 Deferred tax assets: – Deferred tax assets to be recovered after more than 12 months – Deferred tax asset to be recovered within 12 months Deferred tax liabilities: – Deferred tax liability to be recovered after more than 12 months – Deferred tax liability to be recovered within 12 months Amounts owed to subsidiaries are unsecured, interest free and have no fixed date of repayment. Net deferred tax liabilities 21 Provisions for liabilities and charges The net movement on the deferred income tax account is as follows: WEEE provision Total Analysis of total provisions: Non-current Total Group 2012 £’000 102 102 Group 2012 £’000 102 102 2011 £’000 102 102 2011 £’000 102 102 Company 2012 £’000 102 102 Company 2012 £’000 102 102 2011 £’000 102 102 2011 £’000 102 102 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 time scale of the utilisation of this provision cannot be predicted with certainty, it is expected that it will not be utilised before 30 June 2015. Group 2012 £’000 Company 2011 £’000 2012 £’000 2011 £’000 Group Company 15 – 15 (778) – (778) (763) 2012 £’000 (672) (6) (76) 48 (57) (763) £’000 224 (57) (168) 20 19 (4) – 15 – – 55 – 55 106 (11) 150 27 – 27 (699) – (699) (672) 2011 £’000 (62) – (451) (182) 23 (672) £’000 386 – (238) (148) – – – – 57 – – 32 89 (2) (6) 81 – – – – (723) (723) (723) 2012 £’000 (688) – (79) 44 – (723) Other £’000 12 – – 8 – – (4) (8) Other £’000 627 (80) (10) 18 555 (32) 24 547 81 – 81 (769) – (769) (688) 2011 £’000 28 – (569) (147) – (688) Total £’000 622 (57) (406) (132) 27 (4) (8) 15 Total £’000 684 (80) 45 50 699 72 7 778 Accelerated Retirement tax benefit depreciation obligations Accelerated tax depreciation £’000 Fair value gains and losses £’000 The movement in 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: Beginning of year Acquisition of subsidiary (note 28) Income statement charge Tax charged directly to equity Transferred to non-current assets and disposal groups for sale End of year Transferred to non-current assets and disposal groups for sale Deferred tax assets At 1 July 2010 (Charged) to the income statement Credited/(charged) directly to equity At 1 July 2011 (Charged) to the income statement Credited/(charged) directly to equity At 30 June 2012 Deferred tax liabilities At 1 July 2010 Transferred to non-current assets and disposal groups for sale Charged/(credited) to the income statement Charged/(credited) directly to equity At 1 July 2011 Charged/(credited) to the income statement Charged/(credited) directly to equity At 30 June 2012 015702_FW_Thorpe_18-68.indd 52 10/10/2012 15:49 20 Trade and other payables Current Trade payables Social security and other taxes Other creditors Accruals and deferred income Amounts owed to subsidiaries WEEE provision Total Analysis of total provisions: Non-current Total WEEE provision Group 2012 £’000 Company 2011 £’000 2012 £’000 2011 £’000 3,675 1,018 2,298 686 – 7,677 4,733 1,163 1,745 558 – 8,199 2,945 748 2,272 421 2,310 8,696 3,642 964 1,707 385 3,537 10,235 Group Company 2012 £’000 102 102 2012 £’000 102 102 2011 £’000 102 102 2011 £’000 102 102 2012 £’000 102 102 2012 £’000 102 102 2011 £’000 102 102 2011 £’000 102 102 Group Company 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 time scale of the utilisation of this provision cannot be predicted with certainty, it is expected that it will not be utilised before 30 June 2015. ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FW Thorpe Plc Annual Report and Accounts 2012 53 19 Other financial assets at fair value through profit and loss The group and company have units in a sterling cash fund. At 30 June 2012 this amounted to £387,000 (2011: £387,000). 22 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: Amounts owed to subsidiaries are unsecured, interest free and have no fixed date of repayment. Net deferred tax liabilities 21 Provisions for liabilities and charges The net movement on the deferred income tax account is as follows: Deferred tax assets: – Deferred tax assets to be recovered after more than 12 months – Deferred tax asset to be recovered within 12 months Deferred tax liabilities: – Deferred tax liability to be recovered after more than 12 months – Deferred tax liability to be recovered within 12 months Beginning of year Acquisition of subsidiary (note 28) Income statement charge Tax charged directly to equity Transferred to non-current assets and disposal groups for sale End of year Group 2012 £’000 15 – 15 (778) – (778) (763) Group 2012 £’000 (672) (6) (76) 48 (57) (763) 2011 £’000 27 – 27 (699) – (699) (672) 2011 £’000 (62) – (451) (182) 23 (672) Company 2012 £’000 2011 £’000 – – – (723) – (723) (723) Company 2012 £’000 (688) – (79) 44 – (723) 81 – 81 (769) – (769) (688) 2011 £’000 28 – (569) (147) – (688) The movement in 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 assets At 1 July 2010 Transferred to non-current assets and disposal groups for sale (Charged) to the income statement Credited/(charged) directly to equity At 1 July 2011 (Charged) to the income statement Credited/(charged) directly to equity At 30 June 2012 Deferred tax liabilities At 1 July 2010 Transferred to non-current assets and disposal groups for sale Charged/(credited) to the income statement Charged/(credited) directly to equity At 1 July 2011 Charged/(credited) to the income statement Charged/(credited) directly to equity At 30 June 2012 Accelerated tax depreciation £’000 Retirement benefit obligations £’000 224 (57) (168) 20 19 (4) – 15 386 – (238) (148) – – – – Accelerated tax depreciation £’000 Fair value gains and losses £’000 – – 55 – 55 106 (11) 150 57 – – 32 89 (2) (6) 81 Other £’000 12 – – (4) 8 – (8) – Other £’000 627 (80) (10) 18 555 (32) 24 547 Total £’000 622 (57) (406) (132) 27 (4) (8) 15 Total £’000 684 (80) 45 50 699 72 7 778 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 53 10/10/2012 15:49 54 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 22 Deferred income tax continued The “other” deferred tax liabilities consist of deferred tax on development expenditure classified as an intangible asset. The deferred income tax charged to equity during the year is as follows: Tax on actuarial loss on retirement benefits scheme Tax on revaluation of available-for-sale assets Impact of deferred tax rate change Group 2012 £’000 – (8) 56 48 2011 £’000 (148) (10) (24) (182) Company 2012 £’000 – (8) 52 44 2011 £’000 (148) (10) 11 (147) 15,000,000 ordinary shares of 10p each (2011: 15,000,000 ordinary shares of 10p each) 11,893,559 ordinary shares of 10p each (2011: 11,893,559 ordinary shares of 10p each) The ordinary shareholders each have one vote per share. 23 Earnings per share Basic 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 period. Weighted average number of ordinary shares in issue Profit attributable to equity holders of the company (£’000) Basic earnings per share (pence per share) Continuing operations Discontinued operations Total 11,723,559 11,723,559 11,723,559 2012 2011 2012 2011 2012 2011 9,940 84.8 8,412 71.8 1,377 11.7 999 8.5 11,317 96.5 9,411 80.3 Diluted earnings per share Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company does not have any dilutive potential ordinary shares; hence there is no difference between basic earnings per share and dilutive earnings per share. Weighted average number of ordinary shares in issue for diluted earnings per share Profit attributable to equity holders of the company (£’000) Diluted earnings per share (pence per share) Continuing operations Discontinued operations Total 11,723,559 11,723,559 11,723,559 2012 2011 2012 2011 2012 2011 9,940 84.8 8,412 71.8 1,377 11.7 999 8.5 11,317 96.5 9,411 80.3 ACCOUNTS 24 Share capital Authorised Allotted and fully paid Share capital at 1 July and 30 June Movements in treasury shares included in share capital Shares held in treasury at 1 July Share capital at 30 June Number of shares held in treasury at 30 June 25 Other reserves Group and company At 30 June 2011 and 30 June 2012 There were no shares issued during the year (2011: nil). There are no share options outstanding at the year end (2011: nil). Group and Company 2012 £’000 2011 £’000 1,500 1,500 1,189 1,189 Group and Company 2012 £’000 2011 £’000 1,189 1,189 Group and Company 2012 £’000 2011 £’000 17 17 17 17 170,000 170,000 Share Capital premium redemption account £’000 reserves £’000 656 137 015702_FW_Thorpe_18-68.indd 54 10/10/2012 15:49 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 22 Deferred income tax continued The “other” deferred tax liabilities consist of deferred tax on development expenditure classified as an intangible asset. The deferred income tax charged to equity during the year is as follows: 24 Share capital Tax on actuarial loss on retirement benefits scheme Tax on revaluation of available-for-sale assets Impact of deferred tax rate change Group 2012 £’000 – (8) 56 48 2011 £’000 (148) (10) (24) (182) Company 2012 £’000 – (8) 52 44 2011 £’000 (148) (10) 11 (147) Authorised 15,000,000 ordinary shares of 10p each (2011: 15,000,000 ordinary shares of 10p each) Allotted and fully paid 11,893,559 ordinary shares of 10p each (2011: 11,893,559 ordinary shares of 10p each) The ordinary shareholders each have one vote per share. 23 Earnings per share Basic 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 period. Share capital at 1 July and 30 June Movements in treasury shares included in share capital Shares held in treasury at 1 July Share capital at 30 June Number of shares held in treasury at 30 June FW Thorpe Plc Annual Report and Accounts 2012 55 Group and Company 2012 £’000 2011 £’000 1,500 1,500 1,189 1,189 Group and Company 2012 £’000 2011 £’000 1,189 1,189 Group and Company 2012 £’000 2011 £’000 17 17 17 17 170,000 170,000 There were no shares issued during the year (2011: nil). There are no share options outstanding at the year end (2011: nil). 25 Other reserves Group and company At 30 June 2011 and 30 June 2012 Share premium account £’000 Capital redemption reserves £’000 656 137 Weighted average number of ordinary shares in issue Profit attributable to equity holders of the company (£’000) Basic earnings per share (pence per share) Diluted earnings per share Continuing operations Discontinued operations Total 11,723,559 11,723,559 11,723,559 2012 2011 2012 2011 2012 2011 9,940 84.8 8,412 71.8 1,377 11.7 999 8.5 11,317 96.5 9,411 80.3 Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company does not have any dilutive potential ordinary shares; hence there is no difference between basic earnings per share and dilutive earnings per share. Weighted average number of ordinary shares in issue for diluted earnings per share 11,723,559 11,723,559 11,723,559 2012 2011 2012 2011 2012 2011 Continuing operations Discontinued operations Total Profit attributable to equity holders of the company (£’000) Diluted earnings per share (pence per share) 9,940 84.8 8,412 71.8 1,377 11.7 999 8.5 11,317 96.5 9,411 80.3 i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 55 10/10/2012 15:49 56 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ACCOUNTS 26 Cash generated from operations Cash generated from continuing operations Profit before income tax Depreciation charge Amortisation of intangibles Profit on disposal of property, plant and equipment Finance income Retirement benefit contributions in excess of current and past service charge Share of loss from joint venture Changes in working capital – Inventories – Trade and other receivables – Trade and other payables Cash generated from continuing operations The cash generation from discontinued operations is as follows: Group 2012 £’000 12,658 1,062 993 (71) (831) (774) 23 304 918 (1,583) 12,699 2011 £’000 11,613 913 733 (42) (372) (776) 11 (2,843) (2,424) 2,292 9,105 Cash generated from discontinued operations Profit before income tax Depreciation charge Amortisation of intangibles Profit on disposal of property, plant and equipment Finance income – net Changes in working capital – Inventories – Trade and other receivables – Trade and other payables Cash generated from discontinued operations Total cash generated from operations Continuing operations Discontinued operations Total cash generated from operations Company 2012 £’000 13,469 826 773 (44) (2,729) (774) – (108) 1,127 (2,242) 10,298 2012 £’000 388 92 70 (1) (1) (84) (439) (33) (8) 2012 £’000 12,699 (8) 12,691 2011 £’000 11,482 721 609 (35) (1,165) (776) – (1,977) (2,341) 1,282 7,800 2011 £’000 1,333 226 214 (6) (4) (182) 303 (1,128) 756 2011 £’000 9,105 756 9,861 27 Related party transactions The following amounts relate to transactions between the company and its subsidiaries: 2012 Compact Lighting Ltd Philip Payne Ltd Sugg Lighting Ltd Solite Europe Ltd Portland Lighting Ltd 2011 Mackwell Electronics Ltd Compact Lighting Ltd Philip Payne Ltd Sugg Lighting Ltd Solite Europe Ltd Compact Lighting Ltd Philip Payne Ltd Sugg Lighting Ltd Solite Europe Ltd Portland Lighting Ltd Total (2011: £3,397,000). on pages 22 to 24. Purchases of goods £’000 Sales of goods £’000 Sales of services £’000 Dividends paid to company £’000 Purchases of Sales of goods £’000 Sales of services £’000 Dividends paid to company £’000 38 30 1 12 – 33 46 11 7 47 51 339 7 79 – goods £’000 2,823 53 350 6 147 2012 £’000 (1) – (58) (738) 18 4 1 2 – 4 3 1 18 2 1 – – 43 143 98 – – 282 32 111 – 66 – – – Amounts due to related Amounts due from related party at 30 June party at 30 June (1,513) (1,559) 2011 £’000 2012 £’000 2011 £’000 (9) 1,382 2,004 4,097 4,053 (177) – – (2,310) (1,745) 5,480 6,057 Balances due to and from the company by related entities were as follows: Trading balances arise from transactions of goods and services carried out under normal commercial terms. Cash resources are managed centrally by the company and result in balances owed to and from the company when cash is transferred. In addition to the balances stated above, the company has made a provision for losses at Sugg Lighting Ltd of £3,410,000 The key management personnel are the group Board directors; their interests are disclosed in the directors’ remuneration report Although Mackwell Electronics Ltd was disposed of during the year, it remains a related party because there is a connection between a director of the company C M Brangwin and N A Brangwin who is a director of Mackwell Electronics Ltd. During the year the company sold goods to Mackwell amounting to £15,000 (2011: £33,000), purchased goods amounting to £2,328,000 (2011: £2,823,000), and sold services of £3,000 (2011: £4,000). At the year end there were no trade balances due to or from Mackwell Electronics Ltd (2011: £(1,792,000) and £1,000 respectively). The company is owed £2,000,000 in respect of the loan notes issued to the company as part of the sale agreement (note 29), plus accrued interest of £24,000 at the balance sheet date. Prior to the disposal a dividend of £1,416,000 was paid to the company (2011: £282,000). The company owns the premises occupied by Mackwell Electronics Ltd and rent is charged of £102,000 per annum (2011: £102,000). The rent is comparable to commercial rents for similar buildings in the area. 015702_FW_Thorpe_18-68.indd 56 10/10/2012 15:49 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 26 Cash generated from operations Cash generated from continuing operations Profit before income tax Depreciation charge Amortisation of intangibles Profit on disposal of property, plant and equipment Finance income Retirement benefit contributions in excess of current and past service charge Share of loss from joint venture Changes in working capital – Inventories – Trade and other receivables – Trade and other payables Cash generated from continuing operations The cash generation from discontinued operations is as follows: Cash generated from discontinued operations Profit on disposal of property, plant and equipment Profit before income tax Depreciation charge Amortisation of intangibles Finance income – net Changes in working capital – Inventories – Trade and other receivables – Trade and other payables Cash generated from discontinued operations Total cash generated from operations Continuing operations Discontinued operations Total cash generated from operations Group 2012 £’000 Company 2011 £’000 2012 £’000 2011 £’000 11,613 13,469 11,482 12,658 1,062 993 (71) (831) (774) 23 304 918 (1,583) 12,699 913 733 (42) (372) (776) 11 (2,843) (2,424) 2,292 9,105 826 773 (44) (2,729) (774) – (108) 1,127 (2,242) 10,298 721 609 (35) (1,165) (776) – (1,977) (2,341) 1,282 7,800 2011 £’000 1,333 226 214 (6) (4) (182) 303 (1,128) 756 2011 £’000 9,105 756 9,861 2012 £’000 388 92 70 (1) (1) (84) (439) (33) (8) 2012 £’000 12,699 (8) 12,691 FW Thorpe Plc Annual Report and Accounts 2012 57 27 Related party transactions The following amounts relate to transactions between the company and its subsidiaries: 2012 Compact Lighting Ltd Philip Payne Ltd Sugg Lighting Ltd Solite Europe Ltd Portland Lighting Ltd 2011 Mackwell Electronics Ltd Compact Lighting Ltd Philip Payne Ltd Sugg Lighting Ltd Solite Europe Ltd Balances due to and from the company by related entities were as follows: Compact Lighting Ltd Philip Payne Ltd Sugg Lighting Ltd Solite Europe Ltd Portland Lighting Ltd Total Purchases of goods £’000 Sales of goods £’000 Sales of services £’000 51 339 7 79 – 38 30 1 12 – 4 1 18 2 – Purchases of goods £’000 Sales of goods £’000 Sales of services £’000 2,823 53 350 6 147 33 46 11 7 47 4 3 1 18 2 Dividends paid to company £’000 43 143 – 98 – Dividends paid to company £’000 282 32 111 – 66 Amounts due to related party at 30 June Amounts due from related party at 30 June 2012 £’000 (1) (1,513) – (58) (738) (2,310) 2011 £’000 (9) (1,559) – (177) – (1,745) 2012 £’000 1,382 1 4,097 – – 5,480 2011 £’000 2,004 – 4,053 – – 6,057 Trading balances arise from transactions of goods and services carried out under normal commercial terms. Cash resources are managed centrally by the company and result in balances owed to and from the company when cash is transferred. In addition to the balances stated above, the company has made a provision for losses at Sugg Lighting Ltd of £3,410,000 (2011: £3,397,000). The key management personnel are the group Board directors; their interests are disclosed in the directors’ remuneration report on pages 22 to 24. Although Mackwell Electronics Ltd was disposed of during the year, it remains a related party because there is a connection between a director of the company C M Brangwin and N A Brangwin who is a director of Mackwell Electronics Ltd. During the year the company sold goods to Mackwell amounting to £15,000 (2011: £33,000), purchased goods amounting to £2,328,000 (2011: £2,823,000), and sold services of £3,000 (2011: £4,000). At the year end there were no trade balances due to or from Mackwell Electronics Ltd (2011: £(1,792,000) and £1,000 respectively). The company is owed £2,000,000 in respect of the loan notes issued to the company as part of the sale agreement (note 29), plus accrued interest of £24,000 at the balance sheet date. Prior to the disposal a dividend of £1,416,000 was paid to the company (2011: £282,000). The company owns the premises occupied by Mackwell Electronics Ltd and rent is charged of £102,000 per annum (2011: £102,000). The rent is comparable to commercial rents for similar buildings in the area. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 57 10/10/2012 15:49 58 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 28 Acquisition of subsidiary On 1 July 2011 the group acquired 100% of the share capital of Portland Lighting Ltd for an initial amount of £2,500,000. An additional amount of £234,000 has been paid, and a provision has been made for a contingent consideration of £754,000. The provision is based on the profitability of Portland Lighting for both 2011/2012 and the following year. The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out below. On 14 November 2011, the group entered into a sale agreement to dispose of Mackwell Electronics Ltd. The disposal was completed on 2 December 2011, on which date control of Mackwell Electronics Ltd passed to the acquirer. The results of the discontinued operations, which have been included in the consolidated income statement were as follows: Cash Intangible assets Property, plant and equipment Inventories Trade and other receivables Trade and other payables Total identifiable assets Goodwill Total purchase consideration Total purchase consideration satisfied by: Cash Contingent consideration Total consideration Net cash outflow arising on acquisition Cash consideration Less cash in subsidiary acquired Cash outflow on acquisition £’000 232 485 69 150 413 (479) 870 2,618 3,488 2,734 754 3,488 2,734 (232) 2,502 A fair value exercise has been performed on the assets and liabilities, the results were that property, plant and equipment, inventories, trade and other receivables and trade and other payables were assessed and book value was considered fair value. Fair value of intangible assets was assessed and determined on the basis of the technology and brand name acquired. The technology element was determined using an industry typical royalty rate over a five year period discounted to the present day. The brand name element was determined by assessing the impact on profitability of a change in name over a three year period. The goodwill relates to the ongoing levels of profitability business model, established customer base and potential sourcing benefits for other group companies. The contingent consideration is based on EBIT performance for the financial year. £250,000 is payable if EBIT is greater than £500,000 for the year, a further amount is payable of 50% of EBIT in excess of £500,000. This agreement expires in two financial years from the original acquisition date. Portland Lighting Ltd contributed £2,458,000 in revenue, and £588,000 to the group’s operating profit for the period between the date of acquisition and the balance sheet date. 015702_FW_Thorpe_18-68.indd 58 10/10/2012 15:49 ACCOUNTS 29 Disposal of subsidiary Discontinued operations Revenue Expenses Profit before tax expense Attributable tax expense Profit on disposal of discontinued operations Attributable tax expense Period ended 2 December Year ended 30 June 2011 £’000 2011 £’000 4,342 (3,958) 384 (99) 1,092 – 1,377 9,669 (8,336) 1,333 (334) – – 999 Profit attributable to discontinued operations – (attributable to owners of the company) During the year Mackwell Electronics Ltd contributed £(8,000) (2011: £756,000) to the group’s net operating cash flows. A profit of £1,377,000 arose on the disposal of Mackwell Electronics Ltd, being the proceeds of disposal less the associated costs and the carrying amount of the subsidiary’s net assets and attributable goodwill. Disposal of subsidiary On 2 December 2011 the group disposed of its interest in Mackwell Electronics Ltd, a subsidiary company which had been classed as held for sale in the prior year. The net assets of Mackwell Electronics Ltd were £4,487,000 at the date of disposal. The gain on disposal of £1,092,000 resulted from total consideration of £6,500,000 less net assets of £4,487,000, costs of £749,000, less fair value adjustment of £172,000 in respect of the loan notes issued. The total consideration was satisfied by cash of £4,500,000 and loan notes issued of £2,000,000. The loan notes are repayable on 2 December 2016 and attract two different rates of interest; £1,625,000 at 1% over the Bank of England base rate and £375,000 at 4% over Bank of England base rate. The loan note tranche of £1,625,000 has been subject to a fair value adjustment in respect to the interest rate. The carrying value has been adjusted to reflect a commercial interest rate of 4.2% over Bank of England base rate, which is considered to be a rate that Mackwell Electronics Ltd would incur in the external market. The fair value of the loans is considered to be £1,453,000. The impact of Mackwell Electronics Ltd on the group’s results in the current and prior periods is disclosed in the section relating to discontinued operations. 30 Pension scheme pension scheme. benefit pension. 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 • For members joining before 1 October 1995, benefits provided are the higher of their defined contribution pension and their defined • For members joining on or after 1 October 1995, benefits provided are defined contribution in nature. ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FW Thorpe Plc Annual Report and Accounts 2012 59 28 Acquisition of subsidiary On 1 July 2011 the group acquired 100% of the share capital of Portland Lighting Ltd for an initial amount of £2,500,000. An additional amount of £234,000 has been paid, and a provision has been made for a contingent consideration of £754,000. The provision is based on the profitability of Portland Lighting for both 2011/2012 and the following year. The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out below. 29 Disposal of subsidiary Discontinued operations On 14 November 2011, the group entered into a sale agreement to dispose of Mackwell Electronics Ltd. The disposal was completed on 2 December 2011, on which date control of Mackwell Electronics Ltd passed to the acquirer. The results of the discontinued operations, which have been included in the consolidated income statement were as follows: Cash Intangible assets Property, plant and equipment Inventories Trade and other receivables Trade and other payables Total identifiable assets Goodwill Total purchase consideration Total purchase consideration satisfied by: Cash Contingent consideration Total consideration Net cash outflow arising on acquisition Cash consideration Less cash in subsidiary acquired Cash outflow on acquisition A fair value exercise has been performed on the assets and liabilities, the results were that property, plant and equipment, inventories, trade and other receivables and trade and other payables were assessed and book value was considered fair value. Fair value of intangible assets was assessed and determined on the basis of the technology and brand name acquired. The technology element was determined using an industry typical royalty rate over a five year period discounted to the present day. The brand name element was determined by assessing the impact on profitability of a change in name over a three year period. The goodwill relates to the ongoing levels of profitability business model, established customer base and potential sourcing benefits for other group companies. acquisition date. The contingent consideration is based on EBIT performance for the financial year. £250,000 is payable if EBIT is greater than £500,000 for the year, a further amount is payable of 50% of EBIT in excess of £500,000. This agreement expires in two financial years from the original Portland Lighting Ltd contributed £2,458,000 in revenue, and £588,000 to the group’s operating profit for the period between the date of acquisition and the balance sheet date. £’000 232 485 69 150 413 (479) 870 2,618 3,488 2,734 754 3,488 2,734 (232) 2,502 Revenue Expenses Profit before tax expense Attributable tax expense Profit on disposal of discontinued operations Attributable tax expense Profit attributable to discontinued operations – (attributable to owners of the company) Period ended 2 December 2011 £’000 Year ended 30 June 2011 £’000 4,342 (3,958) 384 (99) 1,092 – 1,377 9,669 (8,336) 1,333 (334) – – 999 During the year Mackwell Electronics Ltd contributed £(8,000) (2011: £756,000) to the group’s net operating cash flows. A profit of £1,377,000 arose on the disposal of Mackwell Electronics Ltd, being the proceeds of disposal less the associated costs and the carrying amount of the subsidiary’s net assets and attributable goodwill. Disposal of subsidiary On 2 December 2011 the group disposed of its interest in Mackwell Electronics Ltd, a subsidiary company which had been classed as held for sale in the prior year. The net assets of Mackwell Electronics Ltd were £4,487,000 at the date of disposal. The gain on disposal of £1,092,000 resulted from total consideration of £6,500,000 less net assets of £4,487,000, costs of £749,000, less fair value adjustment of £172,000 in respect of the loan notes issued. The total consideration was satisfied by cash of £4,500,000 and loan notes issued of £2,000,000. The loan notes are repayable on 2 December 2016 and attract two different rates of interest; £1,625,000 at 1% over the Bank of England base rate and £375,000 at 4% over Bank of England base rate. The loan note tranche of £1,625,000 has been subject to a fair value adjustment in respect to the interest rate. The carrying value has been adjusted to reflect a commercial interest rate of 4.2% over Bank of England base rate, which is considered to be a rate that Mackwell Electronics Ltd would incur in the external market. The fair value of the loans is considered to be £1,453,000. The impact of Mackwell Electronics Ltd on the group’s results in the current and prior periods is disclosed in the section relating to discontinued operations. 30 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. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 59 10/10/2012 15:49 60 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ACCOUNTS 30 Pension scheme continued 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 2012 amounted to £1,340,000 (2011: £1,381,000). 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 1 July 2012, and is in progress. The previous valuation was carried out on 1 July 2009 and at that date the value of the fund was £17,169,000. This was sufficient to cover 83% 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 Pension increases in payment of 2.5% pa or RPI if less 3.75% 5.66% 5.50% 3.75% 3.60% 2.35% The figures at 1 July 2009 have been updated as at the balance sheet dates in order to assess the additional disclosures required under IAS 19 as at 30 June 2012 by an independent qualified actuary using the following major assumptions. The movement in the fair value of the plan assets of the year is as follows: 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 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 The balance sheet figures required under IAS 19 are as follows: 2012 2011 2010 2009 2008 2.80% 4.55% 4.40% 2.05% 2.75% 2.10% 22.5 years 24.4 years 24.9 years 26.8 years 3.70% 5.45% 5.50% 2.95% 3.55% 2.35% 22.4 years 24.4 years 24.8 years 26.7 years 3.50% 5.25% 5.35% 3.50% 3.30% 2.20% 22.3 years 24.3 years 24.7 years 26.6 years 3.75% 5.66% 6.00% 3.75% 3.60% 2.35% 22.2 years 4.00% 5.89% 6.40% 4.00% 3.80% 2.40% 22.0 years 24.6 years 24.9 years 30 June 2012 30 June 2011 30 June 2010 30 June 2009 30 June 2008 Expected long-term rate of return Expected long-term rate of return Value £’000 Expected long-term rate of return Value £’000 Equities Bonds Property Other Total market value of assets Present value of scheme liabilities Surplus/(deficit) in the scheme – 0.50% 6.20% 9,744 4.40% 12,484 – 1,596 23,824 (23,809) 15 – 0.50% 7.75% 11,166 5.00% 10,982 – 1,328 23,476 (22,993) 483 7.65% 4.84% 7.35% 0.50% Expected long-term rate of return 7.80% 5.30% 7.80% 0.50% Expected long-term rate of return 7.75% 5.60% 7.75% 5.00% Value £’000 7,265 8,066 12 1,832 17,175 (19,208) (2,033) Value £’000 8,573 7,002 11 1,755 17,341 (17,622) (281) Value £’000 9,045 9,464 19 1,565 20,093 (21,472) (1,379) The property assets have been amalgamated with equities for reporting purposes during the year ended 2011 due to their low value. 015702_FW_Thorpe_18-68.indd 60 10/10/2012 15:49 30 Pension scheme continued The amounts recognised in the balance sheet 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 balance sheet Liability recognised in the balance sheet The movement in the defined benefit obligation over the year is as follows: Contributions by plan participants At 1 July Current service cost Interest cost Actuarial losses Benefits paid At 30 June At 1 July Expected return in plan assets Actuarial gains/(losses) Employer contributions Employee contributions Benefits paid At 30 June Current service cost Interest cost Expected return on plan assets income” respectively. The amounts recognised in the income statement are as follows: 2012 £’000 2011 £’000 (23,809) 23,824 (22,993) 23,476 (22,993) (21,472) (23,809) (22,993) 15 (15) – 2012 £’000 (566) (1,220) (350) (1,603) 2,923 2012 £’000 23,476 1,388 193 1,340 350 (2,923) 23,824 2012 £’000 566 1,220 (1,388) 398 483 (483) – 2011 £’000 (548) (1,151) (349) (281) 808 2011 £’000 20,093 1,184 1,335 1,323 349 (808) 23,476 2011 £’000 548 1,151 (1,184) 515 Total included within staff costs and other financial income Of the total charge, £566,000 (2011: £548,000) and £168,000 (2011: £33,000) were included in “administrative expenses” and “net finance 30 Pension scheme continued The amounts recognised in the balance sheet 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 balance sheet Liability recognised in the balance sheet 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 losses Benefits paid At 30 June The figures at 1 July 2009 have been updated as at the balance sheet dates in order to assess the additional disclosures required under IAS 19 as at 30 June 2012 by an independent qualified actuary using the following major assumptions. 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/(losses) Employer contributions Employee contributions Benefits paid At 30 June The amounts recognised in the income statement are as follows: Current service cost Interest cost Expected return on plan assets Total included within staff costs and other financial income FW Thorpe Plc Annual Report and Accounts 2012 61 2012 £’000 2011 £’000 (23,809) 23,824 15 (15) – (22,993) 23,476 483 (483) – 2012 £’000 2011 £’000 (22,993) (566) (1,220) (350) (1,603) 2,923 (23,809) (21,472) (548) (1,151) (349) (281) 808 (22,993) 2012 £’000 23,476 1,388 193 1,340 350 (2,923) 23,824 2012 £’000 566 1,220 (1,388) 398 2011 £’000 20,093 1,184 1,335 1,323 349 (808) 23,476 2011 £’000 548 1,151 (1,184) 515 Of the total charge, £566,000 (2011: £548,000) and £168,000 (2011: £33,000) were included in “administrative expenses” and “net finance income” respectively. ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 30 Pension scheme continued 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 2012 amounted to £1,340,000 (2011: £1,381,000). 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 1 July 2012, and is in progress. The previous valuation was carried out on 1 July 2009 and at that date the value of the fund was £17,169,000. This was sufficient to cover 83% 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 Pension increases in payment of 2.5% pa or RPI if less 3.75% 5.66% 5.50% 3.75% 3.60% 2.35% 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 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 The balance sheet figures required under IAS 19 are as follows: 2012 2.80% 4.55% 4.40% 2.05% 2.75% 2.10% 2011 3.70% 5.45% 5.50% 2.95% 3.55% 2.35% 2010 3.50% 5.25% 5.35% 3.50% 3.30% 2.20% 2009 3.75% 5.66% 6.00% 3.75% 3.60% 2.35% 2008 4.00% 5.89% 6.40% 4.00% 3.80% 2.40% 22.5 years 24.4 years 24.9 years 26.8 years 22.4 years 24.4 years 24.8 years 26.7 years 22.3 years 24.3 years 24.7 years 26.6 years 22.2 years 22.0 years 24.6 years 24.9 years 30 June 2012 30 June 2011 30 June 2010 30 June 2009 30 June 2008 Expected long-term rate of return Expected long-term rate of return Value £’000 Expected long-term rate of return Value £’000 6.20% 9,744 7.75% 11,166 4.40% 12,484 5.00% 10,982 – – – 0.50% 1,596 0.50% 7.65% 4.84% 7.35% 0.50% – 1,328 23,476 (22,993) 483 Expected long-term rate of return 7.80% 5.30% 7.80% 0.50% Expected long-term rate of return 7.75% 5.60% 7.75% 5.00% Value £’000 7,265 8,066 12 1,832 17,175 (19,208) (2,033) Value £’000 8,573 7,002 11 1,755 17,341 (17,622) (281) Value £’000 9,045 9,464 19 1,565 20,093 (21,472) (1,379) Equities Bonds Property Other Total market value of assets Present value of scheme liabilities Surplus/(deficit) in the scheme 23,824 (23,809) 15 The property assets have been amalgamated with equities for reporting purposes during the year ended 2011 due to their low value. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 61 10/10/2012 15:49 62 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ACCOUNTS 30 Pension scheme continued Analysis of amount recognised in the statement of comprehensive income Actual return less expected return on pension scheme assets Experience gains/(losses) arising on the scheme liabilities Changes in assumptions underlying the present value on the scheme liabilities Restriction of pension scheme surplus Actuarial (loss)/gain recognised in the statement of comprehensive income Cumulative actuarial loss recognised in the statement of comprehensive income at 1 July Actuarial loss recognised in the statement of comprehensive income for the year Cumulative actuarial loss recognised in the statement of comprehensive income at 30 June 2012 £’000 193 227 (1,830) 468 (942) 2012 £’000 (2,864) (1,410) (4,274) 2011 £’000 1,335 (433) 152 (483) 571 2011 £’000 (3,918) 1,054 (2,864) The restriction in the scheme surplus is excluded from the cumulative actuarial loss recognised in the statement of comprehensive income. 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 balance sheet 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 period ending 30 June 2012 was £1,551,000 or 6.5%. The group expect to pay £1,363,000 contributions (2011: £1,229,000) into the pension scheme during the forthcoming year. History of experience gains and losses recognised in the statement of comprehensive income 2012 £’000 2011 2010 2009 2008 % £’000 % £’000 % £’000 % £’000 % 1,335 1,713 (1,969) (2,038) 11% 12% (492) (219) Difference between the expected and actual return on scheme assets Percentage of scheme assets Experience loss on scheme liabilities Percentage of the present value of scheme liabilities Changes in assumptions underlying the present value of scheme liabilities Percentage of the present value of scheme liabilities Restriction of pension scheme surplus Percentage of the present value of scheme liabilities Amount which has been recognised in the SoCI Percentage of the present value of the scheme liabilities 193 227 1% 1% (433) 6% 2% (388) (1,830) 152 (1,371) – 8% 0% (483) (1,410) 571 6% 0% 2% 2% – 9% 2% 6% – 344 – 3% 2% – 633 – 1% 4% – 9% (46) (2,117) (1,624) 0% 11% 31 Group companies The parent company has the following investments as at 30 June 2012 and 30 June 2011: Name of undertaking Mackwell Electronics Limited Compact Lighting Limited Philip Payne Limited Sugg Lighting Limited Solite Europe Limited Portland Lighting Limited TRT Lighting Limited Country of incorporation England England England England England England England Description of shares held Ordinary £1 shares Ordinary £1 shares Ordinary £1 shares Ordinary £1 shares Ordinary £1 shares Ordinary £1 shares Ordinary £1 shares Proportion of nominal value of issued shares held by group and company 100% 100% 100% 100% The principal activities of these subsidiaries are: Compact Lighting Limited – design and manufacture of lighting solutions for retail applications Philip Payne Limited Sugg Lighting Limited Solite Europe Limited – design and manufacture of illuminated signs – design and manufacture of traditional architectural lighting – design and manufacture of cleanroom lighting equipment Portland Lighting Limited – design and manufacture of lighting for signs TRT Lighting Limited – non-trading The cost of investment in subsidiaries is as follows: 100% Disposed on 2 December 2011 100% Acquired on 1 July 2011 100% Non trading Investment in subsidiaries – cost Less provisions The movement in the investment and provisions is as follows: At 1 July 2010 and 1 July 2011 Acquisition of Portland Lighting Ltd Disposal of Mackwell Electronics Ltd At 30 June 2012 Group 2012 £’000 Company 2011 £’000 2012 £’000 – – – – – – 5,732 (1,564) 4,168 2011 £’000 2,572 (1,564) 1,008 Cost £’000 Provisions £’000 2,572 3,488 (328) 5,732 (1,564) – – (1,564) TRT Lighting Ltd was established during the year by FW Thorpe Plc. It has an authorised and issued share capital of £100. There were no other additions or disposals during the year. 015702_FW_Thorpe_18-68.indd 62 10/10/2012 15:49 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 2012 £’000 193 227 (1,830) 468 (942) 2012 £’000 (2,864) (1,410) (4,274) 2011 £’000 1,335 (433) 152 (483) 571 2011 £’000 (3,918) 1,054 (2,864) Actual return less expected return on pension scheme assets Experience gains/(losses) arising on the scheme liabilities Changes in assumptions underlying the present value on the scheme liabilities Restriction of pension scheme surplus Actuarial (loss)/gain recognised in the statement of comprehensive income Cumulative actuarial loss recognised in the statement of comprehensive income at 1 July Actuarial loss recognised in the statement of comprehensive income for the year Cumulative actuarial loss recognised in the statement of comprehensive income at 30 June The restriction in the scheme surplus is excluded from the cumulative actuarial loss recognised in the statement of comprehensive income. 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 balance sheet 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 period ending 30 June 2012 was £1,551,000 or 6.5%. The group expect to pay £1,363,000 contributions (2011: £1,229,000) into the pension scheme during the forthcoming year. History of experience gains and losses recognised in the statement of comprehensive income 2012 £’000 2011 2010 2009 2008 % £’000 % £’000 % £’000 % £’000 % of scheme liabilities (1,830) 152 (1,371) 344 Difference between the expected and actual return on scheme assets Percentage of scheme assets Experience loss on scheme liabilities Percentage of the present value of scheme liabilities Changes in assumptions underlying the present value Percentage of the present value of scheme liabilities Restriction of pension scheme surplus Percentage of the present value of scheme liabilities Amount which has been recognised in the SoCI Percentage of the present value of the scheme liabilities 193 227 1,335 1,713 (1,969) (2,038) 11% 12% (433) (388) (492) (219) 1% 1% 8% 0% 6% 6% 2% 0% 2% 2% 9% 2% 6% – 0% 633 – 3% 2% – 11% 1% 4% – 9% – (483) – – (1,410) 571 (46) (2,117) (1,624) 30 Pension scheme continued Analysis of amount recognised in the statement of comprehensive income 31 Group companies The parent company has the following investments as at 30 June 2012 and 30 June 2011: FW Thorpe Plc Annual Report and Accounts 2012 63 Name of undertaking Mackwell Electronics Limited Compact Lighting Limited Philip Payne Limited Sugg Lighting Limited Solite Europe Limited Portland Lighting Limited TRT Lighting Limited Country of incorporation England England England England England England England Description of shares held Ordinary £1 shares Ordinary £1 shares Ordinary £1 shares Ordinary £1 shares Ordinary £1 shares Ordinary £1 shares Ordinary £1 shares Proportion of nominal value of issued shares held by group and company 100% Disposed on 2 December 2011 100% 100% 100% 100% 100% Acquired on 1 July 2011 100% Non trading The principal activities of these subsidiaries are: Compact Lighting Limited Philip Payne Limited Sugg Lighting Limited Solite Europe Limited Portland Lighting Limited TRT Lighting Limited – design and manufacture of lighting solutions for retail applications – design and manufacture of illuminated signs – design and manufacture of traditional architectural lighting – design and manufacture of cleanroom lighting equipment – design and manufacture of lighting for signs – non-trading The cost of investment in subsidiaries is as follows: Investment in subsidiaries – cost Less provisions The movement in the investment and provisions is as follows: At 1 July 2010 and 1 July 2011 Acquisition of Portland Lighting Ltd Disposal of Mackwell Electronics Ltd At 30 June 2012 Group 2012 £’000 – – – 2011 £’000 – – – Company 2012 £’000 5,732 (1,564) 4,168 2011 £’000 2,572 (1,564) 1,008 Cost £’000 Provisions £’000 2,572 3,488 (328) 5,732 (1,564) – – (1,564) TRT Lighting Ltd was established during the year by FW Thorpe Plc. It has an authorised and issued share capital of £100. There were no other additions or disposals during the year. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 63 10/10/2012 15:49 64 FW Thorpe Plc Annual Report and Accounts 2012 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ADDITIONAL INFORMATION NOTICE OF MEETING 32 Investment in joint venture The group has a joint venture in Australia with its local agent. The venture is jointly controlled with equal voting rights with the group holding a 51% interest. Thorlux Lighting Pty Ltd is registered in Queensland and operates from a sales office in Melbourne. The group has applied the equity method of accounting to recognise this interest. Notice is hereby given that the seventy-sixth Annual General Meeting of FW Thorpe Plc will be held at Merse Road, North Moons Moat, Redditch, Worcestershire B98 9HH on 15 November 2012 at 3.15 pm to transact the following business: At 1 July Share of loss Exchange rate movement At 30 June Group 2012 £’000 136 (23) (2) 111 2011 £’000 156 (11) (9) 136 Company 2012 £’000 156 – – 156 2011 £’000 156 – – 156 33 Events after the balance sheet date Taxation A reduction in the main rate of corporation tax from 27% to 25% from 1 April 2012 was announced in the Budget on 23 March 2011 and substantively enacted on 5 July 2011. In addition to the change in corporation tax rate disclosed above, a number of further changes to the UK corporation tax system were announced in the March 2012 UK Budget Statement. A resolution passed by Parliament on 26 March 2012 reduced the main rate of corporation tax from 26% to 24% from 1 April 2012. Legislation to reduce the main rate of corporation tax from 24% to 23% from 1 April 2013 is included in the Finance Act 2012 which was substantially enacted on 3 July 2012. A further reduction in the main rate is also proposed to reduce the rate to 22% from 1 April 2014. None of these rate reductions had been substantively enacted at the balance sheet date and therefore they are not included in these financial statements. The effect of the changes in corporation tax rates enacted by Parliament on 26 March 2012 and the further changes substantively enacted on 3 July 2012 are not material to the financial statements and have not therefore been calculated. 9. That, subject to the passing of resolution number 8, the directors be and hereby are given the general power to allot equity securities (as defined by section 560 of the Act) for cash, either pursuant to the authority conferred by resolution number 8 or by way of a sale of treasury shares, as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities; 9.1 in connection with an offer by way of a rights issue: (a) to the holders of ordinary shares in proportion (as nearly as may be practicable) to their respective holdings; and (b) to holders of other equity securities as required by the rights attaching to those securities or as the directors otherwise consider necessary but subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to treasury shares, fractional entitlements, record dates, legal or practical problems in or under the laws of any territory or the requirements of any regulatory body or stock exchange; and 9.2 the allotment (otherwise than pursuant to paragraph 9.1) of equity securities up to an aggregate nominal amount of £58,618 representing no more than 5% of the issued ordinary share capital at 12 October 2012. The power granted by this resolution will (unless renewed, varied or revoked by the company prior to or on such date) expire on the earlier of the conclusion of the company’s next Annual General Meeting and the expiry of the period of 15 months following the passing of this resolution, save that the company may, before such expiry, make offers or agreements which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred by this resolution has expired. This resolution revokes and replaces all unexercised powers previously granted to the directors to allot equity securities as if section 561(1) of the 2006 Act did not apply but without prejudice to any allotment of equity securities already made or agreed to be made pursuant to such powers. 1. To receive and adopt the directors’ Report and Accounts for the Ordinary business year ended 30 June 2012. 2. To declare a dividend. 3. To re-elect Mr A B Thorpe as a director. 4. To re-elect Mr M Allcock as a director. 5. To re-elect Mr C M Brangwin 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 and 8 as ordinary resolutions and in the case of 9 and 10 as special resolutions. 7. That the directors’ remuneration report (as set out on pages 22 to 24 of the Annual Report and Accounts) for the year ended 30 June 2012 be approved. 8. That the directors be and hereby are generally and unconditionally authorised to allot shares in the company or to grant rights to subscribe for, or to convert any security into, shares in the company (“Rights”) comprising equity securities (as defined by section 560 of the Companies Act 2006 (“the Act”)) up to an aggregate nominal amount of £310,644. Provided that this authority shall, unless renewed, varied or revoked by the company, expire on the date of the next Annual General Meeting of the company, save that the company may, before such expiry, make offers or agreements which would or might require shares to be allotted or Rights to be granted and the directors may allot shares or grant Rights in pursuance of such offer or agreement notwithstanding that the authority conferred by this resolution has expired. This resolution revokes and replaces all unexercised authorities previously granted to the directors to allot shares or to grant Rights but without prejudice to any allotment of shares or grant of Rights already made, offered or agreed to be made pursuant to such authorities. 015702_FW_Thorpe_18-68.indd 64 10/10/2012 15:49 ACCOUNTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ADDITIONAL INFORMATION NOTICE OF MEETING FW Thorpe Plc Annual Report and Accounts 2012 65 32 Investment in joint venture The group has a joint venture in Australia with its local agent. The venture is jointly controlled with equal voting rights with the group holding a 51% interest. Thorlux Lighting Pty Ltd is registered in Queensland and operates from a sales office in Melbourne. The group has applied the equity method of accounting to recognise this interest. Group 2012 £’000 136 (23) (2) 111 2011 £’000 156 (11) (9) 136 Company 2012 £’000 156 – – 156 2011 £’000 156 – – 156 At 1 July Share of loss At 30 June Exchange rate movement 33 Events after the balance sheet date Taxation A reduction in the main rate of corporation tax from 27% to 25% from 1 April 2012 was announced in the Budget on 23 March 2011 and substantively enacted on 5 July 2011. In addition to the change in corporation tax rate disclosed above, a number of further changes to the UK corporation tax system were announced in the March 2012 UK Budget Statement. A resolution passed by Parliament on 26 March 2012 reduced the main rate of corporation tax from 26% to 24% from 1 April 2012. Legislation to reduce the main rate of corporation tax from 24% to 23% from 1 April 2013 is included in the Finance Act 2012 which was substantially enacted on 3 July 2012. A further reduction in the main rate is also proposed to reduce the rate to 22% from 1 April 2014. None of these rate reductions had been substantively enacted at the balance sheet date and therefore they are not included in these financial statements. The effect of the changes in corporation tax rates enacted by Parliament on 26 March 2012 and the further changes substantively enacted on 3 July 2012 are not material to the financial statements and have not therefore been calculated. Notice is hereby given that the seventy-sixth Annual General Meeting of FW Thorpe Plc will be held at Merse Road, North Moons Moat, Redditch, Worcestershire B98 9HH on 15 November 2012 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 2012. 2. To declare a dividend. 3. To re-elect Mr A B Thorpe as a director. 4. To re-elect Mr M Allcock as a director. 5. To re-elect Mr C M Brangwin 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 and 8 as ordinary resolutions and in the case of 9 and 10 as special resolutions. 7. That the directors’ remuneration report (as set out on pages 22 to 24 of the Annual Report and Accounts) for the year ended 30 June 2012 be approved. 8. That the directors be and hereby are generally and unconditionally authorised to allot shares in the company or to grant rights to subscribe for, or to convert any security into, shares in the company (“Rights”) comprising equity securities (as defined by section 560 of the Companies Act 2006 (“the Act”)) up to an aggregate nominal amount of £310,644. Provided that this authority shall, unless renewed, varied or revoked by the company, expire on the date of the next Annual General Meeting of the company, save that the company may, before such expiry, make offers or agreements which would or might require shares to be allotted or Rights to be granted and the directors may allot shares or grant Rights in pursuance of such offer or agreement notwithstanding that the authority conferred by this resolution has expired. This resolution revokes and replaces all unexercised authorities previously granted to the directors to allot shares or to grant Rights but without prejudice to any allotment of shares or grant of Rights already made, offered or agreed to be made pursuant to such authorities. 9. That, subject to the passing of resolution number 8, the directors be and hereby are given the general power to allot equity securities (as defined by section 560 of the Act) for cash, either pursuant to the authority conferred by resolution number 8 or by way of a sale of treasury shares, as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities; 9.1 in connection with an offer by way of a rights issue: (a) to the holders of ordinary shares in proportion (as nearly as may be practicable) to their respective holdings; and (b) to holders of other equity securities as required by the rights attaching to those securities or as the directors otherwise consider necessary but subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to treasury shares, fractional entitlements, record dates, legal or practical problems in or under the laws of any territory or the requirements of any regulatory body or stock exchange; and 9.2 the allotment (otherwise than pursuant to paragraph 9.1) of equity securities up to an aggregate nominal amount of £58,618 representing no more than 5% of the issued ordinary share capital at 12 October 2012. The power granted by this resolution will (unless renewed, varied or revoked by the company prior to or on such date) expire on the earlier of the conclusion of the company’s next Annual General Meeting and the expiry of the period of 15 months following the passing of this resolution, save that the company may, before such expiry, make offers or agreements which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred by this resolution has expired. This resolution revokes and replaces all unexercised powers previously granted to the directors to allot equity securities as if section 561(1) of the 2006 Act did not apply but without prejudice to any allotment of equity securities already made or agreed to be made pursuant to such powers. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 65 10/10/2012 15:49 ADDITIONAL INFORMATION SHAREHOLDER NOTES 6. As at 12 October 2012 (being the last practicable day prior to the publication of this notice), the company’s issued share capital consists of ordinary shares of 10p each, carrying one vote each. Excluding 170,000 shares held in treasury, the total voting rights in the company as at 12 October 2012 are 11,723,559. 7. 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 C Muncaster Company Secretary Merse Road North Moons Moat Redditch Worcestershire B98 9HH 12 October 2012 66 FW Thorpe Plc Annual Report and Accounts 2012 ADDITIONAL INFORMATION NOTICE OF MEETING CONTINUED 10. 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 10p each of the company provided that: (a) the maximum number of ordinary shares hereby authorised to be acquired is 1,189,356; (b) the minimum price which may be paid for any such share is 10p; (c) 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; (d) the authority hereby conferred shall expire on the date of the Annual General Meeting of the company in 2013; and (e) 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. Notes 1. 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. 2. 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 6.00 pm on 13 November 2012 (or, in the event of any adjournment, 6.00 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. 3. 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. 4. 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. 5. 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 13 November 2012 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. 015702_FW_Thorpe_18-68.indd 66 10/10/2012 15:49 ADDITIONAL INFORMATION NOTICE OF MEETING CONTINUED ADDITIONAL INFORMATION SHAREHOLDER NOTES FW Thorpe Plc Annual Report and Accounts 2012 67 10. 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 10p 6. As at 12 October 2012 (being the last practicable day prior to the publication of this notice), the company’s issued share capital consists of ordinary shares of 10p each, carrying one vote each. Excluding 170,000 shares held in treasury, the total voting rights in the company as at 12 October 2012 are 11,723,559. each of the company provided that: 7. 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 (a) the maximum number of ordinary shares hereby authorised to be acquired is 1,189,356; (b) the minimum price which may be paid for any such share of proxy. is 10p; By order of the Board C Muncaster Company Secretary Merse Road North Moons Moat Redditch Worcestershire B98 9HH 12 October 2012 (c) 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; (d) the authority hereby conferred shall expire on the date of the Annual General Meeting of the company in 2013; and (e) 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. Notes the meeting. 1. 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, 2. 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 6.00 pm on 13 November 2012 (or, in the event of any adjournment, 6.00 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. 3. 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. 4. 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. 5. 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 13 November 2012 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. i w e v e r s s e n i s u B e c n a n r e v o G s t n u o c c A n o i t a m r o f n i l a n o i t i d d A 015702_FW_Thorpe_18-68.indd 67 10/10/2012 15:49 68 FW Thorpe Plc Annual Report and Accounts 2012 ADDITIONAL INFORMATION SHAREHOLDER NOTES CONTINUED 015702_FW_Thorpe_18-68.indd 68 10/10/2012 15:49 Financial calendar 2012 19 October Posting of the Annual Report and Accounts 15 November Annual General Meeting 22 November Payment of final dividend 2013 March May Announcement of interim results Payment of interim dividend September Announcement of results for the year Designed and produced by Radley Yeldar www.ry.com using the paperless proofing system Wizardry. This material used in the publication of this document is carbon balanced. Printed on FSC certified paper. This document is printed on material manufactured at a mill which is ISO14001 accredited FW Thorpe Plc Merse Road North Moons Moat Redditch Worcestershire B98 9HH England Tel: +44 (0)1527 583200 Fax: +44 (0)1527 584177 Incorporating Thorlux Lighting Compact Lighting Philip Payne Sugg Lighting Solite Europe Portland Lighting TRT Lighting F W T h o r p e P c A n n u a l l R e p o r t a n d A c c o u n t s 2 0 1 2 www.fwthorpe.co.uk 015702_FW_Thorpe_Cover_v4.indd 2 Annual Report and Accounts 2012 12/10/2012 14:54
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