Vitec Group plc Annual Report 2001

FY2001 Annual Report · Vitec Group plc

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Underlying
strength
The Vitec
Group plc
annual report
for 2001

At the heart of Vitec is an exceptional group of world-
wide camera and lighting support brands, together with
leading intercoms and equipment rental businesses.
Whilst not immune from the current downturn, these
businesses have demonstrated their strength and
resilience in the most testing market conditions seen
for some years.

Pictured above left to right:

Sachtler Variohoist at the

SF DRS studio in Zürich.

Gitzo tripods used by

photographers world-wide.

Vinten remote control

camera equipment in the

NASDAQ stock exchange,

New York.

Bexel providing the

broadcast infrastructure at a

Britney Spears pop concert

in Las Vegas.

Financial highlights

Chairman’s statement

Chief executive’s review

Group overview

Divisional reports

Broadcast camera systems

Photographic and retail display

Communications and audio

Broadcast services

Financial review

Directors and advisors

Directors’ report

Corporate governance

Statement of directors’ responsibilities

Independent auditors’ report

Accounts 2001

Consolidated profit and loss account

Balance sheets

Consolidated statement of total recognised gains and losses

Reconciliation of movements in shareholders’ funds

Consolidated cash flow statement

Notes to the accounts

Five-year financial summary

Group directory

Shareholder information and financial calendar

Inside back cover

Financial highlights

• Healthy margins despite difficult market conditions

• Tight focus on costs in second half

• Cash conversion of operating profit* improved to 138%

• Recommended increase in total dividend of 7%

Turnover
(£million)

Operating profit*
(£million)

Headline earnings per share*
(pence)

Dividend per share
(pence)

0
.
0
0
4 2
.
1
7
1

4
.
0
9
1

0
.
0
4

4
.
8
3

2
.
8
3

1
.
0
4

8
.
2
6

2
.
8
5

3
.
4
5

4
.
3
5

4
.
6
4

6
.
0
3

3
.
2
6
1

6
.
4
4
1

7
.
2
2

2
.
1
5 2
.
8
1 1
.
6
0 1
.
4
1

97 98 99 00 01

*before exceptional items and goodwill amortisation

The Vitec Group 1

Chairman’s statement

Overview In contrast to my statement this time
last year, when I was able to report that most of
our companies had enjoyed record years, this year
the Group’s results declined significantly. Many of
our businesses are dependent upon the broadcast
industry, which has witnessed savage reductions
in advertising revenues. However, whilst the
lower volumes, combined with an increase in our
operating expenses in the first half, inevitably led
to a decline in profits, the Group continued to
enjoy healthy margins and remains strongly
capitalised. As I reported at the time of our
interims in early September, we took firm action
on costs, particularly in the latter part of 2001,
which restored our margins to 16% for the full
year. In the second half of the year we reduced
the Group‘s operating expenses by over
£6 million compared to the first half.

Financials Turnover decreased by 5% from the
record levels of 2000 to £190.4 million – the first
time in over 5 years that we have suffered a
decline in the top line. Profit before tax,
exceptional items and goodwill amortisation
was £28.0 million, a decrease of 25% over 2000.
Headline earnings per share decreased by 26%
to 46.4p.

Operating cash flow, before exceptional items
and goodwill amortisation, remained strong. We
converted 138% (2000: 114%) of our operating
profits into cash, and free cash flow was
£18 million (2000: £17.6 million). We made no
major acquisitions during the year and net debt
at the year end was £22.5 million.

Goodwill amortisation was £0.9 million (2000:
£0.6 million) and exceptional items, net of tax,
were a charge of £3.2 million (2000: £1.9 million).

Dividend Reflecting the directors’ continuing
belief in the strength of the Group, the Board is
recommending an increased final dividend of
16.6p per share (2000: 15.6p) making a total
dividend of 22.7p for the year (2000: 21.2p),
covered 2 times by this year’s earnings.

2 The Vitec Group

Charitable donations Thankfully none of our
staff were injured in the events of September 11.
Nevertheless, over half of the Group’s business
is in the USA and we considered it entirely
appropriate to donate US$100,000 to the Twin
Towers Fund in New York. Also many of our US
and European staff made personal contributions
to other funds which are helping families affected
by that tragic event.

People Following the resignation of our previous
Chief executive in July last year, we appointed
Gareth Rhys Williams as Chief executive on
23 November. I and other Board members are
delighted that he agreed to join us and he is
already demonstrating a good understanding of
the issues which we need to address to achieve
future growth.

Our staff throughout the Group have worked
tirelessly to minimise the impact of poor market
conditions on our businesses. I would like to
thank them personally for their efforts and their
continuing loyalty to the Group. None of our
senior staff received an annual performance-
related bonus and salaries have been frozen for
many of them.

Future prospects A recovery in our own
fortunes is heavily dependent upon a recovery of
the markets in which we operate. With continuing
economic uncertainty in the USA and Europe, we
are cautious about short-term prospects in the
broadcast industry. However we continue to take
action on costs and remain confident that Vitec is
well positioned to take advantage of an upturn in
our markets.

We continue to look at possible acquisitions of
companies in our markets, where we are able to
add value and where these businesses can be
secured at an acceptable price. The next year
may well provide suitable targets.

Alison Carnwath
Chairman

Chief executive’s review

Overview Vitec’s core markets are broadcasting,
entertainment and media. All of these have been
significantly affected by the economic slowdown
that started in the USA in the first half year, and
which was exacerbated by the shock wave
following September 11. This slowdown has
translated into a particularly marked reduction
in advertising spend, on which many of our
customers depend. Advertising has seen a trend
of strong growth in past years, but this year’s fall
has been significant.

As a result, the networks’ operating and capital
budgets are under severe pressure which,
combined with their need to upgrade to digital
transmission standards, has caused many of them
to defer their spend on our products.

The marketplace Vitec’s products retain a high
profile and visibility with our customers, but the
Group’s sales volume has been hit hard,
particularly in the USA. Broadcast services has
had a very tough year as coverage of outside
events has been scaled back, and the camera
support and intercom businesses that supply the
broadcast networks with their infrastructure needs
have also been impacted.

However, in the photographic camera and lighting
support businesses there was a more muted
effect: sales have continued to grow but much
more slowly than in the past.

There is also a technology driven trend towards
lighter and cheaper digital cameras which has
been putting downward pressure on margins as
they require lower specification support systems.
Additionally, our customers’ needs for improved
operating efficiencies have resulted in order
intake levels for Vinten’s robotic pedestals being
at very high levels.

Management response Vitec’s management
have responded to this new set of circumstances
in several ways. Overhead costs have been
reduced; lean manufacturing programmes
stepped up a gear – much work has recently been
done to improve flexibility and responsiveness at
the individual manufacturing plants. As we enter
2002, working capital controls have been
tightened to husband resources for key projects.

Going forward, continuous downward pressure
needs to be maintained on our cost base, both
direct and indirect. It is clear that maximising the
performance of Vitec, not just the individual
operations, will require a more integrated
approach than in the past. We must also continue
to introduce the new products that will enable our
customers to exploit their creative skills, and
which allow them to do so with greater efficiency.
In today’s environment we need to ensure that
Vitec is leveraging its customer relationships and
manufacturing platforms to best effect,
maintaining the strength of our brands whilst
looking to minimise structural costs.

Underlying strength Despite the economic
situation, Vitec‘s companies continue to be
highly respected names in their markets, with
exceptional reputations for service and reliability.
This is underpinned by the expertise and
enthusiasm of our staff.

Our challenge is to find areas in which to grow,
where Vitec’s customer relationships and skills
can be exploited to launch successful new
products and to add value to acquisitions.

I believe that Vitec’s underlying strength,
evidenced by its reputation for excellence in both
products and service, will enable our company to
capitalise on the upturn when it comes, and
deliver value for its shareholders. I am looking
forward to this challenge.

Gareth Rhys Williams
Chief executive

The Vitec Group 3

Group overview

The Vitec Group supplies a wide range of equipment
and services to the broadcasting, entertainment,
photographic and retail display industries.

It is a major force in its chosen specialised fields.

Activities

Brands

Products

Pedestals and heads for TV production
AutoCam remote-controlled camera systems
Video tripods and heads for ENG
and EFP applications
Studio lighting and scenery hoists
and pantographs
Portable lights
Microprocessor-controlled batteries and
chargers for video cameras
Portable power systems for life
support devices

Photographic and video heads and tripods
Lighting stands, grips, clamps and accessories
Lighting and scenery suspension equipment
Photographic accessories
Live entertainment and exhibition lighting
suspension structures
Modular metal-based retail display systems

Intercom Systems

Multi locational intercom systems
Party-Line intercom systems
Wireless intercom systems
Wireless microphones

Rental of broadcast video equipment
Rental of audio equipment
Rental of high definition TV production supports
Provision of support for major event
broadcasting and webcasting
Sales of communications and audio equipment
and used video equipment

Design and manufacture of high
precision studio and outside
broadcast pedestals and heads;
lightweight tripods and heads; remote-
controlled pan and tilt camera systems;
camera batteries and chargers; on-
camera lights and studio lighting
suspension systems. Focused on
studio broadcast, outside broadcast,
electronic news gathering and
electronic film production markets.

Design and manufacture of
photographic and video camera
supports as well as lighting support
and suspension equipment, for
professional photography, video,
broadcast and cinematography
markets. Distribution of
photographic, video and cine
related equipment and accessories.
Design, manufacture and
distribution of retail display
products.

Design and manufacture of wired
intercom systems, wireless
intercom equipment and wireless
microphones for the broadcast,
live entertainment, air traffic
control, aerospace and defence
markets.

Rental services, including
engineering support for the film
and TV programme production
markets and selected sales of
camera, video, wireless
communication and audio
equipment.

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4 The Vitec Group

With products distributed in nearly 100 countries,
either through dealerships or direct to the end user
and with manufacturing in five countries, Vitec
operates on an international basis.

Locations

Web addresses

Markets

www.antonbauer.com
www.sachtler.com
www.vinten.com

Costa Rica
France
Germany
Japan
Singapore
UK
USA

Denmark
France
Italy
Sweden
UK
USA

www.alu.com
www.bogenphoto.com
www.gitzo.com
www.iff.it
www.litectruss.com
www.manfrotto.com

UK
USA

www.clearcom.com
www.drake-uk.com

USA

www.a-s-group.com
www.bexel.com

The Vitec Group 5

6 The Vitec Group

1 Photographers

everywhere rely on

Manfrotto equipment.

2 Group companies provide

equipment for control rooms

which are at the heart of

broadcasting.

3 Live events – whether

sporting, music

entertainment or corporate

– use products and services

provided by the Group.

4 Group companies equip

and support TV studios

world-wide.

The Vitec Group 7

The decline in our largest market, the
USA, was only partially compensated
by strength in Europe and Asia. Lower
volumes, product mix changes and
higher operating costs reduced margins.

Broadcast camera systems

Generally, sales of camera support and lighting
equipment used in studio production, outside
broadcasting and film-for-TV output were lower
than last year. However, unit volumes of
lightweight equipment used in electronic news
gathering (ENG) increased. In the USA, lower
sales of high-end manual studio pedestals and
heads resulted as programme schedules were cut
back whereas demand for AutoCam systems was
high. Markets in Europe and the Far East,
particularly China, Korea and Japan, performed
well, partially making up for the USA shortfall.
Germany, France and the Middle East softened in
the second half of the year. Anton/Bauer’s
world-wide sales of batteries were lower than last
year, adversely impacted by the decline in sales of
high-end broadcast cameras and delays in the
conversion to digital cameras in the marketplace.

A combination of weak markets and shifts in
product and geographic mix produced turnover
3% lower than the record year in 2000. However,
strong growth in sales of robotic studio lighting
and camera systems was attained, reflecting the
increasing trend toward automation in TV studios,
as the networks pursue ways to reduce their
production costs whilst maintaining programme
quality. Vinten’s AutoCam robotic and remote-
controlled camera systems provide cost effective
solutions for studio news programme production,
whilst Sachtler’s automated suspension and
lighting management systems provide high
quality, state-of-the-art solutions to customers
who are building new studios or modernising
existing studios. The growing market for
AutoCam products is highly competitive and
prices had to be reduced during the year.
Additionally both AutoCam and studio suspension
margins are lower than the traditional camera
pedestal business. Demand was also higher for
the lower margin, lightweight camera support
systems. These mix changes, coupled with slightly
higher operating costs, caused a fall in profit
margins.

8 The Vitec Group

In Germany, Vinten won a US$1 million order
from the Home Shopping Channel Europe for
their new Quattro-Z robotic pedestals. Vinten also
announced a joint marketing venture with
JL Fisher, the leading manufacturer of film camera
support equipment, based in Burbank, California.
This gives Vinten access to the growing market for
high definition digital film making. In October,
Vinten was awarded the Guild of Television
Cameramen UK seal of approval for the Vector
700 panning head. Sachtler won a contract worth
Euro 5 million over four years with ORF TV in
Austria to supply fully motorised studio lighting
suspension systems. The Sachtler solution helps
to improve studio utilisation by minimising set up
times for new productions. ORF TV also adopted
Anton/Bauer batteries as the standard to power
their new Sony MPEG IMX format camera
systems.

Anton/Bauer launched TITAN 70, a unique
battery/charger combination aimed at the
growing ‘event’ market segment. The high
power demands of high definition and digital
film cameras were successfully met with
Anton/Bauer’s 100-watt hour HyTRON 100
system, which was adopted as standard by
Panavision.

Implementation of manufacturing efficiency
programmes continued during the year. Operating
costs increased in the first half but were reduced
in the second half to levels similar to those in the
first half of 2000. Headcount at the year end
was 6% lower than last year. New product
development costs were increased by 8%. It is of
paramount importance to maintain and enhance
our valuable brands by continuing to launch
innovative, cost efficient, high quality products
into the broadcast market. These investments are
included in operating costs.

2001

2000

Turnover

£65.8m £67.6m

Operating profit*

£12.3m £15.2m

Operating margin

18.7%

22.5%

*before exceptional items and goodwill amortisation

1 Sachtler Variohoists are

used extensively at the SF

DRS studio in Zürich.

2 Korean Broadcasting

System, the country’s

premier television station,

uses Vinten Quattro

pedestals. It will provide

complete coverage of the

2002 World Cup.

3 Sachtler Hotpod and

Video 20P head employed

for wildlife videography.

4 A Vinten Quattro OB

Pedestal specifically

designed for the needs

of outside broadcast and

field production.

5 Precision engineering,

the heart of the Sachtler

Video 60 lightweight,

vibration free head.

The Vitec Group 9

The USA, the most important market,
suffered the worst trading conditions
for over 10 years. Strength in the
European and Asian markets for most
of the year greatly mitigated the
effects of this decline.

Photographic and retail display

New product activity included the restyling and
improvement of the 190 tripod range, the launch
of the 540ART video tripod, featuring the unique
ART rapid deployment technology and,
importantly, the 516 video head replacing the
116 MK3 head.

To reduce costs, the Italian companies are being
consolidated into a leaner corporate structure and
Gitzo production was relocated from France to
Italy into a facility vacated by the consolidation of
the Avenger manufacturing in Bassano. Also
Bogen completed its warehouse and distribution
reorganisation. The new Movex IT system was
successfully implemented in the USA and France,
the first steps towards a division-wide integrated
system by the end of 2002.

USA turnover was 11% lower than last year as the
photographic market in the USA fell by over an
estimated 20% compared to 2000. In contrast
European markets were strong for most of the
year, but started to weaken in the final quarter.
Sales increased in Asia where some slowing in
the Taiwanese and South Korean markets in the
second half was offset by strength in Japan
and China.

Sales of the higher margin photographic camera
and lighting supports products were lower than
last year, although sales of video camera supports
were slightly ahead. Bogen set up a new studio
division to address the broadcast, theatre and
architectural markets in the USA and Canada for
the IFF lighting suspension systems, helping IFF
win its first prestigious project in the Sony Music
Studios in Manhattan. IFF also won a notable
contract to supply Indentisystems to the Italian
police. Litec once again increased sales of its
lighting suspension structures by 30% over the
prior year.

10 The Vitec Group

The USA recession affected retailers particularly
in the second half, during which the effects of
the September 11 attacks were also keenly felt.
Retailers cut their prices in order to stimulate
sales. Also they reduced staffing levels and other
costs. Furthermore, mass retailers took market
share from the department stores and specialty
retailers, Alu’s core customers. In the second half,
Alu’s USA sales fell over 20% compared with last
year. Europe fared much better, where sales for
the year increased 70% on 2000. This was
primarily due to increased custom project
business, although the markets in Italy, Benelux,
Spain and Sweden performed well. However the
German market slowed significantly.

In the USA, Alu supplied Levi Strauss for its
national back to school programme and Ralph
Lauren Polo for their department store ‘shop in
shop’ concept. In Europe, Alu won significant
business with Benetton for its world-wide roll out
of standard components, and with Nokia to equip
its European outlets with custom-designed
display equipment.

New products successfully introduced were
Autoforms, laminated shelving and a new range of
signholders. These new accessories complement
our customers’ existing Alu systems and also
satisfy the needs of new customers in creating a
differentiated look.

The new Alu factory and warehouse in Bassano
was completed in April. The Alu USA
warehousing operation and the administrative
functions have been consolidated on a new single
site in New Jersey. In August Alu acquired its
Swedish distributor for £0.3 million.

2001

2000

Turnover

£75.2m £73.8m

1 Manfrotto video camera

head manufactured to

exacting standards for the

professional broadcast

market.

2 A theatrical production

of the musical ‘Jesus Christ

Superstar’ imaginatively

using Litec products to

great effect.

3 The largest department

store in Canada, The Bay,

uses Alu products in over

100 of its stores.

4 Manfrotto 440

lightweight carbon fibre

and magnesium tripod for

both still photography and

Operating profit*

£16.4m £18.0m

video camera use.

Operating margin

21.8%

24.4%

*before exceptional items and goodwill amortisation

5 On location in Italy using

Avenger products for the

shooting of a major film

due for release in 2002.

The Vitec Group 11

Following an outstanding year in 2000
for Clear-Com and Drake, their core
broadcast markets softened due to cut
backs on expenditure. Live entertainment
and voice communications marketplaces
also weakened. Despite cost reduction
measures, profit levels were low.

Communications and audio

Sales volumes declined by over 20%. Headcount
was reduced by 34% which, together with other
actions, reduced operating costs by £1 million in
the second half. Operating costs were 6% lower
than last year and are now lower than their
2000 levels.

2001 saw many changes. In May, Vega’s
operation in Los Angeles was relocated and
integrated with Clear-Com in San Francisco,
where the workforce also had to be reduced in
order to lower costs. Clear-Com completed the
restructuring of its international sales organisation.
Drake’s broadcast international sales team was
strengthened in the Middle East and in South East
Asia, with the opening of an office in Singapore.
In addition, the world-wide sales and product
development activities of its voice communications
business were greatly improved. Demand flow
manufacturing is being introduced at Clear-Com,
with the first manufacturing cell now fully
operational. Successfully meeting customer
demand from this cell within one working day, this
rapid response methodology is being implemented
for all other products.

Despite the downturn, many successes in winning
major international projects were recorded. In the
broadcast sector, Clear-Com product was chosen
by the Big Brother TV show in the UK, GG
Studios in Israel, TV Globo in Brazil, Fukui
Broadcasting in Japan and the Home Shopping
Network in four EU countries. Clear-Com’s live
entertainment customers included L’Opera Bastille
in France, Disney Europe, Auditorio de Tenerife in
Spain as well as several cruise ships and the
Goodwill Games. Building on its CD-quality
communications heritage, Drake was selected by
Swansea Airport in the UK to supply their new
Small Tower Voice Switch system for air traffic
control tower communications following the
airport’s recent CAA approval. Drake's solution
supports commercial flights seven days a week
and comprises a central voice switching matrix
and operator positions interfacing seamlessly with
existing radio frequencies and telephone lines.

12 The Vitec Group

Drake also completed further important work for
DFS, the German Air Traffic Control Authority.
As part of the ‘System East’ modernisation
programme, six airports in eastern Germany have
been digitally networked. One of the most
technically advanced in the world, the network
features Drake’s colour touchscreens and Venix
digital communications equipment delivering high
quality audio with automatic ISDN backup.

Several new products were launched during
2001. Clear-Com introduced the RCS-2000
programmable source-assignment panel and the
PS232a world-class power supply for its Party-Line
range. Its Matrix Plus 3 product line was also
improved with the addition of the i-series line of
modular, expandable intercom panels. Vega’s
frequency-agile wireless intercom, the Q700, was
launched in June and shipments made to several
high profile venues.

Drake launched the Refresh range of user panels.
Featuring high-contrast vacuum fluorescent
displays, they give unrivalled legibility in the
broadcast industry, with a new ergonomic
key design.

2001

2000

Turnover

£18.1m £21.8m

Operating profit*

£0.8m

£1.9m

Operating margin

4.4%

8.7%

*before exceptional items and goodwill amortisation

1 Drake technology is

used extensively at the

heart of German Air Traffic

Control systems.

2 Denmark’s TV2

television news broadcast

company uses Drake’s

leading edge technology to

link its 10 regional studios.

3 The Vega Q700 wireless

intercom system is

customizable to the

differing needs of

performance and event

production in broadcast

and industrial

communications

applications.

4 Clear-Com Party-Line

professional intercom

headset with microphone.

5 Clear-Com series 500

beltpack. Two channels

allow simultaneous

listening and talking.

The Vitec Group 13

The absence of large international
events meant the companies were
almost entirely dependent on the USA
economy. Turnover was 15% lower.
Despite cost reduction measures and
efforts to reduce the rental asset base,
profits were 78% lower.

Broadcast services

The major USA TV networks responded to the
severe contraction in their advertising by cutting
their programming budgets, resulting in
substantially lower rental revenues. The New
York attacks caused further curtailment or
cancellation of many entertainment and
commercial events served by our companies.

Significant investment was made in a new
operational and financial IT system which will
result in faster and better analysis of rental assets
and contract performance, improved asset
utilisation, more effective capital expenditures
and further savings in variable rental costs in
the future.

Staffing levels were reduced by 22% which,
together with other cost reduction programmes,
resulted in second half operating expenses being
over 16% lower than in the first half.

Sales training initiatives and focused marketing
campaigns were implemented in order to optimise
turnover. An improved sales and marketing
infrastructure, including a sophisticated customer
database and contact management system, was
instituted. The results have been encouraging,
although the full potential of this shift in approach
will not be realized until 2002 and beyond.

In order to contain the fall in asset utilisation,
sales of used rental equipment were increased
and planned recurring capital expenditures were
reduced in line with the lower rental turnover.
However, several major additional capital
investments were made in order to improve our
rental offerings. Bexel Broadcast Services,
focused on large events, designed and
constructed its first Mobile Editing and Support
truck (‘BBS ONE’). This 53 foot unit is designed
to meet the evolving needs of broadcast sports
producers, helping them reduce costs by
providing efficient delivery of our equipment
to major events throughout the USA.

14 The Vitec Group

It features two interchangeable edit suites
which can be customized to meet the technical
requirements of each event, and can be used for
two different customers concurrently. Following
its commissioning in November, BBS ONE has
served several high profile events, including the
Tiger Woods Golf Challenge (during which Tiger
Woods was interviewed inside the truck), the
Britney Spears concert in Las Vegas and the
National Collegiate and Professional Football
playoff games. To prepare for the World Cup and
Winter Olympics, Bexel also replaced its inventory
of character generation equipment. These devices
produce the graphics displayed on screen for
sporting and other live televised events. The
inventory of super slow motion cameras and
digital disk recorders was also upgraded and
expanded with state of the art gear. These are
specialised 90 frame camera systems used
primarily for sporting events. Bexel is now firmly
positioned as the leader in this part of the
rental market.

Bexel’s investments in high definition digital
cameras in recent years began to generate better
returns in 2001 as this technology becomes an
accepted alternative for traditional filmmakers.
Bexel provided equipment and services to three
recurring television series, a major feature film and
over twenty smaller scale projects. Previously, all
of these would have been shot on film and
serviced only by specialist rental firms.

2001

2000

Turnover

£31.3m £36.8m

Operating profit*

£1.1m

£5.0m

Operating margin

3.5%

13.6%

*before exceptional items and goodwill amortisation

1 Inside the newly

commissioned mobile

Editing and Support truck

is state of the art

equipment which can be

available on-site for major

live broadcast events.

2 Broadcasting relies on

complex connections,

frequently involving

installing complex fibre

networks, often to tight

deadlines.

3 Bexel’s investment of

$0.5 million in character

generation units supply the

graphics displayed on TV

screens at live televised

events.

4 Purpose built shipping

crates ensure equipment is

quickly and efficiently on

site and ready for use with

the minimum of delay.

5 The Mobile Editing and

Support truck custom

designed and constructed

by Bexel.

The Vitec Group 15

Financial review

Cash flow and net debt Cash generation
remained high despite the lower profits, and net
debt decreased during the year by £8.5 million
to £22.5 million. Cash flow from operations was
£42.1 million (2000: £45.8 million), equating to
103p per share (2000: 112p per share). Working
capital reduced by £0.5 million during the year.
After increasing by £3.7 million in the first half,
stocks were reduced by £7.9 million in the second
half and at the year end were £4.2 million lower
than the prior year. Stock days improved to 130
(2000: 148). Trade debtors were £2.9 million
lower than last year with debtor days improving to
51 days (2000: 53 days). However, creditors were
also lower largely reflecting reduced stocks and
the absence of incentive compensation accruals
at 31 December 2001. Capital expenditures were
£15.4 million (£14.4 million), of which £7.4 million
relates to rental assets and £3.2 million to IT
projects, partly financed by the proceeds from
higher asset disposals of £2.4 million (2000:
£1.6 million).

Treasury policy Financing, financial risk hedging
and tax planning are managed centrally. Hedging
activities are designed to protect profits, not to
speculate. Substantial changes to the financial
structure of the Group or treasury practice are
referred to the Board. There were no substantial
changes during the year.

A portion of the transactions of subsidiaries in
foreign currencies are hedged 12 months
forward. Forward foreign exchange contracts
totalled £30 million (2000: £35 million) at
31 December 2001. Translation of foreign
currency profits and interest rates are not normally
hedged. Foreign currency net assets are not
hedged other than by normal Group borrowings.

Financing activities The average cost of
borrowing for the year was 6.1% (2000: 6.9%).
Net interest cover remained high at 12 times
(2000: 14 times) despite the lower profits. All of
the Group’s committed facilities expire in October
2002. We have already commenced renegotiation
with our banks and do not currently anticipate any
major issues.

Euro Our operating companies in continental
Europe successfully converted to full Euro-based
accounting with effect from 1 January 2002.

Turnover The lower volume and mix effects
reduced turnover by £17 million, offset by
exchange translation gains of £6 million, higher
prices of £1 million and contribution from an
acquisition of £0.5 million. Approximately 70%
of the volume decline occurred in the
Communications and audio and Broadcast
services divisions. The exchange translation
gains arose from the US$, 5% stronger than
sterling versus last year, and the Euro currencies
which were 2% stronger.

Gross margins Gross profit margins fell from
53.3% to 50.6% reflecting the lower volumes and
mix changes. Gross profits were £10.2 million
lower than the prior year.

Operating expenses Cost reduction actions
reduced these significantly from £36.2 million in
the first half to £29.6 million in the second half,
making operating expenses for the year £0.7
million lower than 2000. Operating expenses were
increased £2.1 million by exchange rates and by a
number of costs which would not all normally
recur annually: redundancy and termination costs
of £0.6 million; relocation and reorganisation costs
of £0.5 million and trade debtors written off due
to customer bankruptcies of £0.4 million.

Operating profits The effect of favourable
exchange translation rates, which increased
operating profit by £0.8 million, and the benefits
of the cost reduction actions were not sufficient to
contain the fall in gross profits. Operating profits
fell from £40.1 million to £30.6 million and profit
margins were 16% compared to 20% in last year.

Other profit and loss items The sale of a
building in Italy produced a profit of £0.8 million.
As announced at the Interims, a full impairment
provision of £3.7 million has been made against
the minority investment in Intersense, the high-
tech motion control company, whose profit and
cash forecasts were reduced substantially during
the year.

16 The Vitec Group

Richard Green
Finance director

Directors and advisors

Secretary
Roland Peate FCIS, ACMA

Group Head Office
One Wheatfield Way
Kingston upon Thames
Surrey KT1 2TU
United Kingdom
Tel: +44(0)20 8939 4650
Fax: +44(0)20 8939 4680
Email: info@vitecgroup.com

Registered office
Western Way
Bury St Edmunds
Suffolk IP33 3TB
United Kingdom

Registered in England
No. 227691

Advisors

Stockbrokers
UBS Warburg

Auditors
KPMG Audit Plc

Bankers
HSBC
The Royal Bank of Scotland plc
Wachovia Bank NA

Financial advisors
UBS Warburg

Marketmakers in Company shares
HSBC Securities
Merrill Lynch International
UBS Warburg

Registrar and transfer agent
Capita IRG plc
Bourne House
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Tel: 0870 162 3100 (UK only)
+44 (0) 20 8639 2157 (Overseas only)

Alison Carnwath
BA, ACA
Chairman, non-executive*,
independent*, British, aged
49, appointed to the Board
on 22 January 1996; member
of the Audit committee, the
Remuneration committee and
Chairman of the Nominations
committee. Currently a non-
executive director of Arcadia
Group plc, Glas Cymru plc,
Nationwide Building Society
plc, Man Group plc and QA
Group plc.

Gareth Rhys Williams
BSc, MBA
Chief executive, British,
aged 40, appointed to the
Board on 23 November
2001. Previously Regional
Managing Director, Central
Europe, of BPB plc. Prior
to this he held senior
management positions with
Rexam plc, responsible for
their European custom film
coating business, and for NFI
Electronics.

Richard Green
BSc, FCA, CPA
Finance director, British, aged
52, appointed to the Board
on 2 March 1992. Previously
Director of Financial Planning
at The Morgan Crucible
Company PLC, where he was
responsible for M&A work.
Prior to this he held various
group and operating
company senior financial
positions in the oil and gas
industry in the USA and
South East Asia.

John Potter
CEng, MIEE, AMBIM
Non-executive, independent,
British, aged 58, appointed to
the Board on 1 February
1999; Chairman of the Audit
committee and member of
the Nominations committee
and Remuneration
committee. Formerly a
director of the TI Group plc
until his retirement at the end
of 1998. Currently President
and Chief Executive Officer
of Oxford Automotive, Inc.

Michael Stacey
BSc, FRAeS
Non-executive, independent,
British, aged 63, appointed
to the Board on 1 February
1999; member of the Audit
committee, the Nominations
committee and the
Remuneration committee.
Currently Chairman of
Meggitt PLC and McKechnie
Group, and a non-executive
director of Marshalls plc.

David Bell
MA
Non-executive, independent,
British, aged 55, appointed to
the Board on 12 March 1997;
the senior non-executive
director; member of the
Audit committee, the
Nominations committee
and Chairman of the
Remuneration committee.
Currently, Chairman of the
Financial Times Group, a
director of Pearson plc, non-
executive Chairman of the
Windmill Partnership, non-
executive director of Zen
Research and Chairman of
Common Purpose Europe.

* For a period during 2001 Mrs Carnwath temporarily held an executive role.

See The Board section in the Corporate governance statement on pages 26 to 28.

The Vitec Group 17

Directors’ report

The directors submit their report and the audited accounts of the Group for the year ended 31 December 2001.

Review of the Group and its activities
On 17 April 2001 the Company changed its name from Vitec Group plc to The Vitec Group plc. The performance and activities of
the Group during the year are set out in the Chairman’s statement and the Chief executive’s review on pages 2 and 3 and in
the Financial review on page 16.

Results and dividends
Group proﬁt on ordinary activities before taxation amounted to £24.2 million (2000: £34.7 million).

The directors recommend a ﬁnal dividend of 16.6p per share (2000: 15.6p). If approved, the dividend per share for the year
will total 22.7p (2000: 21.2p) an increase of 7.1% over 2000. Subject to approval by shareholders, the ﬁnal dividend will be paid on
23 May 2002 to shareholders on the register on 26 April 2002.

Post balance sheet events
On 14 February 2002, a subsidiary of the group purchased the trade, assets and certain liabilities of Aspen Electronics Inc for a
cash consideration of US$2.2 million, subject to ﬁnal adjustment on veriﬁcation of the net assets acquired. The company will
be reported within Broadcast camera systems.

Future development
The Group’s strategy is to grow its businesses through organic expansion and carefully planned acquisitions principally in areas
related to its existing businesses, customers, markets and skills.

Research and development
The management of the Group recognises that new products are essential to its long-term success and considerable emphasis
is placed on active product development programmes in the manufacturing companies. In 2001 those companies spent £7.6
million (2000: £7.5 million) on research and development.

Share capital
Details of shares issued during the year are set out in note 20 to the accounts on page 53. An analysis of shareholdings is shown
on the inside back cover. The middle market price of a share of the Company on 31 December 2001, the last day of dealing
in 2001, together with the range during the year is also set out on the inside back cover.

Substantial shareholdings
As at 22 February 2002, the Company had been notiﬁed of the following interests of 3% or more of its issued share capital:

Prudential plc
Baring Trustees (Guernsey) Ltd
Manfrotto SA
CGNU PLC
Legal & General Investment Management Limited

4,966,983
2,698,374
2,478,374
2,169,740
1,628,161

12.12%
6.58%
6.05%
5.29%
3.97%

Directors
The directors during the year were Alison Carnwath (Chairman), David Bell, Philip Cushing, Richard Green, Lino Manfrotto, John
Potter, Gareth Rhys Williams and Michael Stacey.

Philip Cushing resigned as a director and the Chief executive on 22 July 2001. Lino Manfrotto retired as a non-executive director
on 8 August 2001. Gareth Rhys Williams was appointed a director and the Chief executive on 23 November 2001. The other
directors were directors for the whole of the year.

Photographs and biographies of the current directors are set out on page 17.

18 The Vitec Group

Directors’ report

Directors’ remuneration
The members of the Remuneration committee are shown in the section on Corporate governance on pages 26 to 28 and on
page 17 in the individual biographies.

Director’s name

Chairman
Alison Carnwath
Executive directors
Philip Cushing
Richard Green
Gareth Rhys Williams
Non-executive
directors
David Bell
Lino Manfrotto
John Potter
Michael Stacey

Performance related
annual bonus

Salaries and fees
2000
2001
£
£

Beneﬁts*
2000
£

2001
£

2000
£

Pension
related bonus
2000
£

2001
£

Total

2000
£

2001
£

175,000

80,000

280

209

165,217
162,000
31,943

191,155
150,000
–

4,857
12,137
632

7,830
13,896
–

22,500
12,000
22,500
20,000

19,500
–
26,250
19,500

–
–
–
–

611,160

486,405

17,906

21,935

–

–
–
–

–
–
–
–

–

– 175,280

80,209

93,238
56,250
–

–
19,116
2,622

–
17,100
–

170,074
193,253
35,197

292,223
237,246
–

–
–
–
–

22,500
12,000
22,500
20,000

19,500
–
26,250
19,500

149,488

21,738

17,100

650,804

674,928

*The principal beneﬁts are a company car, fuel, medical insurance and life assurance premiums.

During the year the highest paid director earned £193,253 (2000: £292,223).

During the period from Philip Cushing’s resignation until the completion of the handover to the new Chief executive, Alison
Carnwath assumed a part-time executive role whilst retaining her non-executive responsibilities as Chairman. In recognition of
this, she was paid £100,000 in addition to her remuneration as non-executive Chairman.

Philip Cushing’s salary and beneﬁts are for the period commencing 1 January 2001 up to 22 July 2001, being the date of his
resignation. Mr Cushing’s salary includes payment in lieu of a company car for the period 1 April 2001 to 22 July 2001 inclusive. In
addition to the above, a termination payment of £323,928, £2,000 of which was paid direct to his legal advisers in respect of
advice he received in connection with the negotiation of his termination arrangements, was made in respect of Philip Cushing’s
salary and beneﬁts and £71,840 was paid into Mr Cushing’s FURBS. These payments were made in accordance with his contract
of employment. No bonus was paid to Mr Cushing in respect of his period of employment during 2001.

Payments to Malcolm Baggott (former Chief executive) in the previous year in connection with his retirement totalled £476,152.
As disclosed in the Directors’ report for 2000, this payment comprised £166,152 in respect of salary and beneﬁts for his period of
employment from 29 April 2000 to 31 December 2000 and the sum of £310,000 paid into the Vitec Group Executive Pension
Scheme to fund enhanced beneﬁts payable to him as a result of his early retirement.

Gareth Rhys Williams’ salary, which includes payment in lieu of a company car, and beneﬁts are for the period from the date of his
appointment, 23 November 2001, up to 31 December 2001. Mr Rhys Williams received no bonus for the year to 31 December
2001 but for the year 2002 is eligible for a bonus of up to 100% of base salary, 50% of which is conditional upon the Group’s
performance and 50% is based on personal performance targets. For the year 2002 only, Mr Rhys Williams will be guaranteed a
minimum bonus of 25% of his base salary.

Richard Green’s performance related bonus scheme again comprised two elements, based on the Group’s headline earnings per
share and on personal performance, with a maximum bonus payable of 50% of base salary.

David Bell’s and John Potter’s remuneration includes £2,500 each for chairmanship of the Remuneration committee and of
the Audit committee respectively. Lino Manfrotto’s fee is for the period commencing 1 January 2001 up to his retirement on
8 August 2001.

The Vitec Group 19

Directors’ report

Pensions related remuneration
It is the Company’s policy to make provision for pensions for executive directors in respect of their full basic salaries (but not in
respect of annual bonuses or beneﬁts, however paid) through funded retirement beneﬁt schemes. Up to the maximum salary
level permitted by Inland Revenue rules (the earnings cap), retirement beneﬁts are provided through an approved retirement
beneﬁt scheme, as shown below.

Accrued
pension at
31 December
2000
£

2001
£

Increase in
accrued pension
(in excess of
price inﬂation)
during
2000
£

2001
£

Member
contributions
towards pension
2000
2001
£
£

Transfer value
of the increase
in accrued pension
net of member
contributions
2000
£

2001
£

2,981
23,453
199

1,530
20,273
n/a

1,401
2,511
199

1,530
2,335
n/a

–
11,130
557

–
10,290
n/a

17,310
22,220
920

21,340
24,980
n/a

Executive directors

Philip Cushing
Richard Green
Gareth Rhys Williams

Beyond the earnings cap, the cost of pensions comprised deﬁned contribution payments to funded unapproved retirement beneﬁt
schemes (FURBS) as follows:

Philip Cushing £23,947 (for the period up to his resignation) (2000: £47,460), Richard Green £28,674 (2000: £25,650). A FURBS
is currently being arranged for Gareth Rhys Williams and the contributions by the Company, of £3,945 for the period 23 November
2001 to 31 December 2001, has been paid, as an interim measure, into a separate interest bearing account pending
ﬁnalisation of the documentation, at which time it will be transferred into Mr Rhys Williams’ FURBS.

Directors’ interests
The following tables set out the beneﬁcial interests of those persons who were directors at the end of the ﬁnancial year. The
interests in the Company’s shares and share options are shown as at 31 December 2001 and 1 January 2001.

1 January
2001
or subsequent
date of
appointment

5,000
–
10,796
3,000
–
3,000

21,796

31 December
2001

5,000
–
15,796
3,000
10,000
3,000

36,796

Directors’ shareholdings

Alison Carnwath
David Bell
Richard Green
John Potter
Gareth Rhys Williams
Michael Stacey

20 The Vitec Group

Directors’ report

Directors’ share options

Richard Green
Executive share options

SAYE options
Premium priced options

Philip Cushing
Premium priced options

Number of shares

At
31 December
2001
or date of
resignation
as a
director

Options
granted
during
year

Options
exercised
or lapsed
during
year

Market
price at
exercise
date
(pence)

Exercise
price
(pence)

Date from
which
exercisable

Expiry
date

–
–
–
–
–
–
–

–

–
–

–

–
–
–
–
–
–
–

–

–
–

–

25,000
7,000
27,305
14,344
4,095
27,452
32,051

137,247

75,000
100,000

175,000

268
512
694
653
412
683
819

661
793

– April 1995 April 2002
– April 1998 April 2005
– Oct 1999 Oct 2006
– April 2001 April 2008
–
Sep 2005 Feb 2006
– Oct 2003 Oct 2010
– Oct 2003 Oct 2010

– May 2003 May 2010
– May 2003 May 2010

Date of
grant

At
1 January
2001

April 1992
April 1995
Oct 1996
April 1998
June 2000
Oct 2000
Oct 2000

25,000
7,000
27,305
14,344
4,095
27,452
32,051

137,247

May 2000
May 2000

75,000
100,000

175,000

During the current and preceding ﬁnancial years no directors exercised share options. No non-executive directors held share
options.

Directors’ awards under the Long term incentive plan

Richard Green

Philip Cushing

Number of shares

Shares
exercised
or lapsed
during
the year

Shares
awarded
during
the year

At 31
December
2001 or
date of
resignation
as a
director

–
–
–

–

–
–

–

–
–
17,143

14,004
1,996
17,143

17,143

33,143

–
43,651

22,321
43,651

43,651

65,972

Date of
award

At
1 January
2001

Dec 1999
Oct 2000
Apr 2001

14,004
1,996
–

16,000

Apr 2000
Apr 2001

22,321
–

22,321

The Vitec Group 21

Directors’ report

Directors’ awards under the Deferred bonus plan

Number of shares

Shares
exercised
or lapsed
during the
year or
earlier
date of
resignation

Total
at 31
December
2001 or
date of
resignation
as a
director

Basic
award
during
the year

Matching
award
during
the year

Date of
award

At
1 January
2001

Richard Green
Philip Cushing

Apr 2001
Apr 2001

–
–

5,769
5,285

5,769
9,562

11,538
14,847

In November 2001 a share price related cash bonus scheme was adopted under which an award equivalent to an option over
142,857 shares at a price of 350p per share was made to Gareth Rhys Williams. The rules of this cash bonus scheme mirror, as
closely as possible, those of the (1996) Unapproved Executive Share Option Scheme.

Incentive arrangements
The Company has recently reviewed its approved and unapproved share option schemes and revised rules have been drafted to
incorporate best practice and the Association of British Insurers’ latest guidelines. The new schemes, which will be considered
by shareholders at the 2002 annual general meeting, comprise an Inland Revenue approved plan and an unapproved plan,
of which the latter will replace both the (1996) Unapproved Executive Share Option Scheme and the (2001) Unapproved
Executive Share Option Scheme, that was adopted during the year as a short-term measure, under which only existing shares may
be used to satisfy option exercises and in which directors are not entitled to participate. In addition, the Group’s UK and
overseas savings related share option plans expire at the end of their 10-year life in May 2002 and replacement plans will also
be submitted to shareholders for consideration at the 2002 annual general meeting.

The following describes the Group’s current incentive arrangements.

(1984) Executive share option scheme (the ‘1984 Scheme’). Executive directors and other senior employees are selected to
receive options over shares. The exercise of options under the 1984 Scheme is not subject to any performance condition.
Subject to the share price reaching the required threshold, options are exercisable between the third and the tenth anniversaries
of their dates of grant.

(1994) Executive share option scheme (the ‘1994 Scheme’). Executive directors and other senior employees are selected to
receive options over shares. Under the 1994 Scheme exercise is subject to the growth in earnings per share, excluding
exceptional or extraordinary items, exceeding the growth in the retail prices index between the date of the last published balance
sheet of the Company prior to the date of grant of an option and the date of the last published balance sheet of the Company prior
to the exercise of an option. Options are exercisable between the third and the tenth anniversaries of their dates of grant.

(1996) Unapproved executive share option scheme (the ‘1996 Scheme’). Executive directors and other senior employees
are selected to receive options over shares. Under the 1996 Scheme exercise is subject to an increase in earnings per share,
excluding exceptional or extraordinary items, calculated by reference to three consecutive published annual accounts of the
Company of 3% or more over the retail prices index. Options are exercisable between the third and the tenth anniversaries of their
dates of grant.

(2001) Unapproved executive share option scheme (the ‘2001 Scheme’). Senior employees are selected to receive options
over shares. Directors of The Vitec Group plc are not entitled to participate. Under the 2001 Scheme exercise is subject to the
increase in earnings per share, excluding exceptional or extraordinary items, calculated by reference to any three consecutive
balance sheets of the Company published in its annual accounts, commencing with the last such published balance sheet of
the Company prior to the date of grant or any such subsequent balance sheet, exceeding the increase in the retail prices index
over the same period by 3% or more. Options are exercisable between the third and the tenth anniversaries of their dates of grant.
Only existing shares may be used to satisfy option exercises under the 2001 Scheme.

Long term incentive plan (‘LTIP’). Executive directors and other senior employees receive awards over shares that vest in
whole or in part depending on the satisfaction of a performance condition. The performance condition of awards under the LTIP
relates to increases in earnings per share, to align them more closely with the objectives and interests of shareholders.

22 The Vitec Group

Directors’ report

Consequently, under the performance condition, for an award to vest in its entirety, the increase in earnings per share over the
performance period of 3 years must be not less than the increase in the retail prices index plus 36%. For an award to vest at its
lowest level of 25%, the increase in earnings per share over that performance period must be equal to, or greater than, the
increase in the retail prices index plus 9%. Awards lapse if the performance is less than the minimum threshold set out above.

Premium option plan (‘POP’). Under the POP, selected executive directors and other senior employees receive options over
shares that are granted in the form of two tiers. The exercise price of the ﬁrst tier is set at 25% in excess of the share price
immediately prior to the date of grant; the exercise price of the second tier is set at 50% in excess of that same share price.
The two tiers are only exercisable if the average middle market price of the Company’s shares is in excess of the option exercise
price within the relevant period for a minimum of 20 consecutive dealing days. Each tier of options lapses if the share price
does not achieve the required threshold within the relevant period. Subject to the share price reaching the required threshold,
options are exercisable between the third and the tenth anniversaries of their dates of grant.

Deferred bonus plan (‘DBP’). Under the DBP, an eligible executive may defer between 10% and 50% of his cash bonus, that
was itself subject to performance targets linked to Group and individual performance, in return for receiving a matching
award over shares in the Company with a value equivalent to the amount of the deferred bonus. Shares in the Company are
purchased using the deferred bonus and held in trust. In normal circumstances, the shares held in trust may be exercised after 2
years. However, if exercise is deferred until after 3 years and the executive remains employed by the Group, the participant
is entitled to receive the additional shares equal in number to those comprised in the matching award. The ﬁrst awards under
the DBP were granted in April 2001 in respect of bonuses for the year 2000.

In addition to the above arrangements, the Group operates a savings related share option scheme in the UK and similar plans
covering France, Germany, Italy and the USA.

Executive directors are entitled to participate in the Company’s savings related and executive share option schemes (except
the 2001 Scheme), the Long term incentive plan, the Premium option plan and the Deferred bonus plan. Grants under the
Company’s incentive arrangements are phased. No executive option is offered at a discount.

Payments to suppliers
It is the Group’s current policy that individual subsidiary companies are responsible for negotiating the terms and conditions of
trade under which suppliers are asked to operate. Once agreed, payments to suppliers are made in accordance with those
terms and conditions, subject always to the supplier having complied with the terms and conditions. That policy will continue for
the ﬁnancial year ending 31 December 2002. For the ﬁnancial year to 31 December 2001 the Company paid its suppliers on
average within 22 days of date of invoice.

Employees and employee communication
Vitec recognises the importance of involvement, motivation and development of our employees at all levels to enable us to make
the Group even more market aware and customer focused.

The Group continues to operate in many countries and our employment policies, which are designed to meet local conditions and
requirements, are established on the basis of the best practices in each country in which it operates.

Encouragement is given to all employees both in the UK and overseas to participate in the Group’s savings related share option
schemes under which options are granted to employees who enter into contracts to save agreed amounts each month.

Ability and aptitude are the determining factors in the selection, training, career development and promotion of all employees. If
an employee becomes disabled during his or her period of employment, we will, if necessary and to the extent possible, adapt
the employee’s work environment to enable him to continue in his current position or retrain the employee for duties suited
to that employee’s abilities following the disablement. It continues to be the Group’s policy to consider applications for
employment from disabled people on the same basis as other potential employees.

The importance of good communication and working relationships is recognised and actively encouraged. The Group’s website
provides enhanced communications and information exchange capabilities for shareholders and employees.

Our policy is to keep employees informed on matters relating to their employment and on ﬁnancial and economic factors affecting
the Group. This enables our employees to gain a better understanding of our business objectives and their roles in achieving
them. Building and developing the skills, competencies, motivation and teamwork of our people is key to achieving our business
objectives and to ensuring best practices throughout the Group.

The Vitec Group 23

Directors’ report

The Group continues to be organised on a decentralised basis. The senior executives of the Group, including the Chief executive
and the Finance director, meet on a regular basis. In addition, the managements of the operating subsidiaries employ a wide
variety of consultation methods, including joint committees, project and brieﬁng groups.

Environmental policy
The Group’s operations have limited environmental impact. However, we have a responsibility to understand any impact that our
activities do have at a local, national and global level. These are monitored and assessed on an ongoing basis and we seek
solutions to any environmental problems by reviewing best practice and adopting sound policies.

The Group regards compliance with environmental laws and guidelines as important and socially responsible. The head of each of
the Group’s operations is responsible for complying with the relevant environmental regulations in all the geographical areas
in which they operate. Each of the Group’s operations report on and take account of environmental issues as part of the Group’s
system of internal control and risk management that is regularly reviewed by the Board.

Recycling processes have been in use in the Group for many years. Recyclable materials and those that minimise negative
environmental impacts are used wherever possible. A large and increasing amount of the packaging, paper and cartons used by
the Group’s operations is recycled after use and in many cases biodegradable packaging is used.

It is in the interest of the environment and in the ﬁnancial interests of the Group to make the most efﬁcient and responsible use of
energy. The practice of responsible resource and energy management through reduced consumption and the encouragement
of energy and water efﬁciency is widespread throughout the Group’s operations world-wide. This includes the use of energy
saving lightbulbs, electronic timers to control the use of energy efﬁcient heating and airconditioning systems, the preference for
the use of low emission or lead free petrol in our vehicles, waste minimisation and the recycling of paper and toner and laser
cartridges, the use of recycled stationery products where possible and the encouragement to staff to recycle consumer
packaging such as bottles and aluminium cans and to our cleaning contractors to use environmentally friendly products. Used
stamps are collected for the Royal National Institute for the Blind. A greater use of video and telephone conferencing has also
reduced the need for travel and the increasing use of electronic mail has reduced the use of paper.

Particular improvements during the year include the following:

Drake employs reusable packaging for its higher volume products. This packaging is used to protect products whilst they are
being moved around the factory and has also enabled them to reduce their use of non-reusable products.

In the last 12 months, Manfrotto has eliminated all electrical transformers containing polychlorinated biphenyls (PCB) and has
removed any potentially harmful building materials from the majority of its facilities. Italian law lays down guidelines to ensure that
the impact of waste on the environment is minimised. Manfrotto’s waste management is carried out in accordance with these
guidelines. Emissions into the atmosphere, such as dust and vapours etc, are constantly monitored and regulated to ensure they
remain below the relevant pollution thresholds.

Vinten has also made various dust and vapour extraction improvements to their facilities and further enhancements are scheduled.

Donations
During the year, donations totalling £400 were made to the Alzheimer’s Society and The Cancer Research Campaign and a
donation of US$100,000 (equivalent to £68,885) was made to the Twin Towers Fund following the tragedy on 11 September
2001. Charitable donations in 2000 totalled £38,789. No donations were made to any political party.

Annual general meeting
The annual general meeting for 2002 will be held on Wednesday 17 April 2002 at the ofﬁces of Financial Dynamics, Holborn Gate,
26 Southampton Buildings, London WC2A 1PB. The notice of meeting and a proxy card are enclosed. The business will include
the consideration by shareholders of the report and accounts for the year ended 31 December 2001, the proposed dividend, re-
election of directors and election of a director and the re-election of auditors in addition to the following further items of business.

Resolutions dealing with the adoption of four new share option schemes will be proposed. The new schemes will be the 2002
Approved share option plan, the 2002 Unapproved share option plan, the 2002 Sharesave scheme and the 2002 International
sharesave plan.

24 The Vitec Group

Directors’ report

A resolution renewing the directors’ authority to allot shares for cash, as if the pre-emption provisions of Section 89 of the
Companies Act 1985 did not apply, is set out in the notice of meeting. The ﬁrst part of the resolution deals with the allotment of
shares for cash under a rights issue, giving power to make adjustments to deal with overseas shareholders, fractions of shares and
similar matters. The second part renews the power of the directors to allot shares for cash, limited to 5% of the issued share
capital at 25 February 2002. The authority will expire at the end of the Company’s next annual general meeting or, if earlier, on
17 July 2003. Your directors have no present intention of issuing or granting rights over the unissued share capital, except in
relation to the Company’s adopted employee share incentive arrangements and no share issue will be made which will effectively
alter the control of the Company without prior approval of the shareholders in general meeting.

A resolution for a general authority for the Company to make market purchases of its own shares was renewed by shareholders at
the last annual general meeting. The directors believe it is desirable to have the power to make market purchases in the event of
suitable opportunities arising. Accordingly, a resolution to again renew the authority will be proposed at the annual general
meeting. The authority to purchase shares would only be exercised if there was a resultant increase in earnings per share, and it
would be in the best interests of the Company.

Auditors
The auditors, KPMG Audit Plc, are willing to continue in ofﬁce. A resolution will be put to the annual general meeting to re-
appoint them as auditors and to authorise the Board to agree their remuneration.

By order of the Board

Roland Peate
Secretary
25 February 2002

The Vitec Group 25

Corporate governance

The Listing Rules require a company to include in its annual report and accounts a statement of how it has applied the principles
set out in Section 1 of the Combined Code (the ‘Code’) together with an explanation to enable its shareholders to evaluate how
the principles have been applied. The Listing Rules also require a company to include a statement as to whether or not it has
complied throughout the accounting period with the Code provisions set out in Section 1 of the Code. A company that has not
complied with the Code provisions, or complied with only some of the Code provisions or (in the case of provisions whose
requirements are of a continuing nature) complied for only part of an accounting period, must specify the Code provisions with
which it has not complied, and (where relevant) for what part of the period such non-compliance continued, and give reasons for
such non-compliance.

Statement of compliance
The Board considers that it has complied with the Code throughout the year ended 31 December 2001 with the exception of the
Code provisions with which non-compliance is included in the report below. Where non-compliance is reported (Code provisions
B.1.7, B.2.1 and D.3.1), the reason for such non-compliance is set out in the relevant section below. References in parentheses
are to the relevant paragraphs of the Code. The Company regularly reviews and revises its procedures, as necessary, to take
account of the requirements of the Code.

The Board
The Board meets regularly and there is a formal schedule of matters and levels of authority which are delegated to the executive
directors, all other matters and powers being reserved to the Board. The Board comprised ﬁve non-executive directors until Lino
Manfrotto’s retirement on 8 August 2001. From that date, and for the remainder of the year, there were four non-executive
directors. Richard Green has been an executive director throughout the year. The other executive directors during the year have
been Philip Cushing, until his resignation on 22 July 2001 and Gareth Rhys Williams, who was appointed on 23 November 2001.
During the period from Philip Cushing’s resignation until the completion of the handover to the new Chief executive, Alison
Carnwath assumed a part-time executive role whilst retaining her non-executive responsibilities as Chairman. Consequently,
Alison Carnwath, who was a member of the Remuneration committee, was independent for only part of the year (B.2.1).
Furthermore, during the period whilst she also had her part-time executive role, she retained her position on the Audit committee
(D.3.1).

The directors bring independent judgement to bear on strategic matters, the performance of the Group and the adequacy of
resources and standards of conduct. The roles of the Chairman and the Chief executive are separate, although Alison Carnwath
assumed some of the Chief executive’s duties for part of the year, see above. The senior non-executive director is David Bell and
his biographical details are shown on page 17.

The Board has an Audit committee, a Nominations committee and a Remuneration committee. Each committee has formal terms of
reference. The members of these committees are shown on page 17.

Directors, having notiﬁed the Chairman, are able to take independent professional advice in furtherance of their duties at the
Company’s expense. All new directors are given an extensive introduction to the Group, including meeting with senior executives
and visiting the Group’s principal operations. All directors have access to the advice and services of the Group company secretary.

The papers supplied for consideration by the Board are provided on a timely basis and include budgets, strategy papers, reviews
of the Group’s ﬁnancial position and operating performance and annual and interim reports and accounts.

Appointments and re-elections to the Board
A Nominations committee chaired by Alison Carnwath, Chairman of the Board, makes recommendations to the Board on all new
Board appointments. During the year, up to the dates of their resignation or retirement, Philip Cushing and Lino Manfrotto,
respectively, were members of the Remuneration committee. The Chairman and the non-executive directors are normally
appointed for an initial period of three years which usually, with the approval of the Nominations committee and the Board, would
be extended for a further three years. In exceptional circumstances, appointments of non-executive directors may be extended
beyond six years, with the approval of the Nominations committee and the Board, if it is in the interests of the Group to do so.

Under the Company’s articles of association, each director is required to be re-elected at the third annual general meeting
following that at which he or she was last elected or re-elected. Alison Carnwath, John Potter and Michael Stacey will retire and
will be proposed for re-election at the annual general meeting to be held in 2002. Alison Carnwath has completed six years as a
non-executive director, of which she has been Chairman for three years. The Nominations committee and the Board consider it is
in the interests of the Group for her to continue as a director and the Chairman but the appointment will be reviewed periodically.
In addition, Gareth Rhys Williams will stand for election, having been appointed a director since the last annual general meeting.

26 The Vitec Group

Corporate governance

Remuneration committee
Remuneration packages are formulated to attract, retain and motivate executive directors and senior executives of the quality
required, without being excessive. They take into account the responsibilities involved, remuneration packages in comparable
companies, relative performance and both internal and external advice. Remuneration and beneﬁts reﬂect responsibility and
market comparisons. Basic salary is fully pensioned on a funded basis.

The Remuneration committee, comprising David Bell (Chairman) and the other independent non-executive directors, together
with Alison Carnwath (B.2.1), makes recommendations to the Board, within agreed terms of reference, on the framework of
executive remuneration including terms of service, pay structure, incentive arrangements and beneﬁts. The Committee, on behalf
of the Board, determines the remuneration packages of the executive directors, including pension rights and would also
determine any compensation payments in relation to those directors. The Board itself determines the remuneration of the
non-executive directors.

The Committee believes that in certain speciﬁc circumstances it is beneﬁcial for an executive director to be encouraged to take up
external non-executive appointments. Remuneration received by a director in respect of external appointments is retained by
the director.

The Chairman of the Committee, will be available to answer questions about directors’ remuneration at the Company’s annual
general meeting.

Directors’ remuneration
Details of the directors’ remuneration policy and the disclosures required by the Code are set out below and in the Directors’
report on pages 18 to 25.

Richard Green has a service contract requiring 18 months’ notice of termination (B.1.7). His service contract has been in place for a
number of years and the Remuneration committee believes the notice period under the contract remains appropriate. Gareth Rhys
Williams, Chief executive, has a service contract requiring 12 months’ notice of termination by the Company. Neither of the
executive directors’ service contracts provides for pre-determined amounts of compensation in the event of early termination by
the Company. The Committee’s policy in the event of termination is to mitigate compensation to the fullest extent practicable.

Relations with shareholders
The Board recognises the importance of maintaining regular contact with its shareholders to ensure that its businesses, strategy
and remuneration policies are understood and that any concerns are addressed in a constructive way. The Board communicates
with its shareholders through a combination of public announcements through the Stock Exchange, analyst brieﬁngs and
press interviews at the time of the announcements of the interim and the year-end results and, when appropriate, at other times
during the year. The directors also meet with shareholders at the Company’s annual general meeting.

At meetings of shareholders, the level of proxy votes received in respect of resolutions is stated after each resolution has been
dealt with on a show of hands. Separate resolutions are proposed for each issue upon which shareholders are asked to vote.

The Company has complied with the requirement set out in the Code in respect of shareholders’ meetings to send the notice of
annual general meeting and related papers at least 20 working days before the meeting. It will continue to comply with the
requirement.

Internal control
The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed
to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute
assurance against material misstatement or loss (principle D.2).

Since its implementation of the recommendations of the Cadbury Committee Code of Best Practice through the guidance
published by the Working Group on Internal Control in December 1994, the Board has adopted a risk-based approach to
establishing the system of internal control. The application of principle D.2 of the Code and the process followed by the Board in
reviewing the effectiveness of the system of internal control during the year (provision D.2.1) is as follows:

Operating company management is charged with the ongoing responsibility for identifying risks facing each of the
businesses and for putting in place procedures to monitor and manage risks.

The Vitec Group 27

Corporate governance

The responsibilities of the Chief executive ofﬁcer and Chief ﬁnancial ofﬁcer at each operating unit to manage risks within
their businesses are periodically reinforced by Group executive management.

Major commercial, technological and ﬁnancial risks are formally assessed during the annual long-term business planning
process around mid-year. These plans and the attendant risks are reviewed by the Board.

Large capital projects, product development projects and acquisitions require Board approval.

The process by which the Board reviews the effectiveness of internal control has been agreed by the Board and
documented. This involves bi-annual reviews by the Board, of the major business risks of the Group together with the
controls in place to manage those risks as reported to the Board by the Chief executives of each division. In addition, at the
end of each year, individual operating units formally review all of their business risks and mitigating controls and prepare
statements that describe the extent of their compliance with control objectives. These statements are approved by the
Chief executive ofﬁcer and Chief ﬁnancial ofﬁcer of each operating unit and submitted to Group executive management for
review. Any signiﬁcant matters arising from this review are formally reported to the Board by the Group ﬁnance director.
The risk and control identiﬁcation and certiﬁcation process is monitored and periodically reviewed by Group ﬁnancial
management.

The Board has established a control framework within which the Group operates. This contains the following key elements:

organisational structure with clearly deﬁned lines of responsibility, delegation of authority and reporting
requirements.

deﬁned expenditure authorisation levels.

on-site and video conferencing operations reviews covering all aspects of each business are conducted by Group
executive management on a regular basis throughout the year.

comprehensive system of ﬁnancial reporting. The annual budget and long term plan of each operating company are
reviewed in detail and approved by the executive directors. The Board approves the overall Group’s budget and
plans. Monthly actual results are reported against prior year and quarterly budgets. Forecasts are revised where
necessary but at least once every quarter. Any signiﬁcant changes and adverse variances are questioned by the
Group executive directors and remedial action is taken where appropriate. Group tax and treasury is co-ordinated
centrally. There is weekly cash and treasury reporting to Group ﬁnancial management and periodic reporting to the
Board on the Group’s tax and treasury position.

The Board considers that it has fully complied during the year and up to the date of approval of the annual report and accounts
with the Code (D.2.1) as set out in the Guidance for Directors on the Combined Code, published by the Internal Control Working
Party of the Institute of Chartered Accountants in England and Wales.

The Group does not have an internal audit function. However, the Board periodically reviews the need for such a function
(provision D.2.2). The current conclusion of the Board is that this is not necessary given the scale, diversity and complexity of the
Group’s activities. Operational audits are outsourced on an as-needed basis.

Going concern
The directors have made appropriate enquiries and consider that the Group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the
accounts.

28 The Vitec Group

Statement of directors’ responsibilities

Company law requires the directors to prepare ﬁnancial statements for each ﬁnancial year which give a true and fair view of the
state of affairs of the Company and of the Group and of the proﬁt or loss for that period. In preparing those ﬁnancial statements,
the directors are required to:

select suitable accounting policies and then apply them consistently;

make judgements and estimates that are reasonable and prudent;

state whether applicable accounting standards have been followed, subject to any material departures disclosed and
explained in the ﬁnancial statements; and

prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the company and the
group will continue in business.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the
ﬁnancial position of the company and to enable them to ensure that the ﬁnancial statements comply with the Companies Act 1985.
They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.

The Vitec Group 29

Independent auditors’ report to the members of The Vitec Group plc

We have audited the ﬁnancial statements on pages 31 to 59.

Respective responsibilities of directors and auditors
The directors are responsible for preparing the Annual Report. As described on page 29, this includes responsibility for preparing
the ﬁnancial statements in accordance with applicable United Kingdom law and accounting standards. Our responsibilities, as
independent auditors, are established in the United Kingdom by statute, the Auditing Practices Board, the Listing Rules of the
Financial Services Authority, and by our profession’s ethical guidance.

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

We review whether the statement on page 26 reﬂects the company’s compliance with the seven provisions of the Combined
Code speciﬁed for our review by the Listing Rules, and we report if it does not. We are not required to consider whether the
board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the group’s corporate
governance procedures or its risk and control procedures.

We read the other information contained in the Annual Report, including the corporate governance statement, and consider
whether it is consistent with the audited ﬁnancial statements. We consider the implications for our report if we become aware of
any apparent misstatements or material inconsistencies with the ﬁnancial statements.

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

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

Opinion
In our opinion the ﬁnancial statements give a true and fair view of the state of affairs of the company and the group as at
31 December 2001 and of the proﬁt of the group for the year then ended and have been properly prepared in accordance with
the Companies Act 1985.

KPMG Audit Plc
Chartered Accountants

Registered Auditor
London

25 February 2002

30 The Vitec Group

Consolidated proﬁt and loss account
For the year ended 31 December 2001

2001

2000

Before
exceptional
items and
goodwill
amortisation
£m

Notes

Exceptional
items
£m

Goodwill
amortisation
£m

Total
£m

190.4
(94.0)

96.4
(65.8)

30.6
–
–

30.6
(2.6)

28.0
(9.0)

19.0

–
–

–
0.8
(3.7)

(2.9)
–

(2.9)
(0.3)

(3.2)

Turnover
Cost of sales

Gross proﬁt
Net operating expenses

Operating proﬁt
Proﬁt on sale of ﬁxed assets
Amounts written off investments

Proﬁt on ordinary activities before
interest
Net interest payable

Proﬁt on ordinary activities before tax
Tax

Proﬁt on ordinary activities after tax
and for the ﬁnancial year
Dividends

Retained proﬁt for the year
transferred to reserves

Basic earnings per share
Diluted earnings per share
Headline earnings per share

6
5
5

11
11
11

–
–

190.4
(94.0)

200.0
(93.4)

–
(0.9)

(0.9)
–
–

(0.9)
–

96.4
(66.7)

106.6
(69.0)*

29.7
0.8
(3.7)

26.8
(2.6)

24.2
(9.3)

37.6
–
–

37.6
(2.9)

34.7
(11.5)

(0.9)

14.9

23.2

(9.3)

(8.7)

5.6

14.5

36.4p
36.3p
46.4p

56.7p
56.4p
62.8p

*Net operating expenses during the year ended 31 December 2000 included £1.9 million of exceptional items (note 5) and
£0.6 million of goodwill amortisation

The Vitec Group 31

Group

2001
£m

2000
£m

Company

2001
£m

2000
£m

Notes

12
13
14

15
16
22

17
19

20
21
21
21
21
21

10.8
48.5
–

10.9
47.0
3.5

–
2.3
129.0

–
2.4
127.1

59.3

61.4

131.3

129.5

33.6
34.3
17.8

37.8
38.0
19.2

–
3.5
8.2

–
5.1
2.3

85.7
(64.8)

95.0
(38.6)

11.7
(50.8)

7.4
(23.0)

20.9

56.4

(39.1)

(15.6)

80.2
(4.5)
(6.3)

117.8
(46.6)
(7.5)

92.2
(1.5)
(0.1)

113.9
(40.8)
(0.1)

69.4

63.7

90.6

73.0

8.2
2.5
1.6
1.5
–
55.6

8.2
2.4
1.6
1.5
–
50.0

8.2
2.5
1.6
0.9
53.7
23.7

8.2
2.4
1.6
0.9
53.7
6.2

69.4

63.7

90.6

73.0

Balance sheets
As at 31 December 2001

Fixed assets
Intangible assets
Tangible assets
Investments

Current assets
Stocks
Debtors
Cash at bank and in hand

Creditors – due within one year

Net current assets/(liabilities)

Total assets less current liabilities
Creditors – due after more than one year
Provisions for liabilities and charges

Net assets

Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Revaluation reserve
Other reserves
Proﬁt and loss account

Shareholders’ funds - equity

Approved by the Board on 25 February 2002 and signed on its behalf.

Richard Green
Director

32 The Vitec Group

Consolidated statement of total recognised gains and losses
For the year ended 31 December 2001

Proﬁt for the ﬁnancial year
Exchange rate movements on foreign net investments
Tax on exchange differences

Total recognised gains and losses relating to the year

Reconciliation of movements in shareholders’ funds
For the year ended 31 December 2001

Proﬁt for the ﬁnancial year
Dividends

Retained proﬁt for the year
Exchange rate movements and related tax on foreign net investments
New share capital subscribed

Net increase in shareholders’ funds
Opening shareholders’ funds

Closing shareholders’ funds

2001
£m

14.9
0.3
(0.3)

2000
£m

23.2
4.3
0.6

14.9

28.1

2001
£m

2000
£m

14.9
(9.3)

23.2
(8.7)

5.6
–
0.1

5.7
63.7

14.5
4.9
0.1

19.5
44.2

69.4

63.7

The Vitec Group 33

Consolidated cash ﬂow statement
For the year ended 31 December 2001

Net cash inﬂow from operating activities

Returns on investments and servicing of ﬁnance
Interest received
Interest paid

Net cash outﬂow from returns on investments and servicing of ﬁnance

Tax paid

Capital expenditure
Purchase of tangible ﬁxed assets
Sale of tangible ﬁxed assets
Purchase of ﬁxed asset investments

Net cash outﬂow from capital expenditure

Acquisitions
Purchase of subsidiary undertakings

Equity dividends paid

Net cash inﬂow/(outﬂow) before ﬁnancing

Financing
Issue of shares
Net repayment of loans

Net cash outﬂow from ﬁnancing

Decrease in cash in the year

Notes

2001
£m

2000
£m

42.1

45.8

0.8
(3.5)

0.8
(3.8)

(2.7)

(3.0)

(8.4)

(12.4)

(15.4)
2.4
–

(14.4)
1.6
(3.5)

(13.0)

(16.3)

(0.3)

(8.9)

(7.1)

(9.9)

8.8

(2.9)

0.1
(10.1)

0.1
(11.0)

(10.0)

(10.9)

(1.2)

(13.8)

34 The Vitec Group

Notes to the accounts

1 Basis of presentation

The consolidated proﬁt and loss account and balance sheets include the accounts of the Company and its subsidiary undertakings
made up to 31 December 2001. The accounts have been prepared in accordance with all applicable accounting standards under
the historical cost convention modiﬁed to include the revaluation of certain land and buildings.

Two new accounting standards have become partly effective during the year and have been adopted by the Group. FRS 17
Retirement beneﬁts has been adopted by the Group in respect of its transitional disclosures and FRS 18 Accounting policies has
been adopted in full. Neither of these accounting standards has had any signiﬁcant impact on the results or net assets of the
Group.

2 Accounting policies

Basis of consolidation
The results of subsidiaries sold or acquired during the year are included in the accounts up to, or from, the date that control
passes, unless otherwise stated.

For acquisitions made prior to 1 January 1998, the differences between the fair value of the consideration paid for investments in
subsidiaries or businesses and the fair value of their net assets at the date of acquisition is treated as purchased goodwill and
is written off directly against reserves.

For acquisitions made on or after 1 January 1998, purchased goodwill arising from the differences between the fair value of the
consideration paid and the fair value of the net assets acquired as at the date of acquisition is capitalised in the balance sheet
as an intangible asset. This purchased goodwill is being charged to the proﬁt and loss account through amortisation on a
straight-line basis over its estimated useful life up to a maximum of 20 years.

Impairment tests are carried out on the purchased goodwill arising on acquisitions that occurred in the preceding year. Where
necessary, provision is made for any impairment that has arisen.

Upon the disposal of businesses which have become part of the Group by acquisition, purchased goodwill previously written off
to reserves, or the unamortised portion of purchased goodwill remaining in the balance sheet as an intangible asset, is written
off to the proﬁt and loss account.

Turnover
Represents net sales of products and services to external customers.

Foreign currencies
Transactions with overseas customers and suppliers are converted at the average rates for the months in which transactions occur.
Proﬁts and losses arising from the difference between these rates and contracted rates on forward exchange rate contracts, which
are set up as hedges against such sales and purchases, are recorded in cost of sales. Foreign trading proﬁts and cash ﬂows
are translated at the average rates for the year. Monetary assets and liabilities are translated at the year-end rates and the gains or
losses on translation are included in the proﬁt and loss account. Differences on translation of investments in overseas companies
are taken directly to reserves.

Research and development
Expenditure on the Group’s research and development projects is generally charged to the proﬁt and loss account in the year in
which it is incurred. In certain specialised cases where a development project meets clearly deﬁned criteria and the commercial
outcome can be assessed with reasonable certainty, development expenditure is capitalised. Such capitalised expenditure will
be amortised over the life of the project.

Investments
Fixed asset investments are stated individually at cost less, where appropriate, provision for impairment in value. Current asset
investments are stated at the lower of cost and net realisable value. Cost includes, where appropriate, accrued interest.

The Vitec Group 35

Notes to the accounts

2 Accounting policies (continued)

Fixed assets and depreciation
Depreciation is provided at rates estimated to write off the cost or valuation of the relevant assets less their estimated residual
values by equal annual amounts over their expected useful lives. No depreciation is provided on freehold land. Other ﬁxed
assets are depreciated at the rates indicated below:

Freehold and long leasehold buildings
Short leasehold property
Plant and machinery
Motor vehicles
Equipment, ﬁxtures & ﬁttings
Rental equipment

2½% – 5% on cost or valuation
over the remaining period of the lease
12½% – 25% on cost
25% – 33ˆ(cid:2)¯% on cost
10% – 33ˆ(cid:2)¯% on cost
20% – on cost

Stock and work in progress
Stock and work in progress is valued at the lower of cost and net realisable value, less progress payments. Cost includes materials,
direct labour and production overheads incurred in bringing stocks and work in progress to their present location and condition.

Capital instruments
Capital instruments are stated in the balance sheet after the deduction of issue costs, which are charged to the proﬁt and loss
account over the term of the debt.

Receipts and payments on interest rate instruments are recognised on an accruals basis over the life of the instrument. Cash ﬂows
associated with derivative ﬁnancial instruments are classiﬁed in the cash ﬂow statement in a manner consistent with those of the
transactions being hedged.

Deferred tax
The charge for tax is based on the proﬁt for the year and takes into account tax deferred because of timing differences between
the treatment of certain items for tax and accounting purposes. Provision is made for deferred tax only to the extent that it is
considered probable that an actual liability will crystallise. Within any one tax jurisdiction, deferred taxes are only recognised to
the extent of deferred tax liabilities arising in that jurisdiction.

Pension costs
The costs of providing pensions for employees under deﬁned beneﬁt pension schemes are charged to the proﬁt and loss account
over the working lives of the employees in accordance with the recommendations of qualiﬁed actuaries. Any funding surpluses or
deﬁcits that may arise are amortised over the average working life of the employees but surpluses may ﬁrst be used to
improve members’ beneﬁts. The costs of providing pensions for employees under state and other deﬁned contribution schemes
are expensed as incurred.

Employee share schemes
The costs of awards to employees that take the form of shares or rights to shares (including conditional rights) are recognised over
the periods to which the employees’ performance relates. No cost is recognised in respect of SAYE schemes that are offered
on similar terms to all or substantially all employees.

Leases
Rentals under operating leases are charged to the proﬁt and loss account on a straight-line basis.

Assets held for short-term rentals are recorded as plant and machinery within ﬁxed assets and depreciated over their estimated
useful lives. Rental income from these assets is recognised as earned on a straight-line basis over the rental periods.

36 The Vitec Group

Notes to the accounts

3 Activity analysis

3.1 Class of business
Broadcast camera systems
Photographic and retail display
Communications and audio
Broadcast services

Exceptional items
Goodwill amortisation

Group net liabilities

Operating proﬁt
2000
£m

2001
£m

Turnover
2000
£m

2001
£m

Net assets
2000
£m

2001
£m

12.3
16.4
0.8
1.1

30.6
–
(0.9)

15.2
18.0
1.9
5.0

65.8
75.2
18.1
31.3

67.6
73.8
21.8
36.8

40.1 190.4
–
(1.9)
–
(0.6)

200.0
–
–

30.2
33.4
7.5
21.4

92.5
–
–

34.4
31.8
6.0
21.1

93.3
–
–

29.7

37.6 190.4

200.0

92.5

93.3

(23.1)

(29.6)

69.4

63.7

Goodwill amortisation relates to Photographic and retail display - £0.1 million (2000: £0.1 million), Communications and audio -
£0.4 million (2000: £0.1 million) and Broadcast services - £0.4 million (2000: £0.4 million).

Group net liabilities include cash, ﬁnancing and capitalised goodwill.

3.2 Geographic area
By origin
United Kingdom
The rest of Europe
The Americas
Asia and Australasia

Exceptional items
Goodwill amortisation

Group net liabilities

Operating proﬁt
2000
£m

2001
£m

Turnover
2000
£m

2001
£m

Net assets
2000
£m

20‘01
£m

0.8
20.2
8.9
0.7

30.6
–
(0.9)

1.1
21.9
16.3
0.8

23.1
72.6
91.9
2.8

28.3
71.1
97.6
3.0

40.1 190.4
–
(1.9)
–
(0.6)

200.0
–
–

10.8
30.4
49.6
1.7

92.5
–
–

12.6
29.0
50.2
1.5

93.3
–
–

29.7

37.6 190.4

200.0

92.5

93.3

(23.1)

(29.6)

69.4

63.7

The Vitec Group 37

Notes to the accounts

3 Activity analysis (continued)

Turnover by destination
United Kingdom
The rest of Europe
The Americas
Asia and Australasia
Africa and Middle East

4 Operating expenses

Analysis of operating expenses
Marketing, selling and distribution costs
Research and development costs
Administrative expenses
– exceptional restructuring costs
– goodwill amortisation
– other administrative expenses

Turnover
2000
£m

2001
£m

9.2
48.3
105.1
24.6
3.2

8.6
47.3
115.9
25.2
3.0

190.4

200.0

2001
£m

2000
£m

35.8
7.6

–
0.9
22.4

34.8
7.5

1.9
0.6
24.2

66.7

69.0

5 Exceptional items
Exceptional items included in proﬁt on ordinary activities before interest are a full impairment provision of £3.7 million against a
ﬁxed asset investment (Broadcast camera systems) and £0.8 million proﬁt on the sale of property ﬁxed assets (Photographic
and retail display).

Prior year exceptional items included in operating proﬁt were restructuring and relocation costs for the Photographic and retail
display (£1.4 million) and Communications and audio (£0.5 million) divisions.

38 The Vitec Group

Notes to the accounts

6 Operating proﬁt

The following items are included in operating proﬁt
Operating lease rental income on owned broadcast equipment
Depreciation
Operating lease rental expense
Plant, machinery & vehicles
Property

Auditors’ remuneration

Audit fees (company £0.1 million)
Other fees paid to the auditor and its associates

2001
£m

2000
£m

19.0
12.3

23.4
11.4

0.1
4.2

0.4
0.7

0.1
3.6

0.4
0.8

Fees paid to the auditors for non-audit services comprise £0.6 million for tax and £0.1 million for other work.

Reconciliation of operating proﬁt to net cash ﬂow from operating activities

Operating proﬁt
Goodwill amortisation
Depreciation
Loss on sale of ﬁxed assets
Decrease/(increase) in stock
Decrease/(increase) in debtors
(Decrease)/increase in creditors
(Decrease)/increase in provisions

Net cash inﬂow from operating activities

2001
£m

2000
£m

29.7
0.9
12.3
0.1
4.5
3.4
(7.5)
(1.3)

37.6
0.6
11.4
–
(7.3)
(3.8)
5.2
2.1

42.1

45.8

The Vitec Group 39

Notes to the accounts

7 Employees

Aggregate remuneration of all employees during the year
Wages and salaries
Employers’ social security costs
Employers’ pension costs

Average number of employees during the year
Broadcast camera systems
Photographic and retail display
Communications and audio
Broadcast services
Head ofﬁce

2001
£m

2000
£m

42.7
6.9
1.8

40.1
6.2
1.6

51.4

47.9

2001
Number

2000
Number

497
638
158
183
14

505
631
203
201
12

1,490

1,552

8 Directors’ remuneration
The emoluments, share options, awards under incentive schemes and pension entitlements of the directors are disclosed in the
Directors’ report on pages 18 to 25.

The combined remuneration of the directors of the Group is set out below

2001
£m

2000
£m

0.2
0.8
–

1.0

–

0.1
0.5
0.2

0.8

0.4

Fees for non-executive duties
Remuneration for executive duties
Performance-related bonuses

Pension contributions

40 The Vitec Group

Notes to the accounts

9 Tax

UK corporation tax at 30% (2000: 30%)
Tax on exchange differences taken to reserves
Overseas corporate tax
Deferred tax
Adjustments in respect of prior years

Tax on ordinary activities

2001
£m

2000
£m

(0.2)
(0.3)
9.5
0.2
(0.2)

0.2
0.6
11.4
(0.6)
(0.1)

9.0

11.5

Tax on the exceptional items is £0.3 million charge.

Reconciliation of effective tax rate on proﬁt on ordinary activities before exceptional items and
goodwill amortisation

The tax charge has been increased/(reduced) by the following major items

Statutory UK corporation tax rate
Proﬁts in tax free areas
Allowable amortisation of intangible assets
Higher overseas tax rates
Utilisation of tax losses
Other items

Effective tax rate

2001
%

2000
%

30.0
(1.6)
(5.5)
7.2
(1.0)
3.0

30.0
(2.3)
(3.5)
6.1
–
0.6

32.1

30.9

The Vitec Group 41

Notes to the accounts

10 Dividends

Interim paid of 6.1p per share (2000: 5.6p)
Final proposed 16.6p per share (2000: 15.6p)

Total dividends 22.7p per share (2000: 21.2p)

11 Earnings per ordinary share

2001
£m

2000
£m

2.5
6.8

9.3

2.3
6.4

8.7

The calculation of basic earnings per share is based on proﬁt after tax of £14.9 million (2000: £23.2 million) and on the weighted
average number of shares in issue during the year of 40,982,606 (2000: 40,941,665).

Headline earnings per share is presented in order to reﬂect more appropriately the ongoing earnings performance of the Group.
This calculation is based on proﬁt after tax but before exceptional items and amortisation of goodwill. In 2001 this proﬁt was £19.0
million (2000: £25.7 million).

Reconciliation of earnings and its effect on basic earnings per share and headline earnings per share

Proﬁt for the ﬁnancial year
Add back: exceptional items
Add back: goodwill amortisation

2001
£m

2000
£m

2001
pence

2000
pence

14.9
3.2
0.9

23.2
1.9
0.6

36.4
7.8
2.2

56.7
4.6
1.5

Earnings before exceptional items and goodwill amortisation

19.0

25.7

46.4

62.8

The calculation of diluted earnings per share is based on proﬁt after tax of £14.9 million (2000: £23.2 million). The number of
shares used to calculate the diluted earnings per share incorporates the weighted average number of shares in issue of 40,982,606
(2000: 40,941,665) and the number of shares under option of 2,427,624 (2000: 2,468,087), contingently issuable shares from
the total of potential long term incentive plan awards of 337,045 (2000: 199,910) and shares issuable under the deferred bonus
plan of 42,128 (2000: nil), as adjusted for a weighting factor between the average exercise prices of the share options and
the average market price of the Company’s shares during 2001. The number of shares used for the calculation is 41,048,425
(2000: 41,069,476).

42 The Vitec Group

Notes to the accounts

12 Intangible ﬁxed assets

Cost
At 1 January 2001
Currency translation adjustments
Additions

At 31 December 2001

Amortisation
At 1 January 2001
Currency translation adjustments
Charge for the year

At 31 December 2001

Net book value
At 31 December 2001

At 1 January 2001

Development
costs
£m

Total
£m

Goodwill
£m

12.3
0.2
0.6

13.1

1.4
–
0.9

2.3

10.8

10.9

–
–
0.3

0.3

–
–
–

–

0.3

–

12.3
0.2
0.3

12.8

1.4
–
0.9

2.3

10.5

10.9

Additions of £0.3 million in goodwill represents goodwill arising on the acquisition of the assets of Alu Nordic AB, a Swedish
company, on 1 August 2001 by the Photographic and retail display division.

The Vitec Group 43

Notes to the accounts

13 Tangible ﬁxed assets

Group
Cost or valuation
At 1 January 2001
Currency translation adjustments
Additions
Disposals
Transfers between categories

Land
and
buildings
£m

Plant
machinery
and
vehicles
£m

Equipment
ﬁxtures
and
ﬁttings
£m

23.4
(0.4)
1.3
(1.1)
1.3

58.6
0.1
10.7
(4.9)
0.2

14.4
–
3.4
(0.2)
(1.5)

Total
£m

96.4
(0.3)
15.4
(6.2)
–

At 31 December 2001

105.3

24.5

64.7

16.1

Depreciation
At 1 January 2001
Currency translation adjustments
Charge for the year
Disposals

At 31 December 2001

Net book value
At 31 December 2001

At 1 January 2001

49.4
(0.3)
12.3
(4.6)

56.8

6.6
(0.1)
1.2
(0.6)

7.1

34.6
(0.2)
9.5
(3.8)

40.1

48.5

17.4

24.6

47.0

16.8

24.0

8.2
–
1.6
(0.2)

9.6

6.5

6.2

Plant, machinery and vehicles includes broadcast equipment rental assets with a cost of £31.5 million (2000: £31.1 million) and
accumulated depreciation of £14.9 million (2000: £15.3 million).

The ﬁxed assets of the Company, comprising principally of land and buildings, at a cost of £3.3 million (2000: £3.3 million) and
with accumulated depreciation of £1.0 million (2000: £0.9 million) are included above. During the year additions at cost were
£0.1 million and the depreciation charge was £0.2 million.

44 The Vitec Group

Notes to the accounts

13 Tangible ﬁxed assets (continued)

Net book value of land and buildings
at cost or valuation comprise the following
Carried at cost
Carried at valuation (open market basis - 31.3.1989)

Freehold
Short leasehold

Group

Company

2001
£m

2000
£m

2001
£m

2000
£m

15.6
1.8

14.9
1.9

0.3
1.8

17.4

16.8

2.1

15.9
1.5

15.4
1.4

1.8
0.3

17.4

16.8

2.1

–
1.9

1.9

1.9
–

1.9

The Group’s land and buildings shown above at a re-valued net book value of £1.8 million would have been stated under historical
cost at £0.7 million and a net book value of £0.3 million.

The revalued amount of the Group’s land and buildings has been retained as allowed for by the transitional provisions set out
in FRS 15 Tangible ﬁxed assets.

Capital commitments for which no provision has been made in the accounts amount to £1.1 million (2000: £2.3 million) for
the Group and £nil (2000: £nil) for the Company.

14 Fixed asset investments

Investments at cost or written down value are

Group
Cost
At 1 January 2001
Currency translation adjustments

At 31 December 2001

Provision
At 1 January 2001
Amounts provided for

At 31 December 2001

Net book value
At 31 December 2001

At 1 January 2001

Total
£m

Shares
£m

Loans
£m

3.5
0.2

3.7

–
(3.7)

3.5
0.2

3.7

–
(3.7)

(3.7)

–

3.5

–

3.5

–
–

–

–
–

–

The Vitec Group 45

Notes to the accounts

14 Fixed asset investments (continued)

Company
At 1 January 2001
Additional loans

At 31 December 2001

Total
£m

Shares
£m

Loans
£m

127.1
1.9

129.0

84.6
–

84.6

42.5
1.9

44.4

The Group’s investment represents a 16% investment in Intersense Inc. Full impairment provision has been made against this
investment.

Principal subsidiaries

The Group’s principal subsidiaries at 31 December 2001 are listed below.

Vitec Group US Holdings Inc
Vitec Luxembourg Holdings Sarl
Vitec International Financial Services Company Limited

Broadcast camera systems
Anton/Bauer Inc
Centro de Produccion Profesional CPP Limitada
LCB Beteiligungs GmbH
Sachtler Corporation of America
Sachtler GmbH & Co. KG
Vinten Broadcast Limited
Vinten Inc

Photographic and retail display
Alu Inc
Bogen Photo Corporation
Gitzo SA
Gruppo Manfrotto Srl

Communications and audio
Drake Electronics Limited
Vitec CC Inc (trading as Clear-Com)

Broadcast services
Bexel Corporation
Systems Wireless Limited

* Indicates companies directly owned by the parent company

A complete list of subsidiary companies will be included in the next annual return.

Country of incorporation
USA
Luxembourg
Ireland

USA
Costa Rica
Germany
USA
Germany
England and Wales*
USA

USA
USA
France
Italy

England and Wales*
USA

USA
USA

46 The Vitec Group

Notes to the accounts

15 Stocks

Raw materials and components
Work in progress
Finished goods

16 Debtors

Amounts falling due within one year
Trade debtors
Amounts owed by subsidiaries
Other debtors
Tax recoverable
Prepayments and accrued income

Amounts falling due after one year
Prepayments and accrued income
Other debtors

Group

2001
£m

10.3
8.2
15.1

33.6

2000
£m

10.2
9.3
18.3

37.8

Group

Company

2001
£m

26.4
–
3.2
1.1
1.6

32.3

1.2
0.8

2.0

2000
£m

2001
£m

2000
£m

29.3
–
3.7
1.2
1.7

35.9

1.3
0.8

2.1

–
1.9
0.4
1.1
0.1

3.5

–
–

–

–
3.2
0.6
1.2
0.1

5.1

–
–

–

Total debtors

34.3

38.0

3.5

5.1

The Vitec Group 47

Notes to the accounts

17 Creditors

Amounts falling due within one year
Bank loans
Other loans
Payments received on account
Trade creditors
Amounts owed to subsidiaries
Dividends
Corporation tax
Other tax and social security costs
Other creditors
Accruals and deferred income

Amounts falling due after more than one year
Bank loans
Other loans
Loans owed to subsidiaries
Other creditors
Accruals and deferred income

Group

Company

2001
£m

2000
£m

2001
£m

2000
£m

32.0
4.1
0.2
9.6
–
6.8
3.3
1.4
4.7
2.7

64.8

–
4.2
–
0.1
0.2

4.5

–
4.0
0.6
13.8
–
6.4
2.4
1.6
5.4
4.4

38.6

38.0
8.2
–
0.2
0.2

46.6

32.0
–
–
–
11.2
6.8
–
0.1
0.2
0.5

50.8

–
–
1.5
–
–

1.5

–
–
–
–
14.2
6.4
0.5
0.1
0.5
1.3

23.0

38.0
–
2.8
–
–

40.8

48 The Vitec Group

Notes to the accounts

18 Financial instruments

An explanation of the Group’s treasury policy and controls is included in the Financial review on page 16. Short term debtors and
creditors have been omitted from all disclosures other than the currency proﬁle.

a) Financial liabilities

i) Analysis of borrowings

Bank loans
Senior notes
Other loans

Gross ﬁnancial liabilities

ii) Maturity proﬁle

Within one year or less
More than one year but not more than two years
More than two years but not more than ﬁve years

Group

Company

2001
£m

32.0
7.7
0.6

40.3

2000
£m

38.0
11.4
0.8

50.2

2001
£m

32.0
–
–

32.0

Group

Company

2001
£m

36.1
4.2
–

40.3

2000
£m

4.0
42.0
4.2

50.2

2001
£m

32.0
–
–

32.0

2000
£m

38.0
–
–

38.0

2000
£m

–
38.0
–

38.0

The total amount of loans any part of which falls due after 5 years is £nil (2000: £nil).

The holding company for the USA subsidiaries issued, in 1993 via a private placement, US$40 million of 6.72% unsecured Senior Notes
2003 guaranteed by the Company. The notes are repayable in equal instalments over 7 years commencing in 1997. Concurrent with
the drawdowns under the notes, the Company entered into 10 year US dollar/sterling interest rate swap agreements with banks
whereby US$15 million of ﬁxed rate obligations were exchanged for obligations of £10.1 million at interest rates linked to LIBOR.
The obligations under the swap agreements amortise in line with the underlying notes.

Certain foreign currency loans in Italy amounting to £0.6 million (2000: £0.8 million) are secured on the land and buildings of subsidiary
companies in Italy and are at ﬁxed interest rates of 5.1-5.2%. These loans are repayable in instalments until 2003.

The Group had the following undrawn borrowing facilities at the end of the period

Expiring in one year or less
- committed facilities
- uncommitted facilities
More than one year but not more than two years
- committed facilities

Total

2001
£m

28.0
25.0

–

53.0

2000
£m

30.0
25.0

7.0

62.0

The Vitec Group 49

Notes to the accounts

18 Financial instruments (continued)

iii) Interest rate proﬁle

Currency

Sterling
US$
Euro

At 31 December 2001

Sterling
US$
Euro

At 31 December 2000

Total
£m

34.8
4.9
0.6

40.3

42.3
7.1
0.8

50.2

Floating
rate
borrowings
£m

Fixed rate
borrowings
£m

Fixed rate

Weighted
average
interest
rate
%

Weighted
average
period at
ﬁxed rate
Years

34.8
–
–

34.8

42.3
–
–

42.3

–
4.9
0.6

5.5

–
7.1
0.8

7.9

6.7
5.1

2
2

3
3

Floating rate

2001
£m

1.6
4.1
10.8
1.3

17.8

2000
£m

5.0
3.7
8.9
1.6

19.2

The ﬂoating rate borrowings comprise bank loans and swaps bearing interest at rates based on LIBOR.

b) Financial assets

Interest rate proﬁle

Currency

Sterling
US $
Euro
Other

The ﬂoating rate ﬁnancial assets comprise bank deposits bearing interest at rates based on local money market rates.

50 The Vitec Group

Notes to the accounts

18 Financial instruments (continued)

c) Fair value of ﬁnancial assets and liabilities

Cash at bank and in hand
Floating rate borrowings
Fixed rate borrowings
Swaps

At 31 December 2001

Cash at bank and in hand
Floating rate borrowings
Fixed rate borrowings
Swaps

At 31 December 2000

Book value
£m

Fair value
£m

17.8
(34.8)
(5.5)
0.0

(22.5)

19.2
(42.3)
(7.9)
0.0

(31.0)

Market rates have been used to determine fair values.

d) Foreign exchange hedging
Cost of sales includes net losses of £1.0 million (2000: £4.5 million net losses) arising from the difference between the exchange rates at
which foreign currency transactions are converted and the contracted rates on the forward exchange rate contracts set up as hedges
against such transactions. When compared with their values at the exchange rates in effect on 31 December 2001, the cumulative,
unrecognised aggregate gain on forward exchange rate contracts as of 31 December 2001is £0.4 million (2000: £0.5 million). All of these
unrecognised gains relate to the year 2002. Because these contracts are put in place to hedge a portion of the underlying transactions,
any net gain or loss that may arise on these contracts over the forthcoming year will be more than compensated by the corresponding
transactional gains or losses.

e) Currency proﬁle
The main functional (or ‘operating’) currencies of the Group are Sterling, US$ and Euro. The following analysis of net monetary assets
and liabilities, excluding cash and borrowings, shows the Group’s currency exposures after applying the effects of forward contracts
used to manage currency exposure. Such net positions comprise the monetary assets and liabilities of the Group that are not
denominated in the functional currency of the operating units involved.

Net foreign currency monetary assets/(liabilities)

Functional currency of
group operation

Sterling
Euro

Sterling
£m

–
(0.1)

US$
£m

–
(0.5)

Euro
£m

0.1
(0.2)

At 31 December 2001

(0.1)

(0.5)

(0.1)

Sterling
Euro

At 31 December 2000

–
(0.1)

(0.1)

0.6
0.9

1.5

0.9
–

0.9

Other
£m

(0.2)
0.4

0.2

(0.2)
–

(0.2)

Total
£m

(0.1)
(0.4)

(0.5)

1.3
0.8

2.1

The Vitec Group 51

Notes to the accounts

19 Provisions for liabilities and charges

Group

Total
£m

Deferred
tax
£m

Exceptional
restructuring
£m

Other
provisions
£m

Company

Total
£m

Deferred
tax
£m

At 1 January 2001
Currency translation
adjustments
Proﬁt and loss account
Utilised in year

At 31 December 2001

7.5

(0.1)
0.4
(1.5)

6.3

1.7

–
0.2
–

1.9

–
(0.3)
(1.3)

0.3

3.9

(0.1)
0.5
(0.2)

4.1

0.1

–
–
–

0.1

–
–
–

0.1

Other provisions include £2.9 million (2000: £2.6 million) to cover accrued statutory entitlements that will be paid to employees in Italy
and Germany when they leave employment of the Group. The remaining provisions include warranty provisions of £0.8 million
(2000: £0.8 million) and property provisions of £0.2 million (2000: £0.2 million).

Composition of deferred tax provision
Accelerated tax depreciation allowances
Other timing differences

Group

Company

2001
£m

2000
£m

2001
£m

2000
£m

0.7
1.2

1.9

0.7
1.0

1.7

0.1
–

0.1

0.1
–

0.1

There are no other material timing differences on which deferred tax has not been provided. Provision for tax on capital gains payable on
the disposal of revalued properties is made only when it is decided in principle to dispose of the asset.

52 The Vitec Group

Notes to the accounts

20 Share capital

The authorised share capital at 31 December 2001 consisted of 65,000,000 (2000: 65,000,000) shares of 20p each, of which 40,985,752
were allotted and fully paid. The movement during the year was

At 1 January 2001
Exercise of share options

At 31 December 2001

Issued
share
capital
£m

8.2
–

8.2

40,959,492
26,260

40,985,752

At 31 December 2001 the following options had been granted and remained outstanding under the Company’s share option schemes

United Kingdom SAYE schemes
International SAYE schemes
Executive schemes
Premium option plan

Exercise prices

412p - 595p
400p - 633p
268p - 694p
661p - 819p

Dates
normally
exercisable

2002 - 2009
2002 - 2007
2002 - 2011
2003 - 2010

Number of
shares

167,885
302,901
1,066,733
890,105

2,427,624

On 6 April 2001, awards over an aggregate of 147,942 shares in the Company were made to 8 senior Group executives under the
Company’s long term incentive plan. The total number of shares outstanding at 31 December 2001 under the Company’s long term
incentive plan was 337,045 (2000: 199,910).

The terms of the awards and the related performance conditions are described in the Directors’ report.

On 18 April 2001, awards over an aggregate of 94,584 shares in the Company were made to 15 senior Group executives under the
Company’s deferred bonus plan. The total number of shares outstanding at 31 December 2001 under the Company’s deferred bonus
plan was 79,737. The terms of the awards and the related performance conditions are described in the Directors’ report.

The Vitec Group 53

Notes to the accounts

21 Share premium account and reserves

Share
premium
account
£m

Capital
redemption
reserve
£m

Revaluation
reserve
£m

Merger
reserve
£m

Other
reserves
£m

Proﬁt
and loss
account
£m

Group
At 1 January 2001
Retained proﬁt for the year
Premium on new shares issued
Tax on exchange differences
Exchange rate movement on
foreign net investments

At 31 December 2001

2.4
–
0.1
–

–

2.5

1.6
–
–
–

–

1.6

1.5
–
–
–

–

1.5

–
–
–
–

–

–
–
–
–

–

50.0
5.6
–
(0.3)

0.3

55.6

At 31 December 2001 the cumulative goodwill written off on acquisitions prior to 1 January 1998 amounted to
£128.3 million (2000: £128.3 million)

Share
premium
account
£m

Capital
redemption
reserve
£m

Revaluation
reserve
£m

Merger
reserve
£m

Other
reserves
£m

Proﬁt
and loss
account
£m

Company
At 1 January 2001
Retained proﬁt for the year
Premium on new shares issued

At 31 December 2001

2.4
–
0.1

2.5

1.6
–
–

1.6

0.9
–
–

0.9

9.7
–
–

9.7

44.0
–
–

44.0

6.2
17.5
–

23.7

As permitted by Section 230 (4) of the Companies Act 1985 the Company has not presented its own proﬁt and loss account. The amount
of the Group result for the ﬁnancial year dealt with in the accounts of the Company was a proﬁt of £26.8 million (2000: £2.3 million loss).

There is no material difference between the Group’s proﬁt and loss account and the historical cost proﬁt and loss account. Accordingly,
no note of the historical cost proﬁt and loss for the period has been presented.

54 The Vitec Group

Notes to the accounts

22 Cash and ﬁnancing

Reconciliation of net cash ﬂow to movement in net debt
Decrease in cash in the year
Net repayment of loans

Reduction/(increase) in net debt resulting from cash ﬂows
Exchange rate movements

Movement in net debt in the period
Net debt at 1 January

2001
£m

(1.2)
10.1

8.9
(0.4)

8.5
(31.0)

2000
£m

(13.8)
11.0

(2.8)
(0.4)

(3.2)
(27.8)

Net debt at 31 December

(22.5)

(31.0)

Analysis of net debt
Cash

Debt due after one year
Debt due within one year

Total

1 January
2001
£m

Cash
ﬂow
£m

Other
non-cash
£m

Exchange
movements
£m

31 December
2001
£m

19.2

(1.2)

–

(0.2)

17.8

(46.2)
(4.0)

(50.2)

(31.0)

6.2
3.9

10.1

8.9

35.9
(35.9)

–

(0.1)
(0.1)

(0.2)

(0.4)

(4.2)
(36.1)

(40.3)

(22.5)

Exchange rate movements result from the adjustment of opening balances and cash ﬂows in the year to closing exchange rates.

Interest
Bank loans and overdrafts
Other loans - repayable within ﬁve years

Total payable
Interest receivable

Net interest payable

2001
£m

2000
£m

2.6
0.8

3.4
(0.8)

2.6

2.6
1.1

3.7
(0.8)

2.9

The Vitec Group 55

Notes to the accounts

23 Leasing commitments
At 31 December 2001 the Group had the following annual commitments under operating leases

Land and
buildings
£m

0.8
2.3
1.0

4.1

Other
£m

0.1
0.2
–

0.3

Total
£m

0.9
2.5
1.0

4.4

2000
£m

0.9
2.4
0.8

4.1

Expiring within one year
Expiring two to ﬁve years
Expiring after ﬁve years

24 Contingent liabilities

The Company has guaranteed the Senior Notes described in note 18.

25 Pension commitments

During the year, the Group operated funded deﬁned beneﬁt pension schemes set up under separate trusts and open to eligible
employees. The Company pays contributions to the fund in order to provide security for existing pensions and the accrued beneﬁts of
current and former employees.

The adequacy of the schemes to meet the projected beneﬁts is assessed by independent qualiﬁed actuaries at regular intervals. The
most recent actuarial valuations of the schemes, based on the projected unit method, were as at 5 April 2001. The schemes had
assets with a combined market value (excluding the value of insurance policies) of £28.0 million at that date. On the basis of the
assumptions adopted, the value of the schemes’ assets was equal to 108 per cent of the value placed on the beneﬁts that had accrued to
members allowing for expected future increases in salaries. The surpluses arising are being spread over 14 years by way of variation from
regular cost using the straight-line method. The most signiﬁcant actuarial assumptions were: investment return of 6.1% per annum in
respect of liabilities for active members and 5.1% per annum in respect of liabilities for deferred and current pensioners; price inﬂation of
2.5% per annum; general salary inﬂation of 4.5% per annum; pension increases of 2.5% per annum.

Company contributions to the schemes amounted to £0.6 million (2000: £0.9 million) for the year. On this basis, the pension charge for
2001 has been calculated as £0.7 million (2000: £0.8 million). There is a prepayment of £0.9 million (2000: £1.0 million) included in
the balance sheet being the excess of the accumulated company pension contributions paid to the schemes over the amount charged to
the proﬁt and loss account.

The disclosures required in relation to the transitional arrangements within FRS17 Retirement Beneﬁts have been based on the most
recent formal actuarial valuation as at 5 April 2001 updated to 31 December 2001, but using the following ﬁnancial assumptions for
the purpose of FRS17:

Price inﬂation
General salary and wage inﬂation
Increases to pensions in payment (in excess of GMPs)
Increases to deferred pensions
Discount rate

% per annum
2.5
4.5
2.5
2.5
5.75

56 The Vitec Group

Notes to the accounts

25 Pension commitments (continued)

Scheme assets at 31 December 2001 were:

Equities
Bonds
Property
Cash and net current assets

Total

Fair value
£million

19.3
6.1
1.1
0.5

27.0

The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the
timescale covered, may not be necessarily be borne out in practice.

The fair value of the schemes’ assets, which are not intended to be realised in the short term and may be subject to signiﬁcant
change before they are realised, and the present value of the schemes’ liabilities are derived from cash ﬂow projections over long time
periods and thus are inherently uncertain.

The following amounts at 31 December 2001 were measured in accordance with the requirements of FRS17:

Total market value of scheme assets*
Present value of the scheme liabilities*

Surplus/(deﬁcit) in the schemes
Related deferred tax liability

Net pension asset/(liability)

Vitec Group
Pension
Scheme
£million

Vitec Group
Executive
Pension
Scheme
£million

20.0
17.7

2.3
(0.7)

1.6

7.6
8.2

(0.6)
0.2

(0.4)

Total
£million

27.6
25.9

1.7
(0.5)

1.2

The amount of the net pension asset would have a consequential effect on reserves.

* The assets and liabilities shown for the Vitec Group Executive Pension Scheme include an amount of £0.6 million in respect of certain
insurance policies which meet the cost of providing part of the beneﬁt entitlement for some pensioners. The value placed on these
insurance policies is in addition to the value of the schemes’ investments.

The Vitec Group 57

Notes to the accounts

26 Related party transactions

During the year the following related party transactions took place

Lino Manfrotto, a director of Lino Manfrotto & Co Spa, is president and shareholder of Mancor Spa, a company from which Gruppo
Manfrotto rents properties used in its business under operating leases, which expire between 2002 and 2003. Abramo Manfrotto, Chief
Executive, Photographic and retail display division of The Vitec Group plc, is a non-executive director of Mancor Spa. Rents paid to
Mancor in 2001 totalled C241,600, £151,000 (2000: Lit 455 million, £142,835). At 31 December 2001, there were no outstanding
amounts payable to Mancor (2000: Lit 135,000, £44). L Manfrotto also owns a factory leased by Gruppo Manfrotto until 2003. Rents paid
to L Manfrotto during the year totalled C66,000, £41,000 (2000: Lit 125 million, £39,240).

A Manfrotto has a controlling interest in Antide Srl, a company specialising in world-wide web sites and e-mail services. Group
companies paid Antide a total of C68,000, £42,000 during the year (2000: Lit 143 million, £44,891) for products and services. At
31 December 2001 Gruppo Manfrotto owed Antide C38,000, £23,000 (2000: Lit 76 million, £24,669).

27 Post balance sheet event

On 14 February 2002, a subsidiary of the group purchased the trade, assets and certain liabilities of Aspen Electronics Inc for a cash
consideration of US$2.2 million, subject to ﬁnal adjustment on veriﬁcation of the net assets acquired. The company will be reported
within Broadcast camera systems.

58 The Vitec Group

Five-year ﬁnancial summary

Year ended 31 December

2001
£m

2000
£m

1999
£m

1998
£m

1997
£m

Turnover

190.4

200.0

171.4

162.3

144.6

Operating proﬁt before exceptional items and goodwill
amortisation
Interest

30.6
(2.6)

40.1
(2.9)

38.2
(1.1)

40.0
(0.7)

38.4
(0.6)

Proﬁt before tax, exceptional items and goodwill amortisation

28.0

37.2

37.1

39.3

37.8

Operating cash ﬂow
Free cash ﬂow

Capital employed
Intangible ﬁxed assets
Tangible ﬁxed assets
Other net assets
Net cash

Financed by
Shareholders’ funds – equity
Minority interest
Net debt
Deferred tax

42.1
18.0

45.8
17.6

51.1
29.2

43.3
17.8

45.0
23.2

10.8
48.5
34.5
–

10.9
47.0
38.5
–

10.0
37.5
27.7
–

6.9
37.0
33.2
7.3

–
33.3
23.4
3.5

93.8

96.4

75.2

84.4

60.2

69.4
–
22.5
1.9

63.7
–
31.0
1.7

44.2
0.9
27.8
2.3

81.3
0.8
–
2.3

57.3
0.6
–
2.3

93.8

96.4

75.2

84.4

60.2

Statistics
Operating proﬁt (%) before exceptional items and goodwill amortisation
Effective tax rate (%)
Headline earnings per share (p)*
Basic earnings per share (p)
Dividends per share (p)
Year-end ex-dividend mid-market share price (p)

16.1
32.1
46.4
36.4
22.7
425

20.1
30.9
62.8
56.7
21.2
498

22.3
30.7
54.3
53.3
18.5
527

24.6
27.6
58.2
56.6
16.1
587

26.5
31.0
53.4
53.4
14.0
636

* differences between Headline and Basic earnings per share arise from exceptional items in the years in question and, from 1998,
the amortisation of goodwill.

Free cash ﬂow is the cash inﬂow from operating activities less interest, tax and capital expenditure on tangible ﬁxed assets.

The Vitec Group 59

Vinten Broadcast
Western Way
Bury St Edmunds
Suffolk IP33 3TB
UK
Tel: +44 (01284) 752121
Fax: +44 (01284) 750560
www.vinten.com
(also Asia Paciﬁc, France,
Germany, Japan and USA)

Bogen Photo
565 East Crescent Avenue
PO Box 506
Ramsey
NJ 07446-0506
USA
Tel: +1 (201) 818 9500
Fax: +1 (201) 818 9177
www.bogenphoto.com

Litec
Via Venier 52
30020 Marcon (Ve)
Italy
Tel: +39 (041) 596 0000
Fax: +39 (041) 595 1082
www.litectruss.com

Gitzo
Cre´ teil Parc
8-10 rue Se´ journe´
94044 Cre´ teil
France
Tel: +33 (1) 45 13 18 60
Fax: +33 (1) 43 77 15 05
www.gitzo.com

Group directory
Main ofﬁces in each country

Broadcast camera systems

Anton/Bauer
14 Progress Drive
Shelton
CT06484
USA
Tel: +1 (203) 929 1100
Fax: +1 (203) 925 4988
www.antonbauer.com

Sachtler Germany
Gutenbergstrasse 5
D-85716 Unterschleissheim
bei Mu¨ nchen
Germany
Tel: +49 (89) 3215 8200
Fax: +49 (89) 3215 8227
www.sachtler.com
(also Japan and USA)

Photographic and retail display

Alu Italy
Via Dei Commercio 22
36060 Romano d’Ezzelino
V1 Italy
Tel: +39 (0424) 516 816
Fax: +39 (0424) 36550
(also UK)

Manfrotto
Via Sasso Rosso n.19
PO Box 216
I-36061 Bassano del Grappa
Italy
Tel: +39 (0424) 555855
Fax: +39 (0424) 808999
www.manfrotto.com
(also France)

Alu USA
117 Seaview Drive
Secaucus
NJ07094
USA
Tel: +1 (201) 617 2000
Fax: +1 (201) 617 2001
www.alu.com

IFF
Via Vittorio Emanuele 32
I-50041 Calenzano
Firenze
Italy
Tel: +39 (055) 882 6351
Fax: +39 (055) 882 6355
www.iff.it

Communications and audio

Clear-Com
4065 Hollis Street
Emeryville
CA 94608
USA
Tel: +1 (510) 496 6666
Fax: +1 (510) 496 6601
www.clearcom.com

Broadcast services

Audio Specialties Group
465 Herndon Parkway
Herndon
VA 20170-5202
USA
Tel: +1 (703) 471 7887
Fax: +1 (703) 437 1107
www.a-s-group.com

Drake Electronics
26-28 The Hydeway
Welwyn Garden City
Hertfordshire AL7 3UQ
UK
Tel: +44 (01727) 871200
Fax: +44 (01707) 371266
www.drake-uk.com

Bexel
801 South Main Street
Burbank
CA 91506
USA
Tel: +1 (818) 841 5051
Fax: +1 (818) 841 5729
www.bexel.com

60 The Vitec Group

Shareholder information and ﬁnancial calendar

Shareholder enquiries
For enquiries about your shareholding, such as dividends or loss of share certiﬁcate, please contact the Company’s registrars,
Capita IRG plc, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TU, telephone 0870 162 3100 (UK only)
or +44 (0)20 8639 2157 (Overseas only).

Share price information
The middle market price of a share of The Vitec Group plc on 31 December 2001, the last dealing day of 2001, was 425p. During
the year the share price ﬂuctuated between 330p and 562.5p. The Company’s share price is available from the Group’s website
www.vitecgroup.com, with a 15 minute delay, and from the Financial Times web site www.ft.com with a similar delay. Up-to-date
market information and the Company’s share price are available from the Cityline service operated by the Financial Times by
telephoning 0906 8434404.

Financial calendar
Annual general meeting
Ex-dividend date for 2001 ﬁnal dividend
Record date for 2001 ﬁnal dividend
Proposed 2001 ﬁnal dividend payment date
Announcement of 2002 interim results
Proposed 2002 interim dividend payment date

17 April 2002
24 April 2002
26 April 2002
23 May 2002
September 2002
November 2002

Analysis of shareholdings as at 31 December 2001

Shares held

Up to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 50,000
50,001 to 100,000
100,001 and over

Institutions and companies
Individuals including directors and their families

Number of
holders

758
353
61
63
34
71

1,340

440
900

1,340

% of holders

Number of shares

% of shares

56.57
26.34
4.55
4.70
2.54
5.30

100.00

32.84
67.16

100.00

309,027
839,947
429,488
1,572,724
2,565,796
35,268,770

40,985,752

37,842,515
3,143,237

40,985,752

0.75
2.05
1.05
3.84
6.26
86.05

100.00

92.33
7.67

100.00

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2
6
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Group head office
One Wheatfield Way
Kingston upon Thames
Surrey KT1 2TU
United Kingdom
Tel: +44 (0)20 8939 4650
Fax: +44 (0)20 8939 4680
Email: info@vitecgroup.com
Web: www.vitecgroup.com