Vitec Group plc Annual Report 2002

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FY2002 Annual Report · Vitec Group plc

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2002

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taking action

The Vitec
Group plc
annual report
for 2002

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

In 2002 we commenced implementation of our new strategy;
Consolidate-Leverage-Grow, announced at the Interim.

We are consolidating our international operations to reduce our
cost base and make our Group both more competitive and more
profitable. We are leveraging our market expertise and
experience by adopting a more proactive approach to sharing
sales and customer information. We are setting the standard
for innovation and development by continuing to introduce
sophisticated new products.

These actions will put us in a good position to exploit growth
opportunities when the broadcast, media and entertainment
industries recover.

The year in review

Chairman’s statement

Chief executive’s review

Group overview

Divisional reports

Photographic and retail display

Broadcast systems

Broadcast services

Manufacturing

Financial review

Directors and advisors

Directors’ report

Remuneration report

Corporate social responsibility report

Corporate governance

Independent auditors’ report

Accounts 2002

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

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 Registrars
The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, telephone 0870 162 3100 (UK only) or +44 (0)20 8639 2157 (Overseas only).

Online services and electronic voting
Vitec has arranged with Capita Registrars, to use its recently introduced online services. By logging on to www.capitaregistrars.com and selecting
Shareholder Account Services you can make a transaction or dividend payment enquiry, add or change a dividend mandate or change your
registered address.

Capita Registrars has also recently introduced an electronic voting facility. By logging on to www.capitaregistrars.com and selecting
Shareholder Account Services you will find details of the annual general meeting including the venue and text of resolutions. Shareholders
have the facility to vote for, against, discretionary or abstain and can split or restrict votes, appoint the Chairman of the meeting or a third party
as their proxy and include any instruction text. To do this, and use the above facilities, shareholders will need to input a unique User ID which
can be applied for on your first visit to the site. To be allocated a User ID you will need your Investor Code, which can be found on your
dividend stationery and share certificates.

Should you experience any difficulties using these facilities please contact the Capita Registrars helpline 0870 162 3100.

Analysis of shareholdings as at 31 December 2002

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

% of holders

Number of shares

% of shares

744
360
58
71
34
71

1,338

442
896

1,338

55.60
26.91
4.33
5.31
2.54
5.31

100.00

33.03
66.97

100.00

305,152
848,006
395,564
1,659,497
2,448,374
35,365,193

41,021,786

37,989,700
3,032,086

41,021,786

0.74
2.07
0.96
4.05
5.97
86.21

100.00

92.61
7.39

100.00

Share price information
The middle market price of a share of The Vitec Group plc share on 31 December 2002, the last dealing day of 2002, was 277.5p. During the year
the share price fluctuated between 260p and 557.5p. 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.

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Financial calendar
Annual general meeting
Ex-dividend date for 2002 final dividend
Record date for 2002 final dividend
Proposed 2002 final dividend payment date
Announcement of 2003 interim results
Proposed 2003 interim dividend payment date

1 May 2003
23 April 2003
25 April 2003
22 May 2003
September 2003
November 2003

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The year in review

A challenging and high profile project for the Group.
IFF and Litec custom made 200 lighting suspension
units for world renowned architect Renzo Piano’s
prestigious Santa Cecilia auditorium in Rome.

Continued strong cash generation

Resilient performance in Photographic and retail display

Manufacturing restructuring under way, consolidating in
lower cost locations

Emphasis on new product development

Recommended unchanged total dividend of 22.7p

Turnover
£m

4
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1
7
1

3
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2
6
1

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4
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Operating profit*
£m

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2
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8
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4

6
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7
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2

Headline earnings per share*
pence

Dividend per share
pence

8
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6

2
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8
5

3
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4
5

*
*
9
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98 99 00 01 02

**before amortisation of goodwill and exceptional items
**2001 restated for FRS19 deferred tax standard

The Vitec Group 1

Chairman’s statement

The challenge Shareholders are now familiar with the difficult
market in which we have been operating throughout 2001 and
2002 and clearly we are not immune from the impact of this.
The challenge facing our management team remains to focus on
delivering operational improvements in our businesses and to
position them to take advantage of the upturn, when it comes,
by continuing to improve our range of new products and by
creating a more efficient and cost-effective manufacturing
capability throughout the Group.

As is evident from our results for the year ended 31 December
2002, a relatively small decline in turnover (4.3% decline from
£190.4 million in 2001 to £182.2 million in 2002) has a significant
effect on our profit before tax, amortisation of goodwill and
exceptional items (17.5% decline from £28.0 million in 2001 to
£23.1 million in 2002). However, the actions taken during the
year have reduced this effect from that in 2001.

Tighter management Our Photographic and Retail business
continues to perform well, with operating margins (before
amortisation of goodwill and exceptional items) at 20%. In the
tougher broadcast market, the Broadcast Services division has
reacted to the downturn by cost cutting and tighter
management of its rental assets. Together with successful
contracts at the FIFA World Cup, these actions have shown
through in operating profits (before amortisation of goodwill
and exceptional items) reduced by £0.2million on sales down
£1.8million. In our communications companies, now part of
Broadcast Systems, the cost cutting and new products launched
during the year helped to improve profits (before amortisation
of goodwill and exceptional items) by 50% to £1.2million.
However, our results have been most affected by the decline in
the camera support companies, particularly Vinten and Sachtler,
whose operating profits (before amortisation of goodwill and
exceptional items) fell by £5.1 million on sales that were £8.2
million lower. Projects to reduce the cost base through
consolidating manufacturing, and to introduce exciting new
products, are progressing well.

Our profits in the past have benefited substantially from modest
increases in turnover and the Company believes that
shareholders will benefit from the operating leverage in our
business when the broadcast market recovers. We need to
balance the requirement to reduce costs throughout the Group
with the necessity of investing in new products and in effective
sales and marketing such that our brands maintain their value.

Acquisitions During 2002 we looked at a number of
acquisitions which would help the Group develop into adjacent,
but related, areas and which would make not only strategic but
financial sense for shareholders. On close examination through
our due diligence processes a number of these opportunities
failed to meet our financial objectives and these due diligence
costs, amounting to £0.5million, are included in our operating
expenses for 2002. We continue to look for acquisition targets
which can be integrated into our existing portfolio and provide
future growth. Early in 2003 we announced the acquisition of
Radamec Broadcast Systems, whose business is complementary
to Vinten, and OConnor, which manufactures specialist heads
and accessories for the film industry. We expect both
acquisitions to be earnings enhancing from 2004.

2 The Vitec Group

Changes to the board During the year we have had several
changes to the Board. I would like to welcome Will Wyatt, who
joined the Board as a non-executive director in June 2002 and
who brings with him a wealth of experience from his tenure at
the BBC. I also welcome Alastair Hewgill, who joined in May
2002 as Finance director. Alastair previously held senior finance
roles at GKN. Richard Green stepped down as Finance director
in May 2002 and I would like to thank him for his dedication to
Vitec as Finance director for over 10 years. Michael Stacey
resigned in October 2002 and I would like to thank him for his
contribution to the Company.

Our employees have continued to rise to the challenges which
we all face and I thank them for their hard work and flexibility
over the year.

Dividend We are recommending an unchanged final dividend
for the year of 16.6p per share, giving a total dividend for the
year of 22.7p, representing a net yield of 8.4% at the share price
of 270p on 5 March 2003. Our adjusted basic earnings per
share figure of 34.1p is down 20.5% from last year (42.9p) but
we continue to generate good cash flow and have a modest
level of indebtedness.

Outlook Overall, the Group is not anticipating a recovery in
markets during 2003. While present trading is broadly in line
with expectations, we are tackling the decline in the broadcast
market with a significant manufacturing reorganisation, benefits
of which will be seen in 2004. The Broadcast Services division
in the USA has had a slow start to the year, and will not benefit
from the major sporting events of 2002. I will be able to update
shareholders again in early May at the time of our annual
general meeting.

Alison Carnwath
Chairman

Chief executive’s review

During my first year at Vitec, I took the opportunity to review
the various businesses within the Group and to initiate the
implementation of a new strategy based on the watchwords
‘Consolidate-Leverage-Grow’. This new strategic path was
adopted to react to the market environments in which we
operate: whilst photographic markets have remained stable,
broadcasting markets have continued to deteriorate in 2002.
With these difficult market conditions in mind, it was pleasing to
see initial benefits resulting from the new strategy, particularly
in respect of performances at Clear-Com and Drake and in the
new products launched at the end of the year.

Consolidate – Leverage – Grow With the changed market
conditions it is no longer appropriate to run each of the
businesses as independent companies as we have in the past.
There are operating synergies to be achieved from
consolidating some of the manufacturing operations which have
until now been run separately. By being more proactive in
sharing sales leads we will also leverage the market knowledge
we have within the Group. We will continue to keep our
outstanding brands independent, the underlying strength of
Vitec, but look for ways to make them operate more cohesively.
Some of the savings from the consolidation of the
manufacturing platforms will be used to fund increases in R&D
and marketing spend to generate future growth. We will
continue to look for acquisition targets which will add value to
our existing portfolio and provide future potential sales growth,
or where we can improve the performance of the acquired
company.

Market overview Vitec provides products and services to the
broadcasting, media and entertainment industries, which have
themselves been under growing pressure during 2002. Our
core customers, from broadcasting networks through to
individual professional photographers, derive at least part of
their revenue from advertising. This has been in decline for over
a year and the initial hopes of recovery in late 2002 faded, with
many industry observers now predicting a material advertising
upturn as late as 2004. Additionally, some of the large media
groups are going through a period of restructuring and
consolidation which is reducing their expenditure on our
products and services.

Operational performance This reduction in our key customers’
spending power has affected the performance of Broadcast
Systems, particularly Sachtler and Vinten (which primarily
manufacture video camera supports). Our intercom companies
have, however, been successful in selling their systems into new
markets, notably US homeland defence, and have therefore
been able to maintain their level of sales.

Reduced customer spend also impacted Broadcast Services,
where Bexel’s strong performance in the FIFA World Cup was
not sufficient to offset the reductions in its rental contracts from
both outside broadcast and corporate communications
activities. Robust consumer confidence during the year aided
our Photographic and Retail Display division, which saw
continued strong demand from the professional as well as the
semi-professional and amateur photographer for our tripod and
accessory products.

Structural changes and operational efficiencies In the light of
depressed markets, the immediate focus has been on reducing
costs and maintaining our good cash generation. To this end,
we further strengthened our management team – in June we
appointed Brian McCluskie as Operations director and have
made a structural change by consolidating the Broadcast
Camera Systems and Communications and Audio divisions into
one – Broadcast Systems.

We have announced the closure of one plant in the USA and
one in Germany, with the production being moved to existing
facilities in the UK and Costa Rica. The first benefits of this
(£2 million) will flow through in 2004. Operating expense
(before amortisation of goodwill and exceptional items) has
been decreased from 2001 despite increased M&A, tax
advisory and recruitment costs. Other changes at Drake and
Clear-Com have helped their operating profits to rise by 50%
from last year.

At the same time, the strong development pipeline has been
maintained, with exciting product launches from Vinten, Drake
and Manfrotto in particular. Vitec companies will continue to set
the standard for product innovation in order to capitalise on the
market upturn when it comes.

Despite some necessary stock build-up to protect the business
during the factory moves, the continuing focus on cash
generation has resulted in net debt falling by £10.6 million to
£11.9 million at the year end, emphasising the underlying
financial strength of Vitec.

Post balance sheet events During February we announced the
acquisitions of OConnor Engineering Laboratories, based in
Costa Mesa, California, for US$2.7 million (£1.6 million) and
Radamec Broadcast Systems, based in Chertsey, England, for
£4.65 million. OConnor is a leading designer and manufacturer
of camera control heads for the film industry, an area Vitec has
in the past only supplied in a limited way; Radamec Broadcast
Systems has a strong position in Europe in remote controlled
camera systems for both broadcasters and legislatures. Both will
form part of our Broadcast Systems division and we expect
them to be earnings enhancing in 2004.

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

Photographic, 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.

Manual pedestals, tripods and heads for
TV, ENG and EFP applications.
Remote-controlled camera systems.
Studio and portable lighting.
Scenery hoists and pantographs.
Microprocessor-controlled batteries
and chargers for video cameras.
Systems for portable power life
support devices.
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
support.
Provision of support for major event
broadcasting and webcasting.
Sales of communications,
audio equipment and
used video equipment.

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

Design and manufacture of
high quality equipment used
principally by broadcast and
live entertainment
professionals. Focused on
studio broadcast, outside
broadcast, electronic news
gathering and electronic film
production markets with
applications in the air traffic
control and government
markets.

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

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4 The Vitec Group

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

Locations

Web addresses

Markets

Denmark
France
Italy
Sweden
UK
USA

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

Costa Rica
France
Germany
Japan
Singapore
UK
USA

www.antonbauer.com
www.aspenelectronics.com
www.clearcom.com
www.drake-uk.com
www.ocon.com
www.radamecbroadcast.co.uk
www.sachtler.com
www.vinten.com

USA

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

The Vitec Group 5

Photographic and retail display

Products for professional photographers and the retail display market

Robust performance in photographic markets, with weakness in retail
display offset by a large custom contract.

The market place The USA, the Group’s most important
market for the photographic, lighting support and retail display
businesses, enjoyed an exceptionally good year on the
Photographic side despite difficult market conditions. However,
the Retail Display businesses suffered severely as the USA
recession affected retailers and as mass retailers took market
share from the department stores and speciality chains, ALU’s
core customers. European photographic markets were strong
for most of the year but showed some weakness in Germany
throughout the year. Sales decreased in Japan, for the second
consecutive year, and in China, last year’s strongly emerging
market. South Korea’s growth, greatly helped by the World
Cup, was not enough to counter this effect. The Retail Display
business in Europe was very weak on the standard products
but strong in custom projects, in particular with a contract
to supply Nokia.

Professional products Sales of the higher margin
photographic camera and lighting support products increased
compared to last year. Manfrotto and Gitzo launched a large
number of new products at shows during last year, to an
excellent response from the market place. Important launches
included composite video heads, tripods for digital cameras,
geared heads, a LANC-protocol remote control pan bar for
Sony and Canon videocameras, a motorised studio background
support system and a range of Mini DV tripods from Manfrotto;
and new compact carbon fibre tripods and a line of high
performance photographic centre ball heads from Gitzo. IFF,
despite the drop-off in sales of the Identisystem product, has
increased its presence in the studio suspension market. Litec
increased sales of its lighting suspension structures over the
prior year primarily thanks to new products and prestigious
projects such as the NATO convention held near Rome and the
international e-Government symposium in Palermo. On the
distribution side of the photographic sector, Bogen has signed
an exclusive USA agreement for the distribution of Delsey, a
leading brand in camera luggage. In Retail Display, ALU
introduced a number of innovative products at New York's
December market such as the new convenient collapsible box
display structure, ‘Autocube’ and an elegant, easy-to-mount
tension pole system, ‘Stylo’.

6 The Vitec Group

Organisational changes 2002 was a year of great
organisational change for the division: the Photographic
companies have been reorganised around clearer functional
lines operating under a newly formed holding company,
Gruppo Manfrotto srl, which has incorporated all the key
functions of the business. To reduce production costs and
improve efficiency, the Italian manufacturing companies have
successfully introduced flow production lines in two of their
sites. The remaining sites will be converted during 2003.

The Movex IT system was successfully implemented in ALU
New York and ALU Italy. The total conversion to a division-wide
integrated system will be completed by the summer of 2003,
yielding both a smoother fulfilment experience for our
customers and simpler internal processes.

Turnover

2002

2001

£77.0m

£75.2m

Operating profit*

£15.4m

£16.4m

Operating margin

20.0%

21.8%

*before amortisation of goodwill of £0.1 million (2001: £0.1 million)
and exceptional items of £0.8 million (2001: Nil)

Box is the ultimate retail building
block from ALU. It stacks and clips
together allowing one to be used
on its own or a hundred used to
make a complete showcase.

A Litec stage roofing structure filmed in St.
Mark’s Square for an Italian TV special. The
dimensions of the structure (25m long x 15m
deep x 12m high) with a load capacity of
3 tons of lighting equipment places special
emphasis on Litec’s strength. This is one of
the principal growth areas for Litec.

ALU's proven capabilities as a provider of
modular merchandising and retail display
solutions helped them win an exclusive
contract with Nokia. Taking care of the
telecommunication giant's retail presence,
from their shop-in-shop spaces to their
branded stores has shown off ALU's
expertise to the full.

Gitzo is the professional photographic tripod
‘par excellence’; indeed the company is
renowned for having been the first in the
world to offer the high-tech lightweight
rigidity of carbon fibre in their range of
camera supports.

The Manfrotto 522 Video Camera Remote
Control has fast become a star product in the
semi-professional video market, receiving
outstanding reviews from major publications.
The remote unit is mounted on a video head
pan bar, allowing the cameraman to control
both camera movement and camera
functions from a single position and with only
one hand, resulting in easier operation and
reduced risk of camera shake.

The Vitec Group 7

Broadcast systems

Products and systems primarily for broadcast applications

New products launched to stimulate demand, combined with cost
reduction initiatives to tackle a tough broadcast market.

The Broadcast Systems division comprises the units in the
former Broadcast Camera Systems and Communications and
Audio divisions, merged last year as they both primarily sell to
the same customers. The broadcast market has been very tough
throughout the year.

Vinten continues to set the standard for the high end studio
and sports applications: WAVY-TV, in Virginia USA, chose
Vinten’s AutoCam robotic pedestals as a cost effective solution
to upgrade it’s existing manually operated studio cameras,
proving that the product is as relevant to local stations as it is to
larger central studios. At the World Cup, Vinten also had more
than 50 Vector and Vision camera support systems, particularly
the Vector 700 Pan and Tilt Heads, spread across all 20 World
Cup venues. The Vector 700 is extremely popular at such
events as its tailored drag characteristics allow a high level of
control for both slow and fast image capture which is ideal for
slow motion replay. After its launch at IBC 2002, Vinten’s
Fibertec created excitement amongst a variety of users. A
breakthrough in innovation, the Fibertec is a tripod with twice
the rigidity of other products on the market, made of composite
‘I section’ struts rather than the more typical tubular legs.

Sachtler’s product range of camera control and automated
suspension and lighting management systems has been
widened by the introduction of the Artemis product line – four
different balance systems for the professional camera operator.
These portable systems are used for applications where a tripod
is not practicable, typically live sports coverage. Sachtler also
won a new customer, SWR who are one of the largest television
companies in Germany, for their studio lighting applications,
delivering nearly 500 telescopic systems with a total turnover of
1.4 million Euros (£0.9 million).

Anton/Bauer introduced several new products, led by its
unique Dionic battery system. This incorporates state-of-the-art
lithium ion cell chemistry with the proven features of the
Anton/Bauer InterActive Digital battery system and delivers
lightweight performance for the burgeoning market for small
size DV cameras. This new battery accounted for more than
10% of the battery sales in 7 months of production. NBC, an
Anton/Bauer client for over 20 years, chose to upgrade its
battery system to the new Dionic battery and Titan chargers.
The manufacturing operations of the newly acquired Aspen
were integrated into Anton/Bauer's facility in Shelton,
Connecticut. Aspen’s distribution and pricing programs were
reorganised and the product line trimmed to better address
market requirements. A new line of innovative battery and
charger products will be unveiled at NAB 2003.

Clear-Com and Drake, during the year, produced orders and
sales that exceeded those achieved in 2001. After experiencing
a difficult first 6 months, both companies were able to recover
during the second part of the year. While the broadcast market

8 The Vitec Group

remained soft, the investment by Drake to geographically
develop its sales led, in the last quarter, to Drake delivering its
first ever orders to Japan and to the USA: a system for the US
Senate. Clear-Com continued a tradition of significant sales in
Japan and won a prestigious order from NTV worth almost
US$1 million (£0.7 million). Considerable work was undertaken
by Clear-Com to advance its sales to the Military, Government
and Aerospace markets and substantial success was achieved to
help offset the difficult broadcast market.

At IBC in September, Drake launched FreeSpeak, the world’s
first digital cellular wireless intercom. It was enthusiastically
received and the first orders for this revolutionary new wireless
product were placed. Clear-Com wireless sales experienced
strong growth, confirming an increasing demand by customers
in favour of wireless solutions over their more traditional ’wire
connected’ alternative. The integration of VEGA in 2001 and
expansion of Clear-Com’s wireless product range has
underpinned this success. Early in 2002 Drake won a £1.5
million contract for the development and supply of a
communications system for the European Space Agency (ESA)
to be used for the Columbus Space Laboratory Project, which
has subsequently led to projects with other ESA facilities, such
as the astronaut training centre in Cologne. The technology
developed for these programmes has attracted considerable
interest from space agencies around the world. The Air Traffic
Control (ATC) market remained depressed following September
11, however there were signs that the industry had readjusted
to lower revenues and invitations to tender are beginning to
reappear and in early 2003 Drake landed a significant ATC
order for a system in South Korea.

Turnover
Broadcast systems
Communications and audio
Broadcast camera systems

Operating profit*
Broadcast systems
Communications and audio
Broadcast camera systems

Operating margin
Broadcast systems
Communications and audio
Broadcast camera systems

2002

2001

£75.7m
£18.1m
£57.6m

£83.9m
£18.1m
£65.8m

£8.4m
£1.2m
£7.2m

£13.1m
£0.8m
£12.3m

11.1%
6.6%
12.5%

15.6%
4.4%
18.7%

* before amortisation of goodwill of £0.4 million (2001: £0.4 million)

and exceptional items of £5.0 million (2001: Nil)

Fibertec is the revolutionary new lightweight tripod
that has 72% more torsional rigidity than its nearest
competitor. Besides being robust, lightweight and
easy to use, its exceptional rigidity enables a
cameraman to get a stable image every time,
regardless of how demanding conditions may be.

The Predator is a new and
exceptionally fast remote
controlled pan and tilt head
from AutoCam. It provides
rapid on-air quality pan and
tilt movement in a variety of
applications. It allows an
operator to respond rapidly
from any remote location,
and is especially useful for
outside broadcasts and for
filming from unusual or
hazardous locations.

Anton/Bauer introduced several
new products led by its unique
Dionic battery system. This
incorporates state-of-the-art lithium
ion cell chemistry with the proven
features of the Anton/Bauer
InterActive Digital battery system.
It delivers lightweight performance
for the burgeoning market for small
DV cameras. In just 7 months of
production, the new battery has
already accounted for than
10% of battery sales.

The Vitec Group 9

Sachtler’s new Artemis Cine, Cine HD, EFP
Pro and EFP camera stabilizing systems offer
a number of unique benefits. Its modular
construction enables system components to
be combined according to the cameraman’s
needs. Individual modules can also be
replaced or upgraded with a minimum of
effort and cost.

Broadcast services

Rental services and technical support mainly for the broadcast market

Successful FIFA World Cup and Winter Olympics contracts were
highlights in a year of otherwise weak US demand. Growth continues
in high definition services.

Direct sales and marketing The Division's primary operational
focus is on increasing the level and effectiveness of its direct
sales and marketing campaigns. Projects have been taken away
from competitors and several new product packages and
service offerings have been developed as a direct result of
the greater customer contact already being achieved.

The film sector The Division’s ongoing entry into the film
sector via high definition digital camera technology remains a
significant source of new business as producers switch from
shooting on celluloid film to shooting on video.

Weak trading conditions Broadcast Services was impacted by
ongoing weak trading conditions in the USA broadcast industry
in 2002. Over the past few months, there have been signs of a
slow and patchy rebound in broadcast, but the commercial
market remains quite weak. Price competition is still intense
due to the continued sector-wide surplus of equipment
available for rent.

As a result, and despite a significant boost from large Winter
Olympic and World Cup contracts in the first half of the year,
annual turnover was lower than last year. Used equipment
sales were constrained for several months because so much
equipment was needed to serve the large contracts for these
major events.

Capital expenditures Capital expenditures were reduced
sharply in the second half of 2002, to continue bringing the
Division’s pool of equipment in line with lower demand.
More equipment was subrented throughout the year than in
the past which, despite creating lower margins, supports the
large events and helps meet spot shortages without requiring
capital investment.

Cash generation The Division was significantly more cash
generative than it has been historically, as equipment
depreciation costs exceeded the amount of capital investment
needed to meet the lower level of market demand. Equipment
levels will reduce further in 2003, which will allow for continued
profitability and better cash flows, despite the fact that the
larger cyclical events, for example the Olympics and the US
presidential elections, will not recur until 2004.

Turnover

2002

2001

£29.5m

£31.3m

Operating profit*

£0.9m

£1.1m

Operating margin

3.1%

3.5%

*before amortisation of goodwill of £0.4 million (2001: £0.4 million)

10 The Vitec Group

Bexel, a leader in video production, equipment
rental, production support and broadcast television
services has significantly increased its presence in
Advanced Imaging and Electronic Cinematography.
In November the company sponsored a Premier High
Definition (HD) showcase and workshop at its centre
in Burbank, California that was attended by 250
industry professionals from all over the globe.
It emphasised the fact that Bexel offers all three of
today’s high-end HD/Advanced Imaging formats.

Bexel provides equipment to ABC
Sports, ESPN, NFL Films and Fox Sports
to cover events such as the Super Bowl
held in Atlanta, Georgia. Bexel’s
involvement with the Super Bowl - one
of the premier international sporting
events - goes back for almost a decade.

Bexel has added two Viper
FilmStream Cameras to its
rental products range. The
camera, designed to capture
the highest quality digital
images, utilizes three 9.2
megapixel HDDPM Frame
Transfer CCD’s providing
unsurpassed signal delivery
to the FilmStream output.

The Vitec Group 11

Manufacturing

Producing rule breaking products for customers worldwide

Consolidating operations internationally will both drive down costs and
improve manufacturing performance.

New initiatives As consolidation of our manufacturing base
takes place, it will give us a solid platform to launch a second
wave of supply chain and logistics initiatives. In the past, the
businesses have operated in isolation in both these activities.
In 2002 we started projects that will continue throughout 2003;
in supply chain we are focusing on the top areas of spend
across the Group to bring buying power and improved pricing;
in logistics we aim to shorten the time to market as well as
reduce our costs.

Robust processes and measurement systems To allow
smooth new product introductions across the Group and enable
manufacturing to be both more flexible and, in some cases,
physically remote from design, we have implemented common
front-end engineering across the companies. We are well under
way with the implementation of new ERP systems; Bury St
Edmunds went live in May 2002, and we are rolling out the
programme across Broadcast Systems to complete by the end
of 2004.

Standard manufacturing measures have been implemented
across the businesses that can be reviewed, in some cases daily.
This culture has been initiated in Italy, Germany, UK and Costa
Rica with encouraging results.

Reorganization and restructuring In September 2002 we
announced our reorganisation and restructuring plans. Vitec
Manufacturing was formed in October 2002 to bring focus
to the operations parts of the businesses, supporting our strong
Sales and Marketing, Engineering and Design teams. Quality
and ‘Complete and On Time’ delivery are the key goals for the
Operations teams in 2003. The restructuring programme will
focus on consolidating facilities to exploit our scale and deliver
improved quality and delivery performance, but at reduced
cost. We will achieve this by specialising our plants - low
complexity broadcast support products being made in San
Jose, Costa Rica, where we have had a facility for 8 years, and
high complexity products in Bury St Edmunds, England. As a
result, the plants in New York and Munich are being closed.
Full year financial benefits in excess of £3 million will be
achieved in 2005.

To ensure that our products maintain their local design
character and quality, Sachtler’s design, engineering and
product management will remain in Munich, and those for the
automated Vinten products in New York.

Key milestones Some of the key milestones already achieved
are that the first products have already been transferred from
New York to Bury St Edmunds, passing the rigorous quality
assurance checks; the first products have been transferred from
Germany and England to Costa Rica and are now in production;
agreement of the social plans has been reached in Germany;
and top calibre additions to the Costa Rica management team
have been made and their training in Europe completed.

World Class Manufacturing (WCM) The rollout of our WCM
programme is under way with ‘lean’ projects in Manfrotto and
Bury St Edmunds. Again, we have strengthened the team to
accelerate changes to the manufacturing model that will enable
us to be more flexible in our factories, reducing inventory and
improving our customer service.

12 The Vitec Group

Unigraphics, our advanced computer
Design and Engineering software,
provides a virtual environment in which
fully defined electronic prototypes of
new products are created and analysed.
We used this process in the
development of Fibertec.

The 522 LANC video camera remote control unit
is a new departure for Manfrotto. Extensive work
on the adaptability of the product's components,
from circuitry to mechanical parts and housing,
allows the same basic unit to be issued with a
variety of specifications and features to match
rapidly-changing video camera technology, with
only minimal manufacturing changes. Product
development costs have been cut in the process.

FreeSpeak, the world’s first fully-
featured, licence-free, digital wireless
system. The new system eliminates
the problems usually associated
with traditional two-way systems.
It enables users to do everything
normally only possible with a
standard wired communication
system. Computer aided Design and
Engineering enabled us to bring this
system to market quickly.

The Vitec Group 13

Financial review

Turnover reduced by £8.2 million (from £190.4 million to
£182.2 million) or 4.3% in the year. Virtually all of the reduction
occurred in the Broadcast Systems division reflecting the
continuing recession in the broadcast and media industries.
The lower volume and mix effects reduced turnover by £3.3
million and there were lower effective prices due to unfavourable
foreign exchange rate movements of £2.0 million. These
reductions were offset by a net pricing benefit of £0.2 million
and contribution from the acquisition of Aspen Electronics of
£0.8 million. In addition to the above movements, the weaker
US$ (4.3% versus last year) partially offset by a stronger Euro
(1.5% versus last year) resulted in an adverse exchange
translation of £3.9 million.

Gross margins Gross profit margins fell from 50.6% to 47.7%
reflecting the lower volumes and mix changes. Gross profits
were £9.4 million lower than the prior year.

Net operating expenses Net operating expenses before
amortisation of goodwill of £0.9 million and exceptional items of
£5.8 million decreased by £3.5 million to £62.3 million, of which
£2.0 million was due to lower costs and £1.5 million exchange
gains on hedging. Operating expenses were increased by a
number of costs including due diligence on unsuccessful
acquisitions, increased advisory costs and higher bad debts.

Operating profits Operating profits before amortisation of
goodwill and exceptional items fell from £30.6 million to £24.7
million and operating profit margins were 13.6% compared to
16.1% in 2001. The year on year effect of translating overseas
profits was negligible and the net effect of unfavourable
exchange rates was £0.5 million after hedging.

As announced at the interim, the Group has taken an operating
exceptional charge of £5.8 million in the second half relating to
the restructuring of its operations, including the closure of
manufacturing in Munich and New York and transfer to Costa
Rica and Bury St Edmunds.

Other profit and loss items The sale of a building in France for
£1.9 million produced a profit of £0.2 million.

Taxation The effective taxation rate on operating profit before
amortisation of goodwill and exceptional items has increased to
39.4% from 37.1% in 2001. The increase is attributable to an
adverse change in the source of Group profits; particularly the
Group has incurred net losses in the UK but has not benefited
from tax relief on these. In 2002 £0.7 million of the £9.1 million
total tax charge represents deferred tax and is, therefore, a non-
cash charge.

Cash flow and net debt Cash generation remained strong
despite the lower profits, and net debt decreased during the year
by £10.6 million to £11.9 million. Net cash inflow from operating
activities was £35.4 million (2001: £42.1 million), equating to 86p
per share (2001: 103p per share). Cash flow from a reduction in
working capital was £0.6 million (2001: £0.4 million). Capital
expenditures and financial investments were £10.5 million (2001:
£15,4 million), of which £4.8 million relates to rental assets and
£1.1 million to IT projects, partly financed by the proceeds from
higher asset disposals of £3.9 million (2001: £2.4 million). After a
seasonal increase of £0.3 million in the first half, stocks were

14 The Vitec Group

reduced by £3.4 million in the second half and at the year end
were £3.1 million (9.2%) lower than the prior year. Stock days
improved to 117 (2001: 130). Trade debtors were £2.1 million
higher than last year with debtor days at 57 days (2001: 51
days). This was principally due to invoicing in November and
December being £3.7 million greater than the same period in
2001, particularly Retail Display in Europe and Communications
and Audio. However, trade creditors at £12.1 million were £2.5
million higher than last year, largely reflecting the higher level
of activity.

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 at 31 December 2002 totalled £27 million (2001: £30
million). Translation of foreign currency profits and interest rates
are not normally hedged. Foreign currency net assets are not
hedged other than by normal Group borrowing.

The Group operates strict controls over all treasury transactions
involving dual signatures and appropriate authorisation limits.

Financing activities The average cost of borrowing for the year
was 5.2% (2001: 6.1%). Net interest cover (before goodwill
amortisation and exceptional items) remained high at 15 times
(2001: 12 times) despite the lower profits. The Group’s three
year committed facilities were renewed during 2002 and now
expire in October 2005.

UK pensions The Group contributes to two UK defined-benefit
pension schemes. Under the FRS 17 reporting standard for
company accounts, the schemes had a combined deficit as at 31
December 2002 of £4.0 million (2001: surplus £1.7 million).
However, using an actuarial valuation basis broadly consistent with
the last valuation carried out in April 2001 for ongoing funding
purposes, the funding deficit as at 31 December 2002 was lower,
at £2.7 million. The Group is increasing its contributions to the
schemes by £125,000 per annum (some 20% over current Group
contribution levels). It is believed that this action, along with an
improvement in financial conditions, will mitigate the shortfall
over a number of years. The position will be kept under review
until the next actuarial valuation which is due as at 5 April 2004.

Alastair Hewgill
Finance director

Directors & advisors

Alison Carnwath
BA, ACA
Chairman, non-executive,
independent, British, aged
50, appointed to the Board
on 22 January 1996; member
of the Audit committee, the
Remuneration committee and
the Nominations committee.
Currently a non-executive
director of Gallaher Group
plc, Friends Provident plc,
Nationwide Building Society
plc and Man Group plc.

Gareth Rhys Williams
BSc, MBA
Chief executive, British,
aged 41, 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 film coating
business, and for NFI
Electronics.

Alastair Hewgill
BSc, ACMA
Finance director, British,
aged 48, appointed to the
Board on 14 May 2002.
Previously he held senior
finance positions within GKN
plc over a period of 11 years,
including Finance director of
GKN Aerospace Division and
Head of corporate finance
for the group.

David Bell
MA
Non-executive, independent,
British, aged 56, appointed to
the Board on 12 March 1997;
the senior non-executive
director; member of the
Audit 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.

John Potter
CEng, MIEE, AMBIM
Non-executive,
independent, British, aged
59, appointed to the Board
on 1 February 1999;
Chairman of the Audit
committee and member of
the 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.

Will Wyatt
CBE, BA
Non-executive, independent,
British, aged 61, appointed
to the Board on 10 June
2002; member of the Audit
committee and Chairman of
the Nominations committee;
currently Chairman of
Human Capital Limited,
President of the Royal
Television Society, Chairman
of the London Institute and
Governor of Magdalen
College School, Oxford.
Formerly Chief Executive,
BBC Broadcast. Other posts
within the BBC included
Managing director of
Network Television.

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

Financial advisors and stockbrokers
UBS Warburg

Auditors
KPMG Audit Plc

Bankers
HSBC
The Royal Bank of Scotland plc
Wachovia Bank NA

Marketmakers in Company shares
KBC Peel Hunt
Merrill Lynch International
UBS Warburg
Winterflood Securities

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

The Vitec Group 15

Directors' report

The directors present their report and the audited accounts of the Group for the year ended 31 December 2002.

Review of the Group and its activities
The performance and activities of the Group during the year are set out in the Chairman's statement, the Chief executive's review,
the Financial review and the Group overview.

Results and dividends
Group profit on ordinary activities before taxation amounted to £16.6 million (2001: £24.2 million).

The directors recommend a final dividend of 16.6p per share (2001: 16.6p). If approved, the dividend per share for the year will total
22.7p (2001: 22.7p). Subject to approval by shareholders, the final dividend will be paid on 22 May 2003 to shareholders on the register
on 25 April 2003.

Post balance sheet events
On 6 February 2003 the Group acquired the business of OConnor Engineering Laboratories from Autocue Inc for US$2.7 million
(£1.6 million) cash.

On 18 February 2003 the Group acquired the shares of Radamec Broadcast Systems Limited in the UK, and acquired the operating assets
and some of the liabilities of Radamec Inc in the USA, from Radamec Group PLC for £4.65 million in cash.

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, development and engineering
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 2002 those companies spent £7.5 million (2001: £7.6 million)
on research and development.

Share capital
Details of shares issued during the year are set out in note 21 to the accounts on page 56. An analysis of shareholdings is shown on the inside
back cover. The middle market price of a share of the Company on 31 December 2002, the last day of dealing in 2002, together with the
range during the year is also shown on the inside back cover.

Substantial shareholdings
As at 5 March 2003, the Company had been notified of the following interests of 3% or more of its issued share capital:

Interest by

Prudential plc
Baring Trustees (Guernsey) Ltd
Manfrotto SA
Legal & General Investment Management Limited
Post Office Pensions Trustees Limited and Possfund Custodian Trustee Limited
Aviva Plc (formerly CGNU PLC)
Britel Fund Trustees
Hermes Focus Asset Management Limited and Hermes Investment Management Limited

Number
of shares

5,019,618
2,698,374
2,478,374
1,645,736
1,719,537
1,559,991
1,765,852
1,556,234

12.23%
6.58%
6.05%
4.01%
4.19%
3.80%
4.31%
3.80%

Directors
The directors during the year were Alison Carnwath (Chairman), David Bell, Richard Green, Alastair Hewgill, John Potter,
Gareth Rhys Williams, Michael Stacey and Will Wyatt.

Alastair Hewgill was appointed a director and the Finance director on 14 May 2002 following the resignation of Richard Green on 13 May 2002.
Will Wyatt was appointed a director on 10 June 2002. Michael Stacey resigned as a director on 25 October 2002. The other directors were
directors for the whole of the year. The remuneration of the directors is set out in the Remuneration report on pages 19 to 25.

Photographs and biographies of the current directors are set out on page 15.

16 The Vitec Group

Directors' shareholdings
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 are shown as at 31 December 2002 and 1 January 2002 or subsequent date of appointment. Details of the Directors’
other interests in the Company’s shares are set out in the Remuneration report on pages 19 to 25.

Directors’ shareholdings

Chairman
Alison Carnwath
Executive Directors
Gareth Rhys Williams
Alastair Hewgill
Non-executive Directors
David Bell
John Potter
Will Wyatt

31 December
2002

1 January 2002
or subsequent
date of
appointment

35,000

10,000
6,000

–
3,000
–

54,000

5,000

10,000
–

–
3,000
–

18,000

Payments to suppliers
It continues to be the Group's policy that the Company and individual subsidiary companies are responsible for negotiating terms and
conditions under which suppliers operate. Once agreed, payments to suppliers are made in accordance with those terms and conditions,
subject always to the supplier having complied with them. That policy will continue for the financial year ending 31 December 2003.
For the financial year ended 31 December 2002 the Company paid its suppliers on average within 15 days of date of invoice.

Committees of the Board
Details of the Audit committee, the Remuneration committee and the Nominations committee are contained in the Corporate governance
section of this Annual report and in the Remuneration report.

Corporate social responsibility report
The Group’s report on social, environmental and ethical matters is set out on pages 26 to 28. Group policies have been formulated in the
following key areas: employment (including employees and employee communication), environment, human rights, community impact
and involvement, relationships with suppliers, customers and other stakeholders.

Donations
During the year, charitable donations were made totalling £23,271 (2001: £69,285). No donations were made to any political party.
For further information on donations refer to the section on Community impact and involvement set out in the Corporate social responsibility
report on pages 26 to 28.

Annual general meeting
The annual general meeting for 2003 will be held on Thursday 1 May 2003 at the offices of Financial Dynamics, Holborn Gate,
26 Southampton Buildings, London WC2A 2PB. The notice of meeting and a proxy card are enclosed.

The Company’s registrar, Capita Registrars, has recently introduced a new electronic voting facility. The Company will be making use of this
facility. For further information please refer to the section in Shareholder enquiries and electronic voting set out on the inside back cover.

The business of the annual general meeting will include the consideration by shareholders of the report and accounts for the year ended
31 December 2002, the Remuneration report, the proposed dividend, the election of Alastair Hewgill and Will Wyatt, the re-election of
David Bell as director, the re-election of auditors and the following further items of business.

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 6 March 2003. The authority will expire at the
end of the Company's next annual general meeting or, if earlier, on 1 August 2004. 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.

The Vitec Group 17

A resolution for a general authority for the Company to make market purchases of its own shares was first passed at the annual general
meeting in 1998 and renewed by shareholders at subsequent annual general meetings. 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.

The Chairmen of the Board, of the Audit Committee and of the Remuneration Committee will be in attendance at the annual general
meeting to answer questions from shareholders.

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
6 March 2003

18 The Vitec Group

Remuneration report

This report contains the information required under Schedule B of the Combined Code and under the Directors’ Remuneration Report
Regulations 2002. A resolution to approve the report will be proposed at the 2003 annual general meeting. The Chairman of the
Remuneration committee will be available to answer questions about directors' remuneration at the Company's annual general meeting.

Remuneration committee
During the year, the Remuneration committee comprised David Bell (Chairman of the Committee), Alison Carnwath, John Potter and
Will Wyatt, being all of the independent non-executive directors. The Chief executive, Gareth Rhys Williams, attends the meetings by
invitation of the Committee except when his remuneration is being considered. Michael Stacey was a member of the Committee until his
resignation in October 2002. On 4 March 2003, the membership of the Committee was reviewed and reconstituted to comply with the
recommendation in the Higg’s Report into the role and effectiveness of non-executive directors that no one non-executive director should
sit on all three principal board committees. Therefore, with effect from 4 March 2003, the Renumeration committee comprised David Bell
(Chairman of the Committee), Alison Carnwath and John Potter.

Under its terms of reference, the Committee, on behalf of the Board, determines the remuneration packages including bonus arrangements,
participation in incentive schemes, pension contributions and all other benefits received by the executive directors. In the event of the
termination of employment of those directors, the Committee would also determine any compensation payments, after taking appropriate
legal advice. The Committee also makes recommendations to the Board, within its terms of reference, on the framework of senior executive
remuneration including terms of service, pay structure, bonus and share incentive arrangements and other benefits.

The remuneration of the non-executive directors is determined by the Board as a whole with the relevant non-executive director abstaining
when his or her remuneration is considered.

Remuneration policy
The Executive directors’ remuneration comprises a basic salary plus company and individual performance-related elements of up to 100%
salary. Therefore, if they achieve maximum performance in relation to the performance-related elements of their remuneration, these elements
will account for half of their total remuneration.

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 that have
similar international operations, relative performance and both internal and external advice. Remuneration and benefits reflect responsibility
and market comparisons.

The notice period under the service contracts of the executive directors is 12 months. The normal retirement age is 60. Basic salary is fully
pensioned on a funded basis. Executive directors' service contracts do not provide for pre-determined amounts of compensation in the event
of early termination by the Company. The Committee's policy in the event of early termination of employment is to mitigate compensation to
the fullest extent practicable.

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 such external appointments is retained by the director.

The Committee currently has no intention of amending the above stated policy for 2003 and future years, although it will be reviewed
from time to time.

When reviewing and determining executive and non-executive directors remuneration advice is sought and received externally from
remuneration and benefit consultants and their various surveys of remuneration and fees and also internally from the Chief executive,
Gareth Rhys Williams, and the Company secretary, Roland Peate. During 2002 independent advice has been received by the Committee
from Mercer Human Resource Consulting and Monks Partnership. SCA, prior to its acquisition by Mercer Human Resource Consulting,
and Monks Partnership have, for a number of years, provided the Committee and the Company with salary, incentive and benefit advice
although neither firm has been formally appointed. Since the end of 2002, Towers Perrin has been formally appointed and has provided
advice to the Committee.

During the latter part of 2002 a major review of salaries, bonus and incentive awards was undertaken in conjunction with Monks Partnership.
The review, which covered the Group’s operations worldwide, examined and compared the remuneration paid by way of base salary and
bonus to the senior employees of all the companies in the Group with that paid to other companies external to the Group taking into account
the business sector, size, number of employees, areas of operation and international spread.

Chairman and the other non executive directors
The Chairman and the other non-executive directors do not have service contracts but have letters of appointment. The initial period of
their appointments is normally three years and may, by mutual consent and with the approval of the Nominations committee and the Board,
be extended for a further three years. In exceptional circumstances appointments may be extended beyond six years, by mutual consent
and with the approval of the Nominations committee and the Board, if it is in the interests of the Group to do so.

The Vitec Group 19

Executive directors
Executive directors’ remuneration comprises basic salary, bonus, share incentives, company vehicle or cash allowance, fuel where a company
vehicle is provided, medical health insurance, membership of the Group’s Executive Pension Scheme, life assurance and additionally, for
Gareth Rhys Williams, contributions towards a permanent health arrangement and contributions paid by the Company to a funded
unapproved retirement benefits scheme.

Gareth Rhys Williams, Chief executive, aged 41, is employed under a service contract dated 23 November 2001. The notice period by
the Company under his contract is 12 months; notice by the employee is 6 months. The Company may, in the event of termination of
employment, pay a sum in lieu of notice equal to twelve months’ gross basic salary together with the gross value of the other benefits that
he is entitled to receive under his service contract, but excluding pension contributions and any bonus. The bonus arrangements for 2003
will be calculated on the basis that 70% relate to the achievement of operating profit targets and 30% relate to specific personal objectives.
The unexpired term of Gareth Rhys Williams’ contract, to his normal retirement date, is 19 years.

Alastair Hewgill, Finance director, aged 48, is employed under a service contract dated 17 April 2002. The notice period by the Company
under his contract is 12 months; notice by the employee is 6 months. The Company may, in the event of termination of employment, pay
a sum in lieu of notice equal to twelve months’ gross basic salary together with the gross value of the other benefits that he is entitled to
receive under his service contract, but excluding pension contributions and any bonus. The Remuneration committee has determined that
bonus arrangements for 2003 are to be calculated on the basis that 70% relate to the achievement of operating profit targets and 30% relate
to specific personal objectives. The unexpired term of Alastair Hewgill’s contract, to his normal retirement date, is 11 years.

Richard Green resigned as a director on 13 May 2002 and left the Company on 30 June 2002. Richard Green was employed under a service
contract dated 2 March 1992 that required the company to give 18 months' notice of termination.

Incentive arrangements
During 2002 four new incentive arrangements were adopted by shareholders. Those new arrangements were the 2002 Executive Share
Option Scheme, the 2002 Unapproved Executive Share Option Scheme, the 2002 Sharesave Scheme and the 2002 International Plan.

To align the rewards of executive directors and other senior employees more closely with the objectives and interests of shareholders,
the performance conditions applicable to the 2002 Executive Share Option Scheme, the 2002 Unapproved Executive Share Option Scheme
and the Long Term Incentive Plan relate to increases in earnings per share over a performance period. There is no re-testing of performance
in respect of grants or awards.

The current policy of the Remuneration committee is to make annual awards under the Long Term Incentive Plan to the Executive directors
and the other members of the Executive Board and grants of conventional share options to the Group’s senior management immediately
below the level of the Executive Board. Such awards and grants are based on a proportion of salary. Participation in the Deferred Bonus Plan
is open to those employees who are members of the Group’s bonus scheme and who receive a bonus. There are currently no plans to make
any further grants under the Premium Option Plan. Invitations under the Group’s Sharesave arrangements are usually made annually. This is
the Committee’s current policy but it will be reviewed and may be revised from time to time. Such awards and grants take into account the
overall and flow limits advised by the Association of British Insurers.

Monitoring and measuring of the performance conditions takes place at the end of each year when the Company’s results have been audited
and again at time of exercise of options and awards.

The Group currently has the following incentive arrangements in place:

2002 Executive Share Option Scheme This is an Inland Revenue approved Scheme. Executive directors and other senior employees are
selected to receive options over shares. Exercise of an option is subject to growth in the Company’s earnings per share, excluding exceptional
or extraordinary items, exceeding the growth in the retail prices index over a performance period. The percentage growth over the retail
prices index determines the proportion of the award that may be exercised. Options are exercisable between the third and the tenth
anniversaries of their dates of grant.

Performance condition: If the percentage growth in the adjusted earnings per share of the Company exceeds the percentage growth in
the retail prices index over the 3 year performance period by 3.0301% (the base target threshold), an option will become exercisable in
respect of one-third of the shares over which it is held. Full vesting takes place when such growth over the performance period is 9.2727%
or greater. A sliding scale operates for performance between the lower and upper thresholds. Options lapse if the base target threshold is
not achieved. There is no re-testing of performance.

2002 Unapproved Executive Share Option Scheme Executive directors and other senior employees are selected to receive options over
shares. As with the 2002 Executive Share Option Scheme, exercise of an option is subject to growth in the Company’s earnings per share,
excluding exceptional or extraordinary items, exceeding the growth in the retail prices index over a performance period. Options are
exercisable between the third and the tenth anniversaries of their dates of grant.

Performance condition: The performance condition is identical in all respects to the performance condition of the 2002 Executive Share
Option Scheme set out above. There is no re-testing of performance.

20 The Vitec Group

Long term incentive plan. Under this plan, executive directors and other senior employees are selected to receive awards over shares that
vest in whole or in part depending on the satisfaction of a performance condition related to the growth in earnings per share compared to
the retail prices index over a performance period.

Performance condition: The performance condition attaching to awards under the plan relate to increase in earnings per share. 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% or more. For an award to vest at its lowest level of 25%, the growth in earnings per share over the performance period
must be equal to the increase in the retail prices index plus 9%. Awards lapse if the performance is below 9%. Where growth is between 9%
and 36% awards are realisable on a straight-line basis.

Premium option plan Under this plan, 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.

Performance condition: First tier options are only exercisable if the average middle market price of the Company's shares increases to, and
remains in excess of, the option exercise price for a minimum of 20 consecutive dealing days within three years of the date of grant. Second
tier options are only exercisable if the average middle market price of the Company's shares increases to, and remains in excess of, the option
exercise price for a minimum of 20 consecutive dealing days within five years of the date of grant. Each tier of options lapses if the share price
does not achieve the required threshold within the relevant performance 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 Under the plan, an eligible executive may defer between 10% and 50% of his cash bonus in exchange for receiving
an award over shares in the Company with a value equivalent, at the date of award, to the amount of the deferred bonus. An award may,
in normal circumstances, be exercised by a participant 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 additional shares equal in number to those comprised in the award.
The first awards under the plan were made in April 2001 in respect of bonuses for the year 2000. No awards have been made since.

Performance conditions: Bonuses received by participants, and which may be deferred under the plan, are themselves subject to
demanding performance conditions linked to Group and individual performance. The awards under the plan are not subject to any further
performance targets.

2002 Sharesave scheme and International plan The Group also operates a savings related share option scheme in the UK and a similar
International plan in respect of France, Germany, Italy and the USA. The scheme and plan are open to all the Group’s employees in those
geographical areas who have the necessary length of service. Under the scheme and plan participants contract to save a set amount each
month in return for which they receive an option over a specified number of shares. At the end of the savings period participants may exercise
their options to buy shares in the Company using their savings. Exercise is not subject to any performance condition.

Deferred bonus plan The Executive directors do not currently have any awards under the Deferred bonus plan. In April 2001, Richard Green
deferred £28,125 (representing 50%) of his bonus for 2000 in return for an award of 5,769 shares under the Deferred bonus plan. On his
resignation, he retained his award but, to ensure consistency of approach in respect of directors who leave the Company, his entitlement to a
matching award was scaled down from 5,769 shares to 2,404 shares by the trustee of the trust that administers the plan upon
recommendation from the Remuneration committee. On 6 December 2002 Mr Green exercised both his award of 5,769 and his scaled down
matching award of 2,404 shares.

Pensions related remuneration
It is the Company's policy to make provision for pensions for executive directors in respect of their basic salaries (but not in respect of annual
bonuses or benefits) 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 in the table entitled Pensions
related remuneration.

The Vitec Group 21

Five year share price performance 1998-2002
Under the requirements of the Directors’ Remuneration Report Regulations 2002, the Company is required to include a graph showing the
Company’s performance compared to an appropriate index. Set out below, the graph illustrates the Company’s annual Total Shareholder
Return (share price growth plus dividends that have been declared, paid and reinvested in the Company’s shares) relative to the FTSE
Engineering and Machinery Index) for the five year period 1998-2002, assuming an investment of £100. The Engineering and Machinery
Index is the broad market index that includes the Company and comprises comparable companies.

Five-year historical total shareholder return performance
Change in the value of a hypothetical £100 holding over five years
FTSE Engineering and Machinery Index comparison based on 30 trading day average values

Date

Dec 97

Dec 98

Dec 99

Dec 00

Dec 01

Dec 02

Value of hypothetical £100 holding

FTSE Engineering and
Machinery Index

Vitec Group

£120

£110

£100

£90

£80

£70

£60

£50

£40

The following information has been audited.

Directors' emoluments and compensation
For her non-executive duties the Chairman, Alison Carnwath, currently receives a fee of £78,000 per annum, increased from £75,000 per
annum with effect from 1 January 2003. The non-executive directors receive a fee of £25,000 per annum, increased from £20,000 per annum
with effect from 1 April 2002. The chairmen of the Remuneration committee and of the Audit committee, David Bell and John Potter,
respectively, receive an additional £2,500 per annum fee for their services as chairmen of those committees. The Chairman is a member of the
Group’s medical insurance scheme, the premiums for which are paid by the Company. The non-executive directors do not receive any other
benefits from the Company.

Gareth Rhys Williams, Chief executive, currently receives an annual salary of £260,000, increased from £250,000 with effect from 1 January
2003. Mr Rhys Williams is a member of the Vitec Group Executive Pension Scheme and contributes 7% of his salary up to the earnings cap.
That pension scheme is a defined benefit scheme, the accrual rate for which is one fortieth of his pensionable salary for each year of
pensionable service. In accordance with his service contract, the Company makes contributions up to a maximum of 24% of his annual salary
in excess of the earnings cap from time to time to his funded unapproved retirement benefits scheme. In addition, a guaranteed pension-
related bonus of 16% of his annual salary in excess of the earnings cap from time to time is paid to him. He is eligible for a performance-related
bonus, based on Company and individual performance, of up to 100% of base salary each year. In respect of 2002, 50% of the bonus was
conditional upon the Group’s performance and 50% was based on personal performance targets. Mr Rhys Williams received no bonus in
respect of 2001 but for the year 2002 was awarded a bonus of £100,000.

Alastair Hewgill, Finance director, currently receives an annual salary of £155,000, increased from £150,000 with effect from 1 January 2003.
Mr Hewgill is a member of the Vitec Group Executive Pension Scheme and contributes 7% of his salary. That pension scheme is a defined
benefit scheme, the accrual rate for which is one fortieth of his pensionable salary for each year of pensionable service. Mr Hewgill is eligible
for a performance-related bonus, based on Company and individual performance, of up to 100% of base salary each year. In respect of
2002 he was awarded a discretionary bonus of £27,000.

22 The Vitec Group

Details of the directors’ emoluments and compensation for 2002 with comparatives for 2001 are set out in the table below:

Director's name

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

Salaries and
fees
2001
£

2002
£

Benefits
(Note 1)
2001
£

2002
£

Performance
related
annual bonus
2001
2002
£
£

Pension
related bonus
(Note 2)
2001
£

2002
£

Termination
payments
(Note 3)
2001
£

2002
£

Total
2001
£

75,000 175,000

468

280

–

75,468 175,280

250,000
94,828

–
– 165,217
58,810 162,000

31,943 20,884
4,335
–
4,891

632 100,000
27,000
–
–

–
4,857
12,137

2,622
– 24,523
–
–
–
–
–
–
– 19,116 323,862
–

–
–
–
–
– 395,768
–

395,407
126,163

35,197
–
– 565,842
387,563 193,253

26,250
–
26,250
19,200
14,041

22,500
12,000
22,500
20,000
–

–
–
–
–
–

–

26,250
–
26,250
19,200
14,041

22,500
12,000
22,500
20,000
–

564,379 611,160 30,578

17,906 127,000

– 24,523 21,738 323,862 397,768 1,070,342 1,048,572

Notes
1. The principal benefits are a company car, fuel, medical insurance and life assurance. In respect of Gareth Rhys Williams only, a cash
payment of £1,200 per month in lieu of a company car and a contribution of £400 per month to a permanent health arrangement are
included in the figures shown for benefits.

2. Gareth Rhys Williams receives a pension–related bonus calculated at 16% of his annual salary in excess of the pensions earnings cap

from time to time.
Information on termination payments is set out below.

During the year the highest paid director was Richard Green who received £431,188, including termination payments totalling £323,862
and a gain of £43,625 on the exercise of a share option (2001: Philip Cushing received £565,842).

Excluding termination payments, the highest paid director was Gareth Rhys Williams who received £395,407 (2001: Richard Green
£193,253).

In 2001 the highest paid director was Philip Cushing, who received £565,842, including £395,786 paid in respect of the termination of his
employment. Mr Cushing's salary and benefits were for the period commencing 1 January 2001 up to 22 July 2001, the date of his resignation.
Mr Cushing's salary included payment in lieu of a company car for the period 1 April 2001 to 22 July 2001 inclusive. He received 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, in respect of his salary and benefits and £71,840 was paid into his 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.

Mr Green received compensation payments totalling £318,432 upon termination, before deduction of income tax and National Insurance.
That payment included payments in lieu of salary, bonus, company car benefit, pension related bonus and contributions to Mr Green’s FURBS
and represented the Company’s mitigated liability, shortened to 15 months, under his service contract. In addition, £5,340 was paid direct to
Mr Green’s legal adviser in respect of advice he received in connection with the negotiation of his termination arrangements.

Lino Manfrotto’s fee for 2001 was for the period commencing 1 January 2001 up to his retirement on 8 August 2001.

The Vitec Group 23

Directors’ share options

Gareth Rhys Williams
Executive share options
1996 Unapproved
SAYE options

Richard Green (resigned 13 May 2002)
Executive share options
1984 Approved
1994 Approved
1996 Unapproved
1996 Unapproved
SAYE options
Premium priced options

Number of shares

Options
exercised
or lapsed
during
year

Options
granted
during
year

At 31
December
2002 or,
if earlier,
date of
resignation
as a
director

Date of
grant

At
1 January
2002

Market
price at
exercise
date
(pence)

Exercise
price
(pence)

Date from
which
exercisable

Expiry
date

Sep 2002
Nov 2002

–
–

–

–
–

–

142,857
2,451

350
268

–
–

Sep 2005
Jan 2008

Sep 2012
Jun 2008

145,308

Apr 1992
Apr 1995
Oct 1996
Apr 1998
Jun 2000
Oct 2000
Oct 2000

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

25,000
–
–
–
4,095
–
–

137,247

29,095

–
–
–
–
–
–
–

–

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

112,247

268
512
694
653
412
683
819

442.5
–
–
–
Lapsed
–
–

Apr 1995
Apr 1998
Oct 1999
Apr 2001
Sep 2005
Oct 2003
Oct 2003

Apr 2002
Apr 2005
Oct 2006
Apr 2008
Feb 2006
Oct 2010
Oct 2010

Notes
1.

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 £3.50 per share, was made to Gareth Rhys Williams. This was replaced on 19 September 2002 by an equivalent
option over 142,857 shares at the same exercise price of £3.50 per share under the Rules of the (1996) Unapproved Executive Share
Option Scheme, the Scheme used as the comparable for the cash bonus scheme. There is a transitional arrangement for the cash bonus
scheme to run in tandem with the share option. If, and to the extent that, the cash bonus is not triggered by Mr Rhys Williams prior to the
first occasion upon which he becomes entitled to exercise the share option granted on 19 September 2002, the cash bonus scheme will
lapse and will be replaced by the share option.

2. When Richard Green left the Company the Remuneration committee agreed that he could retain the executive options granted to him
and, subject to satisfaction of the performance condition, would be entitled to exercise them subject to the rules of the schemes within
the period of 6 months from the termination date of 30 June 2002. That period has now expired and the options have now lapsed. The
options granted to him under the Premium option plan have been scaled down by the Remuneration committee in accordance with the
rules of the plan. They may be exercised, subject to the satisfaction of the relevant performance conditions for each tier, up to the first
anniversary of the relevant cut off dates, which are 3 years for tier 1 and 5 years for tier 2.
Non-executive directors are not eligible to participate in the Company’s share option or share incentive schemes and consequently they
do not hold any share options or other share incentives.

3. The total gain on the exercise of options by the directors was £43,625. The only director who exercised an option during 2002 was

Richard Green. In 2001 there were no share options exercised by directors.

4. The share price at the end of the year and the highest and lowest share prices during the year are set out on the inside back cover.
5. No non-executive directors held share options.

24 The Vitec Group

Directors’ long term incentives

Awards under the long term incentive plan

Gareth Rhys Williams
Alastair Hewgill
Richard Green

Market
price of
a share at
the date of
award (p)

442.5
342.5
542.0
546.0
472.5
442.5

Date of
award

Mar 2002
Sep 2002
Dec 1999
Oct 2000
Apr 2001
Mar 2002

Awards
exercised
or lapsed
during
the year
(shares)

At 31
December
2002 or
date of
Awards
resignation
made during
the year
as a director
(shares) (shares)

–
–
–
–
–
–

–

28,248
21,898
–
–
–
18,305

28,248
21,898
14,004
1,996
17,143
18,305

68,451

101,594

Awards at
1 January
2002
(shares)

–
–
14,004
1,996
17,143
–

33,143

When Mr Green left the Company his awards under the Long term incentive plan were scaled down by the Remuneration committee
in accordance with the rules of the plan.

Pensions related remuneration

Increase
in accrued
pension
(in excess
of price
inflation)
during
2001

2002

2,434
–
1,657
1,890

199
1,401
2,511
–

Accrued
pension at
31 December
2001
2002

2,633
–

199
2,981
25,110 23,453
–

1,890

Executive directors
Gareth Rhys Williams
Philip Cushing
Richard Green
Alastair Hewgill

Transfer
value of the
increase in
accrued
pension
net of member

Increase
in transfer
value over
Transfer
year to 31
value of December
net of
accrued
member
pension
contri-
at 31
butions
contributions December December
2002
2001

Transfer
value of
accrued
pension
at 31

2002

2001

2002

Member
contributions
towards
pension
2001

2002

7,196

557
–

6,773
–

920
– 17,310
3,400 11,130 10,904 22,220
–
6,125

9,802

–

15,444
–
274,858
16,234

1,412
–
307,173
–

7,259
–
(35,715)
10,109

Beyond the earnings cap, the cost of pensions comprised defined contribution payments to FURBS as follows: Gareth Rhys Williams £36,780
(2001: for the period from commencement of employment on 23 November 2001 to 31 December 2001, £3,945). Richard Green for the
period from 1 January 2002 to the date of his leaving on 30 June 2002 £8,548 (2001: £28,674).

By order of the Board
Roland Peate
Secretary
6 March 2003

The Vitec Group 25

Corporate social responsibility report

This is the Group’s first detailed report on its social responsibility although it has, for many years, taken a caring and considerate approach
to social, environmental and ethical matters throughout its operations worldwide. The Group regards compliance with all relevant laws
and guidelines as important and socially responsible. The Group’s current system of risk management and control, which includes social
responsibility matters, is led by the heads of each of the Group’s operations. Those people are responsible at local level for complying with
the relevant environmental regulations in all the geographical areas in which they operate. They regularly report to the Board through the
Group’s Finance director on such issues as part of the Group’s system of internal control and risk management reporting.

Overall the Group believes that it has limited environmental impact. However, we recognise that we have a responsibility to understand
the impact that our activities might have at local, national and global level. In the past these have been monitored and assessed locally
and solutions have been implemented as appropriate according to best practice, local legal and other requirements. However, we are
now developing and implementing a more consistent approach to adopt sound policies throughout all our operations. As part of the
implementation programme, we are putting in place more formal systems and procedures for identifying, measuring, reviewing and reporting
on social, environmental and ethical matters. Group policies have been formulated in the key areas of employment, environment, human
rights, community impact and involvement and relationships with suppliers, customers and other stakeholders. These policies have already
been implemented at the centre and are being implemented within each operating entity. Reviews are undertaken by local management at
each Group location and reports are made of the major risks in these areas. These reports identify risks, the current measures being taken to
control them and the steps to be taken to reduce or minimise their effect in the future. The compilation of statistics has commenced and they
will be used to monitor improvements and for reporting purposes in future.

1. Employment
Policy
To comply with all relevant legislation and codes of practice relating to employment, health and safety and equal opportunities. To provide
good quality working environments and facilities for employees and training and development appropriate to each of their roles; not to
discriminate in any way; to take a flexible approach towards family responsibilities to assist them in establishing an appropriate work/life
balance; to provide a competitive range of quality employee benefits. To keep the workforce informed of major events and developments
within the Group.

Actions
Employment policies throughout the Group already reflect the policy set out above.

We recognise the importance of involvement, motivation, training and development of our employees at all levels to enable the Group
to become even more market aware and customer focused. The importance of good communication and working relationships is also
recognised and actively encouraged. The Group’s website provides a useful information exchange for shareholders and employees alike.

Our policy is to keep employees informed on matters relating to their employment and on financial and economic factors affecting the Group,
via the Group’s website, senior management briefings and internal distribution of press releases. 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 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 companies employ a wide variety of consultation methods, including conferences, joint committees, project
and briefing groups.

A major survey of salary and benefits of employees in companies has taken place during 2002 and adjustments made to salaries within the
Group, where appropriate.

The Group operates 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. The Group’s wide geographical spread provides
opportunities for employees to work either short term or on secondment for longer periods of time at the Group’s various locations.

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. Invitations under the UK
and the International schemes have been made each year since the schemes were first introduced in 1984.

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 work environment to
enable the employee to continue in his or her current position or retrain the employee for duties suited to that employee's abilities following
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.

Health and safety
A formal system for the recording of accident statistics was introduced in the latter part of 2002 and, therefore, accident statistics are not
available for the whole of the year. We will report accident statistics in the report and accounts for 2003.

26 The Vitec Group

2. Environment
Policy
To promote and improve throughout the Group the benefits of efficient usage of energy and water.

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

It is in the interests 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.

Examples include the use of energy saving light bulbs, electronic timers to control the use of heating, lighting and air-conditioning systems,
preference for the use of low emission and diesel vehicles, waste minimisation and the recycling of paper and toner and laser cartridges, the
use of recycled stationery products, the use of environmentally friendly printing processes, the encouragement of staff to recycle packaging
including bottles and aluminium cans, the use by the Group’s cleaning contractors to use environmentally friendly products, the recycling of
used stamps for donation to the Royal National Institute for the blind and greater use of video and telephone conferencing in place of travel.

In addition, 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 also enables them to reduce their use of non-reusable products. Manfrotto has eliminated all electrical
transformers containing polychlorinated biphenyls (PCB) and removed any potentially harmful building materials from the majority of its
facilities. Under Italian law there are 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.

During 2002 the Group head office joined the New Leaf Scheme. This is a paper recycling scheme which aims to ‘close the loop’ on paper
sourcing. Recycled paper is used in printers, photocopiers and faxes. A recycling company, recommended by New Leaf, then collects any
waste paper to produce further recycled paper. Redundant computer equipment was also donated to New Leaf this year for recycling.

Clear-Com has phased out flow solder operations, thereby reducing emissions.

Anton/Bauer is part of a battery recycling scheme in conjunction with the Rechargeable Battery Recycling Corporation. The RBRC governs
the safe disposal or reclamation of battery cells for battery manufacturers throughout the world.

Vinten have reviewed the dust and vapour extraction systems in their facilities and, during 2003, propose to refurbish their extraction systems
to maintain optimum performance. Vinten intends to achieve ISO 14001 by Autumn 2003 at their manufacturing site in Bury St Edmunds.
This will mean that its operations will be assessed by an independent third party to ensure that they operate to an environmental management
system within the requirements of British Standards.

Energy usage by the Group in 2002

Electricity usage
(in kilowatt hours)

Gas usage
(in kilowatt hours)

Water usage
(in cubic metres)

7,442,845

6,499,615

23,768

This is the first year in which these statistics have been published. It is possible that, although care has been taken to ensure their accuracy, there may be some minor incompleteness
in the reporting from overseas parts of the Group. The gathering of these statistics is being refined.

3. Human rights
Policy
To comply with the laws and customs of each country in which we operate. Not to use child labour. Not to discriminate in any way and to give
equal opportunities to all workers.

Actions
The above policy has been part of the Group’s approach for many years. The Group’s operating companies are required to include it as part
of their employee policies and to comply.

The Vitec Group 27

4. Community impact and involvement
Policy
To contribute to local worthwhile causes and charities and to ensure that the Group’s operations cause minimal negative impact within the
community. Donations are usually, and have been in the past, primarily to childrens’, cancer, police, fire brigade, drug rehabilitation and other
similar charities.

Actions
For many years the Group has contributed to worthwhile causes. However, the Group’s charity committee reviews all written requests for
donations and decides on the level of donation and the charities to which donations are made.

During the year 2002 charity donations were made to 51 charities. The total amount donated by the Company totalled £23,271. In 2001,
donations totalling £400 were made to the Alzheimer’s Society and the Cancer Research Campaign and a special donation of US$100,000
(equivalent to £68,885) was made to the Twin Towers Fund following the tragedy on 11 September 2001. Donations totalled £38,789 in
2000 and £39,305 in 1999. Like all companies, the Group has limited resources and the amount of money available for charitable purposes
will vary from time to time.

5. Relationships with suppliers, customers and other stakeholders
Policy
The Group recognises the obligations it has towards the parties with whom it has business and other dealings such as its customers,
shareholders, employees, suppliers and advisers. Dealings with those groups of people depend upon the honesty, integrity and enthusiasm
of its employees and every effort is made to ensure that a high standard of expertise and business principles are maintained in such dealings.
Where appropriate, training is given to maintain and to raise the standards.

Actions
As stated in the Directors’ report, the Group's policy with suppliers is that individual subsidiary companies are responsible for negotiating
terms and conditions under which suppliers operate. Once agreed, payments to suppliers are made in accordance with those terms and
conditions, subject always to the supplier having complied with them. That policy has been in place for a number of years and will continue
for the financial year ending 31 December 2003. We continue to review and take action where appropriate to ensure the reliable and
consistent sources of quality materials from which our products are made.

In all our dealings, honesty and integrity are paramount. The Group’s brands are a highly valuable asset and every effort is made to enhance
their reputation for high quality service and reliability.

28 The Vitec Group

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.

In addition, the recently published Higgs Report into the Role and Effectiveness of Non-executive Directors and the report by Sir Robert Smith
relating to Audit Committees and the Combined Code have been reviewed and appropriate action is being taken where required to
implement the recommendations. The disclosures set out below incorporate some of the recommendations from those reports.

Statement of compliance
The Board considers that it has complied with the Code throughout the year ended 31 December 2002 with the exception of Code provision
B.1.7 with which non-compliance, and the reason for such non-compliance, is set out in the relevant section below. References in parentheses
are to the relevant paragraph 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 on average six times a year 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. With the exception of Mr Bell, who attended all but two Board
meetings, during 2002 all directors attended all the Board meetings.

Non-executive directors – the Board included five non-executive directors until Michael Stacey’s resignation on 25 October 2002. From that
date, for the remainder of the year, there were four non-executive directors. All non-executive directors are considered to be independent.

Executive directors – the Board included two executive directors throughout the year 2002. Gareth Rhys Williams was a director and the
Chief executive throughout the year. Alastair Hewgill was appointed a director and the Finance director on 14 May 2002 following Richard
Green’s resignation on 13 May 2002. Mr Green had a service contract requiring the Company to give 18 months’ notice of termination (B.1.7).

The directors bring independent judgement to bear on strategic matters, the performance of the Group, the adequacy of resources and
standards of conduct. The roles of the Chairman (who is non-executive) and of the Chief executive are separate. David Bell is the senior
independent director and his biographical details are shown on page 15. Outside of Board meetings, the non-executive directors maintain
regular contact by telephone. In 2003, two meetings of all the non-executive directors are planned.

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. Further information is supplied from time
to time when requested by the Board.

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 during 2002 are shown on page 15. However, the terms of reference and the members of the Committees
are being reviewed, in the light of the Higgs report and the report by Sir Robert Smith, and appropriate changes are being made.

Audit committee
The members of the Audit committee and their biographical details are shown on page 15. The Committee is chaired by John Potter. At least
two meetings are held each year and, during 2002, this was the case. Further meetings are held as and when the Committee consider
appropriate. However, for 2003 and future years the Committee, excluding the Executive directors, will also hold a meeting with the auditors.

The responsibilities of the Committee are:

to consider the appointment of the external auditor and assess independence of the external auditor, ensuring that key partners are
rotated at appropriate intervals;

to recommend the audit fee to the board and preapprove any fees in respect of non audit services provided by the external auditor
and to ensure that the provision of non audit services does not impair the external auditors’ independence or objectivity;

to discuss with the external auditor, before the audit commences, the nature and scope of the audit and to review the auditor’s quality
control procedures and steps taken by the auditor to respond to changes in regulatory and other requirements;

The Vitec Group 29

to oversee the process for selecting the external auditor and make appropriate recommendations through the Board to the shareholders
to consider at the annual general meeting;

to review the external auditor’s management letter and management’s response;

to review any internal audit programme and ensure that any internal audit function is adequately resourced and has appropriate standing
within the Company;

to consider management’s response to any major external or internal audit recommendations;

to approve the appointment or dismissal of the head of internal audit;

to review the Company’s procedures for handling allegations from whistleblowers;

10. to review management’s and the internal auditor’s reports (if any such function) on the effectiveness of systems for internal financial

control, financial reporting and risk management;

11. to review, and challenge where necessary, the actions and judgements of management, in relation to the interim and annual financial

statements before submission to the Board, paying particular attention to:

a. critical accounting policies and practices, and any changes in them

b. decisions requiring a major element of judgement

the extent to which the financial statements are affected by any unusual transactions in the year and how they are disclosed

the clarity of disclosures

significant adjustments resulting from the audit

the going concern assumption

g. compliance with accounting standards

h. compliance with stock exchange and other legal requirements

reviewing the company’s statement on internal control systems prior to endorsement by the Board and to review the policies
and process for identifying and assessing business risks and the management of those risks by the company; and

12. to consider other topics, as defined by the Board.

The Committee has formal terms of reference and is authorised by the Board to investigate any activity within those terms of reference.
It is also authorised to seek any information it requires from any employee and all employees are required to co-operate with any request
made by the Committee. The Committee may obtain outside legal and other independent professional advice, at the Company’s expense,
if it considers this necessary. The need for an internal audit function is regularly reviewed and considered by the Committee. At the present
time the Committee is of the view that such a function is not required.

Remuneration committee
The members of the Remuneration committee and their biographical details are set out on page 15. The Committee is chaired by David Bell.
During 2002, the Committee met five times. The report of the Remuneration committee is set out on pages 19 to 25.

Nominations committee
A Nominations committee chaired by Will Wyatt is delegated authority by the Board to deal with succession planning and making
recommendations to the Board on all new Board appointments. During 2002, the committee met three times.

Appointments and re-elections to the Board
The Chairman and the non-executive directors are normally appointed for an initial period of three years which, with the approval of the
Nominations committee and the Board, would usually 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. During the year, up to the date of his resignation, Michael Stacey was a member of the Nominations committee.

30 The Vitec Group

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. David Bell, the senior non-executive director, will retire and will be proposed for re-election
at the annual general meeting 2003. The directors believe it is in the interests of the Group for him to continue for a further period.
Alastair Hewgill and Will Wyatt will stand for election, having been appointed directors since the last annual general meeting.

The Chairman and Mr Bell, both non-executive directors, have now served for seven years and six years, respectively. As a result of their
significant business experience and detailed knowledge of the Group they have been asked, and have agreed, to continue in their current
roles for a further period. This allows the Board and the Nominations Committee to give further detailed consideration to succession
planning taking into account the experience, knowledge and skills required to fulfil the roles.

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 in the year. The Executive directors
meet with shareholders from time to time during the year. The directors also meet with shareholders at the Company's annual general meeting.

In October 2002, the Group arranged for investors to meet the senior management in informal surroundings. The event included a visit to
one of the Group’s users in Norwich and to the Vinten manufacturing site in Bury St Edmunds.

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 and risk management
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 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 executive of each division. In addition, at the end of each year, businesses formally review, in
detail, all of their business risks and their internal controls, including finance, cash, IT, sales, purchasing and logistics. They then 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 Vitec Group 31

• 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 monthly budgets. Forecasts are revised where necessary but formally 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.

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.

32 The Vitec Group

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

We have audited the financial statements on pages 34 to 62. We have also audited the information in the directors’ Remuneration report that
is described as having been audited.

This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work
has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company
and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors
The directors are responsible for preparing the Annual report and the directors’ Remuneration report. As described on page 32, 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 whether the financial statements and the
part of the directors’ Remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985. We also
report to you if, in our opinion, the Directors’ report is not consistent with the financial statements, if the company has not kept proper
accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law
regarding directors’ remuneration and transactions with the group is not disclosed.

We review whether the statement on page 29 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 the unaudited part of the
directors’ Remuneration report, 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 and the part of the directors’ remuneration
report to be audited. 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 and the part of the directors’ remuneration
report to be audited 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 and the part of the directors’ remuneration
report to be audited.

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 2002 and of the

profit of the Group for the year then ended; and

• the financial statements and the part of the directors’ Remuneration report to be audited have been properly prepared in accordance

with the Companies Act 1985.

KPMG Audit Plc
Chartered Accountants
Registered Auditor
London
6 March 2003

The Vitec Group 33

Consolidated profit and loss account

For the year ended 31 December 2002

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 on profit on ordinary activities

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

Retained (loss)/profit for the year
transferred to reserves

Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share

Notes

4/5

6
5
5

11
11
11

Before
exceptional
items and
goodwill
amortisation
£m

Exceptional
items
£m

Goodwill
amortisation
£m

182.2
(95.2)

87.0
(62.3)

24.7
.–
.–

24.7
(1.6)

23.1
(9.1)

.–
.–

.–
(5.8)

(5.8)
0.2
.–

(5.6)
.–

.–
.–

.–
(0.9)

(0.9)
.–
.–

(0.9)
.–

14.0

(5.6)

(0.9)

2002

2001

Restated(1)

Total
£m

182.2
(95.2)

87.0
(69.0)

18.0
0.2
.–

18.2
(1.6)

16.6
(9.1)

7.5
(9.3)

(1.8)

18.3p
18.3p
34.1p

Total
£m

190.4
(94.0)

96.4
(66.7)(2)

29.7
0.8
(3.7)

26.8
(2.6)

24.2
(10.7)

13.5
(9.3)

4.2

32.9p
32.9p
42.9p

(1) See note 1 on page 38
(2) Net operating expenses during the year ended 31 December 2001 included £0.9 million of goodwill amortisation

All of the above results relate to continuing operations.

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.

34 The Vitec Group

Balance sheets

As at 31 December 2002

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

(1) See note 1 on page 38

Approved by the Board on 6 March 2003 and signed on its behalf.

Alastair Hewgill
Director

Notes

12
13
14

15
16
23

17
19

21
22
22
22
22
22

2002

£m

11.0
42.7
0.5

54.2

30.5
37.0
16.1

83.6

(36.8)

46.8

101.0
(24.3)
(13.8)

62.9

8.2
2.6
1.6
1.5
.–
49.0

62.9

Group
2001

Restated(1)

£m

10.8
48.5
.–

59.3

33.6
34.3
17.8

85.7

(64.8)

20.9

80.2
(4.5)
(8.6)

67.1

8.2
2.5
1.6
1.5
.–
53.3

67.1

2002

£m

.–
2.2
144.8

147.0

.–
2.3
2.3

4.6

(48.3)

(43.7)

103.3
(24.0)
(0.1)

79.2

8.2
2.6
1.6
0.9
53.7
12.2

79.2

Company
2001

£m

.–
2.3
129.0

131.3

.–
3.5
8.2

11.7

(50.8)

(39.1)

92.2
(1.5)
(0.1)

90.6

8.2
2.5
1.6
0.9
53.7
23.7

90.6

The Vitec Group 35

Consolidated statement of total recognised gains and losses

For the year ended 31 December 2002

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
Prior year adjustment(1)

Total recognised gains and losses since the last annual report

(1) See note 1 on page 38

Reconciliation of movements in consolidated
shareholders' funds

For the year ended 31 December 2002

Profit for the financial year
Dividends

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

Net (decrease)/increase in shareholders' funds
Opening shareholders' funds – (restated)(2)

Closing shareholders' funds

2002

£m

7.5
(2.5)
.–

5.0
(2.3)

2.7

2001
Restated(1)

£m

13.5
0.3
(0.3)

13.5
.–

13.5

2002

£m

7.5
(9.3)

(1.8)
(2.5)
0.1

(4.2)
67.1

62.9

2001
Restated(1)

£m

13.5
(9.3)

4.2
(0.1)
0.1

4.2
62.9

67.1

(1) See note 1 on page 38
(2) Opening shareholder's funds at 1 January 2002 have been reduced by £2.3 million (2001: £0.8 million) following the adoption of FRS 19 ‘Deferred Taxation’.

36 The Vitec Group

Consolidated cashflow statement

For the year ended 31 December 2002

Net cash inflow from operating activities
Returns on investments and servicing of finance
Interest received
Interest paid

Net cash outflow from returns on investments servicing of finance

Tax Paid

Capital expenditure and financial investments
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 before financing
Financing
Issue of shares
Net repayment of loans

Net cash outflow from financing

Decrease in cash in the year

Notes

2002
£m

35.4

0.3
(1.9)

(1.6)

(6.6)

(10.0)
3.9
(0.5)

(6.6)

(1.7)
(9.3)

9.6

0.1
(12.0)

(11.9)

(2.3)

2001
£m

42.1

0.8
(3.5)

(2.7)

(8.4)

(15.4)
2.4
–

(13.0)

(0.3)
(8.9)

8.8

0.1
(10.1)

(10.0)

(1.2)

The Vitec Group 37

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 2002. 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.

The Group has adopted FRS 19 ‘Deferred Taxation‘ for the first time in these financial statements. Comparative amounts have been restated
and consequently reserves have been decreased and provisions increased by £2.3 million at 31 December 2001.

The impact of adopting FRS 19 on the profit and loss account in 2002 has been to increase the ordinary and total tax charge by £1.2 million
(2001: £1.4 million). Basic earnings per share for the year ended 31 December 2001 has been restated from 36.4p to 32.9p.

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 in foreign currencies 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 administrative expenses. 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.

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

21/2% – 5% on cost or valuation
over the remaining period of the lease
121/2% – 25% on cost
25% – 331/3% on cost
10% – 331/3% on cost
20% – on cost

38 The Vitec Group

Notes to the accounts

Fixed assets are stated at cost except that, as allowed under FRS 15 ‘Tangible Fixed Assets’, on adoption of that Standard in the year ending
31 December 2000 when the book amounts of revalued land and buildings were retained. These book values are based on the previous
revaluation on 31 March 1989 and have not subsequently been revalued.

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.

Long term contracts
The amount of profit attributable to the stage of completion of a long term contract is recognised when the outcome of the contract can be
foreseen with reasonable certainty. Turnover for such contracts is stated at cost appropriate to their stage of completion plus attributable
profits, less amounts recognised in previous years. Provision is made for any losses as soon as they are foreseen.

Contract work in progress is stated at costs incurred, less those transferred to the profit and loss account, after deducting foreseeable losses
and payments on account not matched with turnover.

Amounts recoverable on contracts are included in debtors and represent turnover recognised in excess of payments on account.

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 taxation 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. Full provision for deferred tax is made, on an un-discounted basis,where there is
an obligation to pay more tax, or a right to pay less tax, in the future. Deferred tax assets are recognised to the extent that it is regarded
as more likely than not that they will be recovered.

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.

FRS 17 ‘Retirement Benefits‘. This Standard replaces the use of actuarial values for assets in a pension scheme in favour of a market-based
approach. In order to cope with the volatility inherent in this measurement basis, the Standard requires that the profit and loss account shows
the relatively stable ongoing service cost, interest cost and expected return on assets. Fluctuations in market values and changes in actuarial
assumptions are reflected in the statement of total recognised gains and losses. The Group has continued to account for pensions and other
post employment benefits in accordance with SSAP 24 but has complied with the transitional disclosure requirements of FRS 17.

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.

The Vitec Group 39

Notes to the accounts

3 Activity analysis

3.1 Class of business
Broadcast Camera Systems
Communications and Audio

Broadcast Systems(2)
Photographic and Retail Display
Broadcast Services

Goodwill amortisation(3)
Exceptional items(4)

Group net liabilities(5)

Operating
profit
2001

£m

12.3
0.8

13.1
16.4
1.1

30.6
(0.9)
.–

29.7

2002

£m

7.2
1.2

8.4
15.4
0.9

24.7
(0.9)
(5.8)

18.0

2002

£m

57.6
18.1

75.7
77.0
29.5

182.2
.–
.–

182.2

Turnover
2001

£m

65.8
18.1

83.9
75.2
31.3

190.4
.–
.–

190.4

2002

£m

24.6
6.8

31.4
29.3
20.5

81.2
.–
.–

81.2

(18.3)

62.9

Net assets
2001
Restated(1)

£m

30.2
7.5

37.7
33.4
21.4

92.5
.–
.–

92.5

(25.4)

67.1

(1) See note 1 on page 38
(2) Broadcast Camera Systems and Communications and Audio divisions have been combined to form Broadcast Systems.
(3) Goodwill amortisation relates to Broadcast Systems – £0.4 million (2001: £0.4 million) Photographic and Retail Display – £0.1 million (2001: £0.1 million), and Broadcast Services –

£0.4 million (2001: £0.4 million)
The net book value of goodwill relates to Broadcast Systems £2.5 million (2001: £1.5 million), Photographic and Retail Display – £1.8 million (2001: £1.9 million), and Broadcast
Services £6.0 million (2001: £7.1 million)

(4) Exceptional items relate to Broadcast Systems £5.0 million and Photographic and Retail Display £0.8 million.
(5) 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

Goodwill amortisation(2)
Exceptional items(3)

Group net liabilities

Operating
profit
2001

£m

0.8
20.2
8.9
0.7

30.6
(0.9)
.–

29.7

2002

£m

(4.1)
18.4
9.7
0.7

24.7
(0.9)
(5.8)

18.0

2002

£m

21.6
76.0
81.9
2.7

182.2
.–
.–

182.2

Turnover
2001

£m

23.1
72.6
91.9
2.8

190.4
.–
.–

190.4

2002

£m

9.7
24.6
45.5
1.4

81.2
.–
.–

81.2

(18.3)

62.9

Net assets
2001
Restated(1)

£m

10.8
30.4
49.6
1.7

92.5
.–
.–

92.5

(25.4)

67.1

(1) See note 1 on page 38
(2) Goodwill amortisation relates to The rest of Europe – £0.1 million (2001: £0.1 million) and The Americas – £0.8 million (2001: £0.8 million).

The net book value of goodwill relates to the United Kingdom – £0.5 million (2001: £0.5 million), The rest of Europe – £1.9 million (2001: £2.0 million)
and the Americas – £7.9 million (2001: £8.0 million).

(3) Exceptional items relate to United Kingdom – £0.6 million, The rest of Europe – £4.3 million and The Americas – £0.9 million.

40 The Vitec Group

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
Distribution costs

– marketing, selling and distribution costs
– research, development and engineering costs

Administrative expenses

– exceptional restructuring costs
– goodwill amortisation
– other administrative expenses
– exchange (gain)/loss on transactions

2002
£m

8.2
50.2
97.7
21.9
4.2

Turnover
2001
£m

9.2
48.3
105.1
24.6
3.2

182.2

190.4

2002
£m

2001
£m

32.5
7.5

40.0

5.8
0.9
23.4
(1.1)

29.0

69.0

35.8
7.6

43.4

.–
0.9
22.0
0.4

23.3

66.7

5 Exceptional items
Exceptional items included in profit on ordinary activities before interest are £0.2 million profit on the sale of property fixed assets
(Photographic and Retail Display), and included in operating profit are restructing costs of £5.8 million (Broadcast Systems £5.0 million
and Photographic and Retail Display £0.8 million).

Prior year exceptional items included in profit on ordinary activities before interest were 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).

The Vitec Group 41

Notes to the accounts

6 Operating profit

The following items are included in operating profit
Operating lease rental income on owned broadcast equipment
Goodwill amortisation
Depreciation
(Profit)/Loss on sale of fixed assets
Operating lease rental expense

Plant, machinery and vehicles
Property

Auditors' remuneration
Audit fees (company £0.1 million – 2001: £0.1 million)
Other fees paid to the auditor and its associates

Fees paid to the auditors for non-audit services comprise £1.0 million (2001: £0.6 million)
for tax and £0.1 million (2001: £0.1 million) for other work

Reconcilation of operating profit to net cash flow from operating activities

Operating profit
Goodwill amortisation
Depreciation
(Profit)/Loss on sale of fixed assets
Decrease in stocks
(Increase)/decrease in debtors
Increase/(decrease) in creditors
Increase/(decrease) in provisions

Net cash inflow from operating activities

2002
£m

16.8
0.9
12.2
(1.5)

0.1
4.4

0.4
1.1

2002
£m

18.0
0.9
12.2
(1.5)
2.7
(4.3)
2.2
5.2

35.4

2001
£m

19.0
0.9
12.3
0.1

0.1
4.2

0.4
0.7

2001
£m

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

42.1

42 The Vitec Group

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 Systems(2)
Photographic and Retail Display
Broadcast Services
Head office

(1)

(2)

See note 1 on page 38
Broadcast Camera Systems and Communications and Audio divisions have been combined to form Broadcast Systems.

2002
£m

42.4
6.2
1.8

50.4

2001
£m

42.7
6.9
1.8

51.4

2002

Number

2001
Restated(1)
Number

606
655
171
14

655
638
183
14

1,446

1,490

8 Directors' remuneration
The emoluments, share options, awards under incentive schemes and pension entitlements of the directors are disclosed in the Remuneration
report on pages 19 to 25.

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

Fees for non-executive duties
Remuneration for executive duties

2002
£m

0.2
0.8

1.0

2001
£m

0.2
0.8

1.0

The Vitec Group 43

Notes to the accounts

9 Tax

(a) Analysis of taxation charge in the year

UK corporation tax payable at 30% (2001: 30%)
Less: Double taxation relief

Tax on exchange differences taken to reserves
Overseas corporate tax
Adjustments in respect of prior years

Total current tax

Overseas deferred taxation

Taxation on profit on ordinary activities

(1) See note 1 on page 38

(b) Factors affecting the current tax charge

Before
exceptional

items and Goodwill and
exceptional
goodwill
items
amortisation
£m
£m

0.3
(0.3)

0.0
.–
8.3
0.1

8.4

0.7

9.1

.–
.–

.–
.–
.–
.–

.–

Before
exceptional

items and Goodwill and
exceptional
goodwill
items
amortisation
£m
£m

2002

Total
£m

0.3
(0.3)

0.0
.–
8.3
0.1

8.4

0.7

9.1

2002

Total
£m

Before
exceptional

items and Goodwill and
exceptional
goodwill
items
amortisation
£m
£m

(0.2)
.–

(0.2)
(0.3)
9.5
(0.2)

8.8

1.6

10.4

.–
.–

.–
.–
0.3
.–

0.3

.–

0.3

Before
exceptional

items and Goodwill and
exceptional
goodwill
items
amortisation
£m
£m

Current tax
Profit on ordinary activities before taxation

Notional charge at UK corporation tax rate of 30%
Profits in tax free areas
Allowable amortisation of intangible assets
Higher overseas tax rates
Permanent timing differences
Unrealised tax losses/(utilisation of tax losses)
Adjustments in respect of prior periods
Other items

Current ordinary tax charge for the year

23.1

6.9
(0.7)
(1.0)
1.8
(0.5)
2.0
0.1
(0.2)

8.4

(6.5)

(2.0)
.–
.–
.–
.–
1.7
.–
0.3

0.0

16.6

28.0

4.9
(0.7)
(1.0)
1.8
(0.5)
3.7
0.1
0.1

8.4

8.4
(0.5)
(1.5)
2.0
.–
(0.3)
(0.2)
0.9

8.8

(3.8)

(1.1)
.–
.–
0.1
1.3
.–
.–
.–

0.3

2001
Restated(1)

Total
£m

(0.2)
.–

(0.2)
(0.3)
9.8
(0.2)

9.1

1.6

10.7

2001

Total
£m

24.2

7.3
(0.5)
(1.5)
2.1
1.3
(0.3)
(0.2)
0.9

9.1

Note: Current tax on Goodwill and exceptional items of £nil in 2002 comprises a charge of £0.1million in respect of the sale of the overseas property and a tax benefit of £(0.1)million
arising on the exceptional costs.

(c) Factors that may affect future tax charges
A significant proportion of the Group's operating profits will continue to be are earned in countries with a higher rate of tax than in the UK.
No deferred tax has been recognised on tax losses of £8 million as these are not expected to be utilised in the forseeable future.

44 The Vitec Group

Notes to the accounts

10 Dividends

Interim paid of 6.1p per share (2001: 6.1p)
Final proposed 16.6p per share (2001: 16.6p)

Total dividends 22.7p per share (2001: 22.7p)

2002
£m

2.5
6.8

9.3

2001
£m

2.5
6.8

9.3

11 Earnings per ordinary share
The calculation of basic earnings per share is based on profit after tax of £7.5 million (2001: £13.5 million – restated) and on the weighted
average number of shares in issue during the year of 41,008,348 (2001: 40,982,606).

Adjusted basic 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 2002 this profit was £14.0 million
(2001: £17.6 million – restated)

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

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

Earnings before exceptional items and goodwill amortisation

(1) See note 1 on page 38

Profit
Restated(1)
2001
£m

13.5
3.2
0.9

17.6

2002
£m

7.5
5.6
0.9

14.0

Earnings per share

2002
pence

18.3
13.6
2.2

34.1

Restated(1)
2001
pence

32.9
7.8
2.2

42.9

The calculation of diluted earnings per share is based on profit after tax of £7.5 million (2001: £13.5 million – restated).

The number of shares used to calculate the diluted earnings per share incorporates the weighted average number of shares in issue
41,008,348 (2001: 40,982,606) and the number of shares under option of 2,678,405 (2001: 2,427,624), contingently issuable shares from
the total of potential Long term incentive plan awards of 404,560 (2001: 337,045) and shares issuable under the Deferred bonus plan of
20,127 (2001: 42,128), 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 2002. The number of shares used for the calculation is 41,022,262 (2001: 41,048,425).

The Vitec Group 45

Notes to the accounts

12 Intangible fixed assets

Cost
At 1 January 2002
Currency translation adjustments
Additions

At 31 December 2002

Amortisation
At 1 January 2002
Currency translation adjustments
Charge for the year

At 31 December 2002

Net book value
At 31 December 2002

At 1 January 2002

Development
costs
£m

Total
£m

Goodwill
£m

13.1
(1.0)
1.9

14.0

2.3
(0.2)
0.9

3.0

11.0

10.8

0.3
.–
0.4

0.7

.–
.–
.–

.–

0.7

0.3

12.8
(1.0)
1.5

13.3

2.3
(0.2)
0.9

3.0

10.3

10.5

Additions of £1.5 million in goodwill represent goodwill arising on the acquisition of the trade, assets and certain liabilities of
Aspen Electronics Inc, on 14 February 2002 by the Broadcast Camera Systems division. (See note 20). The goodwill is being amortised
over a period of 20 years.

46 The Vitec Group

Notes to the accounts

13 Tangible fixed assets

Group
Cost or valuation
At 1 January 2002
Currency translation adjustments
Additions
Disposals

At 31 December 2002

Depreciation
At 1 January 2002
Currency translation adjustments
Charge for the year
Disposals

At 31 December 2002

Net book value
At 31 December 2002

At 1 January 2002

Land and
buildings
£m

Plant
machinery
and vehicles
£m

Equipment
fixtures
and fittings
£m

24.5
0.7
0.3
(3.2)

22.3

7.1
0.1
1.0
(1.4)

6.8

15.5

17.4

64.7
(3.3)
7.7
(5.2)

63.9

40.1
(2.0)
9.2
(4.3)

43.0

20.9

24.6

16.1
(0.1)
2.0
(1.0)

17.0

9.6
.–
2.0
(0.9)

10.7

6.3

6.5

Total
£m

105.3
(2.7)
10.0
(9.4)

103.2

56.8
(1.9)
12.2
(6.6)

60.5

42.7

48.5

Plant, machinery and vehicles includes broadcast equipment rental assets with a cost of £ 31.7 million (2001: £31.5 million) and accumulated
depreciation of £17.2 million (2001: £14.9 million)

The fixed assets of the Company, comprising principally of land and buildings, at a cost of £3.3 million (2001: £3.3 million) and with
accumulated depreciation of £1.1 million (2001: £1.0 million) and net book value £2.2 million (2001: £2.3 million) are included above.
During the year additions at cost were £nil and the depreciation charge was £0.2 million.

Net book value of land and buildings at cost or valuation comprise the following
Carried at cost
Carried at valuation (open market basis – 31 March 1989)

Freehold
Short Leasehold

2002
£m

13.7
1.8

15.5

14.5
1.0

15.5

Group
2001
£m

15.6
1.8

17.4

15.9
1.5

17.4

2002
£m

Company
2001
£m

0.3
1.8

2.1

1.8
0.3

2.1

0.3
1.8

2.1

1.8
0.3

2.1

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 £0.2 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 £0.3 million (2001: £1.1 million) for the Group
and £nil (2001: £nil) for the Company.

The Vitec Group 47

Notes to the accounts

14 Fixed asset investments

Investments at cost or written down value

Group
Cost
At 1 January 2002
Additions
Currency translation adjustments

At 31 December 2002

Provision
At 1 January 2002
Amounts provided for

At 31 December 2002

Net book value
At 31 December 2002

At 1 January 2002

Company
At 1 January 2002
Additions

At 31 December 2002

Investment
in own
shares
£m

Investment
in other
shares
£m

Total
£m

Loans
£m

3.7
0.5
(0.5)

3.7

(3.7)
0.5

(3.2)

0.5

.–

129.0
15.8

144.8

.–
0.5
.–

0.5

.–
.–

.–

0.5

.–

.–
0.5

0.5

3.7
.–
(0.5)

3.2

(3.7)
0.5

(3.2)

.–

84.6
.–

84.6

.–
.–
.–

.–

.–
.–

.–

44.4
15.3

59.7

The Group's investment in other shares represents a 12% investment in Intersense Inc. Full impairment provision has been made
against this investment.

The Group’s investment in own shares at 31 December 2002 represents 142,857 ordinary shares held in respect of grants under share option
schemes. The market value of these shares at 31 December 2002 was £396,000.

48 The Vitec Group

Notes to the accounts

Principal subsidiaries

The Group's principal subsidiaries at 31 December 2002 are listed below.

Vitec Group US Holdings Inc
Vitec Luxembourg Holdings Sarl
Vitec International Financial Services Company Limited
Vitec UK Finance Limited
Vitec UK Investments Limited
Photographic and retail display
Alu Inc
Bogen Photo Corporation
Gitzo SA
Gruppo Manfrotto Srl
Broadcast systems
Anton/Bauer Inc
Aspen Electronics Inc
Centro de Produccion Profesional CPP Limitada
Drake Electronics Limited
LCB Beteiligungs GmbH
Sachtler Corporation of America
Sachtler GmbH & Co. KG
Vinten Broadcast Limited
Vinten Inc
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.

15 Stocks

Raw materials and components
Work in progress
Finished goods

Country of incorporation
USA
Luxembourg
Ireland
England and Wales
England and Wales

USA
USA
France
Italy England and Wales

USA
USA
Costa Rica
England and Wales*
Germany
USA
Germany
England and Wales*
USA
USA

USA
USA

2001
£m

10.3
8.2
15.1

33.6

Group
2002
£m

9.1
7.5
13.9

30.5

The Vitec Group 49

Notes to the accounts

16 Debtors

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

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

Total debtors

17 Creditors

Amounts falling due within one year
Bank loans (unsecured)
Other loans (unsecured)
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 (unsecured)
Other loans (unsecured)
Loans owed to subsidiaries
Other creditors
Accruals and deferred income

50 The Vitec Group

2002
£m

28.5
1.0
.–
3.3
.–
2.3

35.1

1.0
0.9

1.9

37.0

2002
£m

.–
4.0
0.2
12.1
.–
6.8
5.0
1.6
3.6
3.5

36.8

24.0
.–
.–
.–
0.3

24.3

Group
2001
£m

2002
£m

Company
2001
£m

26.4
.–
.–
3.2
1.1
1.6

32.3

1.2
0.8

2.0

34.3

Group
2001
£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

.–
.–
0.5
0.5
1.1
0.2

2.3

.–
.–

2.3

2002
£m

.–
.–
.–
.–
40.3
6.8
.–
0.1
0.2
0.9

48.3

24.0
.–
.–
.–
.–

24.0

.–
.–
1.9
0.4
1.1
0.1

3.5

.–
.–

3.5

Company
2001
£m

32.0
.–
.–
.–
11.2
6.8
.–
0.1
0.2
0.5

50.8

.–
.–
1.5
.–
.–

1.5

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 14. 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
Swaps

Gross financial liabilities

ii) Maturity profile

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

2002
£m

24.0
3.5
0.4
0.1

28.0

2002
£m

4.0
24.0
.–

28.0

Group
2001
£m

32.0
7.7
0.6
.–

40.3

Group
2001
£m

36.1
4.2
.–

40.3

2002
£m

24.0
.–
.–
0.1

24.1

2002
£m

0.1
24.0
.–

24.1

Company
2001
£m

32.0
.–
.–
.–

32.0

Company
2001
£m

32.0
.–
.–

32.0

The total amount of loans any part of which falls due after 5 years is £nil (2001: £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 £0.3 million (2001: £0.6 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 two years but not more than three years

– committed facilities

Total

2002
£m

.–
31.0

31.0

62.0

2001
£m

28.0
25.0

.–

53.0

The Vitec Group 51

Notes to the accounts

18 Financial instruments (continued)

iii) Interest rate profile

Currency

Sterling
US$
Euro

At 31 December 2002

Sterling
US$
Euro

At 31 December 2001

Floating
rate
borrowings
£m

Fixed rate
borrowings
£m

Fixed rate
weighted
average
interest
%

Fixed rate
weighted
average
period at
Years

25.4
.–
.–

25.4

34.8
.–
.–

34.8

.–
2.2
0.4

2.6

.–
4.9
0.6

5.5

6.7
5.1

1
1

2
2

Total
£m

25.4
2.2
0.4

28.0

34.8
4.9
0.6

40.3

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

b) Financial assets

Currency

Sterling
US$
Euro
Other

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

2002
£m

2.5
7.3
5.2
1.1

16.1

Floating rate
2001
£m

1.6
4.1
10.8
1.3

17.8

52 The Vitec Group

Notes to the accounts

c) Fair value of financial assets and liabilities

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

Market rates have been used to determine fair values.

Book value
£m

2002
Fair value
£m

Book value
£m

2001
Fair value
£m

16.1
(25.3)
(2.6)
(0.1)

(11.9)

16.1
(25.3)
(2.6)
(0.1)

(11.9)

17.8
(34.8)
(5.5)
.–

(22.5)

17.8
(34.8)
(5.5)
.–

(22.5)

d) Foreign exchange hedging
Administration expenses includes net gains of £1.1 million (2001: £0.4 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 2002, the cumulative,
unrecognised aggregate gain on forward exchange rate contracts as of 31 December 2002 is £2.6 million (2001: £0.4 million). All of these
unrecognised gains relate to the year 2003. 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.

Functional currency of group operation

Sterling
Euro

At 31 December 2002

Sterling
Euro

At 31 December 2001

Sterling
£m

.–
0.1

0.1

.–
(0.1)

(0.1)

US$
£m

0.1
2.7

2.8

.–
(0.5)

(0.5)

Euro
£m

0.1
.–

0.1

0.1
(0.2)

(0.1)

Other
£m

(0.3)
0.5

0.2

(0.2)
0.4

0.2

Total
£m

(0.1)
3.3

3.2

(0.1)
(0.4)

(0.5)

The Vitec Group 53

Notes to the accounts

19 Provisions for liabilities and charges

At 1 January 2002 (as previously reported)
Prior year adjustment (see note 1 on page 38)

At 1 January 2002 (restated)
Currency translation adjustments
Transfers from current tax
Profit and loss account
Utilised in year

At 31 December 2002

Deferred
tax
£m

Exceptional
restructuring
£m

Group
Other
provisions
£m

1.9
2.3

4.2
(0.3)
(0.8)
0.7
.–

3.8

0.3
.–

0.3
.–
.–
5.8
(0.9)

5.2

4.1
.–

4.1
0.4
.–
0.6
(0.3)

4.8

Total
£m

6.3
2.3

8.6
0.1
(0.8)
7.1
(1.2)

13.8

Company
Deferred
tax
£m

0.1
.–

0.1
.–
.–
.–
.–

0.1

Total
£m

0.1
.–

0.1
.–
.–
.–
.–

0.1

Other provisions include £3.5 million (2001: £2.9 million) to cover accrued statutory entitlements that will be paid to employees in Italy,
Germany and Japan when they leave employment of the Group.

The remaining provisions include warranty provisions of £0.8 million (2001: £0.8 million) and property provisions of £0.2 million
(2001: £0.2 million).

The majority of the exceptional restructuring provision will be utilised in 2003 with the remaining balance utilised in 2004 and 2005.

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

(1) See note 1 on page 38

Group
Restated(1)
2001
£m

1.9
2.3

4.2

2002
£m

2.7
1.1

3.8

Company

2001
£m

0.1
.–

0.1

2002
£m

0.1
.–

0.1

54 The Vitec Group

Notes to the accounts

20 Acquisitions of businesses
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$2m (£1.4m) and deferred consideration of US$0.2m (£0.1m) payable in 2004.

The acquisition was funded from existing cash resources and has been accounted for using the acquisition method of accounting.

Net operating assets acquired comprise the following:

Book
value
£m

Fair value
adjustments
£m

As
adjusted
£m

Net Assets acquired
Tangible fixed assets
Stocks
Debtors
Creditors

Purchased goodwill

0.1
0.4
0.1
(0.2)

0.4

(0.1)

(0.2)

Total cost of acquisition, including expenses, satisfied by cash

The fair value adjustments comprise the alignment of accounting policies for stock and warranty provisions with those of the Group.

Net outflow of cash in respect of acquisitions

Total cost of acquisitions including expenses
Net cash acquired

Total outflow of cash from Group

The results of Aspen have been included in the Broadcast Systems division and comprise:

Turnover
Cost of sales
Operating expenses

Operating loss before goodwill amortisation

0.1
0.3
0.1
(0.3)

0.2

1.5

1.7

1.7
.–

1.7

2002
£m

0.8
(0.5)
(0.4)

(0.1)

The Vitec Group 55

Notes to the accounts

21 Share capital
The authorised share capital at 31 December 2002 consisted of 65,000,000 (2001: 65,000,000) shares of 20p each, of which 41,021,786 were
allotted and fully paid. The movement during the year was:

At 1 January 2002
Exercise of share options

At 31 December 2002

Issued share
capital £m

40,985,752
36,034

41,021,786

8.2
.–

8.2

At 31 December 2002 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

Number of shares

Exercise prices

223,016
348,679
1,334,942
771,768

2,678,405

268p – 595 p
268p – 633 p
350p – 694 p
661p – 819 p

Dates normally
exercisable

2003 – 2010
2003 – 2008
2003 – 2012
2003 – 2010

On 14 March 2002, awards over an aggregate of 140,423 shares in the Company were made to 8 senior Group executives under the
Company's long term incentive plan. On 11 September 2002, an award over 21,898 shares in the Company was made to Alastair Hewgill
under the Company’s long term incentive plan. The total number of shares outstanding at 31 December 2002 under the Company's long
term incentive plan was 404,560 (2001: 337,045).

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 2002 under the Company’s deferred bonus
plan was 51,106. The terms of the awards and the related performance conditions are described in the Directors’ report.

56 The Vitec Group

Notes to the accounts

22 Reserves

Capital
Premium Redemption
reserve
account
£m
£m

Revaluation
reserve
£m

Merger
reserve
£m

Other
reserves
£m

Profit and
loss account
£m

Group
At 1 January 2002 (as previously reported)
Prior year adjustments (see note 1 on page 38)

At 1 January 2002 (restated)
Retained loss for the year
Premium on new shares issued
Exchange rate movement on foreign net investments

At 31 December 2002

2.5

0.1
.–

2.6

1.6

.–
.–

1.6

1.5

.–
.–

1.5

.–

.–
.–

.–

.–
.–

.–

55.6
(2.3)

53.3
(1.8)
.–
(2.5)

49.0

At 31 December 2002 the cumulative goodwill written off on acquisitions prior to 1 January 1998 amounted to £128.3 million
(2001: £128.3 million)

Capital
Premium Redemption
reserve
account
£m
£m

Revaluation
reserve
£m

Merger
reserve
£m

Other
reserves
£m

Profit and
loss account
£m

Company
At 1 January 2002
Retained loss for the year
Exchange rate movement on foreign net investments
Premium on new shares issued

At 31 December 2002

2.5
.–
.–
0.1

2.6

1.6
.–
.–
.–

1.6

0.9
.–
.–
.–

0.9

9.7
.–
.–
.–

9.7

44.0
.–
.–
.–

44.0

23.7
(11.7)
0.2
.–

12.2

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 loss of £2.4 million (2001: £26.8 million profit).

The Vitec Group 57

Notes to the accounts

23 Cash and financing

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

Reduction in net debt resulting from cash flows
Exchange rate movements

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

Net debt at 31 December

2002
£m

(2.3)
12.0

9.7
0.9

10.6
(22.5)

(11.9)

2001
£m

(1.2)
10.1

8.9
(0.4)

8.5
(31.0)

(22.5)

1 January
2002
£m

Cash flow
£m

Other
non-cash
£m

movements(1)

Exchange 31 December
2002
£m

£m

Analysis of net debt
Cash

Debt due after one year
Debt due within one year

Total

17.8

(4.2)
(36.1)

(40.3)

(22.5)

(2.3)

8.1
3.9

12.0

9.7

.–

(28.2)
28.2

.–

0.6

0.3
.–

0.3

0.9

16.1

(24.0)
(4.0)

(28.0)

(11.9)

(1)

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

24 Leasing commitments
At 31 December 2002 the Group had the following annual commitments under operating leases

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

58 The Vitec Group

Land and
buildings
£m

0.8
2.7
0.4

3.9

Other
£m

.–
0.1
.–

0.1

2002
£m

2001
£m

1.5
0.5

2.0
(0.4)

1.6

Total
£m

0.8
2.8
0.4

4.0

2.6
0.8

3.4
(0.8)

2.6

2001
£m

0.9
2.5
1.0

4.4

Notes to the accounts

25 Contingent liabilities
The company has guaranteed the Senior Notes described in note 18.

26 Pension commitments
During the year, the Group operated funded defined benefit pension schemes set up under separate trusts and open to eligible employees.
The Group 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 £0.7 million (2001: £0.6 million) for the year. On this basis, the pension charge for 2002
has been calculated as £0.8 million (2001: £0.7 million). There is a prepayment of £0.9 million (2001: £0.9 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 2002, 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

2002
% per
annum

2.25
4.25
2.25
2.25
5.50

2001
% per
annum

2.50
4.50
2.50
2.50
5.75

Scheme assets as at 31 December

Equities
Bonds
Property
Cash and net current assets

Total

Fair value
£m

2002
Expected rate
of return % pa

Fair value
£m

2001
Expected rate
of return % pa

16.3
5.6
1.4
0.1

23.4

8.2
4.8
6.9
4.0

7.3

19.3
6.1
1.1
0.5

27.0

7.9
5.2
7.1
4.5

7.2

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 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 Vitec Group 59

Notes to the accounts

26 Pension commitments (continued)

Profit and loss charge for the year 2002 (based on 31 December 2001 assumptions)

Analysis of amounts charged to operating profit:

Current service cost
Past service costs

Total charged to operating profit

Analysis of the amount charged to other finance income:

Interest on pension scheme liabilities
Expected return on assets in the pension scheme

Net charge (credit) to other finance income

Total profit and loss charge before deduction for tax

Vitec Group
Pension
Scheme
£m

Vitec Group
Executive
Pension
Scheme
£m

0.7
.–

0.7

1.0
(1.4)

(0.4)

0.3

0.4
.–

0.4

0.5
(0.5)

.–

0.4

Analysis of amounts recognised in the statement of total gains and losses for year to 31 December 2002

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

Actuarial (loss) recognised in the statement of total gains and losses before adjustment for tax

History of experience gains and losses

a. (Gain) loss on plan assets
amount (£ million)
% of plan assets at 31 December 2002
b. Experience (gain) loss on plan liabilities

amount (£ million)
% of plan liabilities at 31 December 2002

c. Total actuarial (gain) loss recognised in the statement of total gains and losses

amount (£ million)
% of plan liabilities at 31 December 2002

Total
£m

1.1
.–

1.1

1.5
(1.9)

(0.4)

0.7

Total
£m

(5.6)
0.1
(0.2)

(5.7)

Total

£5.6m
23.40%

£(0.1)m
0.40%

£5.7m
20.40%

60 The Vitec Group

Notes to the accounts

26 Pension commitments (continued)

Reconciliation to the balance sheets

Fair value of scheme assets
Actuarial value of scheme liabilities

Surplus/(deficit) in the scheme
Related deferred tax asset/(liability)

Vitec Group
Pension
Scheme
£m

Vitec Group
Executive
Pension
Scheme
£m

17.1
(19.0)

(1.9)
0.6

6.8
(8.9)

(2.1)
0.6

Total £m

23.9
(27.9)

(4.0)
1.2

2002

2001

Vitec Group
Pension
Scheme
£m

Vitec Group
Executive
Pension
Scheme
£m

20.0
(17.7)

2.3
(0.7)

Total £m

27.6
(25.9)

1.7
(0.5)

1.2

7.6
(8.2)

(0.6)
0.2

(0.4)

Pension asset/(liability) recognised in balance sheet
(before allowance for deferred tax)

(1.3)

(1.5)

(2.8)

1.6

The amount of the net pension liability would have a consequential effect on reserves. The assets and liabilities shown for the Vitec Group
Executive Pension Scheme include an amount of £0.5 million (2001: £0.6 million) in respect of certain insurance policies which meet the
cost of providing part of the benefit for some pensioners. The value placed on these insurance policies is in addition to the value of the
scheme’s investments.

Movement in scheme surplus/(deficit) during 2002

Surplus in schemes at beginning of year
Movements over year to 31 December 2002:
Current service cost
Employer contributions
Past service cost
Other finance income
Actuarial gain/(loss)

(Deficit) in schemes at end of year

Total
£m

1.7

(1.1)
0.7
.–
0.4
(5.7)

(4.0)

The Vitec Group 61

Notes to the accounts

27 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 in 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 2002 totalled €242,719,
£153,000 (2001: €241,600, £151,000). At 31 December 2002, there were no outstanding amounts payable to Mancor (2001: Nil).
Lino Manfrotto also owns a factory leased by Gruppo Manfrotto until 2003. Rents paid to Lino Manfrotto during the year totalled
€67,000, £42,000 (2001: €66,000, £41,000). At 31 December 2002 there were no outstanding rents payable to Lino Manfotto (2001: nil).

Abramo Manfrotto is a shareholder and director of Antide Srl, a company specialising in world-wide web sites and e-mail services.
Group companies paid Antide a total of €70,000, £44,000 during the year (2001: €68,000, £42,000) for products and services.
At 31 December 2002 Gruppo Manfrotto owed Antide €29,000, £19,000 (2001: €38,000, £23,000).

Abramo Manfrotto is also a shareholder of Antide Net Srl, a company specialising in IT consulting. Group companies paid Antide Net Srl
a total of €8,000, £5,000 during the year (2001: Nil) for services. At 31 December 2002 there were no outstanding amounts payable to Antide
Net Srl.

28 Post balance sheet events
On 6 February 2003 the Group acquired the business of OConnor Engineering Laboratories from Autocue Inc for US$2.7 million cash
(£1.6 million).

62 The Vitec Group

Five year financial summary

Turnover

Operating profit before exceptional
items and goodwill amortisation
Interest

Profit before tax, exceptional items and goodwill amortisation

Operating cash flow
Free cash flow(2)

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

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

2002

£m

182.2

2001
(Restated)(1)(4)
£m

190.4

2000

£m

200.0

Year ended 31 December
1998

1999

£m

171.4

£m

162.3

24.7
(1.6)

23.1

34.9
20.7

11.0
42.7
24.9
.–

78.6

62.9
.–
11.9
3.8

78.6

30.6
(2.6)

28.0

42.1
18.0

10.8
48.5
34.5
.–

93.8

67.1
.–
22.5
4.2

93.8

16.1
37.1
42.9
32.9
22.7
425.0

40.1
(2.9)

37.2

45.8
17.6

10.9
47.0
38.5
.–

96.4

63.7
.–
31.0
1.7

96.4

20.1
30.9
62.8
56.7
21.2
498.0

38.2
(1.1)

37.1

51.1
29.2

10.0
37.5
27.7
.–

75.2

44.2
0.9
27.8
2.3

75.2

22.3
30.7
54.3
53.3
18.5
527.0

40.0
(0.7)

39.3

43.3
17.8

6.9
37.0
33.2
7.3

84.4

81.3
0.8
.–
2.3

84.4

24.6
27.6
58.2
56.6
16.1
587.0

Statistics
Operating profit (%) before exceptional items and goodwill amortisation
Effective tax rate (%)
Adjusted basic earnings per share (p)(3)
Basic earnings per share (p)
Dividends per share (p)
Year-end ex-dividend mid-market share price (p)

13.6
39.4
34.1
18.3
22.7
277.5

(1) See note 1 on page 38.
(2) Free cash flow is the cash inflow from operating activities less interest, tax and capital expenditure on tangible fixed assets.
(3) Differences between Adjusted basic and Basic earnings per share arise from exceptional items in the years in question and, from 1998, the amortisation of goodwill.
(4) The figures for 2001 in the Five-year financial summary have been restated following the adoption & FRS 19 ‘Deferred Taxation’. It has not been practical to restate earlier years.

The Vitec Group 63

Group directory

Main offices in each country

Photographic and retail display

ALU Italy
Via Del Commercio 22
36060 Romano d’Ezzelino
VI Italy
Tel: +39 (0424) 516 816
Fax: +39 (0424) 36550
www.alu.com
(also UK)

Manfrotto
Via Sasso Rosso n19
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
NJ 07094
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

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
I-30020 Marcon (Ve)
Italy
Tel: +39 (041) 596 0000
Fax: +39 (041) 595 1082
www.litectruss.com

Gitzo
Créteil Parc
8/10 rue Sejourné
94044 Créteil
France
Tel: +33 (1) 4 513 1860
Fax: +33 (1) 4 377 1505
www.gitzo.com

Broadcast systems

Anton/Bauer
14 Progress Drive
Shelton
CT 06484
USA
Tel: +1 (203) 929 1100
Fax: +1 (203) 925 4988
www.antonbauer.com

Vinten Broadcast
Western Way
Bury St Edmunds
Suffolk
IP33 3TB
UK
Tel: +44 (0)1284 752121
Fax: +44 (0)1284 750560
www.vinten.com
(also Asia Pacific, France,
Germany, Japan and USA)

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

64 The Vitec Group

Clear-Com
4065 Hollis Street
Emeryville
CA 94608
USA
Tel +1 (510) 496 6666
Fax: +1 (510) 496 6699
www.clearcom.com

Drake Electronics
26-28 Hydeway
Welwyn Garden City
Hertfordshire
AL7 3UQ
UK
Tel: +44 (0)1727 871200
Fax: +44 (0)1707 371266
www.drake-uk.com

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

Bexel
801 South Main Street
Burbank
CA 91506
USA
Tel: +1 (818) 841 5051
Fax: +1 (818) 841 1572
www.bexel.com

In 2002 we commenced implementation of our new strategy;
Consolidate-Leverage-Grow, announced at the Interim.

These actions will put us in a good position to exploit growth
opportunities when the broadcast, media and entertainment
industries recover.

The year in review

Chairman’s statement

Chief executive’s review

Group overview

Divisional reports

Photographic and retail display

Broadcast systems

Broadcast services

Manufacturing

Financial review

Directors and advisors

Directors’ report

Remuneration report

Corporate social responsibility report

Corporate governance

Independent auditors’ report

Accounts 2002

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

Shareholder information and financial calendar

Should you experience any difficulties using these facilities please contact the Capita Registrars helpline 0870 162 3100.

Analysis of shareholdings as at 31 December 2002

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

% of holders

Number of shares

% of shares

744
360
58
71
34
71

1,338

442
896

1,338

55.60
26.91
4.33
5.31
2.54
5.31

100.00

33.03
66.97

100.00

305,152
848,006
395,564
1,659,497
2,448,374
35,365,193

41,021,786

37,989,700
3,032,086

41,021,786

0.74
2.07
0.96
4.05
5.97
86.21

100.00

92.61
7.39

100.00

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September 2003
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taking action

The Vitec
Group plc
annual report
for 2002

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