The Vitec Group plc
Annual Report
& Accounts
2013
The Vitec Group plc
Bridge House
Heron Square
Richmond
TW9 1EN
United Kingdom
T +44 (0)20 8332 4600
F +44 (0)20 8948 8277
info@vitecgroup.com
www.vitecgroup.com
Registered in England and Wales no. 227691
The Vitec Group plc Annual Report & Accounts 2013 The Vitec Group plc
Inside this report
Strategic Report
01 Highlights
02 Chairman’s Statement
04 Vitec Group overview
06 What we do
08 Our business model
10 Group Chief Executive’s Review
12 Market update: Broadcast & Video
14 Market update: Photographic
16 Market update: Military, Aerospace
and Government
17 Our world class brands
18 Financial Review
24 Videocom Division
26
Imaging Division
28 Services Division
29 Operations Executive
30 Board of Directors
32 Directors’ Report
Remuneration
Report
34 Annual Statement by the Chairman
of the Renumeration Committee
35 Remuneration Policy Report
44 Annual Report on Remuneration
Corporate
Responsibility
54 Vitec’s commitment to corporate
responsibility
55 Business Ethics
56 Environment
58 Employees
61 Community & Charitable Donations
Corporate
Governance
62 Chairman’s Report
73 Audit Committee Report
Independent
Auditor’s Report
78
Independent Auditor’s Report
Financial Statements
81 Table of contents
82 Primary Statements
87 Section 1 - Basis of preparation
89 Section 2 - Results for the year
97 Section 3 - Operating assets and liabilities
108 Section 4 - Capital structure
115 Section 5 - Other supporting notes
124 Company Financial Statements
131 Five Year Financial Summary
132 Shareholder Information and
Financial Calendar
Key Performance
Indicators
The Board and Operations Executive
monitor a number of financial and non-
financial KPIs to measure performance
over time. Details of the KPIs can be
found on the following pages:
19 Financial
51 Total Shareholder Return
57 Environmental
58 Health & Safety
The Vitec Group plc website
www.vitecgroup.com
Annual Report & Accounts online
www.vitecgroup.com/annual_report_2013
Cautionary statement: Statements made in the Strategic Report and Directors’ Report (pages 1 to
33) contain forward-looking statements that are subject to risk factors associated with, among other
things, the economic and business circumstances occurring from time to time in the countries and
sectors in which the Group operates. It is believed that the expectations reflected in these statements
are reasonable but they may be affected by a wide range of variables which could cause actual results
to differ materially from those currently anticipated. Nothing in this Annual Report and Accounts should
be construed as a profit forecast.
Where
the story
comes to
life
Designed and produced by Design Motive Ltd
Printed and bound in the UK by CPI Colour Ltd
Highlights
Key points
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• Operating profit* in line with our expectations
• Further improvement in margins with a 110 bps increase in operating margin* to 12.5%
• Good margin* performance in all three Divisions despite challenging markets
• Strong free cash flow+ of £21.4 million after £7.9 million of restructuring spend
• Teradek acquisition performing well and complementing our Broadcast activities
• Following the successful restructuring, the streamlined business is strongly positioned
to benefit from any market upturn
• Profit before tax increased by 26.7% to £20.4 million
• Recommended 4.5% increase in the total dividend for the full year
Vitec Group - 2013 Financial Highlights
Revenue
£315.4m
Operating profit*
£39.5m
Adjusted basic
earnings per share*
56.1p
Net debt
£61.5m
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Videocom Division
Imaging Division**
Services Division
Revenue
£143.1m
Operating profit*
£17.9m
Operating margin*
12.5%
Down
2.1%
Revenue
£141.2m
Up
13.3%
Up
170 bps
Operating profit*
£20.1m
Operating margin*
14.2%
Down
10.6%
Down
12.2%
Down
30 bps
Revenue
£31.1m
Operating profit*
£1.5m
Operating margin*
4.8%
Down
5.8%
Up
25.0%
Up
120 bps
* Before restructuring costs and charges associated with acquired businesses. Profit before tax and adjusted earnings per share are also before disposal of
business. In 2010 and 2009 before significant items.
** Excluding the Staging business that was disposed of during 2012.
+ Cash generated from operations in the financial year after net capital expenditure, net interest and tax paid.
Annual Report & Accounts 2013Strategic ReportRemuneration ReportCorporate ResponsibilityCorporate GovernanceIndependent Auditor’s ReportFinancial Statements
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Chairman’s Statement
Chairman John McDonough
reports on good performance in
challenging markets
The Group has delivered a good performance
in 2013 in challenging markets. We have
restructured our business and are well positioned
to benefit from any upturn in our markets.
Chairman’s Statement
www.vitecgroup.com/chairman
Governance Report
Turn to page 62
Performance
I am pleased to report that the Group delivered a good financial performance during
2013 despite challenging markets. We have strengthened our business and delivered
further improvement in our margins through streamlining how we do business and
managing our cost base. This has been achieved by delivering a complex international
restructuring programme which will deliver long-term benefit to the Group.
The Board has continued to focus upon the Group’s strategy which provides
vital products and services that support the capture of exceptional images to our
customers in the Broadcast & Video, Photographic, and Military, Aerospace and
Government markets. We continued to make good progress in supporting our
customers through our on-going investment in new product development and
the provision of market-leading products. We also acquired Teradek in August
2013 which is a world leading provider of wireless video devices used by
broadcasters, businesses and web channels to transmit images wirelessly.
Vitec’s longer-term growth prospects continue to be positive and we are well
positioned to benefit from any upturn in our markets.
Dividend
As a result of our financial performance in 2013 and our confidence in the future,
the Board has recommended a final dividend of 14.1 pence per ordinary share
(2012: 13.5 pence). The final dividend, if approved by shareholders at the 2014
Annual General Meeting to be held on Thursday, 8 May 2014, will be paid on
Friday, 9 May 2014. This will bring the total dividend for 2013 to 23.0 pence
(2012: 22.0 pence).
Recommended final dividend
per share
14.1 pence
Interim dividend per share
8.9 pence
Total dividend for 2013
23.0 pence
Up
4.5%
The Vitec Group plc
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The Board has also taken further steps to embed the right
culture throughout the Group by re-communicating the
Company’s Code of Business Conduct to all employees.
This clearly sets out the values and beliefs that we expect of
all our people. We will continue to take steps to ensure that
these values and beliefs are fully understood and acted upon
since they underpin the long-term value of Vitec.
Annual General Meeting
The Company’s Annual General Meeting will be held on
Thursday, 8 May 2014 and the Notice of Meeting and
explanatory notes accompany this Annual Report and
can also be found on our website. For the first time we are
reporting on compliance with new regulations applying to
Directors’ remuneration and we will be putting two resolutions
to shareholders. The first binding resolution will be on the
Directors’ remuneration policy for the period from the 2014
Annual General Meeting through to the 2017 Annual General
Meeting. The second resolution will be an advisory vote on the
annual remuneration paid to Directors in 2013. We propose to
conduct a poll vote on all resolutions to ensure that the views
of all shareholders are taken into account when conducting
voting at the Annual General Meeting. I look forward to the
opportunity to meet as many of our shareholders as possible
at this meeting.
Our people
Finally, on behalf of the Board I would like to thank all of our
people for their significant contribution to our success over the
past year. We have implemented major restructuring initiatives
during 2013 and the successful and timely delivery of these as
well as the financial performance of the Company has been
down to the passion, hard work and effort of all our people.
John McDonough CBE
Chairman
25 February 2014
Board and governance
We have made good progress in delivering a clear succession
plan for our Board. This includes several changes amongst the
independent Non-Executive Directors to ensure that we have
a strong, diverse Board with relevant experience to support
the Company in delivering its growth strategy. During 2013,
Maria Richter, John Hughes and Simon Beresford-Wylie stood
down as independent Non-Executive Directors and I would like
to thank each of them for their considerable contribution to
Vitec. In their place we are very pleased to have secured the
services of Mark Rollins, Lorraine Rienecker and Christopher
Humphrey as independent Non-Executive Directors. These
individuals serve as executives in other organisations and bring
with them a wide range of experience of growing businesses
in global markets. We also appointed Carolyn Fairbairn as
Chairman of the Remuneration Committee with effect from
1 December 2013 in succession to Simon Beresford-Wylie.
Carolyn will lead the process to ensure our executive
remuneration policy appropriately rewards our executives for
the execution of strategy and long-term growth in shareholder
value. We will continue to review the composition of the Board
to ensure that we have the right mix of skills and appropriate
diversity to set the strategic direction of your Company and
oversee its successful implementation.
The Governance Report on pages 62 to 77 of this Annual
Report sets out in greater detail the operation of the Board
and its principal committees. However, I can report that we
have carried out an internal Board evaluation in 2013 and
determined that the Board and its individual Directors are
performing effectively. We will, in accordance with the UK
Corporate Governance Code (the “Code”), conduct an
external Board evaluation in 2014 and will report upon
this in next year’s Annual Report.
The Board in 2013 has focused upon the Group’s strategic
direction and performance particularly against challenging
markets. We will continue to develop the Group’s strategy
and report upon progress. The Board continued the practice
of setting itself objectives in 2013 and agreeing new objectives
for 2014. Performance against the 2013 objectives and details
of the 2014 objectives are given in the Governance Report.
We have considered regulatory changes impacting corporate
reporting and executive remuneration and this Annual Report
complies with these changes taking into account emerging
best practice. Notably, the Board has determined that the
2013 Annual Report, taken as a whole is fair, balanced and
understandable. It provides the information necessary for
shareholders to assess the performance, strategy and
business model of the Company in accordance with the
Code. The Governance Report sets out the process
followed to reach this conclusion.
Annual Report & Accounts 2013Strategic ReportRemuneration ReportCorporate ResponsibilityCorporate GovernanceIndependent Auditor’s ReportFinancial Statements
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Vitec Group overview
Vitec is an international Group principally serving
customers in the Broadcast & Video, Photographic and
Military, Aerospace and Government (MAG) markets.
Vitec is based on strong, well known, premium brands
on which its customers worldwide rely.
The Vitec Group is organised into three Divisions:
Find out more
www.vitecgroup.com/about_us
What we do
Turn to page 6
World class products and services
Turn to page 7
Our business model
Turn to pages 8 and 9
Videocom Division
Imaging Division
Services Division
Videocom designs and distributes
systems and products used
in broadcasting and live
entertainment, film and video
production and MAG.
Imaging designs, manufactures
and distributes equipment and
accessories for photography
and video.
Services provides equipment
rental, workflow design and
technical support to TV
production teams and film crews.
2013 Revenue
£143.1m
2013 Revenue
£141.2m
2013 Revenue
£31.1m
% of Vitec Group 2013 Revenue
% of Vitec Group 2013 Revenue
% of Vitec Group 2013 Revenue
45%
45%
10%
2013 average number of employees
2013 average number of employees
2013 average number of employees
921
781
Brands
Avenger, Colorama, Gitzo, Lastolite, Manfrotto,
National Geographic*
175
Brands
Bexel
Brands
Anton/Bauer, Autoscript, Camera Corps,
Haigh-Farr, IMT, Litepanels , OConnor, Microwave
Services Company, Nucomm, Petrol, RF Central,
Sachtler , The Camera Store, Teradek, Vinten ,
Vinten Radamec
Products
Supports , bags , robotic camera systems,
equipment rentals (UK) , lighting, microwave
systems , mobile power, prompters, wireless
video devices
Products
Supports, bags, lighting
Products
Equipment rentals (US), support services
for TV production
Find out more about our Videocom Division
Turn to page 24
Find out more about our Imaging Division
Turn to page 26
Find out more about our Services Division
Turn to page 28
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* National Geographic bags are manufactured and distributed under licence.
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Find out more
www.vitecgroup.com/locations
Our operations
US
Costa Rica
UK, Netherlands,
Germany, France, Italy
Israel
China
Japan
Singapore
Brazil
Our global footprint
Revenue by destination
• We manufacture and distribute our products and services from
our facilities in 12 countries
• We employ around 1,800 people in our business
• Our products and services are sold in over 100 countries
North America 45%
Europe 31%
Asia Pacific 18%
Rest of the
world 6%
4
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1 Autoscript and Vinten Radamec at a
broadcast studio.
2 The new BeFree tripod launched in 2013.
3 Bexel at the MetLife Stadium for the Super Bowl.
4 We have an experienced product sourcing team
based in Dongguan, China, that works closely
with our Asian suppliers.
5 In 2013 we held regional management conferences
in China, Italy, the UK and the US, allowing a wide
number of employees to hear first-hand updates
on key messages and core business priorities from
the Executive Directors and Operations Executive.
Annual Report & Accounts 2013Strategic ReportRemuneration ReportCorporate ResponsibilityCorporate GovernanceIndependent Auditor’s ReportFinancial Statements
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What we do
Vitec’s purpose is to support the capture of exceptional images in its chosen markets of
Broadcast & Video, Photographic, and Military, Aerospace and Government (MAG). Our
products encompass a variety of technologies and are carefully designed to ensure that,
whatever the conditions, the image taker has the best equipment to “capture the moment”.
These technologies range from traditional mechanical engineered products, for example in
our manual camera supports businesses, through to electronics and software, for example
in our wireless businesses. Nonetheless the user is the same – an image taker, whether
an enthusiast, a professional cameraman for a broadcaster or corporate event, a wedding
photographer or a law enforcement officer.
In the markets we serve, our brands are often market leaders both in terms of the premium
product or service supplied and the share of the market our brands capture. Our products and
services have enabled some of the most amazing moments to be captured and shared.
Our purpose
Our 3 markets
Strategic priorities
To support the capture of
exceptional images
• Broadcast & Video
• Photographic
• Military, Aerospace
& Government (MAG)
• Optimising product
development
• Growth markets
• Geographic expansion
• Improving margins
• Strong cash generation
• Investing in talent
Progress on our strategic priorities
Optimising product
development
• Investment in product development
maintained at 4% of product sales
(2012: 4%)
• Developed high-power LED
products and now offer a complete
range of LED lighting for broadcast
studio applications
• Launch of expanded Manfrotto
bag ranges including professional
range to capitalise on strength of
Manfrotto brand
• Strengthened position among
professional photographers with
new 190 series tripod and BeFree
lightweight tripod, well-received
by market
Growth markets
• Expanded further into the
growing pro video segment
of the Broadcast & Video
market with the Ace tripod
• Acquisition of Teradek in
the fast-growing wireless
video devices market
• Engaged with new
entrants to photography
with accessories for
smartphones, the PIXI mini
tripod and other products
targeted at this consumer
segment
* Before restructuring costs and charges associated with acquired businesses.
+ Cash generated from operations after net capital expenditure, net interest and tax paid.
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World class products and services
We design, manufacture
and supply high quality,
world class, branded
products and services
that enable end users
to capture exceptional
images.
Our products primarily
attach to or support a
camera – primarily for
broadcast, video and
photographic applications.
We also provide high-end
technical services to major
broadcasters.
We are structured as one
group; our products serve
a variety of end users and
are offered as a cohesive
package.
View Vitec brands
www.vitecgroup.com/brands
Supports
(pedestals, tripods and heads)
Bags
Camera accessories
- Avenger
- Gitzo
- Manfrotto
- OConnor
- Sachtler
- Vinten
- Manfrotto
- National Geographic**
- Petrol
- OConnor
- Manfrotto
Distribution, rental & services
Lighting & controls
Wireless systems
- Bexel
- Camera Corps
- The Camera Store
- Colorama
- Lastolite
- Litepanels
- Manfrotto
- Haigh-Farr
- IMT
- Microwave Service Company
- Nucomm
- RF Central
- Teradek
Mobile power
Prompters
Robotic camera systems
- Anton/Bauer
- Autoscript
- Camera Corps
- Vinten Radamec
** Manufactured and distributed under licence.
Geographic
expansion
Improving
margins
Strong cash
generation
Investing
in talent
• Continued to drive sales
internationally through
our global sales team
• Continued to focus on
growing sales into the
Asia-Pacific region that
accounts for 18% of
our global sales
• Worked with multi-
national retail and
broadcast customers
to support them
internationally
• Group operating
• Expanded further into
Pro Video segment
margin* has increased
of the Broadcast &
by a further 110bps
Video market with the
to 12.5%
acquisition of Teradek
• Restructuring delivered
• Engaged with
on schedule with
new entrants to
£6.2 million benefit to
photography with
profitability during 2013
accessories for
• Further investments in
smartphones such as
processes including
the Pixi
an in-house painting
plant within the Imaging
Division to improve
operational efficiency
• Free cash flow+ increased
to £21.4 million (2012:
£10.8 million) reflecting
continued focus on working
capital management
• Monitored our working
capital using a variety
of key performance
indicators including:
- Inventory days falling to
106 days (2012: 113 days)
- Trade receivable days
falling to 39 days (2012:
43 days)
- Trade payable days
increasing to 49 days
(2012: 42 days)
• Italian sites awarded
the “Top Employers”
certification by the Top
Employers Institute for
their high employment
standards
• Costa Rican facility
achieved “Great Place
to Work” accreditation
• Proportion of women
employed across the
Group increased to
31% in 2013 (2012:
25%)
Annual Report & Accounts 2013Strategic ReportRemuneration ReportCorporate ResponsibilityCorporate GovernanceIndependent Auditor’s ReportFinancial Statements
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Our business model
At the Group level
At the Divisional level
Everything we do is
underpinned by our values
We create value by:
We create value by:
We create value by:
Strategy
We set Group and Divisional strategy in
the medium term, especially as regards
markets served, customer segments
and products supplied.
Budgeting and monitoring
Vitec sets Group and Divisional budgets
annually and regularly reviews Divisional
performance during the year. This
includes regular forecasts to ensure
that the financial performance is clearly
understandable and appropriate targets
are set.
Investor relations
We communicate our strategy,
performance and outlook with our
investors on a regular basis.
Treasury and tax
Vitec manages its financing, hedging and
tax planning activities centrally to ensure
that the Group has an appropriate
structure and funding to support its
geographically diverse business.
Acquisitions and disposals
We buy businesses that provide a good
return with clear synergies such as
extending our technological, product
or geographic footprint. We dispose
of those businesses that do not fit
strategically or do not offer scope to
deliver attractive returns.
Compliance and governance
Vitec ensures that an effective
governance framework and policies
are in place to ensure a strong culture
of governance and ethical behaviour.
Risk management
We set an overall framework for
reviewing and assessing risk and taking
mitigating strategies as part of the
execution of our strategy.
Health and safety
Vitec sets policies to ensure a healthy,
safe and productive work environment
for all our employees, and ensures they
are complied with.
Talent management
We work across the Group to ensure we
have consistent policies, processes and
initiatives for acquiring, retaining and
engaging our best talent.
Receiving feedback from end users
Our businesses continually obtain feedback
on the markets, competitors and products
from end users as well as from research.
As our businesses are often the market
leader, this enables us to anticipate and
respond to developments to ensure our
brands remain renowned for their
premium offerings.
Designing and developing innovative
product and service offerings for
our brands
We are at the forefront of embracing
new technologies, products and materials
that result in innovative high-quality yet
cost-effective solutions. We have close
relationships with our customers and
end-users. This enables us to maintain
the premium positioning and pricing of
our branded products in our markets.
Sourcing and lean manufacturing
We procure materials from reputable
suppliers and produce our products
in efficient and environmentally friendly
operations and, where appropriate,
in lower cost countries such as Costa
Rica and China. The majority of our
operations are relatively low-volume,
small-batch processes.
Working with global logistics
providers
With distributors and end users across
the globe, we engage with a number
of leading logistics partners to ensure
responsive and timely delivery of our
products to the relevant geography.
Having a global distribution
and sales network to serve
our customers and end users
We market our products and services
through our own sales and marketing
teams. The majority of our sales are
conducted via a global network of
distributors, dealers and retailers who
sell on to end users. The breadth of
products and our strong brand heritage
means that our network of channel
partners is unrivalled in the markets
we serve.
Product excellence
Everything we make and do
is exceptional
Vitec products and services are
exceptional because they are delivered
by outstanding people. We set the
highest standards of technical
performance and aftercare, designing
solutions that do precisely what image-
makers need them to do. All our activities
reflect our obsession with quality.
Customer focus
We are nothing without
our customers
At Vitec, the focus is always on the
customer, allowing us to support them
no matter what changes and challenges
they face. If we respect our customers’
creative expertise, they will respect ours.
Creative solutions
We are constantly looking to break
new ground
At Vitec we learn fast and think forward,
looking for new ways to support our
customers and meet their needs.
To stay ahead of the game, our creativity
has to be applied to every aspect of our
business, not just our products. Our
passion, flair and ability to ask “why not?”
are at the heart of everything we do.
Collaboration
We work better when we work together
The closer we are to our colleagues and
customer contacts, the more successful
we will be. If we celebrate achievements,
share knowledge, pool resources, test
ideas and support each other, life will
be more rewarding and more satisfying.
Integrity
What you see is what you get
Commitment, fairness and honesty
towards our customers, our suppliers
and our own people. By being authentic
we develop loyalty and trust between
ourselves and all those we engage with.
The Vitec Group plc
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Read the Financial Review
on pages 18 to 21
Read about our engagement
with shareholders on page 72
Read about our
strategy and our
markets on
pages 6 to 16
i n g
g e t
t o r i n g
d
u
d m o n i
B
n
a
Investor
relations
Read the Financial
Review on pages
18 to 21
Strategy
v e l o p i n g
a n d
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Desig nin
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servic
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Distribution and sal e s
to our customers
Risk
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Read the Group
Chief Executive’s
Review on pages
10 and 11
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alth
afety
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Read
about employee
engagement
on page 59
Read about our Health &
Safety policy, practice and
statistics on page 58
Read the Corporate
Governance Report
on pages 62 to 77
Read about our principal
risks and their mitigations
on pages 22 and 23
Vitec’s strategy is to
focus on three markets
that offer good long-
term growth potential:
Broadcast & Video
Photographic
We provide high quality,
fail safe equipment
for broadcasters and
videographers
We provide a complete
range of creative
support equipment
for pro photographers,
photographic enthusiasts
and social recorders
Military, Aerospace
& Government (MAG)
We provide high
definition microwave
technologies and
antennas for mission-
critical applications
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Group Chief Executive’s Review
Group Chief Executive Stephen Bird
reviews strategy and performance
Vitec has continued to deliver its strategy and
performed well in challenging markets. Following
the successful implementation of our restructuring
plans, the Group has been streamlined and is well
placed to benefit from any upturn in our markets.
Group Chief Executive’s Review
www.vitecgroup.com/ceo
Chosen markets
www.vitecgroup.com/chosen_markets
Progress on delivering our strategy
We have continued to make good progress in delivering our
strategy of focusing on our core markets and supplementing
this with selective value-adding acquisitions.
stores and increased our penetration in consumer electronics
stores and mass merchandising outlets. We have continued to
grow our on-line sales to both the professional and consumer
segments and maintained or increased our market shares.
Within our Videocom Division we have further developed our
premium product and service offerings to Broadcast & Video
customers such as expanding our range of higher power LED
lights. We have a global sales team that provides a strong
international coverage and is now able to offer a full range
of products and services to our customers all over the world.
Our products and services were at the Sochi Winter Olympics
and will be at the FIFA World Cup in 2014.
Our product offering has been strengthened with the acquisition
of Teradek which is a world leading provider of wireless
video devices and platforms that are used by broadcasters,
businesses and web channels to transmit images wirelessly.
Teradek fits perfectly within our current product ranges, and
complements our existing video activities including its range
of broadcast microwave systems. There is significant scope
for Teradek’s products to be sold through Vitec’s global sales
and distributor network.
We have continued to make progress in developing
Videocom’s MAG activities with its mission-critical visual
communication and surveillance products for security and
defence applications. The business has delivered a $5.8 million
contract with the US Department of Justice in 2013. We have
also been successful in providing high quality application-
specific antennas on a significant number of programmes
including certain space projects.
Our Imaging Division supplies premium ranges of tripods, heads,
camera bags, and lighting supports and controls to professional,
hobbyist and amateur photographers. In a challenging market,
we have continued to serve the traditional photographic speciality
We launched a number of innovative products for both
professional and amateur users. We are pleased with the
initial sales of a number of new tripod and bag ranges that
were launched towards the end of 2013.
Our Services Division has improved its performance by focusing
on providing premium services and managing its cost base.
We will continue to drive the profitable growth of this business
which performs more strongly in years of significant sporting
events such as the Olympic Games in 2012.
2013 performance overview
Vitec has delivered an improvement in operating profit* and
margins* during 2013 in challenging markets. We streamlined
the business while continuing to bring innovative new products
to market and maintaining or increasing our share in our
key markets.
Revenue decreased by 8.7% to £315.4 million (2012:
£345.3 million) reflecting the challenging market conditions
and the absence of the London Olympics that contributed
approximately £10 million of sales in 2012. Despite this decline
in revenue, the continued focus on driving profitability has led
to a £0.2 million increase in operating profit* to £39.5 million
(2012: £39.3 million) and a 110bps improvement in operating
margin* to 12.5%.
Within our Videocom Division, the Broadcast & Video businesses
performed well, improving operating margins* despite lower
volumes through pricing initiatives, tight cost management and
the initial benefits of streamlining actions. The performance
of this Division also included a strong initial performance from
* Before restructuring costs and charges associated with acquired businesses. Profit before tax and adjusted earnings per share are also before disposal of business.
+ Free cash flow: cash generated from operations in the financial year after net capital expenditure, net interest and tax paid.
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the Teradek acquisition. Our MAG activities, which represent
a relatively small part of this Division, made good progress
including a $5.8 million contract with the US Department of
Justice that was delivered in the year. The Imaging Division
maintained a similar margin* percentage despite lower sales.
Towards the end of the year, this Division launched a number
of new products that are already performing well. The Services
Division delivered an improvement in profit* and operating
margin* during the year despite it being a non-Olympic year.
Operating expenses* were £8.8 million lower than in 2012
at £99.1 million. This reflects focused cost control and
£4.4 million of initial benefit from restructuring activities.
The total benefit from restructuring was £6.2 million during
the year with £1.8 million of the savings included in
gross margin.
Profit before tax* of £35.6 million was £0.6 million lower than
the prior year following a full year of the higher interest charges
from the renewal of credit facilities in mid-2012. Adjusted
earnings per share* increased by 0.5% at 56.1 pence per
share (2012: 55.8 pence per share). Group profit before tax
of £20.4 million (2012: £16.1 million) was after £11.4 million
of restructuring costs (2012: £nil) and £3.8 million charges
associated with acquired businesses (2012: £13.7 million).
Free cash flow+ was strong and increased by £10.6 million
to £21.4 million reflecting a continued focus on working capital
management. 2013 free cash flow+ is reported after £7.9 million
of cash outflows on restructuring activities. There was a total
cash inflow of £2.0 million (2012: £15.1 million outflow) after
outflows relating to acquisitions, purchases of shares to meet
share plan commitments and dividend payments.
Streamlining of our UK and international operations
During 2013, we strengthened the Group by streamlining our
UK and international operations and improving our business
processes. These complex projects have been delivered on
schedule and were substantially completed during the year.
The main projects were consolidating activities in the UK,
Israel and the US and the transfer of manufacturing from
the UK to Costa Rica.
As a result of these activities in 2013, there was a one-off
restructuring charge of £11.4 million (2012: £nil). There is a
remaining expense of approximately £1.0 million to fund the
completion of the projects in 2014 with the total restructuring
expenditure expected to be in line with our previous guidance.
The benefit of these restructuring plans to our profitability
in 2013 was £6.2 million. Cash outflows relating to
restructuring were £7.9 million in the year, with a further
outflow of approximately £4.0 million anticipated in 2014
to complete the streamlining activities.
Product development
We continue to invest in new products and enhancements
to our existing product ranges and I am pleased with the
new products that we have launched this year. The level of
product development collaboration across our Divisions has
also remained strong in 2013, including products such as the
LED Spectra light. Further examples of our new products can
be seen in the Divisional case studies on pages 25 to 28.
We continue to invest around 4% of Group product sales
into research and development.
Acquisitions and disposals
We acquired Teradek in the US in August 2013 for an initial
consideration of $14.8 million (£9.5 million). The business has
been integrated into our Videocom Division and is performing
well. We have a strong background in identifying, reviewing
and executing on acquisitions and will continue to evaluate
opportunities as and when they appear.
Market overview
An overview of our three markets is provided on the
following pages.
Approval of Strategic Report
We have provided information in this report on our strategy,
business model and objectives which is contained in the
Strategic Report. You will find the Strategic Report on pages
1 to 31 and its content has been approved by the Board.
Outlook
Our operational outlook for 2014 remains positive; expected
benefits include: a full year impact from having streamlined
our business; a full year’s ownership of Teradek; and increased
activity arising from the Winter Olympics and FIFA World Cup.
Foreign exchange movements particularly from the US Dollar
and Japanese Yen are expected to negatively impact our
results. Although our markets remain challenging, we are
well positioned to benefit from any upturn.
Stephen Bird
Group Chief Executive
25 February 2014
Market updates
Turn to page 12
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Market update
Broadcast
& Video
Vitec supplies the Broadcast & Video
market with a variety of products and
services to assist in the capture and
transmission of video images.
The Broadcast market comprises products and services
used in the production of programmes for broadcasters
and cinematographers, whether in studio or on location.
Adjacent to this market is the professional video segment,
which comprises products and services used in the production
of video by non-broadcasters such as education and religious
establishments, corporate entities and governmental bodies.
The products manufactured by Vitec are camera supports
(pedestals, tripods and heads), robotic camera systems, bags,
LED lighting, prompters, mobile power (batteries and chargers)
and wireless video transmission systems (using microwave,
wi-fi and cellular technology). The services provided by Vitec
include broadcast equipment rental and installation.
We estimate that the Broadcast & Video market for products
and services supplied by Vitec is worth around £700 million
annually. This includes the traditional broadcast and film
markets as well as the video production market.
The growth drivers
Increase in video
There has been a significant increase in the amount of video
being shot globally. This has been stimulated by the ease
with which videographers can capture, edit and distribute
content, for example over the internet and the rise in popularity
of hand-held devices. It has also grown thanks to the increased
video capabilities of photographic cameras. The growth in video
production and the subsequent shortening of the replacement
cycle for cameras affects demand for our products and services.
High definition transition and higher image quality
Television production is increasingly being shot in high
definition which has resulted in studios being upgraded,
camera replacement cycles shortening and increased demand
for our products. The first wave of high definition is largely
complete in certain countries. As producers seek to shoot
higher quality images, ultra high definition cameras are being
manufactured although the timing and extent of their adoption
and thus the effect on demand for our products is uncertain.
Chosen markets
www.vitecgroup.com/chosen_markets
Vitec has the premium
position and largest
market share,
providing many of
the leading products
through our brands
to the Broadcast &
Video markets.
Broadcasters’ capital expenditure
Broadcasters’ ability and willingness to incur capital expenditure
on the construction or refurbishment of studios depends partly
on their financial performance. Those broadcasters reliant on
subscription income have performed well and have expanded
with new operations globally. Likewise in emerging markets
such as China and the states of the former Soviet Union, there
has been a desire to upgrade old facilities and the financial
capability to do so. Those broadcasters reliant on advertising
expenditure have largely recovered since the downturn but tend
to be more susceptible to macroeconomic conditions. The
savings and efficiencies offered by LED lighting compared with
traditional lighting drive the replacement of those products too.
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Key Trend:
Content hours uploaded
to YouTube every minute
120
100
80
60
40
20
0
2007
2008
2009
2010
2011
2012
2013
Source: YouTube
Vitec market position
Camera supports
With our multiple brands, comprising Vinten, Sachtler,
OConnor and Manfrotto, providing broadcast and video
manual supports, we have the premium position and largest
market share. Vinten mainly operates in the broadcast studio
segment, Sachtler and Manfrotto in the broadcast location
and video segments and OConnor in the film segment.
We also supply robotic camera systems mainly for news
and sports applications through our Vinten Radamec and
Camera Corps brands.
Bags
With our Petrol and Kata brands, we are the number one,
by value, in the supply of bags for the video segment.
Lighting
Litepanels led the way in the adoption of LED lighting in the
video segment and “on location” for broadcast. It is now
also the leader in the use of LEDs in broadcast studios.
Mobile power
Anton/Bauer is the leading brand with a number one position,
by value, in the after-market for camera batteries and chargers
in the broadcast sector.
Wireless systems
IMT is number two in the broadcast segment in the US for
microwave systems. Teradek has the largest installed base of
equipment in the US video segment for cellular and wi-fi systems.
Prompting
Autoscript is the number one, by value, for prompting
equipment to the broadcast market.
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14
Market update
Photographic
Vitec supplies this market with a variety of products for
use alongside a photographic camera.
These comprise products manufactured or sourced by Vitec, such as camera supports
(tripods and heads), bags, lighting supports, LED lights and lighting controls (for example,
umbrellas and reflectors), and third party products distributed by Vitec such as flashes.
The majority of our products are designed for use with an inter-changeable lens camera
(ILC) such as a single lens reflex (SLR) camera.
We estimate that the photographic market for product categories supplied or distributed
by Vitec is worth around £800 million annually. Approximately half of this market is
professional photographers and the remainder is consumers who have a keen interest
in photography or who simply want to record and share images. Photography continues
to attract new consumers as the number and type of image-taking devices increases
and the distribution of images via social media continues to grow in popularity.
The growth drivers
Vitec market position
Supports
With high quality and innovative products
sold under the Manfrotto, Gitzo and
Avenger names, we possess the premier
brands in photographic camera tripods
and heads. We are the clear leader in
terms of market share by value globally.
Bags
Sold under the Manfrotto, Kata and, under
licence, the National Geographic brands,
we have a small share in this large product
category. We have grown market share
and believe that it provides opportunities
for further growth.
Lighting
In lighting supports, primarily used in the
professional sector, Manfrotto is the market
leader by value. In lighting controls, we
are the market leader in EMEA with the
Lastolite brand and are gaining share in
the US. In lighting, the use of LEDs is
gaining prominence as a more efficient
replacement for traditional continuous
lighting and Manfrotto is at the forefront
of their introduction.
Sales of cameras with inter-changeable
lenses (ILCs)
After several years of rapid growth, ILC
unit sales in 2013 were 15% lower than in
2012 according to the Camera & Imaging
Products Association (CIPA) although there
were major regional variations. The installed
base of ILCs continues to grow globally
and CIPA expects shipments of ILCs
to be broadly stable in 2014.
The new social recorders
There is a new population of photographers
who are interested in recording images.
These “social recorders” are using smart
phones with high mega-pixel lenses to take
images and share them using social media
platforms. The emergence of a new middle
class in emerging market countries has
contributed significantly to this new
population of photographers. As these
new entrants become more interested
in photography, they migrate to ILCs
and become more likely to acquire
our products for use with that ILC.
New distribution channels
The emergence of new distribution
channels for photographic products,
such as on-line and in consumer electronics
stores, has helped stimulate demand
from new customers. The growth of sales
through on-line channels is continuing.
Chosen markets
www.vitecgroup.com/chosen_markets
Vitec has the leading
premier brands
in photographic
camera tripods,
heads and bags
for the professional
and consumer
photographer.
The Vitec Group plc
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Key Trend:
Shift in sales channels with online now the primary
distribution channel
Internet
Consumer eletronics
Speciality dealers
Others
2009
8%
15%
35%
2013
35%
8%
29%
42%
28%
Source: Management estimates based on GfK market data.
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16
Market update
Military,
Aerospace and
Government
Vitec manufactures and supplies the MAG
market with microwave transmitters,
receivers and antennas to:
• Law enforcement agencies such as police departments –
for example to send video signals from helicopters to
ground patrols.
• Three letter agencies such as the US Department of Justice
who use microwave equipment for surveillance purposes.
• Defence and Space customers where microwave systems
are used to recognise and assess threats more effectively
and where high quality, application specific antennas are
needed for challenging communication environments.
We estimate this market to be worth around £400 million annually.
Our MAG sales are primarily dependent on the level and timing
of investment by the US Government and key US Government
agencies. There continues to be investment in the market that
we serve but the timing of these investments is uncertain.
Product name
Vitec manufactures
and supplies the
Military, Aerospace
and Government (MAG)
market with microwave
transmitters, receivers
and antennas.
The growth drivers
Vitec market position
There is an increasing demand for real-time high quality
video images to be transmitted and received wirelessly by
law enforcement agencies and military users. This technology
provides users with greater situational awareness, for example
for crowd control, and, in unmanned applications, minimises the
potential loss of human life.
As defence products and space vehicles become more
advanced, there is a need for more sophisticated antennas to
send signals back to command and control centres. Haigh-Farr’s
Wraparound™ antenna concept has enhanced the performance
capabilities of aircraft, missiles and spacecraft worldwide.
The market remains challenging, but there are good longer-term
opportunities in the niche market of wireless transmission of
real-time, high quality information.
Microwave transmitters and receivers for
video applications
Vitec’s IMT business is the number two player globally in the
MAG market for microwave transmitters and receivers for video
applications (excluding the in-house operations of prime defence
contractors). IMT is the market leader in the US three letter
agency segment.
Antennas for airborne applications
Vitec’s Haigh-Farr business is the number two player globally
in the MAG market for conformal antennas for airborne
applications (excluding the in-house operations of prime
defence contractors). Haigh-Farr is also joint number two
in conformal antennas for space vehicles.
Chosen markets
www.vitecgroup.com/chosen_markets
The Vitec Group plc
Our world class brands
For over 100 years, through every innovation in photography, film and digital
image-making, Vitec businesses have developed a powerful portfolio of brands
and products. These products have enabled some of the most amazing moments to be
captured under some of the most challenging conditions.
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Videocom Division
Broadcast & Video
MAG
Imaging Division
*
* National Geographic bags are manufactured and distributed under licence.
Services Division
All rights reserved. The above includes some of our trademarks and all names, characters, images, marks and logos shown are protected by national and international trademark, copyright and
other intellectual property laws, conventions, treaties and rights and are owned by The Vitec Group plc or its subsidiaries. Our marks and our interest in them are valuable commercial property
and will be protected from infringement where deemed necessary.
World class brands
www.vitecgroup.com/products
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Financial Review
Group Finance Director
Paul Hayes reviews performance
Revenue
£315.4m
Operating profit*
£39.5m
Adjusted basic earnings
per share*
56.1p
Down
8.7%
Up
0.5%
Up
0.5%
Vitec has performed well in challenging markets
and further improved its margins. We have
generated strong free cash flow and have
successfully streamlined the business.
Financial Review
www.vitecgroup.com/financial_review
Revenue
The Group’s revenue for 2013 at
£315.4 million was 8.7% lower than the
prior year (2012: £345.3 million). Revenue
included a £5.3 million contribution from
acquisitions offset by £8.2 million lower
revenue due to the disposal of the
non-core Staging business in 2012 and
approximately £10 million sales due to
the non-repeat of the London 2012
Olympics. On an organic basis, after
excluding the effect of £4.1 million of
favourable movements in exchange rates,
revenue fell by £31.1 million or 9.2%.
Operating profit
Operating profit* was £0.2 million higher
than prior year at £39.5 million, despite
the lower sales activity. On an organic
basis, operating profit* decreased by
£1.7 million after excluding £0.8 million
of contributions from acquisitions, a
£0.6 million operating loss at the Staging
businesses in 2012, and £0.5 million of
favourable exchange rate movements,
after hedging.
Operating profit* increased despite
the lower revenue as we have focused
on improving margins in the more
challenging macroeconomic environment.
This included £3.1 million of benefits from
pricing over commodity cost increases
(2012: £1.6 million), £6.2 million savings
from restructuring activities, and a further
£5.3 million reduction in operating
expenses during the year. As a result the
operating margin* increased by 110 bps
to 12.5%.
We maintained our investment in product
development and innovation at 4%
of Group product sales (2012: 4%).
Research, development and engineering
expenditure on a like-for-like basis was
£11.1 million (2012: £10.8 million) after
adjusting for capitalised expenditure of
£2.4 million (2012: £0.3 million) and
£0.7 million of amortisation (2012:
£0.6 million).
Management’s estimate of the main
drivers that reconcile the 2013 to the
2012 operating profit* are summarised
in the following table:
Operating profit* bridge
2012-13 Variance Analysis (£ million)
2012 Operating profit*
Gross margin effects:
- Volume, mix and efficiency
- Sales price less cost inflation
Restructuring savings
Underlying operating expenses
Acquisitions
Disposals
Foreign exchange effects:
- Translation
- Transaction after hedging
2013 Operating profit*
(16.3)
3.1
6.2
5.3
0.8
0.6
0.7
(0.2)
39.3
(1.7)
1.4
0.5
39.5
* Before restructuring costs and charges associated with acquired businesses; profit before tax and adjusted earnings per share are also before disposal of business.
The Vitec Group plc
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Net financial expense
Net financial expense totalled £3.9 million (2012: £3.1 million).
Interest payable was £3.6 million (2012: £3.2 million) and was
covered 15 times (2012: 17 times) by earnings before interest,
tax, depreciation and amortisation. Vitec has a $50 million
private placement facility. A new five year £100 million multi-
currency revolving credit facility was arranged in July 2012.
The higher finance costs predominantly reflect a full year of
the higher interest charges on the new facility.
Profit before tax
Profit before tax* decreased by £0.6 million to £35.6 million
(2012: £36.2 million). The reported profit before tax after
restructuring costs, charges associated with acquired
businesses and disposal of business increased by 26.7%
to £20.4 million (2012: £16.1 million).
Taxation
The effective taxation rate on operating profit* after net finance
expense has decreased to 31% (2012: 33%) reflecting the mix
of territories in which the profits arose. The Group’s tax charge
is higher than the UK statutory rate because the majority of its
profits arise in overseas jurisdictions with higher tax rates.
Earnings per share
Earnings per share before restructuring costs, charges
associated with acquired businesses and disposal of a
business was 56.1 pence per share (2012: 55.8 pence per
share) representing growth of 0.5%. This reflects the growth
in operating profit* partly offset by a higher net finance expense
and a higher weighted average number of shares. The basic
reported earnings per share was 31.9 pence per share
(2012: 13.6 pence per share).
Acquisitions and disposals
In August 2013, Vitec acquired Teradek in the US for an initial
consideration of $14.8 million (£9.5 million) after a $0.2 million
credit relating to post-completion adjustments for changes
in working capital. This comprised net cash consideration
of $11.3 million (£7.3 million), the issue of $2.0 million
(£1.3 million) of new Vitec ordinary shares to be held in escrow
for two years post-completion, and $1.5 million (£0.9 million)
to be paid to certain key employees in cash over a two year
period after completion.
$3.2 million (£2.1 million) of deferred consideration is to be paid
in 2014 in relation to the results of Teradek for the year ended
31 December 2013. Up to a further $11.0 million (£7.0 million)
is payable contingent upon the achievement against stretching
annual EBIT targets for the years ending 31 December 2014
and 2015.
The acquisition strengthens Vitec’s product offering particularly
to the growing number of independent videographers and
business users, and will complement our existing video
activities including our range of broadcast microwave systems.
Teradek operates as an autonomous business unit within the
Videocom Division.
During the second half of 2012 Vitec sold its Staging business
which had previously been included in the Imaging Division.
Financial key performance indicators
The Board and Operations Executive monitor a number of financial key performance indicators (KPIs), to measure our
performance over time. Targets for these KPIs are set annually during our budgetary process and are in line with our
strategic objectives:
KPI Measure
2013
2012
Definition/Calculation
Delivering value to shareholders
Basic earnings per share*
Return on sales*
Free cash flow
56.1p
55.8p
12.5%
11.4%
£21.4m
£10.8m
Profit for the financial year after tax, before restructuring costs, charges
associated with acquired businesses and disposal of business divided by
the weighted average number of shares in issue during the financial year.
Operating profit for the financial year before restructuring costs and charges
associated with acquired businesses, divided by revenue for the financial year.
Cash generated from operations in the financial year after net capital
expenditure (including capitalised software and development costs),
interest and tax paid in the financial year.
Controlling our working capital
Working capital to sales
16.5%
20.0%
Inventory days
106 days
113 days
Trade receivable days
39 days
43 days
Trade payable days
49 days
42 days
Growing the business
Constant currency organic revenue growth
(9.2)%
(1.2)%
Constant currency organic operating
profit* growth
(4.2)%
4.2%
Working capital at the end of the financial year divided by annualised Q4
revenue. Working capital at the end of the financial year comprises net
inventories, trade and other receivables and trade and other payables.
Inventory, net of impairment provisions, at the end of the financial year divided
by Q4 cost of sales (before exchange gains/losses) times number of days in Q4.
Trade receivables, net of impairment provisions, at the end of the financial year
divided by Q4 revenue times number of days in Q4.
Trade payables at the end of the financial year divided by Q4 cost of sales
(before exchange gains/losses) times number of days in Q4.
Constant currency revenue of the current financial year (excluding external
revenue from acquired businesses) divided by total revenue of the prior
financial year (excluding revenue from divested businesses) less 1 times 100%.
Constant currency operating profit* of the current financial year (excluding
operating profit from acquired businesses) divided by operating profit* of the prior
year (excluding operating profit from divested businesses) less 1 times 100%.
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Financial Review continued
Restructuring costs
In 2013 there was a restructuring charge of £11.4 million
(2012: £nil) relating to activities to streamline our operations
and improve our processes. Restructuring charges include
redundancy payments, closure costs, transfer of manufacturing
and project management costs together with specific stock
write offs. Of the total charge, £4.5 million is included in cost of
sales with the balance of £6.9 million charged within operating
expenses. These projects have been delivered on schedule and
were substantially completed during the year. The main projects
have included the consolidation of activities in the UK, Israel
and the US and the transfer of manufacturing from the UK
to Costa Rica.
The benefit of these restructuring plans to our profitability
in 2013 was £6.2 million which was at the top end of our
expectations as outlined in the November 2013 Interim
Management Statement. Cash outflows relating to
restructuring were £7.9 million in the year.
Charges associated with acquired businesses
The 2013 charges relate to the Group’s acquisition activities
and amortisation of previously acquired intangibles. In 2012
there was also a one off non-cash impairment charge
relating to goodwill.
The amortisation of acquired intangibles of £2.6 million (2012:
£3.6 million) related to: Manfrotto Lighting (formerly Lastolite)
acquired in March 2011; Haigh-Farr acquired in December
2011; Camera Corps acquired in April 2012; and Teradek
acquired in August 2013.
Transaction costs of £0.4 million were incurred in relation
to the acquisition of Teradek (2012: £0.3 million in relation
to the acquisition of Camera Corps).
Contingent consideration of £0.8 million was accrued during
the year to be paid to the previous owners of Haigh-Farr in
relation to their 2013 performance targets (2012: £1.2 million).
Cash flow and net debt
Cash generated from operating activities was strong at
£52.4 million (2012: £38.4 million) with the Group maintaining
a focus on cash generation.
The Group uses a number of key performance indicators to
manage cash including the percentage of working capital
to sales, inventory days, receivable days and payable days.
Inventory, trade receivable and trade payable days are stated
at year-end balances; inventory and trade payable days are
based on Q4 cost of sales (excluding exchange gains/losses),
while trade receivable days are based on Q4 revenue.
The working capital to sales metric has decreased to 16.5%
(31 December 2012: 20.0%) and overall working capital
decreased by £8.6 million (2012: £14.9 million increase).
Trade receivables days decreased to 39 days (2012: 43 days),
reflecting strong cash collection. Trade and other receivables
decreased by £1.8 million accordingly (2012: £4.4 million
increase) and the ageing remained good and well controlled.
Inventory levels decreased by £4.9 million (2012:
£1.3 million decrease) to £55.3 million at the year-end,
reflecting management focus throughout the year in this area.
Inventory days decreased to 106 (2012: 113 days).
Trade payable days increased to 49 days (2012: 42 days)
and there was a £3.1 million overall increase in trade and
other payables against a relatively low balance at the end
of 2012 (2012: £11.8 million decrease).
Capital expenditure, including capitalised software and
development costs, totalled £22.7 million (2012: £15.5 million),
of which £11.8 million (2012: £7.7 million) related to rental
assets including £3.8 million relating to the 2014 Winter
Olympics. This was partly financed by the proceeds from
rental asset disposals of £3.5 million (2012: £1.6 million).
Overall capital expenditure was equivalent to 1.6 times
depreciation (2012: 1.1 times) and included investments
in manufacturing processes and production tooling.
Net tax paid in 2013 of £8.5 million was lower than in 2012
of £10.8 million mainly due to lower payments in Germany
and the UK partially offset by higher payments in Italy.
As a result, free cash inflow+ increased by £10.6 million
to £21.4 million (2012: £10.8 million).
Free cash flow+
Operating profit*
Depreciation(1)
Changes in working capital
Restructuring costs (2013 plans)
Other adjustments(2)
Cash generated from operating activities
Purchase of property, plant and equipment
Capitalisation of software and development costs
Proceeds from sale of property,
plant and equipment, and software
Interest paid
Tax paid
Free cash flow+
Year ended Year ended
2012
£m
2013
£m
39.5
14.3
8.6
(7.9)
(2.1)
52.4
(19.3)
(3.4)
3.8
(3.6)
(8.5)
21.4
39.3
14.2
(14.9)
-
(0.2)
38.4
(14.2)
(1.3)
1.8
(3.1)
(10.8)
10.8
+ Cash generated from operations after net capital expenditure, net interest
and tax paid.
(1) Includes depreciation and amortisation of capitalised software and
development costs.
(2) Includes change in provisions, share based charge, gain on disposal of
property, plant and equipment, fair value derivatives and transaction costs
relating to acquisitions.
The Vitec Group plc
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Net debt
(£m)
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65
60
55
50
45
40
35
Free
cash flow
Transactions
in own
shares
Exchange
movements
Acquisitions
Dividends
Dec 12
Net
debt
Dec 13
Net
debt
£63.7m
(£21.4m)
£9.8m
£8.5m
£1.1m
(£0.2m)
£61.5m
There was a £8.5 million net cash outflow relating to
acquisitions and disposals during the year (2012: £10.6 million).
In 2012 there was also a cash outflow of £2.1 million relating
to the disposal of the Staging business. Dividends paid to
shareholders totalled £9.8 million (2012: £9.1 million) and there
was a net cash outflow in respect of shares purchased and
issued of £1.1 million (2012: £4.1 million). The net cash inflow
for the Group was £2.0 million (2012: £15.1 million outflow)
which, after £0.2 million favourable exchange (2011: £1.8
million favourable), decreased the net debt to £61.5 million
(2012: £63.7 million).
Treasury
Vitec manages its financing, hedging and tax planning activities
centrally to ensure that the Group has an appropriate structure
to support its geographically diverse business. It has clearly
defined policies and procedures with any substantial changes
to the financial structure of the Group, or to its treasury practice,
referred to the Board for approval. The Group operates strict
controls over all treasury transactions including clearly defined
currency hedging processes to reduce risks from volatility in
exchange rates.
The Group is hedging a portion of its forecast future foreign
currency transactions to reduce the volatility from changes in
exchange rates. Our main exposure relates to the US Dollar
and the table below summarises the contracts held as at
31 December 2013.
The Group does not hedge the translation of its foreign
currency profits. A portion of the Group’s foreign currency
net assets are hedged using the Group’s borrowing facilities.
Currency hedging
December
2013
Average
rate of
contracts
December
2012
Average
rate of
contracts
US Dollars sold
for Euros
Forward contracts
US Dollars sold
for Sterling
Forward contracts
$56.2m
1.32
$61.2m
1.29
$13.5m
1.56
$17.3m
1.57
Financing activities
The Group’s principal financing facility is a £100 million five year
multi-currency revolving credit facility involving five relationship
banks, expiring on 19 July 2017. At 31 December 2013,
£44.2 million (2012: £42.2 million) of the facility was utilised.
The Group has a $50 million (£30.2 million) private placement
facility which has been drawn down in two tranches of
$25 million each. This financing has a combined fixed interest
rate of 4.77% and is due for repayment on 11 May 2017.
The Group therefore has a total of £130.2 million of committed
facilities at the year end with drawings of £74.4 million
(31 December 2012: £73.0 million).
The average cost of borrowing for the year which includes
interest payable, commitment fees and amortisation of set-up
charges was 4.4% (2012: 4.0%) reflecting a net interest cost
of £3.6 million (2012: £3.2 million).
The Board has maintained an appropriate capital structure
without exposing the Group to unnecessary levels of risk
and Vitec has operated comfortably within its loan covenants
during 2013.
Foreign exchange
2013 operating profit* included a £0.5 million net favourable
foreign exchange effect after hedging, mainly due to more
favourable £/$ and £/e rates when compared to 2012.
Dividend
The Directors have recommended a final dividend of 14.1 pence
per share amounting to £6.2 million (2012: 13.5 pence per
share, amounting to £5.9 million). The dividend, subject to
shareholder approval at the AGM, will be paid on Friday, 9 May
2014 to shareholders on the register at the close of business
on Friday, 11 April 2014. This will bring the total dividend for
the year to 23.0 pence per share (up 4.5%).
Paul Hayes
Group Finance Director
25 February 2014
Annual Report & Accounts 2013Strategic ReportRemuneration ReportCorporate ResponsibilityCorporate GovernanceIndependent Auditor’s ReportFinancial Statements
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Financial Review continued
Principal risks and uncertainties
Vitec is exposed to a number of risk factors which may affect its performance. The Group
has a well-established framework for reviewing and assessing these risks on a regular
basis, and has put in place appropriate processes and procedures to mitigate against them.
However, no system of control or mitigation can completely eliminate all risks. The Board
has determined that the following are the principal risks facing the Group:
Change in risk profile
during 2013
Increased risk
Constant risk
Decreased risk
Specific Risk
Mitigation
Demand for Vitec’s products
As experienced during the year in our Imaging Division, demand
for our products may be adversely affected by many factors.
These include changes in customer and consumer preferences
and our ability to deliver appropriate products or to support
changes in technology. During the year we have continued to invest
in new product development and launched a number of new
products particularly in the second half of the year. Demand may
be impacted by competitor activity and demand in our target
markets particularly in the current challenging market environment.
Major contract awards
Our operating performance and cash flow may be dependent
on the timing of major contract awards. The timing of the award
of these contracts can be difficult to predict. In addition, the loss,
suspension or cancellation of contracts may impact trading
performance. In particular our MAG business has benefitted from
the award of some significant contracts from the US Government
during the year but could be adversely impacted by a lower level
of investment in the US defence budget.
New markets and channels of distribution
We value our relationships with our customers and closely monitor
our target markets and user requirements. We maintain good
relationships with all our key customers and make appropriate
investments in product development and marketing activities
to ensure that we remain competitive in each market. In support
of our new product launches, we have completed consumer
research before developing new products to ensure that they
are appropriately designed for our target markets.
We attempt to gain a good understanding of likely demand
through developing close relationships with our customers.
We also have a broad range of contracts that reduce our
dependence on any particular contract or customer. We actively
review our orders and trading outlook and manage our resources
in line with anticipated activity.
As we enter new markets and channels of distribution we may
achieve lower than anticipated trading volumes and pricing levels
or higher costs and resource requirements. This may impact the
levels of profitability and cash flows delivered. During the year we
have seen a continuation of the trend of sales increasingly being
made on-line rather than through stores.
We have a thorough process for assessing and planning the entry
into new markets and related opportunities. This includes marketing
and advertising strategies for our products and services. We
continuously assess our performance in these markets and the
related opportunities and risks. We adapt our approach taking
into account our actual and anticipated performance.
Restructuring activities
During 2013 we have restructured our business activities to
streamline our business and reduce our cost base. This includes
streamlining operations by downsizing selected activities in Europe,
Israel and the US and expanding manufacturing capabilities in
Costa Rica to further shift to lower cost manufacturing. These
activities have progressed well and will better position the Group
for the future. Our operating performance and cash flow has
reflected the effective delivery of these restructuring projects.
Acquisitions and disposals
In pursuing our business strategy we continuously explore
opportunities to enhance our business through development
activities such as strategic acquisitions and disposals. This involves
a number of calculated risks including: acquiring desired businesses
on economically acceptable terms; integrating new businesses,
employees, business systems and technology; and realising
satisfactory post-acquisition performance. During the year we
acquired Teradek which is being integrated into the Group and
is performing strongly.
Although many of these projects have been completed, some
will be finalised in 2014. We have and continue to manage these
projects by using experienced project management teams with
clearly defined project plans supported by regular reporting of key
tasks, financial performance and other metrics. We are separately
tracking the costs and benefits of these projects to ensure that we
can compare their actual performance against our expectations
while monitoring the underlying results of the business. We are
implementing these changes professionally including consulting
with our employees during this period of change.
We mitigate these risks by having a clear acquisition strategy with
a robust valuation model. Thorough due diligence processes are
completed including the use of external advisers where appropriate.
There is a clear focus on integrating acquired businesses and
monitoring post-acquisition performance. Over the past three years
the Group has made four acquisitions and completed the disposal
of a non-core business.
The Vitec Group plc 23
Specific Risk
Pricing pressure
Mitigation
We might experience pricing pressure including challenges in
raising prices, especially in the current economic climate, or not
recovering increases in commodity and other costs. If the price
of products does not at least recover movements in commodity
costs and other expenses and we are unable to reduce our
expenses, our results could be adversely affected.
We ensure that our product and service offering remains
competitive by investing in new product development, in
appropriate marketing and product support and improving the
management of supply chain costs. This allows us to support price
increases when required by working closely with our suppliers and
managing our expenses and cost base appropriately.
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Dependence on key suppliers
We source materials and components from many suppliers in
various locations and in some instances are more dependent on
a limited number of suppliers for particular items. If any of these
suppliers or subcontractors fail to meet the Group’s requirements,
we may not have readily available alternatives, thereby impacting
our ability to provide an appropriate level of customer service.
Dependence on key customers
We aim to secure multiple sources of supply for all materials
and components and develop strong relationships with our major
suppliers. We review the performance of strategically important
suppliers globally on an on-going basis.
Whilst the Group has a wide customer base, the loss of a key
customer, or a significant worsening in their success or financial
performance, could result in a material impact on the Group’s
results. As in previous years, Vitec has no customer that
accounts for more than 10% of sales.
We monitor closely our performance with all customers through
developing strong relationships, analysis of sales trends and
financial performance of our key customers. We continue to
expand our customer base including entering into new channels
of distribution to expand our portfolio of customers.
Employees
We employ around 1,800 people and are exposed to a risk of
being unable to retain or recruit suitable talent to support the
business. We manufacture and supply products from a number
of locations and it is important that our employees operate
in a professional and safe environment. The restructuring of
our business has impacted many of our employees and their
motivation and commitment has been important in delivering these
projects as well as the underlying performance of the business.
We recognise that it is important to motivate and retain capable
people across our businesses to ensure that we are not exposed to
risk of unplanned staff turnover. We fairly reward our employees and
have appropriate staff recruitment, appraisal, talent management
and succession planning strategies to ensure we recruit and retain
good quality people across the business. We take our employees’
health and safety very seriously and have appropriate processes in
place to allow us to monitor and address any issues appropriately.
Laws and regulations
We are subject to a comprehensive range of legal obligations in
all countries in which we operate. As a result, we are exposed
to many forms of legal risk. These include, without limitation,
regulations relating to government contracting rules, anti-bribery
provisions, competition, and health and safety laws in numerous
jurisdictions around the world. Failure to comply with such laws
could significantly impact the Group’s reputation and could
expose the Group to fines and penalties.
We have resources dedicated to legal and regulatory compliance
supported by external advice where necessary. We enhance our
controls, processes and employee knowledge to maintain good
governance and to comply with new laws and regulations such
as the provisions of the UK Bribery Act 2010. The Group has
processes in place to ensure that its worldwide business units
understand and apply the Group’s culture and processes to
their own operations.
Reputation of Vitec Group
Damage to our reputation and our brand names can arise
from a range of events such as poor product performance,
unsatisfactory customer service, and other events either within
or outside our control. We have many premium brands within
our niche markets as well as the reputation of the Group.
Exchange rates
The global nature of the Group’s business means it is exposed to
volatility in currency exchange rates in respect of foreign currency
denominated transactions, and the translation of net assets and
income statements of foreign subsidiaries and equity accounted
investments. The Group is exposed to a number of foreign
currencies, the most significant being the US Dollar and Euro. We
have also seen a significant weakening of the Japanese Yen that
will have a detrimental impact on our future reported performance.
We recognise the importance of our reputation and attempt to
identify any potential issues quickly and address them appropriately.
We recognise the importance of providing high quality products,
good customer service and managing our business in a safe and
professional manner. This requires all employees to commit to
and comply with the Vitec Code of Business Conduct which was
recommunicated to all employees in 2013.
We regularly review and assess our exposure to changes in
exchange rates. We reduce the impact of sudden movements
in exchange rates with the use of appropriate hedging activities
on forecast foreign exchange net exposures. We do not hedge
the translation effect of exchange rate movements on the Income
Statement or Balance Sheet of overseas subsidiaries.
Annual Report & Accounts 2013Strategic ReportRemuneration ReportCorporate ResponsibilityCorporate GovernanceIndependent Auditor’s ReportFinancial Statements
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Videocom Division
The Videocom Division
specialises in the supply of
high-quality broadcast equipment
principally for professionals
engaged in producing video
content for the media industries
globally: broadcast, film and live
events. This equipment is also
supplied to business and industry
or “pro-video” users including
corporate, educational and
religious entities. Videocom also
supplies mission-critical wireless
communication products to the
MAG market. Videocom is well
positioned due to its broad
geographical reach and premium
products. The acquisition of
Teradek has strengthened its
product offering particularly to the
growing number of independent
videographers and business
users, and will complement
our existing activities.
Operations
Videocom’s revenue for 2013 was
£143.1 million, a decrease of 2.1% on
2012 reflecting market conditions and
the absence of the London Olympics.
Despite this decline in sales, our
operating profit* increased by 13.3%
to £17.9 million and operating margin*
improved by 170 bps as a result of the
streamlining of the business and cost
control measures. The restructuring within
the Division is substantially complete,
including the relocation of certain
manufacturing activities to Costa Rica
and the streamlining of our US Broadcast
and MAG activities. We have simplified
and improved our systems and processes
within the Division reducing our costs
while improving our customer service.
Camera supports sales increased with
continuing strong demand particularly
for our premium robotics products.
Litepanels’ LED lighting products
benefitted from growth in the EMEA
and Asian markets. We are in the
process of broadening this product
range to maintain our leading position
in the market. Our Anton/Bauer mobile
power products experienced a
challenging video market while making
progress in supplying batteries and
chargers to medical carts in hospitals.
Camera Corps traded in line with
expectations, with a lower level of sales
activity reflecting the lack of significant
sporting events during the year. This
is in comparison to 2012 where the
business benefitted from the London
Olympics and the UEFA European
football championships.
The recently acquired Teradek business
performed well, delivering a strong
post-acquisition performance.
The Division’s MAG sales included
$5.8 million of transmitters and receivers
to the US Department of Justice. We
continue to bid for a number of significant
opportunities, though the timing of major
awards from US Government agencies
remains difficult to predict.
Revenue
£143.1m
Operating profit*
£17.9m
Operating margin*
12.5%
Down
2.1%
Revenue
2013
2012
Up
13.3%
Operating profit*
2013
Up
170 bps
2012
£143.1m
£146.2m
£17.9m
£15.8m
Operating margin*
2013
2012
12.5%
10.8%
* Before restructuring costs and charges associated with acquired businesses.
Our brands
Supports
OConnor
Sachtler
Vinten
Bags
Petrol
Robotic Camera Systems
Camera Corps
Vinten Radamec
Equipment Rentals UK
The Camera Store
Lighting
Litepanels
Wireless Systems
Haigh-Farr
IMT
Microwave Service Company
Nucomm
RF Central
Teradek
Mobile Power
Anton/Bauer
Prompters
Autoscript
The Vitec Group plc
Vitec in action
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Vitec acquires Teradek
The acquisition of Teradek in August 2013 reflects the Group’s
strategy of expanding into the fast growing pro-video segment
through innovative technology products that appeal to the next
generation of on-line content creators. Teradek supports a
range of broadcasters, businesses and web channels and has
recently launched the Bolt Pro 2000 to complement its existing
offerings, which enables low latency wireless transmission of
images over longer distances. Teradek operates within the
Videocom Division, and its products and technologies will be
sold through Vitec’s entire global sales distribution network.
Litepanels expands Fresnel series
Litepanels broadened its range of professional fixtures with
the addition of the award winning Sola 12 and Inca 12 LED
Fresnel lights. The Sola 12 and Inca 12 are Litepanels’ most
powerful LED Fresnels yet and produce full spectrum light
appropriate for broadcast and cinema production. These
products are ideally suited to replace older studio lighting
fixtures by offering the break-through benefits associated
with Litepanels’ products, including efficient power usage,
low heat emission, flicker free performance and a long life.
Consolidation of production in Costa Rica
Our streamlining activities included the transfer of certain of
our production lines from the UK to the newly expanded plant
in Costa Rica. The transfer has boosted Videocom’s capacity
in the Americas region where we have a skilled workforce
utilising state-of-the-art facilities and high precision machinery.
The transfer of manufacturing to Costa Rica is progressing
well and is on schedule. It is an important part of our global
operations strategy to continuously improve our manufacturing
footprint worldwide.
“Going Big” and streamlining our operations
“Going Big” is an international initiative, which was launched
at the start of 2013 to enhance our customers’ experience of
buying products from Videocom and to enhance management
and distribution collaboration across all our brands. Improved
systems were implemented across Videocom’s global
businesses resulting in simplified supply chains, unified goods
distribution, and improved internal systems and procedures.
Further efficiencies were realised through the consolidation
of our sales, marketing, global technical support and
executive leadership teams. The project has benefitted both
our customers and employees with Videocom acting as a
collaborative organisation, sharing one vision and one distinct
set of values, while retaining our entrepreneurial brand focus.
Vitec in action
www.vitecgroup.com/vitec_in_action
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Imaging Division
The Imaging Division provides
premium photographic and
increasingly video equipment
to both professional and
non-professional users.
The photographic and video
equipment consists primarily
of camera supports, tripods,
camera bags, lighting supports,
LED lights and lighting
accessories. We also supply
a range of tripods, bags, lighting
and other photographic products
to the consumer segment.
Our sales into the consumer market
continue to grow and are supported
by the introduction of a number of new
products including the PIXI mini-tripod
and an iPhone 5 version of the KLYP
that were launched into consumer
retail channels.
We saw growth in our Manfrotto branded
range of camera bags. We have launched
new ranges during the year including a
collection aimed at the professional user
with a premium shock-absorbing camera
system. The market for camera bags has
decreased during the year. Although our
overall sales of bags has declined, we
have grown our relatively small share
of this large market.
Operations
Revenue decreased by £16.7 million to
£141.2 million reflecting the continuation
of the more challenging photographic
market from the second half of 2012.
Independent market research data shows
that we at least maintained or grew our
market shares over the period.
Total operating profit* fell by 12.2%
to £20.1 million, yet operating margin*
was maintained at a similar level to 2012
as a result of price initiatives, restructuring
activities and a strong control over the
cost base. The restructuring activities
included the streamlining of our
operations in Israel, the UK and other
European activities, which are all
substantially complete.
We continue to develop new products
for our professional and hobbyist
customers including upgraded versions
of popular tripod ranges, such as the
Manfrotto 190 series, that now have
further new exclusive and stylish features.
The BeFree, a compact lightweight
support for travel photography, has also
been well-received by the market.
Our brands
Supports
Avenger
Gitzo
Manfrotto
Bags
Manfrotto
National Geographic***
Lighting
Colorama
Lastolite
Manfrotto
Revenue
£141.2m
Operating profit*
£20.1m
Operating margin*
14.2%
Down
10.6%
Revenue
2013
2012**
Down
12.2%
Operating profit*
2013
Down
30 bps
2012**
Operating margin*
2013
2012**
£141.2m
£157.9m
£20.1m
£22.9m
14.2%
14.5%
* Before restructuring costs and charges associated with acquired businesses.
** Excluding the Staging business that was disposed in 2012.
*** Manufactured and distributed under licence.
The Vitec Group plc
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Manfrotto’s new 190 tripod series: setting the industry
benchmark of the future
The 190 series is our most popular tripod range and in
October 2013 Manfrotto launched a brand new edition.
The new 190 series has a number of new exclusive and
stylish features such as a quick power lock system for fast,
complete extension of the legs, and operation of all locks
with one single hand movement. An easy link attachment
was added to expand the tripod’s capabilities by allowing
a LED light, reflector or other accessories to be attached.
Despite these additions, the new edition is more compact
than earlier versions. The new 190 has been nominated
Best Accessory of the year by the prestigious Amateur
Photographer Magazine.
New production processes
We have improved our manufacturing operations in our
Feltre, Italy site, with the inclusion of robotic machinery
and demand planning solutions to enhance production
and sourcing processes. A state-of-the-art painting facility
became operational in 2013 to insource a critical step of
the tripod manufacturing process that had previously been
outsourced. The new facility provides opportunities for product
customisation while reducing lead time and inventories.
Spectra - new professional LED lights
Further developments in lighting products led to the design
of a new portable lighting system: Spectra LED. The lights are
lightweight, compact and portable and can be used not only
on cameras, but also in combination with many other supports
such as stands, booms, clamps and arms. Spectra LEDs excel
in colour fidelity, reliability and lasting power and are marketed
for use both in studio or on location, for both photographers
and videographers. The Spectra was developed in conjunction
with our Litepanels business, emphasising our cross-divisional
product development.
Increased bag range for advanced
and professional users
Two new bag collections were launched in 2013 aimed
at professional and more adventurous photographers.
The two new lines feature superior internal protection,
called the Camera Protection System or CPS. CPS
comprises dividers made from 3D foam specially structured
to dampen and absorb any impacts, offering more protection
at the heart of the bag. The Manfrotto Professional Backpack
50 won the prestigious Red Dot Award in 2013 in the Product
Design category, an internationally recognised mark of quality
and innovation.
Vitec in action
www.vitecgroup.com/vitec_in_action
Annual Report & Accounts 2013Strategic ReportRemuneration ReportCorporate ResponsibilityCorporate GovernanceIndependent Auditor’s ReportFinancial Statements
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Services Division
Our Services Division provides
broadcast equipment rental and
technical support to television
production teams and film crews.
It provides a complete one-stop
solution for producers globally,
enabling customers to deliver the
most demanding projects. It also
enables Vitec to closely monitor
changes in technology and to
showcase our products. The
Division has a strategy to focus
on events where higher levels
of service are most needed.
Revenue for 2013 decreased by 5.8% to £31.1 million compared with 2012 which
benefitted from contracts to supply the London Olympics and the US Presidential
election. The underlying business performed well as we continue to focus on providing
premium solutions to broadcasters while streamlining the business. Despite the sales
decline the operating profit* increased by 25.0% to £1.5 million with operating margin*
120 bps higher including the benefits of disposing of surplus assets and streamlining
its operations.
Revenue
2013
2012
£31.1m
£33.0m
Revenue
£31.1m
Operating profit*
£1.5m
Operating margin*
4.8%
Operating profit*
2013
2012
Down
5.8%
£1.5m
£1.2m
Operating margin*
2013
Up
25.0%
2012
Up
120 bps
4.8%
3.6%
Vitec in action
Our services
Major event production
systems design and
deployment services
Production equipment
rentals
Fibre optic broadcast and
infrastructure solutions
design and deployment
Sales and support of
professional audio and
video products
Used production
equipment sales
Our brands
Bexel
Bexel supports broadcasters at US
Open Tennis
Bexel continued to support CBS and
ESPN with their coverage of the US
Open Tennis Championships, the final
tennis major of the Grand Slam. 2013
marked Bexel’s fifteenth year supporting
CBS and fifth backing ESPN at this event.
Bexel provided full high definition control
rooms supplying international feeds, along
with twelve engineers and staff on site
at the US Tennis Association Billie Jean
King National Tennis Center, New York.
Additional technical services were provided
for the first time in 2013 to assist ESPN
in Brazil and Argentina.
In the ring in Macau, China
Bexel recently designed a broadcast
system for HBO’s biggest ever pay-per-
view boxing event in Macau, China,
dubbed “The Clash in Cotai”. HBO
needed a complete solution which could
overcome the complicated broadcast
logistics in Macau. Bexel’s Hercules
Flypack provided this solution with a
lightweight portable system with state-of-
the-art high definition technology which
could be customised specifically for
HBO’s requirements. Quick to assemble
and compact to transport, the Hercules
design brought first-class production
facilities to the remote and space-
constrained location.
Vitec in action
www.vitecgroup.com/vitec_in_action
* Before restructuring costs and charges associated with acquired businesses.
The Vitec Group plc Operations Executive
The Operations Executive is responsible for leading the organisation. Together the team develops
strategy, implements our business plans and ensures we run the Group effectively. It meets monthly to
discuss the business and drive collaboration. The strength of this team derives from a diverse range of
personal and functional skills and experience.
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Stephen Bird
Group Chief Executive
Paul Hayes
Group Finance Director
Group Chief Executive, British,
aged 53, appointed to the Board
on 14 April 2009. He is currently
a non-executive director and the
senior independent director of
Dialight plc. He was formerly a
non-executive director of Umeco
plc. Previously he was Divisional
Managing Director of Weir Oil &
Gas, part of Weir Group plc. Prior
to this he has worked in senior roles
at Danaher Corporation, Black &
Decker, Unipart Group, Hepworth
PLC and Technicolor Group.
Group Finance Director, British,
aged 47, appointed to the Board
on 13 June 2011. Previously he was
Group Financial Controller at Signet
Jewelers Limited between 2007 and
2011. Prior to that, he held a senior
role at RHM plc from 2004 to 2007,
through its flotation in 2005 and
subsequent sale to Premier Foods
plc. Paul was with Smiths Group
plc for over ten years from 1993,
including a number of divisional and
operating company finance director
roles. He is a Chartered Accountant
having qualified with EY, and has
a first class Masters degree in
Mechanical Engineering.
Martin Green
Group Development
and HR Director
Group Development and HR
Director, British, aged 45, appointed
June 2005. His responsibilities
include strategy and M&A, and
were expanded in 2012 to include
human resources and internal
communications. Previously he
held corporate development
positions at Bunzl plc, at a
broadcast equipment rental
business and worked in investment
banking at N M Rothschild. He
trained and qualified as a solicitor
with Linklaters & Alliance in the
UK and is a Certified Accountant.
Jon Bolton
Group Company Secretary
Group Company Secretary, British,
aged 47, appointed October 2008.
Previously Company Secretary of
Waste Recycling Group. Prior to
this he held company secretarial
positions at GlaxoSmithKline,
where he trained as a company
secretary and Cable & Wireless
where he was Deputy Company
Secretary. He holds a bachelor of
law degree and is a Fellow of the
Institute of Chartered Secretaries
and Administrators.
Matt Danilowicz
Videocom and Services
Divisional Chief Executive
Marco Pezzana
Imaging Divisional Chief
Executive
Divisional Chief Executive,
Videocom and Services Divisions,
American, aged 52, appointed
July 2012. Previous roles include
7 years as President of Clear-
Com, a former Vitec Group
company, Vice President of
Worldwide Channels and General
Manager, Broadcast at Avid
Technology and CEO of iNews,
a market-leading news technology
company. He holds a BA degree
in Economics and English from
the College of William & Mary,
Williamsburg, Virginia.
Divisional Chief Executive,
Imaging Division, Italian, aged 44,
appointed March 2009. Formerly
Managing Director of Manfrotto.
Prior to joining Vitec he held
various positions in general
management and marketing for
consumer goods companies
including Newell Rubbermaid, Arc
International and Dusholux GmbH,
working extensively in the UK, US
and France. He holds a degree in
Political Science from the University
of Milan, with postgraduate studies
at London Business School and
Bocconi University.
Steve Shpock
IMT President
President of IMT, American, aged
54, appointed in 2011. Previously
he held the position of CEO of
Thales Component Corp, and
executive positions at MCE
Technologies (now Aeroflex) and
Litton (now L-3 Com). He has 32
years of leadership experience
encompassing R&D, product
engineering, manufacturing,
domestic and international business
development and overall general
management. He holds the
following academic degrees: BEE
(Stevens Institute of Technology),
MEE and DEE (University of Utah)
and MBA (University of Rochester).
Annual Report & Accounts 2013Strategic ReportRemuneration ReportCorporate ResponsibilityCorporate GovernanceIndependent Auditor’s ReportFinancial Statements
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Board of Directors
John McDonough
CBE, BSc (Eng)
Stephen Bird
MA
Paul Hayes
MEng & Man, ACA
Carolyn Fairbairn
BA, MA, MBA
Group Chief Executive
Group Finance Director
Independent Non-Executive
Director
14 April 2009
13 June 2011
1 February 2012
Role
Chairman
Appointed
15 March 2012
(Chairman from 1 June 2012)
Nationality
British
Age
62
British
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Committee membership
Nominations (Chairman)
Nominations
Skills & experience
John is also Chairman of
Vesuvius plc. He was most
recently Group Chief Executive
of Carillion plc from January
2001 to December 2011. He
was previously a non-executive
director of Tomkins plc from
June 2007 to September 2010,
where he was also Chairman of
the Remuneration Committee,
and Exel from February 2004
to December 2005. Prior to
Carillion, John worked for
Johnson Controls and
Massey Ferguson.
Stephen is currently a non-
executive director and the
senior independent director
of Dialight plc. He was formerly
a non-executive director of
Umeco plc. Previously he was
Divisional Managing Director
of Weir Oil & Gas, part of Weir
Group plc. Prior to this he
has worked in senior roles at
Danaher Corporation, Black
& Decker, Unipart Group,
Hepworth PLC and
Technicolor Group.
British
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Paul was previously Group
Financial Controller at Signet
Jewelers Limited between 2007
and 2011. Prior to that, he held
a senior role at RHM plc from
2004 to 2007, through its
flotation in 2005 and
subsequent sale to Premier
Foods plc. Paul was with
Smiths Group plc for over ten
years from 1993, including a
number of divisional and
operating company finance
director roles. He is a Chartered
Accountant having qualified with
Ernst & Young, and has a first
class Masters degree in
Mechanical Engineering.
British
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Audit
Nominations
Remuneration (Chairman)
Carolyn is currently a
non-executive director of
Lloyds Banking Group plc
and the UK Statistics Authority,
and became a non-executive
director of the Competition
and Markets Authority on its
formation in October 2013.
She was previously a non-
executive director of the
Financial Services Authority,
Director of Group Development
and Strategy at ITV plc, and
Director of Strategy at the BBC
and a member of its Executive
Board. She has also been a
partner at McKinsey, where
she specialised in media, and
a policy adviser in the Number
10 Policy Unit.
The Vitec Group plc
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Christopher Humphrey
BA, MBA, FCMA
Nigel Moore
FCA
Lorraine Rienecker
BEng, MBA
Mark Rollins
BEng, ACA
Role
Independent Non-Executive
Director
Independent Non-Executive
Director;
Senior Independent Director
Independent Non-Executive
Director
Independent Non-Executive
Director
1 March 2004
1 December 2013
2 October 2013
Appointed
1 December 2013
Nationality
British
Age
56
British
69
Committee membership
Audit
Nominations
Remuneration
Audit (Chairman)
Nominations
Remuneration
British
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Audit
Nominations
Remuneration
British
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Audit
Nominations
Remuneration
Skills & experience
Christopher is currently Group
Chief Executive Officer of
Anite plc, holding that position
since 2008. Previously he was
their Group Finance Director
between 2003 and 2008. He
has held senior positions in
finance at Conoco, Eurotherm
International plc and Critchley
Group plc. He was previously
a non-executive director of
Alterian plc between 2011 and
2012. He is a Fellow of CIMA.
Nigel is currently Chairman
of JKX Oil & Gas plc, and a
director of Hochschild Mining
plc and Ascent Resources
plc. Formerly a London based
partner of EY, where he was
engagement partner for a
number of significant client
companies with specific
responsibilities for their audits.
Lorraine is currently Executive
Vice President, Strategy, Sales
& Marketing at Meggitt plc,
holding that position since
2005. Previously she was
Director of Strategy & Planning
at BAE Systems and Marconi
Electronic Systems (GEC)
between 1998 and 2002 and
has held several other senior
roles at Booz Allen & Hamilton
and Bombardier.
Mark is currently Chief
Executive of Senior plc, being
appointed to that position in
March 2008. He joined Senior
plc in 1998 from Morgan
Crucible plc, and became
Group Finance Director in
2000. He was formerly a Non-
Executive Director of WSP
Group from 2006 to 2012.
He is a Chartered Accountant
and holds a first class degree
in Engineering.
Annual Report & Accounts 2013Strategic ReportRemuneration ReportCorporate ResponsibilityCorporate GovernanceIndependent Auditor’s ReportFinancial Statements
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Directors’ Report
Directors
The Directors who held office at 31 December 2013 and up
to the date of this report are set out on pages 30 and 31 along
with their photographs and biographies.
Changes to the Board during the year and up to the date of this
report were as follows:
Name
Date
Position
Maria Richter
John Hughes
Resigned on
15 May 2013
Resigned on
30 June 2013
Independent Non-Executive
Director
Independent Non-Executive
Director
Mark Rollins
Appointed on
2 October 2013
Independent Non-Executive
Director
Simon
Beresford-Wylie
Resigned on
1 December 2013
Independent Non-Executive
Director and Chairman of the
Remuneration Committee
Christopher
Humphrey
Appointed on
1 December 2013
Independent Non-Executive
Director
Lorraine
Rienecker
Appointed on
1 December 2013
Independent Non-Executive
Director
All current Directors will be standing for re-appointment at the
forthcoming Annual General Meeting to be held on Thursday,
8 May 2014. The remuneration of the Directors including their
respective shareholdings in the Company is set out in the
Remuneration Report on pages 34 to 53.
Directors’ and Officers’ liability insurance and
indemnification of Directors
The Company maintains Directors’ and Officers’ liability
insurance which gives appropriate cover for any legal action
brought against its Directors. The Company has also granted
indemnities to each of its Directors to the extent permitted by
law. Qualifying third party indemnity provisions (as defined in
Section 324 of the Companies Act 2006) were adopted on 16
March 2009 for those Directors on the Board at that time and
have been agreed by all Directors joining the Board since that
date. These indemnities remain in force in relation to certain
losses and liabilities which the Directors may incur to third
parties in the course of acting as Directors of the Company.
Share capital
The Company has only ordinary shares of 20 pence nominal
value in issue. Note 4.3 to the consolidated financial statements
summarises the rights of the ordinary shares as well as the
number issued during 2013. An analysis of shareholdings is
shown on page 132. The closing middle market price of a share
of the Company on 31 December 2013, together with the range
during the year, is also shown on page 132. For details of own
shares held by the Company see note 4.3 to the consolidated
financial statements.
Substantial shareholdings
As at 25 February 2014, the Company had been advised under
the Disclosure and Transparency Regime, or had ascertained
from its own analysis, that the following held interests of 3%
or more of the voting rights of its issued share capital:
Shareholder
Delta Lloyd NV
Manfrotto
Harris Associates
Number of
voting rights
% of voting
rights
6,630,137
4,788,702
3,597,159
Cazenove Capital Management
2,981,873
Aberforth Partners
2,742,678
Schroder Investment Management
2,244,033
Standard Life Investments
2,156,538
Heronbridge Investment Management
2,046,893
Nmás1
1,726,885
Royal London Asset Management
1,765,105
M&G Investment Management
1,473,083
15.05
10.87
8.16
6.77
6.22
5.09
4.89
4.65
3.92
4.01
3.34
Committees of the Board
The Board has established Audit, Nominations and
Remuneration Committees. Details of these Committees,
including membership and their activities during 2013 are
contained in the Corporate Governance section of this
Annual Report and in the Remuneration Report.
Corporate responsibility
The Group’s report on corporate responsibility is set out on
pages 54 to 61. The Group has a Code of Business Conduct
and specific policies which cover the following key areas: health
and safety; risk and fraud; employment; whistleblowing; the
environment; human rights; community impact and involvement;
and relationships with suppliers, customers and other
stakeholders. It regularly reviews these policies and
revises them as and when necessary.
Corporate governance
The Group’s report on Corporate Governance is on pages 62
to 77 and forms part of this Directors’ Report.
Companies Act 2006 disclosures
In accordance with Section 992 of the Companies Act 2006
the Directors disclose the following information:
• The Company’s capital structure and voting rights are
summarised on page 114, and there are no restrictions on voting
rights nor any agreement between holders of securities that result
in restrictions on the transfer of securities or on voting rights;
• There exist no securities carrying special rights with regard
to the control of the Company;
• Details of the substantial shareholders and their shareholdings
in the Company are listed above;
• Shares awarded under the core award of the Company’s
Deferred Bonus Plan are held in a nominee capacity by the
Employee Benefit Trust (EBT). The Trustees of the EBT do
not seek to exercise voting rights on shares held in the EBT.
No voting rights are exercised in relation to shares unallocated
to individual beneficiaries;
• The rules concerning the appointment and replacement of Directors,
amendment to the Articles of Association and powers to issue or
buy back the Company’s shares are contained in the Articles of
Association of the Company and the Companies Act 2006;
• There exist no agreements to which the Company is party
that may affect its control following a takeover bid; and
The Vitec Group plc • There exist no agreements between the Company and its
Directors providing for compensation for loss of office that
may occur because of a takeover bid.
Articles of Association
The Company’s Articles of Association set out the rights
of shareholders including voting rights, distribution rights,
attendance at general meetings, powers of directors,
proceedings of directors as well as borrowing limits and other
governance controls. A copy of the Articles of Association
can be requested from the Group Company Secretary.
Conflicts of interest
During the year no Director held any beneficial interest in any
contract significant to the Company’s business, other than a
contract of employment. The Company has procedures set out
in the Articles of Association for managing conflicts of interest.
Should a Director become aware that they, or their connected
parties, have an interest in an existing or proposed transaction
with the Group, they are required to notify the Board as soon
as reasonably practicable.
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 financial statements.
Statement of Directors’ Responsibilities in respect of the
Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report
and the Group and parent company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and
parent company financial statements for each financial
year. Under that law they are required to prepare the Group
financial statements in accordance with IFRSs as adopted
by the EU and applicable law and have elected to prepare
the parent company financial statements in accordance with
UK Accounting Standards and applicable law (UK Generally
Accepted Accounting Practice).
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and parent
company and of their profit or loss for that period. In preparing
each of the Group and parent company 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;
• For the Group financial statements, state whether they have
been prepared in accordance with IFRSs as adopted by the EU;
• For the parent company financial statements, state whether
applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained
in the parent company financial statements; and
• Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
parent company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy,
at any time, the financial position of the parent company and
enable them to ensure that its financial statements comply with
the Companies Act 2006. They have general responsibility for
taking such steps as are reasonably open to them to safeguard
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the assets of the Group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
In addition, each of the Directors considers that the Annual
Report, taken as a whole, is fair, balanced and understandable
and that it provides all the information necessary for
shareholders to assess the Company’s performance,
business model and strategy.
Disclosure of information to auditors
The Directors who held office at the date of approval of this
Directors’ Report confirm that, so far as they are each aware,
there is no relevant audit information (as defined in Section
418(2) of the Companies Act 2006) of which the Company’s
auditors are unaware; and each Director has taken all the steps
that they ought to have taken as a Director to make themselves
aware of any relevant audit information and to establish that the
Company’s auditors are aware of that information.
Annual General Meeting (AGM)
The 2014 AGM will be held at 2.30pm on Thursday, 8 May
2014 at Prince Philip House, 3 Carlton House Terrace,
London SW1Y 5DG.
The Chairmen of the Board and of each of its Committees
will be in attendance at the AGM to answer questions from
shareholders. All Directors will be standing for re-appointment
at the AGM.
The Company will be making use of the electronic voting facility
provided by its registrars, Capita Asset Services. The facility
includes CREST voting for members holding their shares in
uncertificated form. For further information, please refer to the
section on on-line services and electronic voting set out in the
notes to the Notice of Meeting.
The notice of the AGM and an explanation of the resolutions
to be put to the meeting are set out in the Notice of Meeting
accompanying this Annual Report. The Board fully supports all
the resolutions and encourages shareholders to vote in favour
of each of them.
Auditors
Our Auditor, KPMG Audit Plc, has instigated an orderly wind
down of its business. KPMG Audit Plc will therefore not be
seeking re-appointment as auditor of the Company at the
forthcoming AGM. A statement of the circumstances connected
with its decision not to seek re-appointment accompanies this
Annual Report and can be found on our website. The Board
has recommended the appointment of KPMG LLP, an
intermediary parent of KPMG Audit Plc as auditor and a
resolution concerning its appointment shall be put to the
forthcoming AGM. A separate resolution will also be put to
the AGM authorising the Board to agree its remuneration.
By order of the Board
Jon Bolton
Group Company Secretary
25 February 2014
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Remuneration Report
• Thirdly, the Annual Report on Remuneration sets out
remuneration paid to Directors in 2013 including annual bonus
and long-term incentives, as well as details of how we intend
to implement our Remuneration Policy for 2014. Shareholders
will also have the opportunity for an advisory vote on the
Annual Report on Remuneration at the 2014 AGM and
this will be an annual process.
2013 performance
Despite 2013 being a challenging year for the Group,
we have delivered results in line with market expectations
with an operating profit* of £39.5 million, up by 0.5% on 2012,
and adjusted basic earnings per share* of 56.1 pence, up by
0.5% on 2012. This has been achieved through a rigorous
approach to cost control, including the implementation of a
major restructuring programme that will continue to deliver
long-term benefit to the Group and our investors. We also
successfully completed the acquisition of Teradek during 2013,
enhancing our broadcast market offering.
The Group has also produced a strong free cash flow+ in 2013
of £21.4 million (2012: £10.8 million) through a consistent focus
on working capital management. As a result, net debt at 31
December 2013 of £61.5 million was £2.2 million lower than
that at 31 December 2012 despite cash outflow relating to the
restructuring and acquisition activities.
Committee activities
During 2013, the Committee considered a range of issues including:
• Executive Directors’ salary increases with effect from 1
January 2014 have been set at 2.5%, reflecting pay increases
within the Group’s workforce and current market conditions.
• 2013 bonus payments to Executive Directors were 71% and
74% of the maximum potential award for the Group Chief
Executive and Group Finance Director respectively. This has
been earned against the Group delivering profit before tax* of
£35.6 million and strong free cash flow of £21.4 million which
is a good result given the challenging markets experienced
during 2013. Each Executive Director is required to defer half
of their bonus into the Deferred Bonus Plan (“DBP”) for three
years ensuring that focus on long-term growth is encouraged.
• Long Term Incentive Plan (“LTIP”) awards made in 2011 to
Executive Directors vested at a level of 28.55% of the maximum,
reflecting growth of 33.9% in adjusted basic earnings per
share* over the performance period. The element of the
award subject to the Total Shareholder Return performance
condition failed to achieve the minimum threshold level and
therefore lapsed.
• We consulted with our major shareholders and key
governance bodies, representing a significant proportion
of our share capital, on a proposal to renew the LTIP at the
2014 AGM as the existing rules expire in early 2015. Following
this consultation and shareholder feedback we have decided
to remove the matching award element of the DBP to simplify
our incentive arrangements and bring them more in line with
market practice; further details are set out below.
Remuneration Report on-line
www.vitecgroup.com/remuneration
Section 1:
Annual Statement by the
Chairman of the Remuneration
Committee
Dear Shareholder
In my first annual statement on remuneration following my
appointment as Chairman of the Remuneration Committee,
I set out the Committee’s approach to Directors’ remuneration.
The Committee’s objective is to set a remuneration policy that is
clearly understood by our shareholders and employees, and that
drives the right behaviours in terms of incentivising Executive
Directors to deliver growth in long-term shareholder value.
The Remuneration Report is split into three sections.
• Firstly, my annual statement summarising the work of the
Remuneration Committee in 2013.
• Secondly, the Remuneration Policy Report that sets out in
detail the Company’s policy on Directors’ remuneration.
Shareholders will for the first time have a binding vote on
this policy at the 2014 Annual General Meeting (“AGM”)
and it is the intention that this will set the policy for Directors’
remuneration for the next three years for the Company,
effective from the 2014 AGM. Unless there is a need
to change this policy we do not propose putting the
Remuneration Policy Report to shareholders for
approval again until the 2017 AGM.
* Before restructuring costs and charges associated with acquired businesses. Profit before tax and adjusted earnings per share are also before disposal of business.
In 2010 and 2009 before significant items.
+ Cash generated from operations in the financial year after net capital expenditure, net interest and tax paid.
The Vitec Group plc
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Section 2:
Remuneration Policy Report
Policy report
This Policy Report will cover remuneration for Directors of
the Company for a three year period commencing from the
Company’s AGM on 8 May 2014 until the AGM to be held in
2017. The Policy Report will remain on the Company’s website
at www.vitecgroup.com. Should there be a need to change
the Company’s policy covering Directors’ remuneration
ahead of this date, shareholders will be asked to approve
a revised policy.
This Report contains further information required under the
Listing Rules and the UK Corporate Governance Code.
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Remuneration policy for Executive Directors
Remuneration packages are developed to attract, retain and
motivate Executive Directors without being excessive, and
to be aligned with both the interests of shareholders and the
business strategy of the Company. They take into account
the responsibilities and risks involved and the remuneration
packages of comparable companies that have similar scale
international operations. Consideration of remuneration and
benefits across the Company’s employee population is also
taken into account. The Committee also takes into account
the views of shareholders and representative bodies where
material changes to the Executive Directors remuneration
policy are being considered.
Remuneration for the Executive Directors consists of
several elements including base salary, annual cash bonus,
LTIP, pension contribution and other taxable benefits. The
remuneration policy table on the following pages summarises
each element of remuneration for the Executive Directors
including an explanation of the link to strategy, its operation,
maximum opportunity and performance measures.
• The structure of the 2014 Annual Bonus Plan has been
designed to incentivise Executive Directors to deliver against
challenging targets for 2014 particularly against the backdrop
of current market conditions. Its structure is a combination
of both financial targets (Group profit before tax* and
operating profit converted into operating cash flow)
and personal objectives.
• Executive Directors are required to hold a shareholding in the
Company of at least one times base salary built up over a
reasonable period of time. Both of our Executive Directors
have achieved this level, clearly aligning their interests with
those of shareholders.
Changes to policy
The Remuneration Committee has monitored executive
remuneration packages to ensure that they remain fit for
purpose in achieving our objectives, taking into account a
range of factors including market conditions, the ability to
attract and retain a talented management team, the views
of our major shareholders and advice from our remuneration
advisor. The structure of executive remuneration has not
changed during 2013. However, having consulted with
our major shareholders in late 2013 and taking account of
emerging best practice, we will remove the matching share
element of the DBP with effect from the 2014 AGM. To part
compensate for this we will, with effect from this date, increase
the annual level of LTIP award to the Executive Directors from
100% of salary to 125% of salary. Both Executive Directors
have agreed to waive this increase in 2015. This will simplify
our remuneration structure going forward. The Remuneration
Committee is satisfied that the policy on remuneration is driving
the management team to deliver on the Group’s strategy,
and that the proposed changes continue to align the interests
of Executive Directors with those of its shareholders.
Shareholders will be asked to approve new rules for the LTIP
at the 2014 AGM. Further details are set out in the AGM Notice
of Meeting that accompanies this Annual Report and is also
available on our website.
The Remuneration Committee will continue to monitor
the Group’s remuneration policy to ensure that it remains
fit for purpose.
Annual General Meeting
To conclude, please note that the Directors’ Remuneration
Policy Report and the Annual Remuneration Report will be put
to separate votes at the AGM to be held on 8 May 2014. I will
attend the Annual General Meeting and be available to answer
questions on this report and our executive remuneration policy.
Carolyn Fairbairn
Chairman, Remuneration Committee
25 February 2014
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Remuneration policy table for Executive Directors
Purpose and
link to strategy
Operation
Base salary Base salary is
set at a level
to secure
the services
of talented
Executive
Directors with
the ability to
develop and
deliver a growth
strategy.
Fixed contractual cash amount usually paid
monthly in arrears.
Normally reviewed annually, with any increases
taking effect from 1 January each year, although
the Committee may award increases at other
times of the year if it considers it appropriate.
This review is dependent on continued satisfactory
performance in the role of an Executive Director. It
also includes a number of other factors, including
experience, development and delivery of Group
strategy and Group profitability, as well as external
market conditions and pay awards across
the Company.
Benefits
To provide
Executive
Directors with
ancillary benefits
to assist them
in carrying out
their duties
effectively.
Executive Directors are entitled to a range of
benefits including car allowance, private health
insurance and life assurance.
Other ancillary benefits may also be provided
where relevant, such as expatriate travel or
accommodation allowances.
Executive Directors are entitled to participate
on the same terms as all UK employees in the
Sharesave Plan or any other relevant all-employee
share plan.
Performance
measures
Not applicable.
Not applicable.
Maximum opportunity
Whilst the Committee has
not set a maximum level of
salary, the Committee will
usually award salary increases
in line with average increases
awarded across the Group.
Larger increases may,
in certain circumstances,
be awarded where the
Committee considers that
there is a genuine commercial
reason to do so, for example:
• where there is a significant
increase in the Executive
Director’s role and duties;
• where an Executive Director
falls significantly below
market positioning;
• where there is significant
change in the profitability
of the Company or
material change in market
conditions; and
• where an Executive Director
was recruited on a lower
than market salary and
is being transitioned to
a more market standard
package as he or she
gains experience.
There is no maximum
level of benefits set.
However, benefits are set
at an amount which the
Committee considers to
be appropriate, based on
individual circumstances
and local market practice.
The Committee has not set
a maximum level of benefit,
given that the cost of certain
benefits will depend on
the individual’s particular
circumstances.
Executive Directors’
participation in the UK all-
employee Sharesave Plan
is capped at the individual
entitlement levels set by the
UK Government from time
to time or as prescribed by
the rules of the relevant all-
employee share plan.
The Vitec Group plc 37
Maximum
opportunity
An absolute
maximum
of 125% of
base salary
to be paid in
each year.
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Performance measures
Measures and targets for the
annual bonus are set annually
by the Committee.
Currently, around half of the
annual bonus is based on the
achievement of annual targets
set against the Group’s profit
before tax*, with the remainder
based on the achievement of
annual personal objectives and
achievement of annual targets
set against the Group’s operating
cash flow generated as a
percentage of operating profit*.
The Committee reserves the right
to annually vary these proportions
and also the measures to ensure
the annual bonus remains
appropriate and challenging.
Targets are measured over
a one year period. Payments
range between 0% and 125%
of base salary for threshold and
maximum performance.
Awards granted under the DBP
after the 2014 AGM are not
subject to any performance
conditions. Details of the
performance conditions applicable
to matching awards granted prior
to the 2014 AGM are described
on page 46 of this report.
Purpose and link to
strategy
Operation
Annual
bonus
To provide a material
incentive to drive
Executive Directors
to deliver stretching
strategic and financial
performance and
to grow long-
term sustainable
shareholder value.
Half of the annual
bonus is deferred into
the DBP and focuses
the Executive Director
on long-term value
delivery and growth.
Paid annually based on performance in
the relevant financial year. The amount is
determined based on published full year
results after the year end.
Award levels and performance measures are
reviewed annually. The Committee ensures
that performance measures remain aligned
to the Company’s business objectives and
strategic priorities for the year.
Half of the annual bonus paid is deferred
into core awards under the DBP for a period
of three years on a mandatory basis unless
the Committee determines an alternative
deferral period is appropriate. Awards may
be granted in the form of conditional awards,
nil-cost options, forfeitable shares or similar
rights and may be settled in cash. For DBP
awards granted prior to the 2014 AGM
participants may also receive a matching
award over the same value of shares as
are subject to the corresponding deferred
bonus award, the vesting of which is subject
to achievement of the same performance
conditions as for the LTIP. Matching awards
will not be made for awards granted after
the 2014 AGM under the DBP.
The Committee retains full discretion to
amend the bonus payout (upwards or
downwards), if in its opinion any calculation
of payout does not produce a fair result
for either the individual or the Company,
taking into account the overall business
performance of the Company. Any such
use of discretion will be clearly reported
in the next published remuneration report.
Participants may also receive the value of
any dividends which would have been paid
on shares in respect of which the award
vests, which may be calculated assuming
reinvestment of the dividends in the
Company’s shares on a cumulative basis.
In the event of any material misstatement
of the Company’s financial results or serious
reputational damage to the Company
caused by a breach of the Company’s
Code of Business Conduct or otherwise,
the Committee may reduce or impose
further conditions on awards.
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Remuneration policy table for Executive Directors continued
Purpose and link to
strategy
Operation
Maximum
opportunity
Performance measures
Long Term
Incentive
Plan (“LTIP”)
To provide a long-
term performance
and retention
incentive for the
Executive Directors
involving the
Company’s shares.
To link long-term
rewards to the
creation of long-
term sustainable
shareholder value by
way of delivering on
the Group’s agreed
strategic objectives.
The current LTIP rules expire in early
2015, and new LTIP rules are being
proposed at the 2014 AGM.
Under both the current and the new LTIP,
awards are made over a fixed number
of shares, which will vest based on the
achievement of performance conditions
over a performance period of, unless the
Committee determines otherwise, at least
three years. The performance conditions
are set by the Committee at the start of
the performance period. Awards can take
the form of a conditional award of shares,
a nil-cost option or similar rights.
Awards may be settled in cash.
Participants may also receive the
value of any dividends which would
have been paid on shares in respect
of which the award vests, which may
be calculated assuming reinvestment
of the dividends in the Company’s
shares on a cumulative basis.
In the event of any material misstatement
of the Company’s financial results or
serious reputational damage to the
Company caused by a breach of the
Company’s Code of Business Conduct
or otherwise the Committee may reduce
or impose further conditions on awards.
The maximum
value of shares
over which awards
may be granted
in respect of each
year is 150%
of base salary
(although 200%
is permitted
in exceptional
circumstances
determined by
the Committee).
The first set of
awards to the
current Executive
Directors following
the 2014 AGM will
be granted at no
more than 125% of
base salary, though
Executive Directors
have agreed to
waive 25% of this
award in 2015.
LTIP awards may be based on
both financial and share price
based performance conditions as
determined from time to time by the
Committee. It is currently the intention
for awards granted to have 50% of
the award subject to the Company’s
Total Shareholder Return compared
to a comparator group measured
over a three year performance period
and 50% of the award subject to
targets set against growth (adjusted
by the Committee as it considers
appropriate) in the Company’s
adjusted basic earnings per share*
over the same performance period.
However the Committee reserves
the right to change the balance of the
measures as it deems appropriate,
such that no measure accounts for
less than 25% of the total award.
At threshold, 25% of the award will
vest, increasing on a straight-line
basis up to 100% for performance
in line with maximum. The
Committee also reserves the right
to impose an underpin condition on
awards such that any level of vesting
in the opinion of the Committee
is justified by the underlying
performance of the Company.
Pension
contribution
To provide a benefit
comparable with
market rates, helping
with the recruitment
and retention of
talented Executive
Directors able to
deliver a long-term
growth strategy.
Usually paid monthly in arrears.
Executive Directors may receive a
contribution into the Company’s Defined
Contribution Plan, a personal pension
arrangement and/or a payment as a
cash allowance.
20% of base
salary.
Salary is the
only pensionable
element of
Executive Director
remuneration.
None.
Notes to the remuneration policy table for
Executive Directors
Under the Company’s share plans the Committee may: (1) in the event
of any variation of the Company’s share capital, demerger, delisting,
special dividend or other event which may affect the price of shares,
adjust or amend awards in accordance with the terms of the plan;
and (2) amend a performance condition if an event occurs which
causes it to consider an amended condition would be more appropriate
and not materially less difficult to satisfy.
Legacy plans
The Committee reserves the right to make any remuneration payments
and payments for loss of office notwithstanding that they are not in line
with the policy set out above where the terms of the payment were
agreed: (1) before the policy came into effect; or (2) at a time when
the relevant individual was not a Director of the Company and, in the
opinion of the Committee, the payment was not in consideration for
the individual becoming a Director of the Company. For these purposes
payments include the Committee satisfying awards of variable
remuneration and, in relation to an award over shares, the terms
of the payment are agreed at the time the award is granted.
Performance measures
The annual bonus plan is based on both personal and financial
measures. Typically, the majority of the bonus will be based on financial
measures such as Group profit before tax*. The measures have been
chosen to provide a balance between incentivising the delivery of the
Group’s key financial priorities in any particular year and important
individual strategic objectives. The Committee may vary the specific
measures and targets year-on-year to ensure that they reflect the key
financial and strategic priorities for the Company in any given year.
The LTIP is currently based on Total Shareholder Return performance
against a specific comparator group, and absolute adjusted basic
earnings per share* growth. The Committee considers these to be
important measures of performance for the Company over the longer
term. Whilst Total Shareholder Return links a portion of the LTIP to the
creation of value for shareholders, adjusted basic earnings per share*
growth is a key performance indicator for the Group. Any changes
to these measures will be aligned with the long-term strategy of
the business.
Provisions for the withholding and recovery of sums from the Directors
are as set out in the table above.
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Remuneration policy table for the Chairman and Non-Executive Directors
The table below sets out a description of the operation of the Chairman and Non-Executive Directors’ remuneration for the
period through to the Annual General Meeting in 2017. Neither the Chairman nor the Non-Executive Directors participate in
any annual bonus plan or the Company’s share plans:
Role
Purpose
Operation
Chairman
To recruit and retain an independent
Non-Executive Chairman reflecting the
responsibilities and time commitment
for the role. To lead an effective Board
enabling the delivery on the Group’s
growth strategy and creation of long-
term sustainable shareholder value.
Non-
Executive
Director
To recruit and retain independent
Non-Executive Directors reflecting the
responsibilities and time commitment
for the role to contribute to an effective
Board and to deliver on the Group’s
growth strategy and creation of long-
term sustainable shareholder value.
Whilst the Board has not set a maximum level of fee payable to the Chairman,
the Board will review the level of fee paid usually on an annual basis and
determine whether that is sufficient in terms of market conditions and also
the time commitment for the role.
The Chairman’s fee is an all inclusive consolidated amount. The Chairman’s
fee is paid in cash usually on a monthly basis in arrears and not in shares.
Fees are benchmarked against other FTSE-listed companies of a similar size
and complexity to Vitec. Any future increases will take into account the need
to ensure that the fee remains competitive and reflects the time commitment
for the role.
The Chairman’s remuneration also covers his chairmanship of the
Nominations Committee.
Fees paid to Non-Executive Directors of the Company consist of the following:
• A base fee;
• An additional fee for the role of the Senior Independent Director; and
• An additional fee for chairing Board Committees.
Fees are usually reviewed annually and are benchmarked against other FTSE-
listed companies of a similar size and complexity to Vitec and are typically
increased in line with annual salary increases for the Executive Directors. All fees
above are usually paid in cash and not in shares and are paid monthly in arrears.
Any future increases will take into account the need to ensure that the
fee remains competitive and reflects the time commitment for the role.
The Board has not imposed a maximum level of fee payable.
Benefits
To reimburse Non-Executive Directors for
reasonable expenses and bear any costs
associated with tax, where relevant.
Expenses are reimbursed as and when incurred (including travel and
hotel accommodation).
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Illustrative remuneration performance scenarios
The following charts set out three scenarios for the current remuneration of Stephen Bird and Paul Hayes in the year following
the 2014 Annual General Meeting (the first year that the remuneration policy will apply).
Stephen Bird
Long-term incentives
Annual bonus
Fixed pay
Paul Hayes
Long-term incentives
Annual bonus
Fixed pay
£’000
£1,600
£1,400
£1,200
£1,000
£800
£600
£400
£200
£1,438,995
28%
36%
36%
£876,247
12%
29%
59%
£518,135
100%
£’000
£1,600
£1,400
£1,200
£1,000
£800
£600
£400
£200
£359,882
£606,069
12%
29%
100%
59%
£992,935
28%
36%
36%
Minimum
On-target
Maximum
Minimum
On-target
Maximum
Minimum
Base salary
Benefits
Pension
Total fixed pay
(Minimum)
On-target
performance
Maximum
£409,271
£27,010
£81,854
£518,135
Fixed pay - £518,135
Annual Bonus - £255,794
LTIP - £102,318
and totalling - £876,247
Fixed pay - £518,135
Annual Bonus - £511,589
LTIP - £409,271
and totalling - £1,438,995
Minimum
Base salary
Benefits
Pension
Total fixed pay
(Minimum)
On-target
performance
Maximum
£281,357
£22,254
£56,271
£359,882
Fixed pay - £359,882
Annual Bonus - £175,848
LTIP - £70,339
and totalling - £606,069
Fixed pay - £359,882
Annual Bonus - £351,696
LTIP - £281,357
and totalling - £992,935
The illustrations are based on the following assumptions:
Fixed pay
• Base salary as at 1 January 2014.
Minimum
On-target
Maximum
• The total value of benefits received in the year ending 31 December 2013 and includes car allowance, private healthcare and
income protection.
• Pension contribution of 20% of base salary.
Annual bonus
None
Long Term Incentive Plan
None
50% of the maximum payout (i.e. 62.5%
of base salary).
25% vesting under the LTIP (i.e. 25% of
base salary) and set out at face value,
with no share price growth or dividend
assumptions.
100% of the maximum payout (i.e. 125% of base salary).
100% of the maximum payout (i.e. 100% of base salary)
and set out at face value, with no share price growth or
dividend assumptions.
The Vitec Group plc 41
Consideration of employment conditions elsewhere in
the Company
The Committee, when determining Executive Directors’
remuneration, takes into account remuneration and
employment terms and conditions, including levels of
pay for all employees of the Company. The Committee
is kept informed on:
• Salary increases for the general employee population;
• Company-wide benefits including pensions, share incentives,
bonus arrangements and other ancillary benefits;
• Overall spend on annual bonus; and
• Participation levels and outcomes in the annual bonus
plan and the LTIP.
When setting the remuneration of the Executive Directors,
the Committee has regard to general employment terms and
conditions within the Company as set out above. However,
it is recognised that the roles and responsibilities of Executive
Directors are such that different levels of remuneration apply,
with a greater proportion of remuneration tied to the financial
performance of the Company. The Committee did not
consult with the Company’s employees when drawing
up the Directors’ remuneration policy set out in this report.
Policy on outside appointments
The Committee believes that it is beneficial both for the
individual and the Company for an Executive Director
to take up one external non-executive appointment.
Remuneration received by an Executive Director in respect
of such an external appointment would be retained by the
Director. Stephen Bird was appointed on 10 January 2013
as an independent Non-Executive Director of Dialight plc.
In this role he receives a basic fee of £40,000 per annum
and an additional £5,000 per annum in the role of Senior
Independent Director. Under the terms of his service contract,
Paul Hayes, with the agreement of the Group Chief Executive
and Chairman, may take up one external non-executive
appointment of a listed company. As of the date of
this report he has not taken up any such external
non-executive appointment.
Remuneration policy for senior managers and other
employees of the Company
The remuneration policy for senior managers in the Company
is similar to that of the Executive Directors other than that the
quantums are lower. They will participate in the annual bonus
plan with the same structure as the Executive Directors,
as well as the LTIP, and therefore a significant element of their
remuneration is dependent upon the financial performance
of the Company and the Company’s share price in addition
to individual performance.
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Remuneration for all other employees is set taking into account
local market conditions to ensure that pay and benefits
attract and retain employees in those local markets and to
help achieve delivery of the Group’s agreed strategy. A large
proportion of employees are able to participate in bonus
plans that are tied to Company or Divisional/Business Unit
financial performance as well as individual performance against
personal objectives. The structure of bonus plans varies across
the employee workforce to achieve different objectives.
Full time employees in some countries (UK, US, Italy and Costa
Rica) are able to participate in an all-employee Sharesave plan
granting employees an option to save and purchase a limited
number of shares in the Company at a discount to the market
price at the time an offer of the plan is made. Over 50 senior
managers also participate in the LTIP that awards shares
subject to satisfaction of performance conditions over a
three year performance period.
All full time employees are also offered membership of a
pension scheme upon joining the Company which is compliant
with local legal requirements. In the UK, employees are able
to join a defined contribution pension plan with both the
employee and employer making fixed contributions.
Approach to recruitment remuneration
The Committee’s policy is to seek to recruit Directors with
the requisite skill and experience to lead the business and
grow the value of the Company over the long-term. Generally,
pay on recruitment will be consistent with the policy for
Executive Directors as set out in the policy table above.
However, the Committee may, in its absolute discretion,
include remuneration components or awards which are not
specified in the policy table, subject to the maximum level
of variable pay set out below, where this facilitates the hiring
of candidates of an appropriate calibre and skill-set to deliver
on the Group’s strategy. The Committee will ensure that this
is only done where there is a genuine commercial need,
and where this is in the best interests of the Company and
its shareholders. The Committee does not intend to use
this discretion to make a non-performance related payment
(for example a “golden hello” payment).
The absolute maximum level of variable pay will be 325%
of base salary (excluding any buy-out awards) which is in line
with the Remuneration Policy set out above. This comprises
up to 125% of base salary under the annual bonus and up
to 200% of base salary under the Company’s LTIP.
In certain circumstances, the Committee may need to make
payments or awards to an executive in respect of buying-out
remuneration arrangements relinquished on leaving a previous
employer. When doing so, the Committee will aim to do so
broadly on a like-for-like basis. It will take a number of relevant
factors into account which may include any performance
conditions attached to these awards and the time at which
they would have normally vested. These payments or awards
are excluded from the maximum level of variable remuneration
referred to above.
In the event of any such treatment, the Committee will explain
in the next annual remuneration report the rationale for the
relevant arrangements.
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Service contracts
The Executive Directors service contracts are as follows:
Date of
Contract
Notice period
from the
Company to
the Executive
Notice period from
the Executive to
the Company
28 January
2009
12 months
6 months
3 June 2011
12 months
6 months
Stephen Bird,
Group Chief
Executive –
appointed on 14
April 2009
Paul Hayes, Group
Finance Director
– appointed on 13
June 2011
A copy of the service contracts for the Executive Directors is
available from the Group Company Secretary at the Company’s
registered office during normal business hours at Bridge House,
Heron Square, Richmond, TW9 1EN and is also available on the
Company’s website www.vitecgroup.com.
The terms of the service contracts do not provide for pre-
determined amounts of compensation in the event of early
termination by the Company. The Remuneration Committee’s
policy in the event of early termination of employment is set
out below.
Policy on payment for loss of office
Executive Directors’ notice periods under their service contracts
are summarised in the above table. The Committee believes
that the Company’s policy on payment for loss of office and
the structure of notice periods is sufficient to ensure that the
executive has security of tenure and also that the Company
has sufficient retention and notice periods to enable an orderly
process for succession planning either through internal or external
recruitment. In the opinion of the Committee, any shorter notice
period from either party would not be in the Company’s best
interests. The Committee in accordance with best practice will
not give any Executive Director a service contract of greater
than 12 months’ notice.
In the event of termination of office, the Committee will consider
the circumstances in connection with the termination of office
including the notice period contained within the service contract,
the circumstances around the termination and what is considered
to be in the best interests of the Company. The terms of service
contracts do not provide for pre-determined amounts of
compensation in the event of early termination of employment.
The Committee maintains a full discretion to treat each such
termination upon its merits trying to mitigate the cost of
a termination but ultimately honouring contracted terms.
Dealing with each specific element of remuneration for
an Executive Director this would mean the following:
Base salary, pension and other benefits – These will be paid
for the notice period subject to being mitigated if the Executive
Director secures other suitable employment. This means that
each element will continue to be paid on a monthly basis in
arrears during the notice period either to the end of the notice
period or if earlier to the point at which the Executive Director
secures another suitable role.
Annual bonus plan – The Committee will generally pro rate
an annual bonus to the date of termination and the payment
of the annual bonus will be usually dependent upon the
satisfaction of financial performance conditions and an
assessment of the achievement of personal objectives up
to the point of leaving. The Committee reserves an absolute
discretion in circumstances which it considers appropriate
to enable a full year’s annual bonus to be paid in full to an
Executive Director in accordance with the limits and rules
of the annual bonus plan applying to the Executive Director.
Long Term Incentive Plan
Awards granted under the Company’s LTIP are generally
treated as follows:
Awards granted after the 2014 AGM
If a participant ceases office or employment with the Group his
award will lapse unless he is a good leaver or dies. An individual
is a good leaver if he ceases employment because of ill-health,
injury, disability, the sale of his employing company or business
out of the Group or for any other reason at the Committee’s
discretion (except where the participant is summarily dismissed).
Except in the case of death (where awards vest following death,
unless the Committee determines otherwise), awards will
normally vest on the normal vesting date, unless the Committee
determines that awards should vest at the time the individual
ceases employment.
In these circumstances unvested awards will only vest to the
extent that the Committee determines, taking into account
the satisfaction of the relevant performance conditions.
Unless the Committee determines otherwise, the period of time
that has elapsed since the award was granted until the date of
cessation of employment will also be taken into account
(except in the case of death, when time pro-rating will only
apply if the Committee so determines).
Awards granted before the 2014 AGM
Awards will lapse on the individual ceasing to be a director or
employee within the Group, unless the Committee determines
otherwise. Assuming the Committee allows an award to vest,
it shall determine the time at which and the extent to which an
award will vest, having regard to, unless it determines otherwise
in exceptional circumstances, the proportion of the performance
period the individual has served and the extent to which the
relevant performance conditions have been met. Awards will
always lapse for gross misconduct.
Deferred Bonus Plan – Awards granted after the 2014 AGM
will vest on the normal vesting date (unless the Committee
determines that awards should vest on the individual’s cessation
of employment) except in the case of: (1) death, when awards
will vest following the individual’s death; or (2) gross misconduct,
when awards will lapse. DBP core awards granted before the
2014 AGM vest on the individual’s cessation of employment
except for reasons of gross misconduct.
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of appointment. All the Non-Executive Directors and Chairman
(as well as the Executive Directors) are subject to annual
re-election by the shareholders at the AGM.
Copies of the Chairman’s and each Non-Executive Director’s
letters of appointment are available from the Group Company
Secretary at the Company’s registered office during normal
business hours at Bridge House, Heron Square, Richmond
TW9 1EN and are also available on the Company’s website
www.vitecgroup.com.
Consideration of shareholder views
The Committee has taken into account the views of its
shareholders in setting the remuneration of Directors.
The Company received over 99% proxy vote support
to the 2012 Remuneration Report at the 2013 AGM
indicating a strong level of support for the structure of
Directors’ remuneration.
During 2013, the Committee consulted with its major
shareholders, representing over 60% of its share capital,
on the renewal of the rules for the LTIP and DBP ahead
of the 2014 AGM.
A consistent theme coming out of the consultation concerned
the simplification of arrangements, and in particular, around
the matching element of the DBP.
The Committee was grateful for the level of feedback it received,
and as a result of some of the issues raised by shareholders the
Committee proposes to remove the matching element of the
DBP with effect from the 2014 AGM. To compensate the
Executive Directors for the loss in value as a result of the
removal of this element of their package, the Committee is
proposing to increase the quantum of awards under the LTIP
for the Executive Directors from 100% to 125% of base salary.
This will come into effect for awards granted from the 2014
AGM onwards, although the Executive Directors have agreed
to waive this increase in respect of the first grant of awards to
be made under the LTIP in 2015.
The Committee’s Chairman, Carolyn Fairbairn, will be attending
the Company’s 2014 AGM and is available to answer questions
and welcomes the opportunity to listen to the views of
shareholders on remuneration at that meeting.
Matching awards will lapse on the individual ceasing to be
a Director or employee of the Group, unless the Committee
determines otherwise. Assuming the Committee allows a
matching award to vest, it shall determine the time at which
and the extent to which matching awards will vest, having
regard to, unless it determines otherwise in exceptional
circumstances, the proportion of the performance period
the individual has served and the extent to which the
relevant performance conditions have been met.
The Committee will ultimately aim to mitigate the cost of any
termination payment to an Executive Director whilst also fairly
treating an Executive Director, honouring the terms of a service
contract and acting in the Company’s best long-term interests.
The Committee will, upon reaching an agreement with an
Executive Director on the terms of termination, publish the
details both with an announcement and with details published
in the next following Remuneration Report and this will include
an explanation of the use of any discretion around any such
termination payment.
Change of control
In the event of a change of control of the Company, LTIP
and DBP awards granted after the 2014 AGM will vest with
the Committee taking into account, in the case of the LTIP
awards, the extent to which the relevant performance
conditions have been satisfied and, unless the Committee
determines otherwise, the period of time that has elapsed
since grant. In the event of a winding-up of the Company,
demerger, delisting, special dividend or other event that may
affect the price of shares, the Committee may also allow
awards to vest on the same basis.
In the event of a change of control or voluntary winding-up of
the Company, regarding awards granted under the LTIP and
DBP prior to the 2014 AGM, awards will vest in full (in the case
of deferred bonus awards) and to the extent determined by the
Committee (in respect of LTIP awards and matching awards
granted under the DBP) having regard to, except in exceptional
circumstances, the time elapsed since grant and the extent to
which performance conditions have been satisfied. If the
Company may be affected by a demerger, dividend in specie,
special dividend or another transaction that may affect the
value of the shares, it may also allow awards to vest early.
Chairman and Non-Executive Directors
The Chairman and Non-Executive Directors do not have
service contracts but serve under letters of appointment.
The initial period of their appointments is three years but their
appointments may, by mutual consent and with the approval
of the Nominations Committee and the Board, be extended
for a further three years. 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
interest of the Company to do so. Under the letters of
appointment notice can be given by either party upon one
month’s written notice. Apart from the disclosure under the
Remuneration policy table for the Chairman and Non-Executive
Directors there are no further obligations which could give rise
to a remuneration or loss of office payment under the letters
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Section 3:
Annual Report on Remuneration
Shareholders will be asked to give an advisory vote on the Annual Report on Remuneration at the AGM to be held on Thursday,
8 May 2014.
Directors’ single figure of total remuneration (audited)
The following table sets out the single figure of total remuneration for Directors for the financial years ended 31 December 2013
and 2012:
Base salary / fees
Benefits
Pension
Annual bonus
Long-term incentives
Total
2013
£
2012
£
2013
£
2012
£
2013
£
2012
£
2013
£
2012
£
2013
£
2012
£
2013
£
2012
£
Executive Directors
Stephen Bird
Paul Hayes
Richard Cotton
(left on 4 February 2011)
Non-Executive Directors
John McDonough
(joined 15 March 2012)
Nigel Moore
Carolyn Fairbain
(joined 1 February 2012)
Christopher Humphrey
(joined 1 December 2013)
Lorraine Rienecker
(joined 1 December 2013)
Mark Rollins
(joined 2 October 2013)
Michael Harper
(left 1 June 2012)
Simon Beresford-Wylie
(left 1 December 2013)
John Hughes
(left 30 June 2013)
Maria Richter
(left 15 May 2013)
Total
Notes:
399,289
389,550
27,010
26,519
79,858
77,910
355,616 386,434 172,829 790,236 1,034,602 1,670,649
274,495
267,800
22,254
21,879
54,899
53,560 253,050 267,298
0
0
604,698 610,537
-
28,393
140,000
111,364
53,000
53,000
40,417
36,666
3,333
3,333
9,855
-
-
-
-
50,000
41,250
45,000
20,000
40,000
14,928
40,000
-
-
-
-
-
-
-
-
-
-
-
400
-
5,048
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 165,242
- 199,083
-
-
-
-
-
-
-
-
-
-
- 140,000 111,364
-
53,000
53,000
-
40,417
36,666
-
-
-
-
3,333
3,333
9,855
-
-
-
-
50,000
-
41,250
45,000
-
20,000
40,000
-
14,928
40,000
999,900 1,061,773
49,264
48,798 134,757 136,518
608,666 653,732
172,829
955,478 1,965,416 2,856,299
1. Taxable benefits includes car allowance, healthcare cover and income protection.
2. Each Executive Director receives a pension contribution of 20% of base salary into a pension arrangement of their choice (including the Company’s defined contribution
scheme). Both Executive Directors currently take this contribution in the form of a cash payment.
3. In respect of the Annual Bonus 2013, both Stephen Bird and Paul Hayes’ bonus potential was 125% of base salary. Further details are set out in the “Further notes”
section on the following page.
4. Long Term Incentives comprise LTIP and matching awards under the DBP awards made in 2011 that achieved performance conditions ending on 31 December 2013
based upon Total Shareholder Return and adjusted basic earnings per share* growth. These awards will vest to the individual in March 2014 and for the purpose of
the above table a value is shown based on the average market value of the Company’s ordinary shares over the quarter ended 31 December 2013 which was £6.69
per ordinary share. The 2014 Remuneration Report will disclose the actual value of the awards when they vest in March 2014. 2012 figures relate to 2010 LTIP and
matching awards under the DBP that vested in April 2013 but with performance conditions ending on 31 December 2012. The 2012 values are based on the share
price on the actual date of vesting. Further details are provided in the “Further notes” section below.
5. Each Director has confirmed in writing to the Company that the information in the single figure remuneration table is correct and that they have not received from the
Company any other items of remuneration other than disclosed.
The Vitec Group plc
45
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Further notes to the Directors’ single figure of total
remuneration table
(1) Base salary
The table below shows base salaries for 2013:
Executive Director
2013 Salary
Stephen Bird
Paul Hayes
£399,289
£274,495
(2) Benefits
The single figure of total remuneration table sets out the total
value of benefits received by each Executive Director in 2013.
The table below sets out details of these.
Executive Director Car
allowance
Healthcare
cover
Income
Protection
Stephen Bird
£19,959
Paul Hayes
£15,203
£2,251
£2,251
£4,800
£4,800
(3) Pension allowance
The table below sets out the value of the cash payment in lieu
of pension for each Executive Director in 2013:
Executive Director
Pension allowance
Stephen Bird
Paul Hayes
£79,858
£54,899
(4) Annual bonus
In 2013, each Executive Director was entitled to receive a
maximum bonus of up to 125% of base salary, half of which
is deferred into the Deferred Bonus Plan.
The financial elements of the annual bonus plan for each
Executive Director were based upon actual financial results
achieved for Group profit before tax* and Group conversion
of operating profit into operating cash flow (over a quarterly
and full year average target) measured against financial targets
set by the Board. The Group profit before tax* financial element
represents 50% of the maximum bonus that could be earned
and the Group conversion of operating profit* into operating
cash flow represents 25% of the maximum bonus that could
be earned.
Under the rules of the annual bonus plan there is a link
between the two financial performance conditions so that
the conversion of operating profit* into operating cash flow
element will only pay out if the Group profit before tax*
element has at least achieved threshold performance.
The Remuneration Committee considered that these two
financial performance conditions are key financial measures
for the Group driving the right behaviour in terms of achieving
profit and operating cash flow generation and had the most
direct impact upon shareholder value for the year ended
31 December 2013.
For both financial targets in 2013 the following trigger points
were used in determining performance and whether a bonus
was payable:
• 90% or less of target – Threshold – resulting in no pay-out;
• 100% of target – resulting in half of the maximum pay-out;
• 110% of target – Stretch – resulting in the maximum
pay-out; and
• A straight line sliding scale operates between each of the
above points for both financial targets.
The Remuneration Committee considered that these trigger
points were appropriate and sufficiently stretching given
the uncertain macroeconomic environment and challenging
markets that the Company faced.
The personal objective element of the 2013 annual bonus plan
for each Executive Director, representing 25% of the maximum
bonus that could be earned, is based upon individual
performance measured against stretching personal objectives
set by the Board and Remuneration Committee, as set
out below:
Stephen Bird
Paul Hayes
• Continue the development of
• Develop, drive and control
a world class organisation
• Plan and execute restructuring
initiatives to deliver sufficient cost
savings to achieve 2013 budget
• Deliver the strategy for the MAG
businesses and increase profitability
• Increase Manfrotto market share
• Delivery on Videocom strategy
• Develop a strategic growth strategy
for new territories
• Maintain merger and acquisition
process
restructuring and cost saving
initiatives across the Group
• Drive the culture of recognising
the importance of operating cash
flow and to deliver strong cash
generation
• Strengthen the self-assurance
process within the Group to drive
management to regularly assess
and strengthen their financial
controls
• Develop the finance function to
have a clear vision and strengthen
the team across the Group
• Develop the Group’s tax strategy
The table below sets out the annual bonus awards made to
Executive Directors in respect of the year ended 31 December
2013. The bonus payments were based upon the achievement
of Group profit before tax* of £35.6 million and an annual
conversion of operating profit* into operating cash flow of
105% for 2013. This bonus payout was at stretch for the
operating profit* into operating cash flow financial element
and at target for the Group profit before tax* element.
Group
profit
before
tax*
Group
conversion
of operating
profit* into
operating
cash flow
Individual
performance
against
personal
objectives
Total
bonus
as a %
of 2013
salary
2013
annual
bonus
£124,778
£124,778
£106,060
89%
£355,616
£85,780
£85,780
£81,490
92%
£253,050
Stephen
Bird
Paul
Hayes
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Remuneration Report
Annual Report on Remuneration continued
Under the rules of the annual bonus plan the Remuneration
Committee retains a full and absolute discretion as to whether
a bonus is payable or not that may be used only in exceptional
circumstances, taking into account the overall financial
performance of the Company. Any use of this discretion in
connection with an Executive Director will be clearly explained
in the Remuneration Report.
Half of the 2013 bonus will be deferred into the 2005 DBP.
The deferred bonus is used to purchase core award shares
held in trust for a three year period. Subject to the achievement
of performance conditions, the core award shares can be
matched on a ratio of up to one matching share for every one
core award share. The vesting of the matching shares is based
upon the same performance conditions as for the LTIP (see
“Scheme interests awarded during the financial year ended
31 December 2013” section on the following page). Following
approval of the Remuneration Policy Report and new incentive
arrangements at the 2014 AGM, the matching element of the
DBP will no longer be used for awards from that date forward.
(5) Long Term Incentives – LTIP and DBP
The long-term incentive awards value shown in the single figure
of total remuneration table relate to the following awards:
Awards vesting in respect of performance to 31
December 2013
These relate to awards made in 2011 under the LTIP and
matching awards under the DBP. Awards are measured based
50% upon the Company’s Total Shareholder Return (“TSR”)
measured against a comparator group and 50% subject to
growth in the Company’s adjusted basic earnings per share*
(“EPS”). Each performance condition is entirely independent
from the other performance condition and there is no re-testing
of either performance condition. The detail of each performance
condition for each award is set out below.
For that part of an award made in 2011 under the LTIP
measured against TSR, if the Company’s TSR performance is at
the median of the comparator group at the end of the three-year
performance period, 35% of that element of an award may vest.
The full element of an award may vest if the Company’s TSR
performance is in the top 20% of the comparator group. There
is a pro-rata straight line vesting between these two points.
The comparator group comprised approximately 60 companies
of similar market capitalisation to the Company and having
at least 50% of their turnover arising outside the UK.
The Remuneration Committee reviewed the composition of
the comparator group in conjunction with its remuneration
advisor ahead of the award being made.
For that part of an award made in 2011 under the LTIP
measured against EPS growth, if the percentage growth in
the EPS of the Company exceeds the percentage growth in
the Retail Price Index (RPI) over the three-year performance
period by 5% (Compound Average Annual Growth Rate),
35% of that element of an award may vest. Full vesting of an
award occurs if the growth in EPS over the performance period
exceeds growth in RPI by 10% (Compound Average Annual
Growth Rate) or greater. There is a pro-rata straight line vesting
between these two points.
The same performance conditions applied to matching awards
made in 2011 under the DBP as for the LTIP except that at
median performance for TSR or 5% EPS growth one matching
share vests for every three core award shares and at the upper
quintile point for TSR and 10% EPS growth one matching share
vests for every one core award share.
An award lapses if the lower point under both performance
conditions is not achieved during the performance period.
The Remuneration Committee also considered the underlying
financial performance of the Company before it confirmed vesting.
Performance out-turn
The table below provides an estimate of the value of the awards
and the potential level of vesting achieved as a result. The 2014
Remuneration Report will disclose the actual value of the awards
when they vest in March 2014:
2011 Awards
Actual performance
Vesting as % of award
TSR
EPS
Below median
0%
33.9% growth over the period
57.1%
Total vesting
28.55%
TSR is calculated on the basis of growth in the Company’s share
price over a three year performance period plus dividends paid
during that period and is expressed as a percentage of average
compound annual growth. Share price performance is averaged
over three months at the start and end of a performance period
to eliminate volatility that may result in anomalous outcomes.
The TSR performance is independently verified by Deloitte on
behalf of the Committee and is ranked against the comparator
group companies’ TSR performance to determine the outcome.
EPS is determined in accordance with note 2.5 of the
Financial Statements.
Awards vesting in respect of performance to
31 December 2012
These relate to awards made in 2010 under the LTIP and DBP.
The performance conditions for these awards are the same as
those outlined above (awards made in 2011) except that the
EPS growth figures were 4% growth in excess of RPI and 8%
growth in excess of RPI respectively.
The Remuneration Committee also considered the underlying
financial performance of the Company before it confirmed vesting.
Both performance conditions were measured to 31 December
2012 and the final outcome resulted in 84.8% of the TSR
element vesting and 100% of the EPS element vesting.
The combined vesting level of 92.4% for the LTIP and 0.92
matching award shares for every core award share held
resulted in awards vesting to participants in April 2013.
The Vitec Group plc
47
Other outstanding awards
Awards vesting in respect of performance to
31 December 2014
For awards made in 2012, 50% of an award is subject to
TSR with the Company’s TSR performance ranked against
the constituents of the FTSE 250 index (excluding financial
services companies and investment trusts) over a three year
performance period. The constituents of the FTSE 250 index
have a greater level of complexity and internationality when
compared to the previous comparator group constituents and
so are more comparable to Vitec’s business operations where
approximately 90% of revenues are generated outside the UK.
Threshold performance for the TSR performance condition will
be at the median point of the comparator group and will result
in 25% of an award vesting. Full vesting for the TSR element
will be at the upper quartile point of the comparator group.
A straight line sliding scale will operate between each of the
above points. Below threshold performance none of the
award will vest.
50% of the award will be subject to EPS growth over a three
year performance period. For awards made in 2012 the EPS
growth figures were set at 6% per annum for 25% vesting and
12% per annum for full vesting. A straight line sliding scale will
operate between each of the above points and below 6%
EPS growth none of the award will vest. Subject to satisfaction
of performance conditions to 31 December 2014, these
awards will vest in March 2015.
There is no re-testing of either performance condition.
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Scheme interests awarded during the financial year
ended 31 December 2013
Long Term Incentive Plan 2013 awards
The table below provides details of the awards made under
the LTIP on 21 March 2013. Performance for these awards
is measured over the three financial years from 1 January
2013 to 31 December 2015. They are subject to the same
performance conditions as for the 2012 award except that
the EPS growth figure is an absolute growth figure of 6% per
annum for threshold with 25% of this part of the award vesting
and EPS absolute growth of 12% plus per annum resulting in
all of this part of the award vesting, with a straight line sliding
scale between these two points. None of this part of the award
will vest for EPS absolute growth lower than 6% per annum.
Dividends that would have been paid on shares vesting under
the LTIP during the performance period are re-invested in
additional shares for each of the above awards.
There is no re-testing of any performance condition under any
of the above awards and the Remuneration Committee will also
consider the underlying financial performance of the Company
before it confirms vesting of any of the above awards.
TSR is calculated on the basis of growth in the Company’s
share price over a three year performance period plus
dividends paid during that period and is expressed as a
percentage of average compound annual growth. Share
price performance is averaged over three months at the start
and end of a performance period to eliminate volatility that
may result in anomalous outcomes. The TSR performance is
independently verified by Deloitte on behalf of the Committee
and is ranked against the comparator group companies’
TSR performance to determine the outcome.
Long Term Incentive Plan awards
Type of award
Stephen Bird
Paul Hayes
Performance
shares
Number
of shares
awarded
61,833
42,507
Face value*
(£)
Face value
(% of salary)
Threshold vesting
(% of face value)
Maximum
vesting
(% of face value)
End of performance
period
£399,289
£274,495
100%
100%
25%
100%
31 December 2015
* Face value has been calculated using the Company’s share price at the date of grant of 645.75p.
Deferred Bonus Plan awards
The following table provides details of the awards made under the DBP on 8 April 2013. The same performance conditions
apply to these awards as described above for LTIP awards made in 2013.
Type of award
Number of
core shares
awarded
Face value
(£)
Threshold vesting
(% of face value)
Maximum vesting
(% of face value)
End of performance period
Stephen Bird
Paul Hayes
Core award
shares using
deferred
annual cash
bonus
15,969
£102,401
11,046
£70,832
1 matching share for
every 3 core award
shares
1 matching share for
every 1 core award
share
31 December 2015
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Remuneration Report
Annual Report on Remuneration continued
£8,000
Fee was last increased in August 2008.
Carolyn Fairbairn
Payments to Past Directors
Richard Cotton, former Finance Director who left on 4 February
2011, received a payment of £165,242 during the year ended
31 December 2013. This was based on the vesting of awards
under the LTIP and DBP made on 8 March 2010 and 9 March
2010 respectively in accordance with the terms of his severance
package. The detail is shown on the table on page 49 of
this report.
Chairman and Non-Executive Directors
The Chairman and Non-Executive Directors were paid the
following fees in 2013:
Role
Comment
2013
Annual
Fee
Chairman
£140,000
Non-Executive
Director
£40,000
The fee was agreed upon the
Chairman’s appointment to the Board
on 15 March 2012.
Base fee paid to Non-Executive
Directors. Fee was last increased in
June 2010.
Chairman of Audit
Committee
Chairman of
Remuneration
Committee
Senior Independent
Director
£5,000
Fee was last increased in August 2008.
£5,000
Fee was last increased in July 2011.
Fees for the Chairman, Non-Executive Directors, Committee
Chairmen and Senior Independent Director roles are reviewed
annually by the Board with the support of Deloitte providing
market data to ensure that fees remain appropriate given time
commitment and the need to attract the right experience for
the role. There is no commitment to increase fees annually.
The Chairman and Non-Executive Directors do not receive
any other benefits from the Company.
Directors’ Shareholding Requirements and Share Interests
The Board has determined that Executive Directors of the
Company are required to build up, over a reasonable period of
time, a substantial holding of shares in the Company of at least
one times base salary. A reasonable period is considered to be
the life of a performance period tied to an award vesting under
the Company’s LTIP or DBP. Both Executive Directors satisfied
this requirement throughout the whole of 2013 and up to the
date of this report. Other members of the Operations Executive
are encouraged to do the same up to a level of 50% of
base salary.
The Chairman and Non-Executive Directors of the Company
have no such requirement and have discretion as to whether
to hold shares in the Company or not. The following table sets
out the interests in the Ordinary Shares of the Company held
by each Director (or connected persons) of the Company
during the year ended 31 December 2013:
Executive Director’s shareholdings as at
31 December 2013
Executive
Director
Share
ownership
requirement
(% of
annual
salary)
Number
of shares
owned
outright
(including
connected
persons)
Number
of shares
beneficially
owned
(DBP core
award
shares)
Number
of shares
unvested
and
subject to
performance
(DBP
matching
and LTIP
shares)
Ownership
requirements
met (based
on shares
owned
outright and
core award
shares)
Stephen
Bird
Paul
Hayes
100%
126,854
67,605
67,605
311%
100%
29,000
19,889
19,889
113%
Chairman and Non-
Executive Directors
1 January 2013 (or date
of appointment if later)
31 December 2013 (or
date of departure if earlier)
50,000
26,154
0
0
5,000
0
John McDonough,
Chairman
25,000
Nigel Moore
26,154
0
0
0
0
Mark Rollins (appointed
on 2 October 2013)
Christopher Humphrey
(appointed on 1
December 2013)
Lorraine Rienecker
(appointed on 1
December 2013)
Simon Beresford-Wylie
(ceased to be a director
on 1 December 2013)
Maria Richter (ceased to
be a director on 15 May
2013)
John Hughes (ceased to
Notes:
be a director on 30 June
2013)
4,263
4,263
0
0
0
0
1. The closing mid-market share price on 31 December 2013 was £6.39 and
the calculation of the percentage shareholding requirement achieved for the
Executive Directors is based on this closing mid-market share price.
2. The shares shown in the beneficial holdings table above were acquired by the
Directors using their own funds and not through any share incentive scheme
(or similar) with the exception of the following disclosures in notes 3 and 4 below.
3. Stephen Bird’s share interests include 67,605 shares (at 31 December 2013)
purchased in the market using deferred annual cash bonus and held by the
Employee Benefit Trust, the trust used to hold shares in respect of awards
made under the Vitec Group 2005 DBP. These shares will vest out of the DBP
in 2014, 2015 and 2016 respectively. Neither these shares or any of the other
shares held by Stephen Bird have any performance conditions attached to
them. During the year ended 31 December 2013 Stephen Bird acquired
42,334 shares and 24,399 shares through the exercise of awards under
the LTIP and DBP respectively arising from awards made in 2010.
4. Paul Hayes’ share interests include 19,889 shares (at 31 December 2013)
purchased in the market using deferred annual cash bonus and held by the
Employee Benefit Trust, the trust used to hold shares in respect of awards made
under the Vitec Group 2005 DBP. These shares will vest out of the DBP in 2015
and 2016 respectively. Neither these shares or any of the other shares held by
Paul Hayes have any performance conditions attached to them.
5. There has been no change to the Directors’ shareholdings described in the
table above in the period from 31 December 2013 to 25 February 2014.
The Vitec Group plc 49
Directors’ Long-Term Share Incentives (audited)
Sharesave
The Group operates an all-employee savings-related share option scheme in the UK (Sharesave) and a similar international plan
in respect of overseas employees in certain countries (US, Italy and Costa Rica). The scheme and plan are open to all the Group’s
employees in those countries, including the Executive Directors. Both Stephen Bird and Paul Hayes participate in the UK scheme
and the details are shown below.
Director
Date of
Grant
At
1 January
2013
(shares)
Options
exercised
during the
year
Options
lapsed
during the
year
Options
granted
during the
year
At 31
December
2013
(shares)
Exercise
price
(pence)
Market
price at
date of grant
(pence) (1)
Date from
which
exercisable
Expiry Date
Stephen
Bird
26 September
2012
1,657
Paul
Hayes
26 September
2012
1,657
-
-
-
-
-
-
1,657
543
678.5
1,657
543
678.5
1 November
2015
1 November
2015
30 April 2016
30 April 2016
(1) The market price for the grant of shares under option under Sharesave was calculated on the basis of a three day average of the closing mid-market share price from
29 August 2012 to 31 August 2012 inclusive. A 20% discount was applied to this price under this HMRC approved Sharesave plan. There is no performance condition
attached to the exercise of the Sharesave plan which is an all-employee plan.
Long Term Incentive Plan
Executive Directors are annually made a conditional award of shares in the Company, currently representing 100% of annual
base salary, based on the three day average closing mid-market share price of the Company in the period just prior to the award.
The award is subject to satisfaction of performance conditions over a three year performance period. The following table sets
out the outstanding awards under the LTIP as at 31 December 2013 for each of the Executive Directors (including the former
Executive Director):
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
Director Date of
Award
Awards
at 1
January
2013
Award
exercised
during the
year
Associated
dividend
shares
with the
exercised
awards
Awards
lapsed
during
the year
Awards
made
during the
year
At 31
December
2013
Market
price on
which
award
made
(pence)
Market
price at
exercise
date
(pence)
Face value
of award
End of
Performance
Period
Percentage
of interest
that vests
if threshold
performance
achieved
-
381
641.25
-
-
-
94,619
87,427
8,030
7,192
62,352
58,124
-
39,958
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
62,352
595
58,124
674
61,833
61,833
645
-
39,958
674
42,507
42,507
645
-
-
-
-
-
20,650
19,080
1,806
1,570
-
-
381
622.25
8
March
2010
14
March
2011 (1)
16
April
2012
21
March
2013
16
April
2012
21
March
2013
8
March
2010
Stephen
Bird
Paul
Hayes
Richard
Cotton
(left on 4
February
2011)
35%
35%
25%
25%
25%
25%
35%
100% of
annual
salary
100% of
annual
salary
100% of
annual
salary
100% of
annual
salary
100% of
annual
salary
100% of
annual
salary
100% of
annual
salary (pro
rated to
date of
departure)
31
December
2012
31
December
2013
31
December
2014
31
December
2015
31
December
2014
31
December
2015
31
December
2012
(1) The LTIP award made on 14 March 2011 has achieved 57.1% of its performance condition based on EPS growth. The TSR performance condition did not achieve
the minimum level to vest. 28.55% of the award will therefore vest in March 2014.
Annual Report & Accounts 2013Strategic ReportRemuneration ReportCorporate ResponsibilityCorporate GovernanceIndependent Auditor’s ReportFinancial Statements
50
Remuneration Report
Annual Report on Remuneration continued
Deferred Bonus Plan
Each year, Executive Directors are required to defer a proportion of their annual bonus into the DBP. The matching awards are
subject to satisfaction of performance conditions over a three year performance period.
Director Date of
Award
Awards
at 1
January
2013
(shares)
Award
exercised
during the
year
Associated
dividend
shares with
the exercised
awards
Awards
lapsed
during
the year
Awards
made
during
the year
At 31
December
2013
Stephen
Bird
Paul
Hayes
Richard
Cotton
(left on 4
February
2011)
9 March
2010 (core
award)
9 March
2010
(matching
award)
29 March
2011 (core
award)
29 March
2011
(matching
award)
12 April
2012 (core
award)
12 April
2012
(matching
award)
8 April
2013 (core
award)
8 April
(2013)
(matching
award)
12 April
2012 (core
award)
12 April
2012
(matching
award)
8 April
2013 (core
award)
8 April
2013
(matching
award)
8 March
2010 (core
award)
8 March
2010
(matching
award)
26,185
26,185
2,405
-
26,185
24,090
2,212
2,095
28,690
28,690
22,946
22,946
-
-
8,843
8,843
-
-
-
-
-
-
-
-
-
-
-
5,569
5,569
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,569
5,123
479
446
Market
price on
which
award
made
(pence)
Market
price at
exercise
date
(pence)
385
641.25
385
641.25
-
-
-
-
-
-
-
-
28,690
608
28,690
608
22,946
677
22,946
677
15,969
15,969
641
15,969
15,969
641
-
-
8,843
677
8,843
677
11,046
11,046
641
11,046
11,046
641
-
-
-
-
-
-
-
-
-
-
-
-
-
-
381
629
381
629
Percentage
of interest
that vests
if threshold
performance
achieved
Not
applicable
33.3%
Not
applicable
33.3%
Not
applicable
33.3%
Not
applicable
33.3%
Not
applicable
33.3%
Not
applicable
33.3%
Not
applicable
33.3%
End of
Performance
Period
31
December
2012
31
December
2012
31
December
2013
31
December
2013
31
December
2014
31
December
2014
31
December
2015
31
December
2015
31
December
2014
31
December
2014
31
December
2015
31
December
2015
31
December
2012
31
December
2012
Face
value of
award
100% of
annual
bonus
100% of
annual
bonus
100% of
annual
bonus
100% of
annual
bonus
100% of
annual
bonus
100% of
annual
bonus
50% of
annual
bonus
50% of
annual
bonus
100% of
annual
bonus
100% of
annual
bonus
50% of
annual
bonus
50% of
annual
bonus
100% of
annual
bonus
(pro rated
to date of
departure)
100% of
annual
bonus
(pro rated
to date of
departure)
Note: The DBP award made on 29 March 2011 has achieved 57.1% of its performance condition based on EPS growth. The TSR performance condition did not
achieve the minimum level to vest. 100% of the core awards and 28% of the matching awards will therefore vest in March 2014.
The Vitec Group plc 51
Performance graph of the Company’s ordinary shares
compared to comparator group
The Company is required to include a line graph showing
the Company’s ordinary share performance compared to
an appropriate index initially over a five year period, but
building up to a ten year performance period over subsequent
years. The graph below illustrates the Company’s annual Total
Shareholder Return (TSR) (share price growth plus dividends
that have been declared, paid and re-invested in the
Company’s shares) relative to the FTSE 250 for the preceding
five year period, assuming an initial investment of £100.
This index has been chosen since it is the comparator group
(excluding financial services companies and investment trusts)
for one of the performance conditions tied to awards under
the LTIP. The Committee notes that the FTSE 250 index is
a recognised broad market equity index, relatively complex
and international in nature and is comparable to the
Company’s business operations where approximately 90%
of revenues are generated outside the United Kingdom.
Each point is a 30 trading day average of the indices.
TSR data is taken from Datastream.
TSR comprises share price growth plus dividends paid over
a three year period and is expressed as a percentage of
average compound annual growth.
£
450
400
350
300
250
200
150
100
50
0
31 Dec
2008
31 Dec
2009
31 Dec
2010
31 Dec
2011
31 Dec
2012
31 Dec
2013
The Vitec Group plc
FTSE 250
Performance table setting out the total remuneration
of the Chief Executive
The following table sets out the single figure of total
remuneration paid and the amount vesting under short-term
and long-term incentives (as a percentage of the maximum
that could have been achieved) to the Group Chief Executive
for each of the five years ended 31 December 2013. Stephen
Bird was appointed Group Chief Executive on 14 April 2009.
Prior to Stephen Bird, Alastair Hewgill was interim Chief
Executive from 1 October 2008 to 14 April 2009.
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
Year
(ended 31
December)
Group Chief
Executive
CEO single
figure of
total
remuneration
Annual Bonus
payout against
maximum
opportunity %
(including actual
amount paid)
Long-term
incentive
vesting rates
against
maximum
opportunity %
2013
2012
2011
2010
2009
2009
£1,034,602
£1,697,841
£2,053,828
£812,946
£487,087
71%
(£355,616)
79.4%
(£386,434)
87.3%
(£323,816)
98.75%
(£355,994)
68.7%
(£172,069)
£151,634
42%
(£51,911)
Stephen
Bird
Stephen
Bird
Stephen
Bird
Stephen
Bird
Stephen
Bird (from
14 April
2009)
Alastair
Hewgill
(from 1
January
2009 to 14
April 2009)
28.55%
(£172,829)
92.4%
(£817,428)
100%
0%
0%
0%
Percentage change in remuneration of the
Group Chief Executive
The table below sets out a comparison of the following elements
of remuneration paid to the Group Chief Executive, Stephen Bird,
in the year ended 31 December 2013 compared to the year
ended 31 December 2012 and compared to that of UK based
employees: Annual Salary; Taxable Benefits; and Annual Bonus.
The Remuneration Committee has selected this comparator
group on the basis that the Group Chief Executive is UK based
and this provides a local market reference, is a sizeable population
and a fair representation of the Group’s employee base.
Annual Salary
(% change
in 2013
compared to
2012)
Taxable
Benefits (%
change in 2013
compared to
2012)
Annual Bonus
(% change
in 2013
compared to
2012)
2.5%
2.5%
(8)%
2.5%
2.5%
43%
Stephen Bird,
Group Chief
Executive
UK based
employees
Note: The difference between the percentage change in bonus for the Group
Chief Executive and all UK based employees is as a result of a Division which
employs a large proportion of the UK workforce missing financial targets in
respect of 2012 performance which resulted in low bonus payments in 2012.
Relative importance of spend on pay
The table on the following page sets out for the year ended 31
December 2013 compared to the year ended 31 December 2012
the actual expenditure of the Company in terms of remuneration
paid to or receivable by all employees of the Vitec Group and
distributions to shareholders by way of dividends. There have
been no share buybacks or other significant distributions
and payments required to be disclosed that would assist in
understanding the relative importance of spend on pay.
Annual Report & Accounts 2013Strategic ReportRemuneration ReportCorporate ResponsibilityCorporate GovernanceIndependent Auditor’s ReportFinancial Statements
52
Remuneration Report
Annual Report on Remuneration continued
Year ended
31 December
2013
Year ended
31 December
2012
% change
Core measures for 2014 annual
bonus plan
Weighting
(% of overall opportunity)
Total remuneration
paid to all Vitec
Group employees
Total dividends paid
to shareholders
£92.5m
£96.9m
(4.5)%
£9.8m
£9.1m
7.7%
Statement of Implementation of Remuneration Policy in
the Year Ending 31 December 2014
This section provides an overview of how the Committee is
proposing to implement the Remuneration Policy in 2014.
(1) Base salary
The table below sets out the 2014 base salary for each Executive
Director, together with the percentage increase from 2013:
2014 Salary
Increase
Stephen Bird
Paul Hayes
£409,271
£281,357
2.5%
2.5%
In determining the increases for 2014, the Committee took into
account a number of factors, including Company and individual
performance, the executive’s responsibilities and experience,
pay increases for the Company’s employees, market rates for
Executive Director remuneration, the need for retention of a
talented executive team and prevailing economic conditions.
(2) Benefits
The car allowance taxable benefit has been increased in line
with base salary increases for 2014. The other taxable benefits
of private healthcare and income protection are respectively
premium based and contractually based.
(3) Pension allowance
The pension allowances remain unchanged from 2013
representing 20% of base salary. Both Executive Directors
currently take this contribution in the form of a cash payment.
The table below shows the value of the cash allowance in 2014:
Pension contribution
Stephen Bird
Paul Hayes
£81,854
£56,271
(4) Annual Bonus
The maximum opportunity remains unchanged since 2013 at
125% of base salary. Half of any annual bonus earned for the
year ended 31 December 2014 will be deferred into the DBP
for a period of three years and held in the form of shares in the
Company. There will be no matching award that can be earned
on this deferred bonus.
The table below provides information on the performance
measures against which performance for the 2014 annual
bonus plan will be measured:
Group profit before tax*
Group percentage of operating profit*
converted to operating cash flow
Role specific personal objectives set by
the Board and Remuneration Committee
for the Executive Director
50%
25%
25%
The performance measures selected reflect the strategic and
operational objectives of the Group. The Committee considers
that the specific targets and personal objectives for 2014 are
commercially sensitive and therefore has not disclosed them.
The Committee will disclose these targets and objectives at
such point that the Committee considers that they are no
longer commercially sensitive.
(5) Long Term Incentive Plan
Executive Directors will receive an award of shares under the
LTIP equivalent to 100% of base salary in 2014. These awards
will be made in the 42 day period following the announcement
of the full year results for the year ended 31 December 2013
that will be announced on 26 February 2014. There will be
no changes to the performance conditions from the awards
granted in 2013, namely: 50% of the award will be subject
to TSR with the Company’s TSR performance ranked against
the constituents of the FTSE 250 index (excluding financial
services companies and investment trusts) over a three year
performance period; and 50% of the award will be subject
to adjusted basic earnings per share* growth over a three
year performance period. The Remuneration Committee will
determine the EPS targets for minimum and maximum vesting
levels for 2014 awards taking into account market consensus
figures, advice from its corporate broker and internal forecasts
to determine that these targets are sufficiently stretching.
The detail of the performance conditions will be clearly set
out in the announcement detailing the award made.
(6) Chairman and Non-Executive Directors’ remuneration
The fee structure for the Chairman and Non-Executive Directors
for 2014 is set out in the table below:
Chairman
Non-Executive Director
Chairman of Audit Committee
Chairman of Remuneration Committee
Senior Independent Director
2014 fee
2013 fee
£140,000
£140,000
£41,000
£10,000
£9,000
£6,000
£40,000
£8,000
£5,000
£5,000
The basic Non-Executive Director fee, Chairman of Audit
Committee, Chairman of Remuneration Committee and Senior
Independent Director fees were increased with effect from 1
January 2014 as detailed in the table above. This was to reflect
the time commitment and to ensure a competitive fee to attract
the right level of experience for the roles. This increase took into
account benchmark data for fees for Non-Executive Directors
and the respective roles provided by Deloitte. The Board has
agreed that the basic Non-Executive Director fee will typically
be increased in line with the level of salary increases given to
Executive Directors on an annual basis in future years and that
the fees paid to the Chairman, Senior Independent Director and
The Vitec Group plc 53
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
Chairman of the Audit and Remuneration Committee will be
reviewed again in July 2015.
Voting at Annual General Meeting
At the Company’s last AGM held on 15 May 2013, the
Directors’ Remuneration Report was put to the shareholders
for an advisory vote in compliance with regulations applicable
at that time. The resolution was approved on a show of hands
at the meeting however the table below sets out the proxy
votes voted for, against and withheld against the Remuneration
Report. In future years, we will disclose this information for both
the resolutions to approve the Annual Remuneration Report
and the Remuneration Policy Report.
Resolution
Advisory vote on
the Remuneration
Report for the
year ended
31 December 2012
For proxy
votes and
% of votes
cast
31,588,489
shares
(99.1% of
votes cast)
Against proxy
votes and % of
votes cast
Withheld
proxy votes
and % of
votes cast
274,752 (0.89%
of votes cast)
5,664 shares
(0.01% of votes
cast)
As at the date of the Company’s AGM on 15 May 2013
the Company had 43,810,296 Ordinary Shares in issue.
The Remuneration Committee considers that an against or
withheld vote of 20% or more of the votes cast is deemed to
be significant. Based on the level of support to the Directors’
Remuneration Report at the 2013 Annual General Meeting,
the Committee did not consider that there were any issues
of concern. In the event that a significant level of concern is
raised, both the Chairman of the Board and the Chairman of
the Remuneration Committee will contact key shareholders
to understand and address the detail of concern.
Consideration by the Directors of matters relating to
Directors’ remuneration
The Remuneration Committee comprised the following
members during 2013:
Carolyn Fairbairn
Chairman with effect from 1 December 2013
(Committee member throughout 2013)
Nigel Moore
Mark Rollins
appointed with effect from 2 October 2013
Lorraine Rienecker
appointed with effect from 1 December 2013
Christopher Humphrey
appointed with effect from 1 December 2013
Simon Beresford-Wylie
Chairman until 1 December 2013 when resigned
Maria Richter
resigned with effect from 15 May 2013
John Hughes
resigned with effect from 30 June 2013
base salaries, annual cash bonus arrangements, participation
in incentive schemes, pension arrangements and all other
benefits received by the Executive Directors. The Committee
also oversees the framework of senior executive remuneration,
including members of the Operations Executive, including terms
of service, pay structure, annual cash bonus, pensions, share
incentive arrangements and all other benefits.
The Committee invites individuals to attend meetings, as it
deems necessary, to assist with consideration of remuneration
matters. The Chairman, John McDonough, the Group Chief
Executive, Stephen Bird, the Group Company Secretary, Jon
Bolton and the Group Development and HR Director, Martin
Green, attended meetings by invitation in the year ended
31 December 2013. The Executive Directors or members
of the Operations Executive are not present when their own
remuneration is being considered.
The remuneration of the Chairman and the Non-Executive
Directors is determined by the Board as a whole, with the
Chairman or the relevant Non-Executive Director abstaining
when his or her remuneration is considered.
For further information regarding governance for the
Remuneration Committee see pages 69 and 70 of this
Annual Report.
External advisors
The Committee received independent advice from Deloitte
LLP as the Committee’s appointed remuneration advisor
during the year ended 31 December 2013. Deloitte have
a wide range of experience and knowledge on executive
remuneration for multinational companies such as the Company
and are able to provide detailed background and context to
enable the Committee to come to an informed decision on
executive remuneration. This advice related to disclosures
in the 2012 Directors’ Remuneration Report, drafting of the
2013 Directors’ Remuneration Report in compliance with the
new disclosure requirements, measurement of performance
conditions associated with long-term incentive arrangements,
changes to performance conditions associated with long-term
incentive arrangements, a proposal to renew the Company’s
LTIP and DBP at the 2014 Annual General Meeting and general
remuneration advice. Deloitte’s total fees for 2013 work and
advice relating to executive remuneration was £58,800 (2012:
£76,200). Deloitte also provided other services to the Company
during the year, including work and advice relating to expatriate
tax, international relocations and corporate finance. Deloitte is a
member of the Remuneration Consultants Group and operates
under that group’s voluntary code of practice for remuneration
consultants in the UK. The Committee is satisfied that the advice
they have received from Deloitte during 2013 has been objective
and independent. The Committee also received advice and
administrative support during 2013 from the Group Company
Secretary, Jon Bolton, and the Group Business Development
and HR Director, Martin Green.
This Annual Remuneration Report has been approved by
the Remuneration Committee and signed on its behalf by:
All of the Committee members are independent
Non-Executive Directors.
Carolyn Fairbairn
Chairman, Remuneration Committee
The Committee, on behalf of the Board, determines the policy
and implementation of the remuneration packages, including
25 February 2014
Annual Report & Accounts 2013Strategic ReportRemuneration ReportCorporate ResponsibilityCorporate GovernanceIndependent Auditor’s ReportFinancial Statements
54
Corporate Responsibility
Stephen Bird confirms Vitec’s
commitment to corporate responsibility
Our corporate purpose is to provide vital products and services that support the
capture of exceptional images. To do this we operate with the following values:
> Product excellence – everything we make and do is exceptional
> Creative solutions – we are constantly looking to break new ground
> Integrity – what you see is what you get
> Customer focus – we are nothing without our customers
> Collaboration – we work better when we work together
Corporate responsibility is central to sustainable growth and we recognise that our
stakeholders increasingly consider corporate responsibility matters in decision making
about whether to invest in Vitec or to buy our products and services. New regulation
has also been introduced in 2013 requiring listed companies such as Vitec to disclose
publicly their greenhouse gas emissions. In 2013 we have maintained our FTSE4Good
index membership demonstrating our commitment to environmental, social and
governance matters. We will continue to develop our corporate responsibility activities.
The Board has overall responsibility for corporate responsibility matters and has
approved our Code of Business Conduct, Environmental Policy and Health and Safety
Policy. Each of these is available on our website and they are the cornerstone of our
approach to corporate responsibility. The Board has delegated to me the co-ordination
of our corporate responsibility efforts and through senior executives at Group and
Divisional level we co-ordinate our efforts on the areas of business ethics, environment,
employees and community and charitable donations. Our approach is flexible and
pragmatic to reflect the size and scale of our operations and we focus our limited
resources where necessary to comply with legal requirements.
2013 has been a year of consolidation given the restructuring initiatives undertaken in
the Group. We have focused on two key areas. Firstly, to ensure we accurately capture
our greenhouse gas emissions and report them in compliance with new regulations.
Secondly we have re-communicated our Code of Business Conduct and whistleblowing
arrangements to all employees to ensure that our values are understood and that
employees clearly know what is expected of them in terms of behaviour and values.
The Operations Executive receives regular updates on corporate responsibility issues
from the Group Company Secretary and progress will continue to be monitored and
reported on going forward. In turn I report to the Board on our corporate responsibility
initiatives including health and safety performance and our approach to ethics.
The following pages describe our 2013 corporate responsibility activities organised in
the following areas:
Business Ethics
Page 55
Employees
Page 58
Environment
Page 56
Community &
Charitable Donations
Page 61
Corporate Responsibility Report on-line
www.vitecgroup.com/responsibility
We believe it is important to
our stakeholders that Vitec
is committed to a sustainable
business model and takes
corporate responsibility
seriously to ensure the
long-term value of
our business.
A co-ordinated corporate
responsibility programme
will engage and motivate
our employees, add value
for our customers and
protect our reputation,
benefiting the Company,
our shareholders and all
other stakeholders.
The Vitec Group plc 55
Business Ethics
Our Vision
Our Approach
C
o
r
p
o
r
a
t
e
R
e
s
p
o
n
s
b
i
i
l
i
t
y
To ensure our employees have a clear
understanding of what is expected of them in
conducting business in the right way with a
common set of values. We expect our business
partners to abide by standards that are
compatible with our own.
Vitec’s Board has implemented a robust
governance framework including a Code of
Business Conduct that is communicated to all
employees and major business partners articulating
our values, beliefs and behaviours. Where
appropriate we train our employees on key issues
including bribery and corruption and promote a
whistleblowing service as a back-up control.
Code of Business Conduct
Anti-bribery
Whistleblowing service
Our Code of Business Conduct
(Code) provides clear guidance to our
employees on how they are expected
to behave towards employees, suppliers,
customers, shareholders and on our
wider responsibility to the communities
within which we operate. The Code,
which is available on our website, sets
out our approach to business integrity
including an express prohibition on
bribery and kickbacks, guidance on
gifts and hospitality, conflicts of interest,
books and records, competition, share
dealing, respect for the UN Universal
Declaration of Human Rights, respect
for the individual and privacy, diversity,
health and safety, environmental
sustainability, business partners,
charitable donations and a clear
prohibition on political donations.
To ensure that the Code is understood
by our employees, during 2013 we
re-communicated our Code to each
employee in the Group and we ensure
that all new employees receive a copy
as part of their induction to Vitec. When
new businesses have been acquired the
Code has been rolled out to employees
in those new businesses to ensure that
a common Group-wide approach to
business ethics is in place. In 2013 we
carried this out for employees at Teradek,
who joined the Group in August 2013.
All employees are expected to comply
with the Code and any violations of it
are to be reported to local management
or the Group Company Secretary
for investigation.
We have continued with the development
of our employees’ understanding of
anti-bribery and corruption as reflected
in our Code. Over 500 employees have
taken an on-line training module (also
translated into Italian, German and
Japanese) including the Board of
Directors, Operations Executive,
senior executives and customer-facing
employees covering anti-bribery and
corruption. All participants were required
to complete the module and to take a
test on the issues covered by the training.
All new employees who fit into this
category and recently acquired
businesses, including Teradek, have
undertaken the training in 2013 and
our aim is to further develop the training
in 2014 to build upon employees’
understanding and knowledge of
this issue as well as other important
governance matters.
In 2012 we communicated our Code
on a risk-based approach to our major
suppliers, customers, agents and
distributors. We have either secured their
agreement with the terms of our Code
or secured evidence of their own ethics
procedures including an express
prohibition on bribery. We have continued
with this risk based approach in 2013
ensuring that new major suppliers,
customers, agents and distributors either
sign up to the Company’s Code or
provide evidence of their own ethics
procedures. All agents and distributors
have in place formal agreements which
clearly prohibit bribery and set out our
expectation on behaviour and values.
We operate an independent
whistleblowing service in conjunction
with Expolink. This service enables any
employee or third party who feels that
the normal reporting channels through
line management are not appropriate,
to report confidentially any issues around
dishonesty, fraud, bribery, malpractice,
bullying, unfair treatment, unsafe working
practices or other contraventions of our
Code. In accordance with a clearly
agreed documented procedure, all
such reports are notified to the Group
Company Secretary, the Group Chief
Executive and the Chairman of the Audit
Committee, and are investigated
independently by senior management
who are not connected to the report.
The outcome of investigations is reported
to the Chairman of the Audit Committee.
The service was re-communicated to all
our employees in 2013 with re-branded
posters, a letter from the Group Chief
Executive and a letter from Expolink
explaining the service to ensure that
it remains visible and understood.
The service is introduced to all employees
of new businesses on acquisition and
during 2013 was communicated to
employees at Teradek. During 2013
we received nine whistleblowing reports
principally concerning employee issues
in the UK, US, Italy and Costa Rica.
All whistleblowing reports were
independently investigated with remedial
actions taken where necessary.
Information on the whistleblowing service
is displayed at all sites on notice boards
and in prominent areas where employees
and visitors meet. It is our intention to
re-communicate the whistleblowing
service again in 2015 to ensure that
it remains prominent for employees.
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Corporate Responsibility
Environment
Our Vision
Our Approach
To become increasingly environmentally friendly
without impacting our competitiveness.
We are creating a “green culture” by adopting
technologies, materials and processes that will
have the lowest impact on the environment.
Vitec’s products and processes
Vitec’s green practices
In 2013 we continued to implement initiatives aimed at sustaining
and protecting the environment, in the areas of research and
development, production, packaging and waste disposal.
By their very nature, our products and services have a low
impact on the environment: we use low-hazard materials;
we minimise the use of resources during the manufacturing
process; and we search for materials that are sustainable
and can be recycled and re-used.
Our efforts and environmental awareness have continued to
evolve, not only to comply with regulations but also to make
our business better. By putting in place a proper environmental
management system we are reducing operating costs and
business risks, while ensuring sustainability.
An example of how innovation and technology play a critical role
in helping reduce the impact on the environment is LED lighting,
which is produced by Litepanels and Manfrotto. LED technology
has significant benefits over traditional lighting as LED lights last
ten times longer than a regular incandescent bulb and are four
times more energy efficient. The dramatic cut in the amount of
energy used translates to financial savings for users along with
creating a cleaner environment.
Videocom successfully delivered a major strategic project during
2013, with teams working together across the globe to adapt
business processes to support a fundamental change to how the
Division does business with its customers and employing a leaner
approach to its global operations. The successful completion of
the project has enabled customers to order multiple products,
and receive one delivery and one invoice, thus increasing value
to customers with less work and waste.
Environmental Policy on-line
www.vitecgroup.com/environmental_policy
As part of our commitment to responsible business practices,
in 2013 we continued initiatives aimed at reducing energy, paper
and water use, encouraging recycling and proper waste disposal,
and promoting a culture of sustainability among our employees.
We monitor and track our usage of electricity, gas and water across
our manufacturing, warehouse and administrative sites and make
efforts, where possible, to reduce our usage both in terms of reducing
costs and impact on the environment. Many buildings within the
Group have timer and motion sensors for lighting to save on
electricity usage. Other buildings have programmable thermostats
that are centrally managed to optimise the building’s heating
and cooling needs, therefore maintaining a steady temperature.
The electricity contracts with Green Certificates at the Italian sites
were renewed in 2013, confirming the commitment to use energy
generated by renewable sources.
The Group’s electricity, gas and water usage per £million of Group
revenue over the last five years is set out on the following page.
Whilst the Group’s electricity, gas and water usage has increased on
the basis of usage per £million of Group revenue in 2013 compared
to 2012, actual usage in each of these two years is set out below
and has declined for both electricity and water usage during 2013.
The Imaging Division’s sites in Bassano and Feltre in Italy had
their ISO 14001 status confirmed in 2013, showing that these
operations have designed and implemented effective
environmental management systems.
Videocom has focused on manufacturing quality and operational
excellence particularly at its Bury St Edmunds site in 2013. A new
Global Quality Manager has been tasked with this improvement
initiative as well as setting up a new Continuous Improvement
Proactive Quality Assurance team. To deliver this, personal
development training for employees has been undertaken
including Level 7 Advanced Diploma in Strategic Quality
Management and ISO9001: 2008 Auditor training.
Actual electricity, gas and water usage in 2013 and 2012
Electricity (MWh)
Gas (MWh)
Water (cubic metres)
2013
2012
2013
2012
11,521
12,335
2013
2012
6,574
6,453
26.95
28.26
The Vitec Group plc 57
Our electricity, gas and water usage based on usage per £million of Group revenue
Electricity - MWh / £m Group revenue
Gas - MWh / £m Group revenue
Water - cubic metres / £m Group revenue
35.2
37.5
35.2
35.7
36.5
40.00
30.00
20.00
10.00
30.00
25.00
20.00
15.00
10.00
5.00
25.4
25.1
20.3
18.7
20.8
0.12
0.10
0.08
0.06
0.04
0.02
0.10
0.10
0.08
0.08
0.09
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
The table below shows the quantities of materials that were
recycled in 2013 at our major manufacturing sites in the UK,
Italy and Costa Rica. All measurements are in kilograms.
Feltre, Italy
Bury St Edmunds, UK Cartago, Costa Rica
Aluminium – 73,616
Aluminium – 30,910
Aluminium – 33,876
Iron and Steel – 32,622 Steel – 4,200
Steel – 7,357
Paper and cardboard
– 70,020
Paper and cardboard
– 41,300
Paper and cardboard
– 18,600
Plastic – 11,394
Plastic – 500
Plastic – 3,849
Wood – 13,030
Wood – 18,000
Carbon fibre – 344
Carbon fibre – 1,180
Brass – 7,187
Magnesium – 1,142
Copper, Bronze and
Brass – 80
Green Waste – 580
Iron – 1,179
The recycling largely covers the cost of waste management at
our main sites. Similar recycling initiatives are carried out at our
other manufacturing sites. Offices and manufacturing sites
throughout the Group have waste recycling points to enable
the sorting of waste into different recycling streams (paper,
glass, plastics, ink toners, batteries and general).
This Annual Report is produced using vegetable-based inks and
materials approved by The Forest Stewardship Council. We also
encourage our shareholders to receive the Annual Report
electronically thereby saving on production and distribution
resources and costs.
Most of the Group’s operating sites including the Head Office,
Divisional head offices and business units have video
conference facilities in place enabling employees to video
conference with both internal and external parties and to
optimise the need for business travel.
Vitec objectives and future plans
Over recent years we have made progress in energy efficiency
and the use of renewable energy where practical. However, being
aware that the environment presents many cost, regulation and
reputational risks, we have set up a rigorous reporting system to
capture data in a consistent way across the whole Group and to
identify opportunities for cost and energy reduction.
Building upon our work in 2012 in preparation for the
requirement to report on greenhouse gas emissions with effect
from 1 October 2013 in accordance with the Greenhouse Gas
Emissions (Directors’ Reports) Regulations we have developed
our processes to enable the accurate capture and reporting of
all material Scope 1 and 2 emissions. These emissions have
been recorded at 20 of our major operating sites in the twelve
months to 30 September 2013, and arise from on-site energy
use and any fugitive emissions, and transport from owned
vehicles. We have identified these 20 major operating sites as
the material sites for the Group for this requirement as it covers
our principal operating sites including: Feltre, Italy; Bury St
Edmunds, UK; Cartago, Costa Rica; Burbank, US; Mount
Olive, US; Ashby-de-la-Zouch, UK; and Shelton, US. These 20
sites account for over 95% of the Group by revenue. We have
excluded our smaller sites as their size and scale of operations
are not material with respect to their Scope 1 and 2 emissions.
We have also excluded Teradek that was acquired in August
2013 to allow that business sufficient time to adopt our
reporting guidelines. As well as enabling the reporting of
emissions, this information will enable us to identify potential
cost savings going forward.
Our most significant emissions arise from the use of electricity
which makes up all our Scope 2 emissions. Approximately two
thirds of our Scope 1 emissions arise from the use of natural gas
with the remainder mostly arising from transport fuel. All our
emissions have been calculated using the latest Defra conversion
factors available at www.gov.uk/measuring-and-reporting-
environmental-impacts-guidance-for-businesses.
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Greenhouse Gas Emissions for the period from 1 October
2012 to 30 September 2013 (Tonnes of CO2 equivalent)
For the year ended 30 September 2013
Scope 1 emissions
Scope 2 emissions
Total gross emissions
Total carbon emissions per £m of Group revenue
Tonnes CO2e
1,713
4,389
6,102
19.3
For the year ended 31 December 2012 we reported CO2e data
giving an indicative overall carbon footprint (Scope 1 and 2) of
8.3 tonnes CO2e (intensity ratio of 24 tonnes CO2e/£m of
revenue). For 2013, in accordance with reporting regulations
and guidance published by Defra we selected a reporting date
of 30 September 2013 to enable accurate data to be collated
to compile the table above in time for inclusion in this Annual
Report. We have conducted an internal review to check the
completeness and accuracy of the reported data. Going
forward we will report on progress with our greenhouse
gas emissions to show year on year figures for the Group.
Potential areas of saving have been identified notably in
our larger production sites in the UK and Italy. These include
energy efficient lighting, staff awareness, regular maintenance
programmes, optimisation of machinery and equipment
switch off, and optimisation of control around air conditioning.
Associated capital requirements and payback periods will be
assessed as opportunities arise to identify the best opportunities
to pursue, balancing the need to deliver on other business
priorities in 2014 and beyond.
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Corporate Responsibility
Employees
Our Vision
Our Approach
Be a responsible employer providing attractive
opportunities for our people to develop.
We are attracting and engaging a committed
workforce, ensuring diversity and non-
discrimination. Vitec is committed to respecting
the UN Universal Declaration of Human Rights.
Our people are a key asset for the Group
We are fully aware that our employees are critical for the success
of the business. Passionate, motivated, skilled employees in a
good working environment directly contribute to our strategy,
performance and reputation.
In 2013 we continued to focus time and resource on our
employees, including initiatives on subjects such as wellbeing,
engagement and training events.
In early 2013 Vitec’s Italian sites, covering approximately 600
employees, were awarded the Top Employers certification by the
Top Employers Institute for their high employment standards.
All critical areas of HR processes were assessed including
benefits, working conditions, training and development, career
development and company culture.
Videocom in Costa Rica received an award from Great Place
to Work® recognising the good employment practices in the
business. The award recognises five specific areas of employee
satisfaction as measured by an all-employee survey: credibility,
respect, impartiality, pride and partnership.
Our seven year accident record
2013
4 accidents
representing 211 accidents per 100,000 employees
2012
6 accidents
representing 288 accidents per 100,000 employees
2011
8 accidents
representing 390 accidents per 100,000 employees
2010
10 accidents
representing 525 accidents per 100,000 employees
2009
10 accidents
representing 511 accidents per 100,000 employees
2008
16 accidents
representing 723 accidents per 100,000 employees
2007
20 accidents
representing 976 per 100,000 employees
Health and Safety
The provision of a healthy, safe and productive work environment
for all our employees is a priority for Vitec, for which all our
management and employees are responsible.
We have continued to impress the need for excellent health
and safety procedures in compliance with the Group’s Health
and Safety Policy, which is available on the Company website.
This policy sets the Group-wide guidelines for the prevention
of accidents and work-related ill-health and provides guidance
for the adequate control of health and safety risks arising from
work-related accidents.
All accidents and near misses, whether they result in absence
from work or not, are reported and remedial action identified and
implemented to prevent such occurrences in the future. Reporting
is prompt with any accident resulting in over three days absence
reported to senior Divisional management as well as the Group
Chief Executive as soon as possible. Our seven year accident
record is shown opposite, which details the number of accidents
resulting in over three days’ absence from work across the Group.
This demonstrates continued improvement in this area across the
Group’s operations and we will continue to develop our practices
to deliver further improvements in this important area.
There have been no work related fatalities since the Group began
collating Health & Safety statistics in 2002.
The Operations Executive reviews health and safety performance
every month, discussing any incidents of note and supports the
Divisions in the management of local health and safety
committees and the implementation of regular training activity.
The Group Chief Executive updates the Board regularly on health
and safety performance by way of monthly reports and verbally
at Board meetings.
Employees receive training on health and safety procedures that
are appropriate to their line of work and environment. This may,
for example, involve training in warehouse operations, working at
heights, fire safety or more general initiatives to make employees
aware of the dangers that can be encountered in the execution
of their various duties. Within each of the Group’s Divisions
separate assessment and training appropriate to operations is
carried out for health and safety. For example, the Imaging sites
at Bassano and Feltre had their OHSAS 18001 occupational
health and safety certification confirmed in 2013. Employees
are reminded of the need to work safely with posters on notice
boards at all sites. Health and Safety Committees at all major sites
hold regular meetings to review safety, to ensure that operating
practices are safe and to address potential safety concerns.
The Vitec Group plc 59
ISSUE
004
OCTOBER TWO THOUSAND & THIRTEEN
pag. 2
Dear colleagues,
BUSINESS HIGHLIGHTS
Our Divisional CEO Marco Pezzana
gives us an overview of the year so far
and sets up a positive outlook for 2014
pag. 3
NEWS FROM OUR WORLD
New photo club in the USA.
The Italian IT announce the integration of Lync
with summer well over and Christmas on the way
October is a moment to take stock of our progress
and start planning for the next year. In this issue Marco
Pezzana gives us an overview of the year so far and sets
up a positive outlook for 2014. Our recently launched
products like Befree and PIXI receive rave reviews with
new and exciting products like the New 190, Spectra
and Advanced & Professional bags on the way to stores.
Click me features two employees from facilities and a big
welcome to our new colleagues from all over the world.
As always we invite you to get in touch with the editorial
staff at snapshot@manfrotto.com to share news and
highlights from your “imaging world.” We would love to
hear from you.
pag. 4-5
PRODUCT HIGHLIGHTS
CMO Renzo Rizzo talks about LED technology
and loads of new products hit the markets
RECENT EVENTS
A round up of events and initiatives from recent months
and “picture of the month” winners
pag. 6-7
pag. 8-9
Snapshot Issue 4
PEOPLE FOCUS
Welcome to new employees,
click me and sponsorships
Vitec shopping cards
Health and safety training in Cartago, Costa Rica
Product highlight:
check out the new 190,
a champion of Manfrotto
excellence
Engagement
Wellbeing
In 2013 we developed a mission statement to underpin our
Group communications, both internally and externally, which
requires us to present our brand and messaging clearly and
consistently to engage investors, employees and customers.
Guided by this statement we aim to provide our employees
with an engaging and stimulating environment where they
are encouraged to learn and develop. We communicate with
our employees on a regular basis, keeping them informed
of business performance at a Group, Divisional and business
unit level. Reflecting the diverse global nature of our employees
we use multiple channels and a variety of media to
communicate with them.
A business overview, focusing on results and key events,
is shared with all employees via two annual, global
communication videos presented by the Group Chief Executive.
In April and May 2013 we held several management
conferences in the US, Italy, UK and China, involving the
Group Chief Executive, Group Finance Director and senior
managers across the Group covering strategy, results and
main achievements. This local format enabled a wider number
of employees to attend and hear first-hand updates on key
messages and core business priorities.
Good3
The Good3 project, launched in 2011 in the Group’s Imaging
Division, continued in 2013 with more initiatives undertaken
at several sites.
The programme was developed to help employees to stay
healthy, by providing them with training and tools to develop
good habits in the areas of diet, exercise and the prevention
of illnesses. Examples within Imaging included discounted
gym memberships at the principal Italian sites of Bassano and
Feltre and also Manfrotto’s US distribution business based in
New Jersey. The Manfrotto UK business rolled out a cycle-to-
work scheme in 2013 under the UK Government’s cycle
scheme initiative. Healthy eating initiatives were promoted
within Imaging with a Good3 discounted product line included
within site vending machines. The intention is for this to be
extended throughout the whole Division.
The focus on educating employees to enable them to make
healthy decisions is also active within Videocom. Initiatives
across the globe have taken place such as occupational health
services and talks in the UK, annual flu vaccinations, healthy
eating and exercise programmes across the US as well as
weekly on-site dental facilities at Costa Rica.
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Alongside Group level communications, employees receive
briefings on performance and business issues on a regular
basis from Divisional and business unit senior management.
This takes the form of internal announcements, breakfast
meetings with Divisional management, quarterly business
updates via video, and intranet sites.
As an example of the progress made within Divisional
communication, Videocom has consolidated and increased
its internal communication by launching a new internal portal
“Informed”. The site focuses on product news and sales team
resources and is supported by a weekly digital newsletter.
Employees are also sent local communications, with each
Division delivering its own employee newsletter: “Snapshot”
within the Imaging Division, “The View” within the Videocom
Division; and a monthly e-newsletter from the Services Division.
We have further developed the HUB which is now also a global
communication and training resource portal for all employees.
2013 saw the addition of the Communication HUB where
news and announcements from the Divisions are collated,
enabling employees to share more and work better together.
Working environment
We continue to invest in improving the work environment for
our employees, creating contemporary spaces with upgraded
technology and communication systems that enable
collaboration and personal efficiency. In 2013, the Group
relocated its Manfrotto UK business into a single site in the
UK based in Ashby-de-la-Zouch. We further expanded our
manufacturing operations in Cartago, Costa Rica and
relocated several of our US businesses into new sites
improving the working environment and working efficiencies.
Improving manufacturing quality and operational excellence
have been a key focus at Bury St Edmunds, UK. A Continuous
Improvement Proactive Quality Assurance (CIPQA) team has
been established and we continue to develop individuals’ skills
at the site through additional training.
We have also listened to and responded to our employees’
views. 2013 has seen the promotion of family friendly working
with a focus on eliminating negative work patterns and stress.
Initiatives linked to this have included flexible working
opportunities for all Videocom UK employees and the launch
of the US East Coast summer hours programme, where
employees were able to adjust their working hours during the
week and finish early each Friday. Within the Imaging Division,
a supplementary labour agreement has presented new flexible
working opportunities and an improved working environment
for employees, with a specific focus on women in terms of
work/life balance.
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Benefits
We employ over 1,800 employees in 12 countries who are
managed in accordance with local employment legislation,
policies and our organisational values. Attracting the talent
we need and retaining their commitment to our organisation
in all of the territories in which we operate has required the
organisation to commence an assertive approach to our benefits
packages in order to support our employees and to remain
competitive in a global market where talent is in short supply.
In the US our employees participate in a consolidated Health
Benefits Plan that provides a valued level of healthcare.
Similar plans are offered to employees in other territories.
Employees are provided with the option to join pension plans
appropriate to local markets and in the UK this involves a
Group Personal Pension Plan with minimum employer and
employee contributions and in the US a 401k plan. In the UK
we are implementing auto enrolment for those employees who
have not joined the Company pension plan with a staging date
of 1 April 2014.
Employees in the UK, US, Italy and Costa Rica are further given
the opportunity to join an all-employee Sharesave scheme on
an annual basis, enabling the employee to save a fixed amount
each month to purchase shares in the Company at a discounted
rate. Good levels of take up are experienced.
The Imaging Division’s Italian sites offer employees a Vitec
Shopping Card that allows employees to benefit from special
prices on food, drinks, travel, clothing, sport, cinema and
medicine through agreements with local retailers. These
discounts of up to 50% help employees to increase their
purchasing power.
Capability and development
Learning and development activity continued to take place in
our businesses in accordance with the personal development
plans put in place in 2010, results of annual performance
appraisals and organisational need. The Organisation and Talent
Review (OTR) has continued to be developed to fully understand
the organisation’s capacity and capability for achieving its
strategic plans. The OTR enables the Operations Executive to
create the leadership pipeline for its critical roles and specify the
development requirements to be offered to employees.
The HUB continues to act as a learning and development
resource to support the Group’s four core priorities of building
the right organisation, developing commercial acumen,
operational excellence and working together. Throughout 2013
it evolved from a senior management resource to a universal
tool offering a range of learning and development materials to
assist all employees to build on their skills, known as the Talent
HUB. These include self-help videos, on-line resources and
working toolkits. Recently, personal development planning
templates and guides were added to the Talent HUB to help
employees analyse their development needs and support
career-related discussions.
The performance appraisal process, in operation in each of the
Divisions, provides the opportunity for the employee to discuss
current performance and future potential with their line manager
in an objective and positive manner. The development needs
identified by the discussions will continue to be used to enhance
the global programme of talent development for release more
widely across the Group.
Working at Vitec
www.vitecgroup.com/working_at_vitec
Targeted learning and development activities have been
instigated within the Divisions. In 2013, Videocom launched its
Training Academy, delivering product and sales training across
all brands to employees at three training academy sites in
Germany, the UK and the US. Individual and departmental
training programmes have also been launched to increase
capabilities in sales, engineering and management. This is a
long-term incentive for Videocom with a calendar of training
and supporting activity planned for 2014. Within Imaging,
Manfrotto’s School of Xcellence Shoot and Share training
programme continued to educate employees on photography
and videography. 19 seminars were attended by more than
170 employees and guests throughout 2013.
Opportunity
Vitec has an equal opportunities culture with an express
prohibition on discrimination of any kind. In 2011, Lord Davies’
report on Women on Boards was considered by the Board
leading to a reiteration of our diversity statement, which is set
out on page 66 of the Governance Report and on our website.
The organisation’s current gender breakdown is as follows:
Gender statistics as at 31 December 2013
Number
of men
% of men
Number
of women
% of
women
Board
Operations Executive
Senior Management
6
7
21
Rest of organisation
1,190
This data does not include contractors
75%
100%
91%
69%
2
0
2
25%
0%
9%
535
31%
Through efforts by the human resources teams to attract women
to Vitec and encourage them to apply for promotions the gender
balance of the overall workforce has shifted during 2013. We now
employ 31% women throughout the organisation, up from 25%
at the end of 2012. We are pleased with this improvement and
will continue to strive to employ a diverse workforce.
Vitec’s approach to diversity has always followed a strict policy of
sourcing the best person for the role irrespective of race, gender,
age or disability. We are keen to develop further the recruitment
of talented women to the organisation at all levels and are
developing policies and procedures across the Group to achieve
this. Following feedback from employees, during 2013 we
established a working group under the direction of the Group
Chief Executive and involving the most senior women throughout
the Group to discuss issues pertaining to diversity and the role of
women within Vitec. The group comprises the 50 most senior
female employees and met for the first time via video-conference
in late 2013. A number of initiatives have been set out including
a vision to increase the number of women in senior roles by 2016,
ensuring that all senior women have personal development plans,
encouraging the women to network across the industries we
operate in and ensuring that Vitec and its business units
encourage flexible working. The group has begun to share
ideas via email and will continue to meet during 2014.
It is Vitec’s policy that applications for employment by disabled
persons are always fully considered, bearing in mind the
respective aptitudes and abilities of the applicant concerned.
In the event of employees becoming disabled all reasonable
effort is made to ensure that their employment within the Group
continues. It is our policy that the training, career development
and promotion of disabled persons should be, as far as possible,
identical to that of all other employees.
The Vitec Group plc 61
Corporate Responsibility
Community & Charitable Donations
Our Vision
Our Approach
Support the communities in which
we operate.
We emphasise initiatives and projects strongly
backed by employees, that are relevant to what we
do and that can be supported for several years.
The Vitec Group and its subsidiaries have continued to support charitable and community based causes in 2013.
The following are a few examples of the good work being done by Vitec in the communities within which we operate.
Local community donations
A Spot of Red
Match of the Heart and Cheru Cup
Manfrotto ran two blood donation
awareness campaigns within its Italian
and US locations. Manfrotto Italy donated
prizes for a competition to promote “A
Spot of Red”, a campaign run by the
Association of Voluntary Italian Blood
Donors. Their colleagues in the US
supported a blood drive and arranged a
specific day to donate blood to support
the New Jersey Blood Centre.
Kingston University Television and
Video Technology Department
Vitec’s Head Office continued its link with
Kingston University’s Television and Video
Technology department with a donation
of £4,000 in 2013. This donation was
used to provide further broadcast
equipment including some of the
Company’s products giving over 200
students the opportunity to use first-hand
the Company’s broadcast and
photographic equipment including Vinten,
Manfrotto and Autoscript products.
Imaging’s Bassano and Feltre sites
organised an employee football match
and tournament in support of a local
foundation that helps children suffering
with onco-hematology diseases. e2,500
was donated to the charity “Citta della
Speranza”, after more than 250 people
had attended the tournament to support
4 teams playing for the Cheru Cup,
named after a former employee who
passed away two years ago.
West Suffolk College Media School
Videocom’s 2013 initiatives included the
donation of Vinten products to a local
college media school and sponsorship
of one of the business studies
graduation prizes.
The Bury St Edmunds site in the UK
supports local and national charities
such as Children in Need and the St
Nicholas Hospice in Suffolk. This is also
reflected at Manfrotto UK, based in
Ashby-de-la-Zouch, who donate to a
local hospice, Rainbows. The newly
expanded Costa Rican production facility
in Cartago invests many hours in the
community including sponsoring a local
nursing home and holding an event for
an adult handicap shelter in the local
town of Cot.
Water Aid and reaching the
unreached
Manfrotto UK donated £3,000 to
Water Aid, a charity helping some of
the poorest people in Africa, India and
Pakistan gain access to safe water,
sanitation and hygiene. It also gave
a further £6,000 to Reaching the
Unreached, a UK registered charity that
supports charitable work in India for the
poor, promoting projects involving
water, food, medicine and education.
The Company has had a long-standing
relationship with the town in India that it
has supported for over forty years, and
employees wish to maintain that link.
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Corporate Governance
Chairman John McDonough, CBE explains
Vitec’s corporate governance framework
Corporate Governance on-line
www.vitecgroup.com/corporate_governance
Your Board, under my Chairmanship,
is responsible to all Vitec’s stakeholders
for providing strong leadership and
effective decision-making to ensure
the continued success of the Group
and the implementation of our strategy.
This report explains how the Board
operates in delivering this. We strive to
work in accordance with best corporate
governance practice and evolve those
practices and procedures to deliver
long-term sustainable shareholder value.
I believe that we have a sound and robust corporate governance
framework in place, which I confirm has applied throughout 2013.
2013 has been an important year for the Board and I have
spent further time getting to know the business and its people
in greater detail, and specifically focusing on the role of the
Board in directing the Group’s strategy. I have visited more of
the Group’s businesses, including Cartago, Costa Rica to see
operations following the announcement of our expansion at this
facility, Bassano and Feltre, Italy where we held our July Board
meeting and Bury St Edmunds, UK where our Videocom
Division is headquartered. I have also met with several major
shareholders during 2013 to hear first-hand their views on
the business and to ensure there is a clear and open dialogue.
The Board spent a significant amount of time reviewing and
evaluating the Group’s strategy and future prospects. I am
confident that we have the right strategic plan in place to
generate good returns for our shareholders. This is underpinned
by high quality business operations and a strong executive
management team to meet our stakeholders’ expectations
of strategic delivery. Alongside the strategic review we have
considered the Group’s principal risks, and the associated
processes and procedures to mitigate them. Further detail
on the principal risks can be found on pages 22 and 23.
Under my Chairmanship, the Nominations Committee has
focused on succession for the Board during 2013. With the
appointments of Mark Rollins on 2 October 2013, and Lorraine
Rienecker and Christopher Humphrey on 1 December 2013,
all as independent Non-Executive Directors, your Board has
been strengthened. They bring with them financial, strategic
and technological knowledge and expertise to assist with the
implementation of our strategy. They also enhance our diversity
in terms of gender, professional and global experience. All three
of our Directors are currently working in other international
companies, ensuring they have relevant and current commercial
experience of the fast-paced changing environment in which we
operate. Induction programmes have been developed for each of
these Directors and further information on their appointments and
the content of their inductions is provided later in this report.
Your Board and their biographies are set out on pages 30 and 31.
Maria Richter did not stand for re-appointment at the 15 May
2013 AGM having come to the end of her term of appointment.
John Hughes left the Board on 30 June 2013 and Simon
Beresford-Wylie left the Board on 1 December 2013. I would
like to thank all three for their hard work and commitment to
Vitec during their respective tenures.
The Vitec Group plc 63
The Board now comprises eight directors including myself as
Chairman, five independent Non-Executive Directors and two
Executive Directors. Nigel Moore will have served on the Board
for 10 years at the 2014 AGM. The Board believes that Nigel
continues to provide rigorous independence and commitment
to the role, and his experience particularly on financial matters,
governance and the management of risk is considered vital.
This is particularly important given his experience with the
Group and the short periods of tenure for the newly appointed
independent Non-Executive Directors. We believe he remains
the right candidate for the roles of Senior Independent Director,
having been appointed to this role in May 2011, and Chairman
of the Audit Committee. Timely Board succession for these
roles remains important and we will advise shareholders of
any further changes at an appropriate time.
My governance review has taken into account the UK
Corporate Governance Code (“the Code”), as introduced in
June 2010 and updated in September 2012, and explains
how we have applied its Main Principles. I confirm that the
2013 Annual Report has been drafted in full compliance
with the latest version of the Code including its supporting
principles and provisions, and that each has been complied
with throughout 2013, as required by the Listing Rules.
Leadership
The Board is responsible to shareholders for the creation
and delivery of sustainable performance and long-term
shareholder value. However, there are separate roles for each
member of the Board and we have agreed a clear division
of responsibilities between the Chairman and Group
Chief Executive. Full details of our respective roles and
responsibilities can be found on our website and these
are reviewed annually.
It is my responsibility to manage the Board ensuring its
effectiveness in all aspects of its role. I work closely with
the Group Chief Executive and Group Company Secretary
to achieve this, ensuring that all Directors are kept advised
of key developments, that they receive accurate, timely
and clear information and that they actively participate in
the decision-making process. Board agendas are reviewed
and agreed in advance to ensure that each Board meeting
utilises the Board’s time most efficiently. I encourage all Board
members to openly and constructively challenge the proposals
made by executive management led by the Group Chief
Executive. I ensure that each Director properly exercises the
power vested in them and in accordance with the Company’s
Articles of Association, relevant law and any directions as
provided by the Company in general meeting. Apart from
the remuneration of Directors or Directors’ fees there were
no instances when a Director had to abstain from voting on
a matter due to a conflict of interest during 2013. The Board
has adopted a formal procedure for dealing with any such
conflicts or potential conflicts of interest.
The Group Chief Executive is responsible for managing the
day-to-day running of the business. The Operations Executive
supports the Group Chief Executive in this duty, the seven
members of which are shown on page 29. The Group Chief
Executive and I have a good working relationship, meeting
at least monthly outside of scheduled Board meetings to
discuss strategy and performance, and to ensure that Board
meetings cover relevant matters. Our relationship and regular
dialogue helps to underpin the working of the Board, providing
for an open forum in which matters are discussed.
Nigel Moore is the Senior Independent Director having been
appointed to that position in May 2011. In this role, Nigel has
overseen my evaluation as part of the internal Board evaluation
process we carried out in 2013 and this was an important task
given the completion of my first full year in the role. Further
information on the outcome of my evaluation is provided later
in the report. He has also assisted me in the selection and
nomination of the new independent Non-Executive Directors.
The Board operates under a Schedule of Matters Reserved
to it, which includes, amongst other items: consideration
and development of the Group’s strategy; setting of annual
operating budgets; annual review of progress against
strategy and budgets; financial results; dividends; changes
in the Board composition including key roles; acquisitions
and disposals; material litigation; capital structure; risk
management strategy; and various statutory and regulatory
approvals. During 2013 the Schedule of Matters Reserved
to the Board was reviewed and updated to ensure
compliance with best practice. The full Schedule of
Matters Reserved to the Board is available on our website.
The Board has taken into account the Code requirement
that it confirms that the Annual Report taken as a whole
is fair, balanced and understandable, and provides the
information necessary for shareholders to assess the Group’s
performance, business model and strategy, and has retained
this power for itself. To achieve this we have asked the
Executive Directors and Operations Executive to provide
us with clear documentary evidence around the content
and process of the 2013 Annual Report. The Audit Committee
has confirmed to us that the financial statements as contained
in the 2013 Annual Report are true and fair and that the work
of the external auditor has been accurate and effective.
On the basis of this process, we are able to confirm that the
2013 Annual Report taken as a whole is fair, balanced and
understandable through knowledge of the following processes
and reliance on management:
• a detailed planning stage including drafting guidance and
co-ordinated project management;
• a verification process dealing with the factual content of the
Annual Report, both internally and by the external auditor;
• comprehensive reviews undertaken at different levels in the
Group that aim to ensure consistency and overall balance;
and
• comprehensive review by the senior management team.
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Corporate Governance
Board activities completed during 2013
The Board dealt with a diverse range of matters
during 2013 which are summarised here.
At each main meeting the following standing
items are considered:
• Confirms compliance with Directors’ duties
and considers any new conflicts of interest
• Reviews minutes of previous meetings
• Reviews actions from previous meetings
May (held in central London, UK)
August (short notice meeting held by
conference call)
• Received a strategic update on the Videocom
Division from the Videocom Divisional Chief
Executive
• Received a briefing on the business to be
conducted at the AGM
• Noted the content of the Interim Management
• Considered and approved the terms of the
acquisition of Teradek
October (short notice meeting held by
conference call)
• Reviews progress against agreed Board
Statement
objectives
• Reports from the Group Chief Executive,
Group Finance Director, Group Company
Secretary and Group Development
and HR Director on key aspects of the
business including current trading, strategy,
acquisitions and disposals, financial results,
health and safety, governance and HR
• Reviews performance against KPIs
There were six scheduled Board meetings and
three short notice Board meetings in 2013.
Apart from the standing items described above
the following is a summary of the material items
considered at each meeting in 2013:
February (held in Richmond, UK)
• Annual Results, including review and approval,
where appropriate, of:
- Report from the Audit Committee Chairman
- Report from the Remuneration Committee
Chairman
- Considered principal risks and mitigation to
be disclosed
- Report on going concern
- Final dividend recommendation
- Full year results announcement for the year
ended 31 December 2012
- 2012 Annual Report
- Approval of resolutions to be submitted to
the AGM and content of Notice of AGM
- Management Representation letter
• Strategy update covering photographic
and broadcast markets
• Considered and approved Group-wide
restructuring proposal
• Considered discretionary increases for
the Vitec Group Pension Scheme
• Reviewed Non-Executive Directors’ and
Chairman’s fees
• Approved the appointment of Mark Rollins as
an independent Non-Executive Director
• Reviewed funding level of the Vitec Group
Pension Scheme before the triennial valuation
and auto enrolment
• Board training on inside information
• Approved the re-communication of the
Group’s whistleblowing arrangements to
employees
• Considered the 2013 re-forecasted budget
July (held in Feltre/Bassano, Italy)
• Site visit to Imaging Division head office and
manufacturing plant in Italy
• Received a strategic update on the Imaging
Division from the Imaging Divisional Chief
Executive
• Reviewed the Group’s 2013/14 insurance
renewals
• Considered the 2013 re-forecasted budget
• Approved a multi-currency pooling facility to
be made available to the Group
October (held in Richmond, UK)
• Report from the Remuneration Committee
Chairman
• Report from the Nominations Committee
Chairman
• Received a strategy update
• Considered the 2013 re-forecasted budget
• Agreed the funding plan for the Vitec Group
Pension Scheme
• Approved property lease for Litepanels
November (short notice meeting held by
conference call)
• Approved the appointments of Christopher
Humphrey and Lorraine Rienecker as
independent Non-Executive Directors
• Report from the Audit Committee Chairman
December (held in Richmond, UK)
• Report from the Remuneration Committee
Chairman
• Received an update on the Group’s strategic
• Report from the Nominations Committee
plans
Chairman
• Approved the giving of letters of support to
subsidiary entities in connection with their
2012 annual financial statements
August (held in Richmond, UK)
• Half year results, including review and
approval, where appropriate, of:
-Report from the Audit Committee Chairman
• Received a strategic update on the Imaging
Division from the Imaging Divisional Chief
Executive
• Considered and approved the 2014 budget
• Reviewed the outcome of the 2013 internal
Board evaluation
• Report from the Audit Committee Chairman
• Report from the Remuneration Committee
Chairman
• Reviewed updated Board governance
documents and key policies including the
Code of Business Conduct
• Reviewed Chairman’s and Non-Executive
Directors’ fees
• Approved Imaging Division new product
- Considered principal risks and mitigation to
capital expenditure project
be disclosed
- Report on going concern
- Interim dividend
- Half year results announcement for the period
ended 30 June 2013
- Management Representation letter
• Considered an update on Board composition
• Received a strategic update on the MAG
business from the IMT President
• Received strategic opportunities presentation
• Considered diversity within the organisation
The Vitec Group plc
65
Details of Directors’ attendance at Board and Committee
meetings is shown in the table on page 72 including any
instance when a Director was unable to attend and the reason.
When any Director is unable to attend they continue to receive
the necessary papers and I seek to contact them in advance
of the meeting to obtain their views and decisions on the
proposals to be considered.
The Board visited the Group’s operations in Italy in July 2013,
visiting both the Imaging Division’s head office in Bassano and
the manufacturing plant in Feltre. During the visit the Board
was able to meet the Division’s senior management and learn
more about the business operations. The Board was given
a demonstration of new products, including those still under
development. The Board intends to hold a meeting at one
overseas business each year in the foreseeable future to
allow Directors to develop their understanding of operations.
Each Director is also encouraged to visit operations when
appropriate to further their understanding of the business
and meet operational management.
As part of the wider governance framework it is important to
explain the workings of the Operations Executive. The Group
Chief Executive chairs the monthly meetings of the
Operations Executive which discusses ongoing business
performance and enables the Group Chief Executive to
manage the business with his direct reports. I receive an
update from the Group Chief Executive on any salient
matters resulting from each meeting.
I was pleased to welcome members of the Operations
Executive to a number of Board and Committee meetings
during 2013, along with the Group Risk Assurance Manager.
Their attendance allows the Board to directly question those
senior managers responsible for the business and to gain a
better understanding of their respective businesses. This has
been particularly useful during 2013 as we have spent a
significant amount of time considering not only the Group’s
strategy as a whole, but that of each individual Division.
We will continue to welcome members of the Operations
Executive and other senior management to Board and
Committee meetings in the future.
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We normally hold a dinner for the Board around each
scheduled meeting to enable Directors to discuss current
business matters and also to give an opportunity for senior
management or external advisors to attend to give updates on
trading, markets or wider industry matters. This is a very useful
format enabling a less formal opportunity for the Board to get
to know one another and also executive management. It also
enables the business to be discussed at the Board meeting
to be introduced and for more time to consider matters.
At least twice a year we also hold Non-Executive Director only
meetings, scheduled around the February and August Board
meetings. These enable the Non-Executive Directors to raise
any issues that they may wish to without executive
management present. In my role as Chairman I will feed back
to the Executive Directors on these discussions and take any
actions necessary to address matters raised.
To monitor its ongoing performance during 2013, the Board
set itself several objectives for the year which are detailed in
the section on Board performance evaluation. Progress against
each objective was tracked at each scheduled Board meeting
during 2013. The key output from the 2013 Board evaluation
has allowed us to set further objectives for 2014 that I will
report on in next year’s Annual Report.
In addition to the matters reserved to it, the Board delegates
certain items to its principal Committees. I feel it is appropriate
to ensure that the Board has sufficient time to deal with
strategic matters while retaining oversight on salient points
by virtue of its Committees. The Board’s three principal
committees are the Audit, Remuneration and Nominations
Committees and, during 2013, a Disclosure Committee was
formed. Each Committee operates under clear Terms of
Reference which were updated during the year to reflect
emerging best practice and, specifically for the Remuneration
Committee, the need to comply with the new reporting
requirements as set out by the Companies Act 2006. Copies
of each Committee’s current Terms of Reference are available
on our website.
Each Committee is authorised to seek any information it
requires from any employee of the Company in order to
perform its duties and to obtain, at the Company’s expense,
outside legal or other professional advice on any matter within
its Terms of Reference. Each Committee, at least once a year,
reviews its own performance, constitution and Terms of
Reference to ensure it is operating at maximum effectiveness
and recommends any changes it considers necessary to the
Board for approval.
The Remuneration and Audit Committees each agreed their
objectives for 2013 in order to monitor their progress and
performance. Progress on each objective is set out in this
report under the relevant section for that Committee.
Objectives for these two Committees have been set for 2014
and an evaluation of progress against these objectives will be
reported in next year’s Annual Report.
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Corporate Governance
Effectiveness
2013 has been a year of change for the Board with three newly
appointed independent Non-Executive Directors and three
Non-Executive Directors retiring. This has been a structured
process to ensure that the Board has the right skills, talent and
diversity to effectively deliver the Company’s agreed strategy.
All newly appointed Directors participated in at least one set of
Board and Committee meetings in 2013 and we have worked
hard on apprising them with the Group’s operations as quickly
as possible.
Each of the Non-Executive Directors bring independent
character and judgement to bear on strategic matters, the
performance of the Group, the adequacy of resources and
standards of conduct. The Board considers that Carolyn,
Fairbairn, Christopher Humphrey, Nigel Moore, Lorraine
Rienecker and Mark Rollins are independent in accordance
with the recommendations of the Code. Each Director brings
a complementary set of skills and diversity to the Board,
having served in companies of varying size, complexity and
market sector. When combined, these skills give your Board
the comprehensive skill set required to deliver the strategic
objectives of the Group and to ensure its continued success.
On appointment, we provide each Director with a tailored
and extensive induction to the Group. Each of Christopher
Humphrey, Lorraine Rienecker and Mark Rollins are undergoing
this process, which includes meeting with all of their fellow
Board members, the Operations Executive, key external
advisors, receiving briefings on each area of the business
in turn and visiting the Group’s principal operations including
sites in the UK, Italy and US.
All Directors, having notified me in the first instance, are able
to take independent professional advice at the Company’s
expense in furtherance of their duties. During 2013 no Director
felt the need to take such advice. They also have access to the
advice and services of the Group Company Secretary, who is
responsible for advising the Board, through the Chairman, on
all governance matters.
Ongoing training for new Directors and existing Directors is
available at the request of the Director. Each Director receives
details of relevant training and development courses from both
the Group Company Secretary and from external bodies such
as KPMG, Deloitte and Slaughter and May. The requirement
for training is discussed at meetings of the Board and of its
Committees and I ensure that each Director has the required
skills and knowledge to enable them to operate efficiently on
the Board. The Group Company Secretary maintains a register
of training undertaken by Directors to facilitate this discussion.
During the year the Board collectively received training sessions
on such matters as investor relations, bid defence and the
Takeover Code, inside information, corporate governance and
changes to corporate reporting. The Board regularly receives
written updates on governance, regulatory and financial
matters as they are published.
Working with the Group Chief Executive and Group Company
Secretary, I ensure that the Board receives papers for
consideration so that it gives all Board members adequate time
to read, prepare and, where appropriate, ask questions prior
to the meeting about the information supplied. The information
includes sufficiently detailed budgets, strategy papers, reviews
of the Group’s financial position and operating performance, and
annual and half yearly reports. Each Board member receives
a detailed monthly report from the Group Chief Executive,
Group Finance Director, Group Company Secretary and Group
Development and HR Director, plus a Health and Safety Report
covering the ongoing performance of the business. The Board
receives further information from time to time as and when
requested.
All meetings of the Board and its Committees are minuted
by the Group Company Secretary or the Deputy Company
Secretary. In the first instance, minutes are reviewed by the
Chairman of that meeting before being circulated to all Directors
in attendance and then tabled for approval at the next meeting.
Any concerns raised by Directors are clearly recorded in the
minutes of each meeting.
The Board has the power at any time and from time to time
to appoint any person to be a Director, either to fill a casual
vacancy or as an addition to the existing Board, subject to
a maximum number of 15 Directors as prescribed by the
Company’s Articles. Any Director so appointed shall hold
office only until the next AGM and shall then put himself
or herself forward to be re-appointed by the members.
The Chairman and the other Non-Executive Directors are
appointed for an initial period of three years which, with the
approval of the Nominations Committee and the Board, would
normally be extended for a further three years. If it is in the
interests of the Group to do so appointments of Non-Executive
Directors may be extended beyond six years, with the approval
of the Nominations Committee, the Board and the individual
Director concerned. Under the Company’s Articles, each
Director is required to stand for annual re-appointment.
Full details are included within the 2014 Notice of AGM.
On making appointments to the Board, amongst other criteria,
the issue of diversity is considered. The Board agreed its policy
on diversity during 2011 which was reviewed during the year
and deemed to remain appropriate. Our statement is set out
below, as well as being published on our website:
Vitec recognises the importance of a fully diverse workforce
in the successful delivery of its strategy. The effective use of
all the skills and talents of our employees is encouraged and
this extends to potential new employees. It is essential that the
best person for the job is selected regardless of race, gender,
religion, age, sexual orientation, physical ability or nationality.
Vitec is fully committed to equal opportunity where talent is
recognised. The Board will keep under regular review the
issue of diversity including at Board level, senior management
level and throughout the entire workforce, taking into account
amongst other things Lord Davies’ review Women on Boards.
We will report upon this issue annually in our Annual Report.
The Employees section of the Corporate Responsibility Report
contains further information on diversity, including the disclosure
of gender diversity statistics at Board, Operations Executive and
senior management level as well as throughout the organisation,
in accordance with the requirements of the Companies Act 2006.
The Vitec Group plc 67
Board performance evaluation
We conducted an internal Board evaluation in 2013 and it
is expected that the next externally facilitated evaluation will
be conducted in 2014 and reported upon in next year’s
Annual Report.
Following the internal Board evaluation in 2012, the Board set
itself several objectives for 2013. These are summarised below
with an evaluation of performance against each:
2013 Board Objectives
Progress during 2013
Four areas were covered by the 2013 internal process:
• Evaluation of the performance of the Board by each Director
• Evaluation of the performance of the Committees of the Board by
each member of the relevant Committee
• Evaluation of the Non-Executive Directors by the Chairman
• Evaluation of the Chairman led by the Senior Independent Director
taking into account the views of the Board
The 2013 evaluation took the form of questionnaires,
individual meetings and discussion at the Board meeting held
in December 2013. The Group Company Secretary and I agreed
the format of the questionnaire, which requested Directors to
evaluate the performance of individual Directors, Board
Committees, the ability of the Board and Directors to set
strategy, monitor performance, leadership, culture and corporate
governance, taking into account the balance of skills, experience
and knowledge of the Group by each Director.
I subsequently followed up with each Director on the content
of their completed evaluation forms, allowing for a discussion
to take place around any areas for improvement. Nigel Moore,
as Senior Independent Director, co-ordinated the process for
my evaluation, with follow up discussions with each Director
on the basis of completed evaluation forms.
I am pleased to report that all your Board members considered
that the Board, its Committees and individual Directors have
performed effectively during 2013, both individually and as
a collective unit. Non-Executive Directors have demonstrated
a willingness to devote sufficient time and effort to understand
the Company and its businesses and have provided
independent, rigorous and constructive challenge on strategy
and operational performance. The processes, governance
and controls around the Board and its Committees were
also deemed to be effective and robust.
Each Director was asked to report on the key items for the
Board to focus on during 2014. As in previous years these
key items have been incorporated into the Board’s agreed
objectives for 2014 and will focus on the areas of Group
strategy, Board structure including the successful induction
of newly appointed Directors, market trends, technology,
succession planning for the Executive Directors and senior
management, and development of the governance
environment in line with emerging best practice. I will report
to you on progress against each of these objectives in the
2014 Annual Report.
Finalise the
development of
the Group and
Divisional strategies
and regularly review
progress
Ensure suitable
Board succession
plans
Implement talent
management
programme, ensure
senior executive
succession plans in
place and ensure
diversity is under
consideration within
the business
Monitor Executive
Director and
senior executive
remuneration and
ensure reporting is
in compliance with
new regulations
Maintain
best practice
governance
standards
Received regular detailed updates from each
Division on progress against each of their
strategic plans with Divisional Chief Executive
Officers attending Board meetings; identified
and discussed key areas concerning strategy
and agreed programme for on-going review of
strategy; approved the acquisition of Teradek in
August 2013; reviewed other corporate action
opportunities
Appointed Mark Rollins as an independent
Non-Executive Director on 2 October 2013;
appointed Christopher Humphrey and
Lorraine Rienecker as independent
Non-Executive Directors on 1 December
2013; appointed Carolyn Fairbairn as
Chairman of the Remuneration Committee
with effect from 1 December 2013; and
completed internal board evaluation in 2013
Received an update on talent development
strategy including succession planning
for key roles in the Group; supported the
introduction of a diversity group for senior
female employees; met with each member
of the Operations Executive to learn more
about the “bench strength” of the executive
management
99% shareholder support by way of submitted
proxies for the 2012 Remuneration Report
at 2013 AGM; received updates from the
Remuneration Committee on emerging
best practice; oversaw consultation with
shareholders on new LTIP and DBP rules and
amendment of the DBP structure following
shareholder feedback; oversaw drafting of
new remuneration report to be published
in March 2014
2012 Annual Report complied with UK
Corporate Governance Code and all
resolutions approved at 2013 AGM;
established a Disclosure Committee;
re-communicated key policies (including
Code of Business Conduct and whistleblowing
arrangements) to all employees and
introduction of new policies on inside
information and whistleblowing; ensured
acquired companies received all necessary
governance materials
Ensure significant
business risks
are agreed and
regularly monitored
Reviewed detailed risk assessment and
mitigation process and disclosed principal
Group risks in 2012 Annual Report; reviewed
key strategic risks for each Division
Measure Board
effectiveness
using performance
indicators
Monthly monitoring of financial performance
and health & safety indicators; quarterly
monitoring of the Company’s Total
Shareholder Return
Performance evaluations of each of the Executive Directors also
took place against achievement of specific personal objectives,
the result of which can be found in the Remuneration Report in
respect of the outcome on their 2013 annual bonus.
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Corporate Governance
Overview of the Nominations Committee
The Board has appointed the Nominations Committee to oversee
the composition of the Board, senior executive recruitment and
succession, and the process for appointments of Directors.
The Nominations Committee, that I chair, has agreed terms of
reference that are available on the Company’s website.
Chairman
Members
John McDonough
Current Committee members
are shown in bold
Duties
• Reviews and evaluates the
structure, size and composition
(including the skills, knowledge,
experience and diversity) of the
Board
• Considers succession planning
for Directors and other senior
executives
• Identifies and nominates to the
Board candidates for Board
vacancies
• Prepares descriptions of roles
and capabilities required for
Board appointments
The Nominations Committee uses the support of external
executive search consultants where necessary to facilitate
searches for new Directors. During 2013 JCA Group assisted
with the selection and appointments of Mark Rollins, Christopher
Humphrey and Lorraine Rienecker as independent Non-
Executive Directors. JCA Group assisted in drafting a clear
brief on the role, skills and personal attributes that the Board
was looking for, taking into account Board diversity, and followed
up with a search process to identify suitable candidates. Initial
interviews were held with candidates with both myself and the
Group Chief Executive, following which a shortlist was created
taking into account the skills of each candidate and perceived
fit with the Board and senior management team. The majority
of the Board then met with each preferred candidate individually
to ensure that the correct person with the right skills and
dynamic fit with the Board was appointed. This same process
would occur whether the role was executive or non-executive
in nature. The process for the appointments in 2013 was led
by me as Chairman of the Committee. However, should a
search for the role of Chairman be necessary, this would be
conducted by the Senior Independent Director with the support
of the Group Chief Executive. Subject to the outcome of each
search, a formal recommendation on an appointment is made
by the Nominations Committee to the full Board for approval.
Stephen Bird
Carolyn Fairbairn
Christopher Humphrey (from 1
December 2013)
Nigel Moore
Lorraine Rienecker (from 1
December 2013)
Mark Rollins (from 2 October
2013)
Simon Beresford-Wylie (until 1
December 2013)
John Hughes (until 30 June 2013)
Maria Richter (until 15 May 2013)
• Reviews the executive and non-
executive leadership needs of
the Company
• Reviews time commitment of
Non-Executive Directors
• Ensures that Non-Executive
Directors receive a formal letter
of appointment
Following the changes made during 2013 I am confident that
we have the right mix of skills, personalities and diversity on the
Board to shape the direction of the Group going forward, deliver
on strategy, monitor on-going performance and discharge good
corporate governance. I will remain mindful of the need to have
the right balance on the Board and future Board changes will
take this into consideration.
Each newly appointed Non-Executive Director has commenced
a thorough induction programme. This has comprised individual
meetings with the Executive Directors, members of the
senior management team and myself as Chairman. Visits to
major business sites in the US, UK and Italy have either been
organised or will be held during 2014 taking into account other
commitments. Sessions have been held on the products and
services we offer and how each business operates in its chosen
markets and segments, along with the internal governance
processes and procedures that exist to support our operations.
To gain a better understanding of the Group externally, each
newly appointed Non-Executive Director has met with our
corporate advisors including KPMG, Investec and Rothschild.
The Vitec Group plc 69
Nominations Committee activities during 2013
Chairman
Members
At each main meeting:
• Confirms compliance with Directors’ duties and considers any new
conflicts of interest
• Reviews minutes of previous meetings
• Reviews actions from previous meetings
• Reviews progress against objectives
The Committee met four times during 2013 and covered the following
matters:
Carolyn Fairbairn (from 1
December 2013)
Simon Beresford-Wylie (until 1
December 2013)
July
Current Committee members
are shown in bold
Christopher Humphrey (from 1
December 2013)
Nigel Moore
Lorraine Rienecker (from 1
December 2013)
Mark Rollins (from 2 October
2013)
Carolyn Fairbairn (until 1 December
2013)
John Hughes (until 30 June 2013)
Maria Richter (until 15 May 2013)
• Considered the recruitment of independent Non-Executive Directors,
including role specification, engagement of JCA Group to facilitate the
search and reviewed candidate profiles
• Reviewed vision statement on diversity and gender diversity statistics
for the Group
• Reviewed progress on talent management and senior management
succession planning
October (two meetings)
• Recommended to the Board the appointment of Mark Rollins
as an independent Non-Executive Director; and considered the
appointment of Carolyn Fairbairn as Chairman of the Remuneration
Committee in succession to Simon Beresford-Wylie
• Reviewed further candidate profiles
November
• Recommended to the Board the appointments of Christopher
Humphrey and Lorraine Rienecker as independent Non-Executive
Directors
Duties in accordance with Terms of Reference
• Determining and agreeing with
the Board the broad framework
or policies for Board and
executive level remuneration
• Ensuring executive management
are provided with appropriate
incentives to encourage
enhanced performance
• Reviewing performance-related
pay schemes and ensuring their
structure encourages long-term
growth for the Company
• Reviewing remuneration trends
and major changes in employee
benefits across the Group
• Reviewing termination
arrangements in accordance
with contractual terms
• Ensuring full disclosure is made
regarding remuneration in the
Company’s Annual Report in
accordance with prevailing
regulations
• Ensuring advice is obtained from
• Reviewing ongoing
appropriate sources
appropriateness of remuneration
policy
• Reviewing the design and
targets for any performance
related pay schemes
• Reviewing the design of all share
incentive plans
• Agreeing objectives and
reviewing performance against
each one
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Overview of the Remuneration Committee
The Remuneration Committee was chaired by Simon
Beresford-Wylie until 1 December 2013 when he was
succeeded by Carolyn Fairbairn. The Remuneration Committee
comprises exclusively independent Non-Executive Directors.
The Chairman, Group Chief Executive, the Group Development
and HR Director and the Group Company Secretary have all
been invited to meetings throughout 2013. The Committee
met five times in 2013.
The Board has delegated to the Remuneration Committee
the setting of a remuneration framework or broad policy for the
Company’s Group Chief Executive, other Executive Directors
and members of the Operations Executive. The Committee’s
full Terms of Reference can be found on our website.
An overview of the work completed by the Remuneration
Committee during the year is set out in the following table.
The Remuneration Report for the year ended 31 December
2013 on pages 34 to 53 provides an introduction from the
Committee Chairman, sets out the Group’s remuneration
policy for Executive and Non-Executive Directors and
gives full details of Executive and Non-Executive Directors’
remuneration during 2013.
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Corporate Governance
Remuneration Committee activities during 2013
The Remuneration Committee set itself several objectives for
2013, the detail and progress against which is detailed below:
During 2013 the Remuneration Committee had five meetings, of
which four were scheduled and one was held at short notice. At each
scheduled meeting the Committee considers the following matters:
• Confirms compliance with Directors’ duties and considers any new
conflicts of interest
• Reviews minutes of previous meetings
• Reviews actions from previous meetings
• Reviews progress against objectives
The following specific business was dealt with at each meeting held in 2013:
February
• Approved the Remuneration Committee Report to be included in 2012
Annual Report
• Reviewed and agreed on personal objectives for Executive Directors
for 2012 and 2013
• Reviewed outcome of 2012 annual bonus plan
• Reviewed satisfaction of performance conditions tied to LTIP and
DBP awards made in 2010
• Reviewed and approved awards to be made under the LTIP and
DBP in 2013
• Reviewed the structure and performance conditions of the 2013
annual bonus plan
July
• Reviewed a proposal on the renewal of the long-term incentive plans
and the format of an associated consultation with shareholders
• Received a presentation on the impact of new Remuneration
Reporting Regulations
October
• Considered shareholders’ feedback to the long-term incentive plans
renewal consultation
• Reviewed a paper on the key features of the new Remuneration
Report to be included in the 2013 Annual Report
• Received a market update on executive remuneration from Deloitte
• Reviewed indicative bonus outcomes under the 2013 annual bonus plan
November
• Reviewed Executive Director and Operations Executive benchmark
remuneration information
• Reviewed the structure of the proposed renewal of long-term incentive
plans and agreed to communicate changes to shareholders
December
• Considered and agreed the outcome of 2013 objectives and set 2014
objectives for the Committee
• Received an update on further feedback received from shareholders
on the restructure of long-term incentive plans
• Reviewed a draft of the Remuneration Report to be included in the
2013 Annual Report
• Received an update on indicative outcome for the 2013 annual
bonus plan
• Reviewed remuneration and proposed salary increases for 2014 for
the Executive Directors and Operations Executive
• Reviewed structure of the 2014 annual bonus plan
2013 Remuneration
Committee Objectives
Progress during 2013
Ensure remuneration
policies and practices
reward fairly and
responsibly with
clear link to strategic
objectives, corporate
and individual
performance
Consult with major
shareholders on the
renewal of the LTIP
and DBP in advance
of the 2014 AGM
Ensure best
practice annual
Remuneration Report
and that approved
by shareholders at
the AGM, both for
2012 report and
2013 report under
the new Directors’
remuneration
regulations
Monitor executive
remuneration trends
including the views of
investors and investor
advisory bodies
Continue to monitor
progress and
success of Deloitte
in supporting the
Remuneration
Committee around
new reporting
requirements and
remuneration policy
supporting the
Group’s strategy
• 2012 Remuneration Report received over
99% support in terms of proxies submitted
for the 2013 AGM
• Agreed that annual bonus was linked to
stretching financial performance; vesting
of long-term incentives tied to TSR and
EPS over three year performance period;
Executive Directors required to build a
shareholding stake in the Company of at
least one times gross annual salary; and
claw-back provisions across all bonus and
long-term incentives
• Agreed on the drafting of the remuneration
policy to be disclosed in the 2013 Annual
Report
• Reviewed remuneration structure in light
of investor body views to have simple
remuneration arrangements
• Agreed on removing the matching element
of the DBP and increasing the potential
under the LTIP in response to investor
feedback
• 2012 Remuneration Report fully compliant
with all applicable regulations and received
over 99% of the proxy votes for the
resolution at the 2013 AGM
• Agreed on the drafting of the revised
Remuneration Report to be disclosed
in the 2013 Annual Report, to include a
Chairman’s Statement, a policy report and
an implementation report
• Received voting guidance from investor
advisory bodies in advance of 2013 AGM
• Received ongoing updates from Deloitte on
market practice
• Considered responses to consultation from
major shareholders in connection with the
renewal of the LTIP
• Provided support on the consultation with
major investors
• Provided drafting guidance on the new
Remuneration Report
• Provided detailed benchmark data and
analysis to support pay rises and the
amendments to the LTIP and DBP for
Executive Directors and senior executives
The Remuneration Committee has set itself objectives for
2014 and will report on progress against these in the 2014
Annual Report.
The Vitec Group plc 71
Accountability
Internal control and risk management
The Board and Audit Committee are responsible for the
Group’s system of internal controls to safeguard shareholders’
investment and the Company’s assets. As part of its
responsibility, the Board regularly, and at least annually, reviews
the effectiveness of its internal controls. There are systems
and procedures in place for internal controls that are designed
to provide reasonable control over the activities of the Group
and to enable the Board to fulfil its legal responsibility for the
keeping of proper accounting records, safeguarding the assets
of the Group and detecting fraud and other irregularities.
The approach taken is designed to provide reasonable
assurance against material misstatement or loss, although it
is recognised that as with any successful company, business
and commercial risks must be taken and enterprise, initiative
and the motivation of employees must not be unduly stifled.
It is not our intention to avoid all commercial risks and
commercial judgements will be made in the course of the
management of the business.
The Board has adopted a risk-based approach to establishing
the system of internal controls. The application and process
followed by the Board in reviewing the effectiveness of the
system of internal controls during the year were as follows:
• Each business unit is charged with the ongoing responsibility
for identifying risks facing it and for putting in place
procedures to monitor and manage those risks.
• This system has been in place for the year under review
and up to the date of approval of the Annual Report.
• The responsibilities of the senior management at each
business unit to manage risks within their businesses are
periodically reinforced by the Operations Executive.
• Major strategic, operational, financial, regulatory, compliance
and reputational risks are formally assessed during the
annual long-term business planning process around mid-
year. These plans and the attendant risks to the Group
are reviewed and considered by the Board.
• Large financial capital projects, property leases, product
development projects and all acquisitions and disposals
require advance Board approval.
• The process by which the Board reviews the effectiveness
of internal controls has been agreed by the Board and is
documented. This involves regular reviews by the Board
of the major business risks of the Group, together with the
controls in place to manage those risks. In addition, each
year businesses conduct a self-assessment of their internal
controls. The results of these assessments are reviewed by
the Group Risk Assurance Manager who provides a report
to the Group Finance Director and the Chairman of the Audit
Committee. The Board is made aware of any significant
matters arising from the self-assessments. The risk and
control identification and certification process is monitored
and periodically reviewed by Group financial management.
• A centralised database of risks facing the Group, as well
as each individual business, and an evaluation of the impact
and likelihood of those risks is maintained and updated
regularly by the Group Risk Assurance Manager. The
principal risks and uncertainties and mitigation for them
for the Group are set out on pages 22 and 23 of this
Annual Report.
• 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;
- operational review process covering all aspects of each
business conducted by Group executive management
on a regular basis throughout the year;
- strategic planning process identifying key actions and
initiatives to deliver the Group’s long-term strategic
development; and
- comprehensive system of financial reporting including
weekly flash reports, monthly reporting, quarterly
forecasting and an annual budget process. The Board
approves the overall Group budget, forecasts and strategic
plans. Monthly actual results are reported against prior
year, budget and latest forecasts. These forecasts are
revised where necessary but formally at least once every
quarter. Any significant changes and adverse variances
are reviewed by the Group Chief Executive and Operations
Executive and remedial action is taken where appropriate.
Group tax and treasury functions are co-ordinated centrally.
There is regular cash and treasury reporting to Group
financial management and monthly reporting to the
Board on the Group’s tax and treasury position.
The Group’s internal audit function, led by the Group Risk
Assurance Manager, conducted a number of internal audits
and additional assurance reviews during 2013, the details
of which were presented to the Audit Committee. The audits
included reviews of the appropriateness and effectiveness of
controls within the Group including: purchasing and payments,
sales and cash collection, inventory management, accounting
and reporting and IT processes. An internal audit plan for 2014
has been prepared and agreed with the Audit Committee.
The Board considers that it has fully complied with the Code
during the year and up to the date of approval of the 2013
Annual Report and that it accords with the publication by the
Financial Reporting Council on Internal Control: Guidance to
Directors (formerly known as the Turnbull Guidance) in respect
of internal controls.
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Corporate Governance
Relations with Shareholders
Maintaining regular contact with our shareholders remains an
important part of our activities. In 2013 this has involved face to
face meetings between the Group Chief Executive, Group Finance
Director and each of our major shareholders tied into the publication
of our full year and half year results. I have also met with several major
shareholders to discuss progress of the business and its governance.
We have consulted with our major shareholders on changes in our
executive remuneration arrangements in 2013. We aim to ensure
that our business, strategy, governance and remuneration policies
are clearly understood and that any concerns are addressed in
a constructive way. Establishing and maintaining reliable lines of
communication is fundamental to good corporate governance.
I was pleased to meet some of our shareholders at the 2013 AGM
and look forward to meeting you again at the 2014 AGM. This offers
an opportunity for you to meet with our Directors and to hear more
about the Group’s strategy. Shareholders are encouraged to attend
the AGM and to ask questions about the business. I confirm that
all Board members are scheduled to attend the forthcoming AGM,
including each of the Committee Chairmen. Details of the AGM are
included in the Notice of Meeting that accompanies this Annual
Report and which is available on our website.
For the 2014 AGM and for future general meetings of shareholders,
I propose that voting on resolutions will be made by way of a poll.
This reflects best practice in terms of meeting administration and
ensures that all the views of shareholders who submit proxy forms
are taken into account in terms of the actual voting at the general
meeting. The necessary procedures for a poll will be complied with
in accordance with the Company’s Articles. The outcome of the
voting at the AGM will be announced by way of a Stock Exchange
announcement and full details will be published on the Company’s
website shortly after the meeting. At the 2013 AGM over 70%
of our shares were voted by way of proxies submitted. Separate
resolutions are proposed for each substantive issue upon which
Attendance table for Governance Report 2013
shareholders are asked to vote. Shareholders attending the AGM
will still have the opportunity to raise questions at the meeting.
We publish an Annual Report each year usually in March following
the end of the financial year on 31 December. To allow shareholders
to review the Annual Report in advance of the AGM and create an
informed view of the Company, we comply with the requirement
set out in the Code in respect of shareholder meetings to send the
Notice of AGM and related papers at least 20 working days before
the meeting and we will continue to comply with this requirement.
The Board communicates with its shareholders via a combination
of public announcements through the London Stock Exchange,
analyst briefings, roadshows and press interviews at the time of
the announcements of the half year and full year results and, when
appropriate, at other times in the year. The Executive Directors,
Senior Independent Director, Chairman of the Remuneration
Committee and I also meet with investors from time to time to
discuss relevant matters.
Regular updates from the Executive Directors at Board meetings
keep the Board advised of the views of major shareholders.
We also receive monthly reports on market and investor sentiment
along with a full shareholder analysis.
Copies of public announcements and financial results are
published on the Company’s website, www.vitecgroup.com,
along with a number of other investor relations tools, including
information on how to invest in the Company’s shares, a
dividend chart, share prices and presentation materials used
for shareholder presentations.
We will continue to evolve our investor relations arrangements to
ensure that our shareholders and stakeholders remain informed
on the Company’s strategy and ongoing financial performance.
John McDonough CBE
Chairman
25 February 2014
Number of meetings
Current Directors
John McDonough
Carolyn Fairbairn
Christopher Humphrey (appointed 1 December 2013)
Nigel Moore
Lorraine Rienecker (appointed 1 December 2013)
Mark Rollins (appointed 2 October 2013)
Stephen Bird
Paul Hayes
Former Directors who served during 2013
Simon Beresford-Wylie (until 1 December 2013)
John Hughes (until 30 June 2013)
Maria Richter (until 15 May 2013)
Board
Audit
Remuneration
Nominations
Scheduled
Short
notice
Scheduled
Short
notice
Scheduled
Short
notice
Scheduled
Short
notice
6
6
6
1/1
6
1/1
2/2
6
6
5/5
0/2*
2/2
3
3
3
-
3
-
1/1
3
3
3
-
-
4
-
4
1/1
4
1/1
1/1
-
-
3/3
0/1*
1/1
-
-
-
-
-
-
-
-
-
-
-
-
4
-
4
1/1
4
1/1
2/2
-
-
3/3
0/1*
1/1
1
-
1
-
1
-
1
-
-
1
-
-
2
2
2
-
2
-
2
2
2
-
2
-
1/1
1/1
2
-
2
-
-
2
-
2
-
-
* John Hughes did not attend the scheduled Board, Audit Committee and Remuneration Committee meetings held in February 2013 and the scheduled
Board meeting in May 2013 due to personal circumstances.
The Vitec Group plc 73
Corporate Governance
Report from Nigel Moore,
Chairman of the Audit Committee
Report from Nigel Moore
The Audit Committee at the date of this report comprises five
Non-Executive Directors, all of whom are considered
independent. During 2013 the members were:
Corporate Governance on-line
www.vitecgroup.com/corporate_governance
The Audit Committee is responsible for
ensuring that the financial integrity of the
Group is effective, through the regular
review of its financial performance.
It is also responsible for ensuring
that the Group has appropriate risk
management processes and internal
controls, and that audit processes are
robust. I will explain in more detail the
Committee’s activities in my report.
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Chairman
Members
Nigel Moore
Carolyn Fairbairn
Christopher Humphrey (from
1 December 2013)
Lorraine Rienecker (from
1 December 2013)
Mark Rollins (from 2 October 2013)
Simon Beresford-Wylie (until
1 December 2013)
John Hughes (until 30 June 2013)
Maria Richter (until 15 May 2013)
Current Committee members
are shown in bold
The Audit Committee provides effective governance over external
financial reporting, risk management and internal controls and
reports its findings and recommendations to the Board. In my
capacity as Chairman of the Audit Committee, I am pleased to
report on the operations of the Committee during the past year,
with emphasis on the specific matters we have considered,
including compliance with the UK Corporate Governance Code
(“the Code”) and associated Guidance on Audit Committees.
I confirm that we have fully complied with the requirements of the
Code as issued in September 2012 and which applies to financial
years beginning on or after 1 October 2012.
I have been Chairman of the Committee since 2004, and have
the necessary recent and relevant financial experience as
required by the Code having formerly been a London-based
partner of EY, where I was engagement partner for a number
of significant client companies with specific responsibilities for
their audits. Also, during the last ten years I have been Chairman
of the Audit Committee of several public limited companies and
attended many training sessions and updates presented by the
major accounting firms. The other members of the Committee
have a broad range of appropriate skills and experiences
covering financial, commercial and operational matters and
their biographies are summarised on pages 30 and 31.
The Committee has four scheduled meetings a year and I work
closely with the Group Finance Director, Group Risk Assurance
Manager and Deputy Company Secretary to ensure that the
Committee is provided with the necessary information it requires
to discharge its duties. We operate with a rolling agenda
programme, taking into account our Terms of Reference (which
can be found on the Company’s website), the Group’s annual
reporting requirements and any other matters which arise on
an ad-hoc basis. The Committee maintains a balance between
the review of financial reporting and the risk assurance process
to ensure they both receive appropriate consideration and
challenge. Full detail of the work we completed during 2013
is set out in the table on page 77.
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Corporate Governance
We assessed the effectiveness of the annual audit by the
external auditor, KPMG. This included reviewing their audit
approach; the strength of the audit team and their knowledge
of the Group’s businesses; and the robustness of their challenge
specifically on more judgemental areas. This was supported by
separate discussions at the Audit Committee with Executive
Directors, senior executives and representatives of the audit
team. The Committee did not find any areas of concern raised
during its discussions and review of the external audit.
We concluded that KPMG had completed the external audit
effectively and in accordance with auditing standards. We also
took into account publications made by the Financial Reporting
Council, including the Annual Report as published by the Audit
Quality Review team and the Audit Inspection Unit’s Public
Report on the inspection of KPMG, which provided the
Committee with comfort that an external and independent
review of the quality of KPMG’s overall audit work had taken
place. Given this, we recommend the appointment of KPMG
as auditor of the Company at the 2014 AGM for the
forthcoming year.
As explained in the Chairman’s letter accompanying the Notice
of AGM our auditor, KPMG Audit Plc, has instigated an orderly
wind down of its business and has therefore informed the
Company that the entity which conducts audit services in the
future is to change from KPMG Audit Plc to KPMG LLP. KPMG
Audit Plc will therefore not stand for re-appointment at the
Company’s 2014 AGM. As a consequence of this wind down,
the Board and Audit Committee has decided to put KPMG LLP
forward to be appointed as auditor and a resolution to this effect
will be considered at the 2014 AGM. Whilst the legal entity
performing the audit will change from the 2014 AGM, I confirm
that the audit partner, Robert Brent, and the audit team will
remain unchanged. The Company is required to send you a
copy of the statement of the circumstances connected with
KPMG Audit Plc’s decision not to seek re-appointment. This will
be circulated with the Notice of AGM and will be available on the
Company’s website at www.vitecgroup.com.
As already explained by the Chairman, the Board takes
responsibility for determining that the Annual Report, taken as a
whole, is fair, balanced and understandable. At the request of
the Board, the Audit Committee has concentrated its review of
the full year results on the financial statements only. Following
a review of the process around the annual audit as described
above and the content of the financial statements, the Audit
Committee recommended to the Board at its meeting on 24
February 2014 the adoption of the financial statements and
that they provide a true and fair view of the financial
performance of the Group.
Significant issues
The Committee considered several significant accounting
issues, matters and judgements in relation to the Group’s
financial statements and disclosures for the year ended 31
December 2013. As part of the half year and full year reporting
process, management present an accounting paper to the
Committee, and the external auditors are asked to also
comment on the key areas of accounting judgement and
disclosure. The information presented is used by the Committee
to critically review and assess the key policies and judgements
that have been applied, the consistency of policy application
from year to year and the appropriateness of key disclosures
made, together with compliance with the applicable accounting
standards. The significant issues arising and a description of
how each was addressed is shown in the following table.
Significant issue
How it was addressed
Goodwill arising
on acquisition of
businesses
Working capital
management
The carrying value is subject to annual
impairment testing undertaken by management
who apply a series of assumptions concerning
future revenue and cash flows and discount
rates for cash generating units. Management
presented the outcome of the impairment
review to the Audit Committee, highlighting
the level of headroom, and this summary is
also commented upon by the external auditor.
The Committee critically reviewed
management’s assessment of the carrying
value of these intangible assets and their
disclosure in the Group’s financial statements
and concurred with management’s conclusion
that no impairment charges were required for
the year ended 31 December 2013.
The Committee critically reviewed the carrying
value of the Group’s working capital taking
into account management’s assessment of
the appropriate level of provisioning against
inventory obsolescence and the collectability
of receivables. Management presented to the
Committee the experience of bad debts during
the year, and the debtor concentration and
days outstanding. With regard to inventory the
gross levels held and the provisions recorded
against obsolescence were also presented to
the Committee. In addition the external auditor
presented their findings with regard to the key
audit testing over working capital covering all
the major locations. The Committee concurred
with management’s assessment of the Group’s
working capital position.
The Vitec Group plc 75
Significant issue
How it was addressed
Provisions and
other liabilities
Restructuring
costs and
provisions
Initial
assessment
of contingent
considerations
in relation to
acquisitions
The Committee considered the judgemental
issues relating to the level of provisions
and other liabilities. The more significant
items include post-employment obligations
and taxation. For each area management
presented to the Committee the key
underlying assumptions and the key
judgements applied. The external auditor
also presented on each of these areas
and their view of the range of potential
outcomes. The Committee has used this
information to review the position adopted in
terms of the amounts charged and recorded
as provisions, acknowledging the level of
subjectivity that needs to be applied.
The Committee considered the presentation
and accounting for the costs that arose in
connection with the various restructuring
activities that were announced during the
year. Management presented an analysis
of the types of costs incurred, the nature
of the provisions held at the year end and
the proposed presentation and disclosures.
The external auditor reported on the
findings from the audit work performed and
commented on the accounting requirement
with regard to recognising restructuring
provisions at the year end. The Committee
reviewed the analysis with consideration
to how other similar companies present
and disclose restructuring activities and
concurred with the disclosures and
presentations proposed.
On 28 August 2013 the Group acquired
Teradek, LLC for which future consideration
is potentially payable under an earn-out
provision contingent on the achievement of
agreed milestone targets. The Committee
has reviewed the accounting valuation
of the contingent consideration and
management’s assessment of the fair
value as measured at the acquisition date.
In addition the Committee discussed
and agreed with the external auditor the
accounting treatment to be applied for the
current year and to any future adjustments
to the amount provided, and the appropriate
disclosures that were proposed to be
presented in the financial statements.
I invite the audit partner from the Company’s external auditor,
KPMG, to attend meetings of the Committee on a regular basis
and during 2013 they attended each meeting, either in whole
or for part of the meeting. The Chairman, Group Chief Executive,
Group Finance Director, Group Risk Assurance Manager and
Group Company Secretary attend meetings by invitation and
other members of the senior management team attend as
required. At two of the meetings the Executive Directors and
senior management were not present for part of the meeting
so that members of the Committee could meet with the external
auditor in private. I will continue to encourage the practice of
the Committee meeting in private with the external auditor in
the future.
KPMG has acted as the Company’s external auditor since 19
July 1995 and we comply with the requirement to rotate the
audit partner every five years. We reviewed the external audit
arrangements in 2010 and as a result Robert Brent of KPMG
was appointed and has been the audit partner since the audit
of the 2011 results. His term of appointment is currently
expected to end in 2016. In accordance with the new Code,
and acknowledging the Competition Commission’s proposal
that FTSE 350 companies must put their statutory audit
engagement out to tender at least every ten years, it is
possible that we will tender the audit process in 2016, or
earlier if KPMG’s performance falls short of the Audit
Committee’s expectations.
We have a policy on the use of the external auditor for
non-audit services that has been in place for a number of
years. The use of the external auditor is determined by their
demonstrable competence and competitive pricing, and
monetary thresholds for the approval of non-audit work by
KPMG have been set by the Committee. The policy is divided
into three parts:
• Work where use of the external auditor is deemed
appropriate: This type of work includes accounting advice
in relation to acquisitions and divestments, corporate
governance and risk management advice, defined audit
related work and regulatory reporting.
• Work requiring Audit Committee clearance: This type of
work includes services as reporting accountants,
compliance services (including fraud and money laundering),
transaction work (mergers, acquisitions and divestments),
valuation and actuarial services, fairness opinions and
contribution reports.
• Work from which the external auditor is excluded: This
includes internal accounting or other internal financial
services, design development or implementation of financial
information or internal controls systems, internal audit
services or their outsourcing, forensic accounting services,
executive or management roles and functions, IT
consultancy, litigation support services and other financial
services such as broker, financial adviser or investment
banking services.
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Corporate Governance
I confirm that during 2013 the policy has been followed without
exception and that no changes to the scope of the policy have
been made. During 2013, £0.15 million was paid to KPMG
in respect of non-audit work compared to an audit fee of
£0.4 million. This non-audit work included the financial due
diligence of Teradek, LLC that was acquired during the year.
In addition, the non-audit fees have increased in comparison
to last year due to the inclusion of fees payable to Makinson
Cowell that has provided the Company with investor relations
advice for a number of years. This is due to the acquisition of
Makinson Cowell by KPMG during 2013.
Our performance as a Committee was assessed through the
internally facilitated Board performance evaluation, information
on which has been provided earlier in the Governance Report.
The Audit Committee was deemed to be working effectively
and no major suggestions for improvement were noted.
To ensure that we continue to be an effective Committee, we set
and measure our performance against specific objectives every
year. These objectives vary annually and the details of our
objectives for 2013 and the progress made is summarised
below. I am pleased to confirm that we successfully achieved
all of these objectives. Progress on achievement against our
2014 objectives will be reported in next year’s Annual Report.
Audit Committee specific objectives
2013 Audit
Committee
Objectives
Review risk
assurance
mapping process
to assess and
drive appropriate
coverage across
all key areas
Review updated
self-assessment
process to ensure
that it supports
management in
analysing the
effectiveness of
internal controls
Review the
effectiveness of
using external
advisors to
provide local-
language internal
audit services
Progress during 2013
The risk assurance mapping process was
further developed during the year and
these developments were reviewed and
approved by the Committee. This included
strengthening the controls and processes
around IT systems, project management and
business continuity to further improve the level
of assurance.
A new self-assessment questionnaire has
been implemented across the business to
improve the level of assurance from this
process. This was reviewed and approved by
the Committee after considering the results
from an initial testing phase and feedback
after it had been implemented.
External audit teams with local language skills
and familiarity with local culture were used to
provide internal audit services in a number of
regions including China, Hong Kong, Japan
and Costa Rica. The Committee reviewed the
performance of these activities and concluded
that it was effective and should continue to be
used, where appropriate, going forward.
Review and
approve a “vision”
for the Group’s
finance function
to assist in
driving a cohesive
partnership
throughout the
business
The Group Finance Director alongside
senior members of the finance team defined
the vision for the Group’s finance function
including: business partnership; governance
and controls; efficiency and continual
improvement; and team development and
sharing best practice. The Committee
supports this vision having reviewed and
approved it before it was put in place.
Ensure
appropriate
disclosures are
made in the 2012
Annual Report in
compliance with
the UK Corporate
Governance Code,
specifically around
the workings
of the Audit
Committee
The Committee reviewed the financial
statements in the 2012 Annual Report and
the separate disclosures on the workings of
the Audit Committee, including the letter from
the Audit Committee Chairman. It determined
that these met the requirements of the UK
Corporate Governance Code in place at that
time. The approach taken for the Committee’s
review of the 2013 Annual Report recognises
that the Board has retained responsibility for
confirming that the Annual Report taken as a
whole is fair, balanced and understandable.
The Vitec Group plc
77
Audit Committee activities during 2013
During 2013 the Audit Committee had four
scheduled meetings. At each scheduled
meeting the Committee considers the
following matters:
• Confirms compliance with Directors’
duties and considers any new conflicts
of interest
• Reviews minutes of previous meetings
• Reviews actions from previous meetings
• Reviews Risk Assurance Report covering
risk, assurance, internal audit and internal
controls
• Reviews progress against current year
objectives
• Reviews whistleblowing reports and
action plans to resolve matters reported
The following specific business was dealt
with at each meeting held in 2013:
February
July
• Annual results for 31 December 2012,
• Reviewed and approved vision for Vitec’s
including reviews of:
finance function
- Accounting issues report
• Reviewed proposed Group self-
- Full year report from the external auditor
including Auditor’s Report to be included
in the 2012 Annual Report
assessment process
• Reviewed external audit strategy paper
for the year ended 31 December 2013
- Consolidated financial statements for
the year ended 31 December 2012
• Received training on developments in
corporate reporting
- Report on internal controls
• Considered Financial Reporting Council’s
- Separate report on the work of the Audit
Committee
requirement of Fair, Balanced and
Understandable
- Performance, effectiveness and
independence of the external auditor
- Fees for non-audit services and
professional fees
• Reviewed whistleblowing, anti-bribery and
corruption procedures, confirming that the
Group has adequate procedures in place
• Recommendations to the Board on:
August
- The consolidated financial statements
- The re-appointment of and fees for
the external auditor
- Independence and objectivity of the
external auditor
- Management’s representation letter
to external auditor
• Reviewed utilisation of local language
auditors supporting internal audit
• Reviewed 2013 internal audit plan
• Received update on Group’s compliance
with the Bribery Act 2010
• Reviewed site risk surveys that had been
conducted at each of the Group’s main
manufacturing sites
• Private meeting between the Committee
and external auditor without executive
management present
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• Half year results for 30 June 2013,
including reviews of:
- Accounting issues report
- Report from the external auditor
- Half year results for the half year ended
30 June 2013
- Fees for non-audit services and
professional fees
- Principal risks and uncertainties
• Recommendations to the Board on:
- The half year results
- Management’s representation letter
to external auditor
December
• Reviewed a paper on the process for year
end reporting
• Considered which financial reporting
issues were deemed to be significant for
disclosure in the 2013 Annual Report
• Considered the outcome of 2013
objectives and agreed 2014 objectives
Nigel Moore
Chairman of the Audit Committee
25 February 2014
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Independent Auditor’s Report to the
members of The Vitec Group plc only
Opinions and conclusions arising from our audit
1. Our opinion on the financial statements is unmodified
We have audited the financial statements of The Vitec Group plc for the year ended 31 December 2013 set out on pages 81 to 131.
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December
2013 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
• the parent company financial statements have been properly prepared in accordance with UK Accounting Standards; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the IAS Regulation.
2. Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements, the risks of material misstatement that had the greatest effect on
our audit are shown in the table below.
For further reference to these risks, refer to pages 74 and 75 (Report from Nigel Moore, Chairman of the Audit Committee) and page 88
(Critical accounting judgements and estimates).
The risk
Our response
Valuation of inventory
(£55.3 million)
Refer to note 3.3 of the
financial statements
The inventory held at the year end covers a wide
range of products and the demand for these and
the ability of the Group to sell this inventory in the
future may be adversely affected by many factors.
Such factors include, among others, changes in
customer and consumer preferences, competitor
activity including pricing, the introduction of new
products and technology and the current
uncertain economic outlook. The risk is that the
Group may not recover the cost of inventory
via future sales, and may not hold appropriate
provisions against obsolete and slow moving
inventory. Accordingly the net book value
recorded may be materially incorrect.
Our audit procedures included, among others,
inspecting the ageing of inventory to identify any slow
moving inventory lines and we critically assessed
whether appropriate provisions had been established
for slow moving and obsolete inventory. We checked
the average prices achieved on sales in the year
and after the year end across the range of product
lines to test whether these exceeded the book
value of inventory. We compared the methodology
and assumptions used by the Group in calculating
the inventory provisions to those used in the prior
years and, as part of this, we considered whether
we would expect a change to the methodology
and assumptions based on any changes to the
current markets that the Group serves, noting the
demand factors highlighted in this table. Further,
we considered the historical accuracy of provisions
recorded by examining the utilisation or release of
previously recorded provisions. We also considered
the adequacy of the Group’s disclosures (see Note
3.3) in relation to provisions for risks concerning
inventory obsolescence.
Valuation of trade
receivables (£35.8 million)
Refer to note 3.3 of the
financial statements
Vitec sells products to a wide customer base
located across numerous countries each with
different macroeconomic environments, and with
no dependency on any one particular customer.
The recoverability of trade receivables is dependent
on the credit worthiness of customers and their
ability to settle the amounts due. There is a risk of
non-payment and non recovery of the amounts
recorded as trade receivables at the year end.
Accordingly provisions are required for amounts
that are no longer considered recoverable.
Our audit procedures included, among others,
considering the appropriateness of the provisions
recorded against trade receivable balances with
reference to cash received after the year end, the
ageing analysis, the concentration of counterparty
risk, and considering the historical accuracy of
provisions recorded by examining the utilisation
or release of previously recorded provisions. We
have also considered the adequacy of the Group’s
disclosures (see Note 3.3) in relation to provisions for
risks concerning recoverability of trade receivables.
The Vitec Group plc
79
Current tax liability
(£5.2 million)
Refer to note 2.4 of the
financial statements
Goodwill carrying value
(£56.0 million)
Refer to note 3.1 of the
financial statements
Restructuring provision
(£2.7 million) and
disclosure of costs
incurred (£11.4 million)
Refer to notes 2.2 and 3.5 of
the financial statements
Teradek acquisition
accounting – deferred and
contingent consideration
Refer to note 3.4 of the
financial statements
The risk
Our response
The level of current tax liability recognised requires
judgements as to the likely outcome of decisions
to be made by the relevant tax authorities across
the large number of tax jurisdictions in which the
Group operates. There is a risk that the judgements
on which tax liabilities are based do not take into
account or properly reflect the latest available tax
information or an appropriate application of tax
legislation, and as a result the Group’s tax liabilities
are either over or understated.
The Group records goodwill that totals £56.0 million.
This is subject to annual impairment testing and the
impairment calculations are based on discounted
projected cash flows of the relevant cash generating
units (“CGUs”). This analysis is inherently subjective
as it involves future projections and requires
estimation with regard to future growth rates and
discount rates specific to each CGU. There is
a risk that the key assumptions, estimates and
judgements on which the calculations are based
are inappropriate and that goodwill is overstated
as a result.
In this area our audit procedures included, among
others, challenging the appropriateness of the
assumptions applied and estimates made in relation
to current tax liabilities by considering the range of
possible outcomes that may be assessed under
the applicable tax laws. We involved our own tax
specialists to assist in critically assessing the
assumptions used by reference to international and
local tax legislation in different jurisdictions. We also
assessed whether the Group’s tax disclosures set
out in Note 2.4 are appropriate and in accordance
with relevant accounting standards.
Our audit procedures in this area included, among
others, assessing the key inputs such as projected
economic growth, country specific risk factors and
discount rates by reference to external data where
available. We tested the sensitivity of the impairment
calculation to changes in the key judgements and
assumptions to assess the level of headroom within
the calculations. In addition, we tested the principles
and integrity of the Group’s discounted cash flow
model. We also assessed whether the Group’s
disclosures (see Note 3.1) about the impairment tests
and the sensitivity of the outcome of the impairment
assessment to changes in key assumptions reflected
the risks inherent in the valuation of goodwill.
The Group has implemented various restructuring
activities for which significant costs (£11.4 million)
have been recorded during the year. This includes
costs that are committed at the year end and for
which provisions have been recorded (£2.7 million).
Such provisions require estimations concerning
final redundancy settlements and onerous lease
commitments, and as such are inherently subjective.
Accordingly there is a risk that the amounts
recorded may be materially incorrect. There is also
a risk that the disclosures included in the financial
statements are insufficient to allow the reader a full
understanding of the nature of the costs incurred
and included within the restructuring charge.
In this area, our audit procedures included, among
others, critically assessing whether the restructuring
programmes and commitments were sufficiently
advanced to trigger the need for a provision in
accordance with relevant accounting standards.
We considered the commitments made via public
announcements and other communications with
those to be affected. We tested the accuracy of
provisions through agreeing individual provisions
to supporting information. We also considered the
adequacy of the Group’s disclosure in respect of
the restructuring activities and provision (see Notes
2.2 and 3.5) in detailing the amounts incurred and
provided for at year end.
As detailed in Note 3.4, the Group acquired
Teradek on 28 August 2013. The acquisition
includes future consideration contingent on the
achievement of performance targets for the years
ending 31 December 2014 and 2015. Establishing
the fair value of the contingent consideration
is inherently subjective as it involves future
projections and requires estimation with regard
to future performance. There is a risk that the key
assumptions, estimates and judgements on which
the calculations are based are inappropriate and
that as a result the associated goodwill is under or
overstated. In addition, any payments that would be
made relating to 2014 and/or 2015 shall be charged
to the Income Statement as and when incurred.
In this area, our audit procedures included, among
others, inspecting Teradek forecasts that were
prepared and approved by the Board to support the
acquisition in August 2013, and also the base case
projections for the business as approved as part of
the Group’s annual budgeting cycle in the fourth
quarter of 2013. We assessed these against
Teradek’s actual performance in 2013 understanding
any variances to budget and the key assumptions
underlying the future forecast. We considered the
range of possible fair value assessments based
on the performance targets agreed, the base case
forecasts, and the actual performance to date.
We have also considered the adequacy of the
Group’s disclosures about the deferred and
contingent consideration as set out in Note 3.4.
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Independent Auditor’s Report to the
members of The Vitec Group plc only
3. Our application of materiality and an overview of the
scope of our audit
The materiality for the Group financial statements as a whole
was set at £2.8 million. This has been determined with reference
to a benchmark of Group gross revenue (of which it represents
1%) which we consider to be one of the principlal considerations
for members of the Company in assessing financial performance
of the Group.
We agreed with the Audit Committee to report all corrected and
uncorrected misstatements we identified through our audit with
a value in excess of £140,000, in addition to other audit
misstatements below that threshold that we believe warranted
reporting on qualitative grounds.
Audits for Group reporting purposes were performed by
component auditors at the reporting components in the
following countries: UK, Italy, France and Germany. In addition,
specified audit procedures were performed by component
auditors in the US. These Group procedures covered 81.8%
of Group revenue and 90.8% of Group operating profit
before restructuring costs and charges associated with
acquired businesses.
The audits undertaken for Group reporting purposes at the key
reporting components of the Group were all performed to a
materiality level of £1.5 million set by the group audit team.
Detailed audit instructions were sent to all the auditors in these
locations. These instructions covered the significant audit areas
that should be covered by these audits (which included the
relevant risks of material misstatement detailed above) and set
out the information required to be reported back to the group audit
team. The group audit team visited reporting components in the
following locations: UK, US and Italy. Telephone meetings were
held with the auditors at all other reporting component locations.
Statutory audits are performed at the majority of the subsidiaries
to local materiality levels which are below those applied for
Group reporting but generally these are completed after the
date of this report.
The remaining 18.2% of Group revenue and 9.2% of Group
operating profit before restructuring costs and charges
associated with acquired businesses is represented by 24
reporting components around the world. Review procedures
are performed on all 24 reporting components by the group
audit team. Local statutory audits are performed over five of
these components, but generally these are completed after
the date of this report.
4. Our opinion on other matters prescribed by the
Companies Act 2006 is unmodified
In our opinion:
• the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the
Companies Act 2006; and
• the information given in the Strategic Report and the
Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements.
5. We have nothing to report in respect of the matters on
which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if,
based on the knowledge we acquired during our audit, we have
identified other information in the Annual Report that contains
a material inconsistency with either that knowledge or the
financial statements, a material misstatement of fact, or that
is otherwise misleading.
In particular, we are required to report to you if:
• we have identified material inconsistencies between the
knowledge we acquired during our audit and the Directors’
statement that they consider that the Annual Report and
financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group’s performance, business
model and strategy; or
• the Corporate Governance Statement does not appropriately
address matters communicated by us to the Audit
Committee.
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit.
Under the Listing Rules we are required to review:
• the Directors’ statement, set out on page 33, in relation to
going concern; and
• the part of the Corporate Governance Statement on pages 62
to 77 relating to the Company’s compliance with the nine
provisions of the UK Corporate Governance Code (2010)
specified for our review.
We have nothing to report in respect of the above
responsibilities.
Scope of the report and responsibilities
As explained more fully in the Directors’ Responsibilities Statement
set out on page 33, the Directors are responsible for the
preparation of the financial statements and for being satisfied that
they give a true and fair view. A description of the scope of an
audit of financial statements is provided on the Financial Reporting
Council’s website at www.frc.org.uk/auditscopeukprivate.
This report is made solely to the Company’s members as a body
and is subject to important explanations and disclaimers
regarding our responsibilities, published on our website at
www.kpmg.com/uk/auditscopeukco2013a, which are
incorporated into this report as if set out in full and should be
read to provide an understanding of the purpose of this report,
the work we have undertaken and the basis of our opinions.
Robert Brent (Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
25 February 2014
The Vitec Group plc 81
Table of contents
The notes are grouped under the following sections:
Primary Statements
Consolidated Income Statement ............................. 82
Consolidated Statement of Comprehensive Income ... 83
Consolidated Balance Sheet ................................... 84
Consolidated Statement of Changes in Equity ......... 85
Consolidated Statement of Cash Flows ................... 86
Section 1 - Basis of preparation ...................................... 87
Section 2 - Results for the year ........................................ 89
2.1 Profit before tax
(including segmental information)....................... 89
2.2 Restructuring costs and charges associated
with acquired businesses .................................. 92
2.3 Net finance expense .......................................... 92
2.4 Tax .................................................................... 93
2.5 Earnings per share ............................................ 96
Section 3 - Operating assets and liabilities .................... 97
3.1 Intangible assets ............................................... 97
3.2 Property, plant and equipment ........................ 100
3.3 Working capital ............................................... 102
3.4 Acquisitions and disposals .............................. 104
3.5 Provisions ....................................................... 107
Section 4 - Capital structure .......................................... 108
4.1 Net debt .......................................................... 108
4.2 Financial instruments ....................................... 109
4.3 Share capital and reserves .............................. 114
Section 5 - Other supporting notes ............................... 115
5.1 Employees ...................................................... 115
5.2 Pensions ......................................................... 116
5.3 Share-based payments ................................... 120
5.4 Leases ............................................................ 122
5.5 Related party transactions ............................... 122
5.6 Principal Group investments ............................ 123
5.7 Subsequent events ......................................... 123
The Vitec Group plc Company financial statements
Company Balance Sheet ....................................... 124
Reconciliation of Movements in Shareholders’ Funds . 125
Notes to the Company financial statements .......... 126
Five year financial summary ............................................... 131
Shareholder Information and Financial Calendar ........... 132
Each section sets out the accounting policies applied in
producing these notes together with any key judgements
and estimates used. Text boxes provide an introduction
to each section.
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82
Consolidated Income Statement
For the year ended 31 December 2013
Revenue
Cost of sales
Gross profit
Operating expenses
Operating profit
Comprising
- Operating profit before restructuring costs and charges associated with acquired businesses
- Restructuring costs
- Charges associated with acquired businesses
Net finance expense
Disposal of business
Profit before tax
Comprising
- Profit before tax, excluding restructuring costs, charges associated with acquired businesses and disposal of business
- Restructuring costs
- Charges associated with acquired businesses
- Disposal of business
Taxation
Profit for the year attributable to owners of the parent
Earnings per share
Basic earnings per share
Diluted earnings per share
Average exchange rates
Euro
US$
Notes
2.1
2.2
2.1 / 2.2
2013
£m
315.4
(181.3)
134.1
(109.8)
2012
£m
345.3
(198.1)
147.2
(121.6)
2.1
24.3
25.6
2.2
2.2
2.3
2.2
2.2
3.4
2.4
2.5
39.5
(11.4)
(3.8)
24.3
(3.9)
-
39.3
-
(13.7)
25.6
(3.1)
(6.4)
20.4
16.1
35.6
(11.4)
(3.8)
-
20.4
(6.4)
14.0
36.2
-
(13.7)
(6.4)
16.1
(10.2)
5.9
31.9p
31.8p
13.6p
13.4p
1.17
1.56
1.23
1.58
The Vitec Group plc
Consolidated Statement of
Comprehensive Income
For the year ended 31 December 2013
Profit for the year
Other comprehensive income:
Items that will not be reclassified subsequently to profit and loss:
Remeasurements of defined benefit obligation, net of tax
Items that may be reclassified subsequently to profit and loss:
Foreign exchange gain recycled to the Income Statement on disposal of business
Currency translation differences on foreign currency subsidiaries
Net gain on designated effective net investment hedges
Amounts released to Income Statement in relation to cash flow hedges, net of tax
Effective portion of changes in fair value of cash flow hedges
Total comprehensive income/(loss) for the year attributable to owners of the parent
83
2013
£m
14.0
2012
£m
5.9
(0.2)
(3.8)
-
(2.8)
0.5
(1.8)
2.6
12.3
(2.0)
(8.2)
2.4
0.3
2.1
(3.3)
Annual Report & Accounts 2013
84
Consolidated Balance Sheet
As at 31 December 2013
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Trade and other receivables
Derivative financial instruments
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Current tax assets
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Bank overdrafts
Trade and other payables
Derivative financial instruments
Current tax liabilities
Provisions
Non-current liabilities
Interest-bearing loans and borrowings
Other payables
Post-employment obligations
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Translation reserve
Capital redemption reserve
Cash flow hedging reserve
Retained earnings
Total equity
Balance Sheet exchange rates
Euro
US$
Approved by the Board on 25 February 2014 and signed on its behalf by:
Paul Hayes
Group Finance Director
Notes
2013
£m
2012
£m
3.1
3.2
3.3
4.2
2.4
3.3
3.3
4.2
2.4
4.1
4.1
3.3
4.2
2.4
3.5
4.1
3.3
5.2
3.5
2.4
4.3
76.3
53.5
0.4
1.0
14.0
145.2
55.3
48.5
2.5
2.7
12.9
121.9
267.1
-
48.1
0.1
5.2
6.5
59.9
74.4
0.8
9.1
1.4
1.3
87.0
146.9
120.2
8.8
12.1
(4.3)
1.6
2.3
99.7
120.2
68.2
48.6
0.5
0.6
14.4
132.3
59.5
50.1
1.8
1.0
10.0
122.4
254.7
0.7
44.4
0.1
6.6
2.5
54.3
73.0
1.0
9.4
1.2
1.2
85.8
140.1
114.6
8.8
10.4
(2.0)
1.6
1.5
94.3
114.6
1.20
1.66
1.23
1.63
The Vitec Group plc
Consolidated Statement of Changes in Equity
85
Balance at 1 January 2013
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Remeasurements of defined benefit obligation, net of tax
Currency translation differences on foreign currency subsidiaries
Net gain on designated effective net investment hedges
Amounts released to Income Statement in relation to cash flow hedges,
net of tax
Effective portion of changes in fair value of cash flow hedges
Contributions by and distributions to owners
Dividends paid
Own shares purchased
Share-based payment charge, net of tax
New shares issued
Balance at 31 December 2013
Balance at 1 January 2012
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Remeasurements of defined benefit obligation, net of tax
Foreign exchange gain recycled to the Income Statement on
disposal of business
Currency translation differences on foreign currency subsidiaries
Net gain on designated effective net investment hedges
Amounts released to Income Statement in relation to cash flow hedges,
net of tax
Effective portion of changes in fair value of cash flow hedges
Contributions by and distributions to owners
Dividends paid
Own shares purchased
Share-based payment charge
New shares issued
Balance at 31 December 2012
Share
capital
£m
Share
premium
£m
Translation
reserve
£m
Capital
redemption
reserve
£m
Cash flow
hedging
reserve
£m
Retained
earnings
£m
Total
equity
£m
8.8
10.4
(2.0)
1.6
1.5
94.3
114.6
-
-
-
-
-
-
-
-
-
-
8.8
-
-
-
-
-
-
-
-
-
1.7
12.1
-
-
(2.8)
0.5
-
-
-
-
-
-
(4.3)
-
-
-
-
-
-
-
-
-
-
1.6
-
-
-
-
(1.8)
2.6
-
-
-
-
2.3
14.0
14.0
(0.2)
-
-
-
-
(9.8)
(1.5)
2.9
-
99.7
(0.2)
(2.8)
0.5
(1.8)
2.6
(9.8)
(1.5)
2.9
1.7
120.2
8.7
9.8
5.8
1.6
(0.9)
104.3
129.3
-
-
-
-
-
-
-
-
-
-
0.1
8.8
-
-
-
-
-
-
-
-
-
-
0.6
10.4
-
-
(2.0)
(8.2)
2.4
-
-
-
-
-
-
(2.0)
-
-
-
-
-
-
-
-
-
-
-
1.6
-
-
-
-
-
0.3
2.1
-
-
-
-
1.5
5.9
5.9
(3.8)
(3.8)
-
-
-
-
-
(2.0)
(8.2)
2.4
0.3
2.1
(9.1)
(4.8)
1.8
-
94.3
(9.1)
(4.8)
1.8
0.7
114.6
Annual Report & Accounts 2013
86
Consolidated Statement of Cash Flows
For the year ended 31 December 2013
Cash flows from operating activities
Profit for the year
Adjustments for:
Taxation
Depreciation
Amortisation of intangible assets
Impairment of goodwill
Net gain on disposal of property, plant and equipment and software
Fair value gains on derivative financial instruments
Share-based payment charge
Contingent consideration since date of acquisition
Disposal of business
Net finance expense
Operating profit before changes in working capital and provisions
Decrease in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables
(Decrease)/increase in provisions
Cash generated from operating activities
Interest paid
Tax paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment and software
Purchase of property, plant and equipment
Capitalisation of software and development costs
Acquisition of businesses, net of cash acquired
Disposal of business
Net cash used in investing activities
Cash flows from financing activities
Proceeds from the issue of shares
Own shares purchased
Proceeds from interest-bearing loans and borrowings
Dividends paid
Net cash used in financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 31 December
Notes
2013
£m
2012
£m
14.0
5.9
6.4
12.4
4.5
-
(2.1)
-
1.4
0.8
-
3.9
41.3
4.9
1.8
3.1
1.3
52.4
(3.6)
(8.5)
40.3
3.8
(19.3)
(3.4)
(8.5)
-
(27.4)
0.4
(1.5)
1.9
(9.8)
(9.0)
3.9
9.3
(0.3)
12.9
10.2
12.6
5.2
8.8
(0.3)
(0.2)
1.8
1.0
6.4
3.1
54.5
1.3
(4.4)
(11.8)
(1.2)
38.4
(3.1)
(10.8)
24.5
1.8
(14.2)
(1.3)
(10.6)
(2.1)
(26.4)
0.7
(4.8)
18.8
(9.1)
5.6
3.7
6.2
(0.6)
9.3
3.4
4.1
The Vitec Group plc
Section 1 – Basis of preparation
87
This section lays out the Group’s accounting policies that
relate to the financial statements as a whole. Where an
accounting policy is specific to one note, the policy is
described in the note to which it relates.
Foreign currencies
The consolidated financial statements are presented in Sterling
with the reporting currency of the Group’s subsidiaries generally
being that of the local country.
The Vitec Group plc (the “Company”) is a company domiciled
in the United Kingdom. The consolidated financial statements of
the Company as at and for the year ended 31 December 2013
comprise the Company and its subsidiaries (together referred
to as the “Group”).
As required by EU law (IAS Regulation EC 1606/2002) the
Group financial statements have been prepared in accordance
with International Financial Reporting Standards as adopted by
the EU (“IFRS”), and have been approved by the Directors.
The financial statements are principally prepared on the basis of
historical cost. Areas where other bases are applied are identified
in the accounting policy outlined in the relevant note.
The Company has elected to prepare its parent company financial
statements in accordance with UK GAAP.
Going concern
The Group’s business activities, together with the factors likely to
affect its future development, performance and position are set
out in the Strategic Report. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are described
in the Financial Review. In addition, note 4.2 “Financial Instruments”
includes the Group’s financial risk management objectives, details
of its financial instruments and hedging activities, and its exposure
to foreign currency risks, interest rate risks and liquidity risk.
The Group has considerable financial resources, including
undrawn borrowing facilities at the end of the year of £66.6 million
(see note 4.2 “Financial Instruments”). The Directors believe that
the Group is well placed to manage its business risks.
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing
the Consolidated Financial Statements.
Basis of consolidation
Subsidiaries are entities that are directly or indirectly controlled
by the Group. Control exists when the Group has the power to
govern the financial and operating policies of an entity in order to
obtain benefits from its activities. The results of subsidiaries sold
or acquired during the year are included in the accounts up to,
or from, the date that control exists.
Transactions in foreign currencies are translated at the exchange
rate on that day.
Foreign currency monetary assets and liabilities are translated
at the year end exchange rate. Where there is a movement in
the exchange rate between the date of the transaction and
the year end, a currency translation gain or loss may arise.
Any such differences are recognised in the Income Statement.
Non-monetary assets and liabilities measured at historical cost
are translated at the exchange rate on the day of the transaction,
unless they are stated at fair value in which case they are
translated at the exchange rate of the day the fair value
was determined.
The assets and liabilities of overseas companies, including
goodwill and fair value adjustments arising on consolidation,
are translated at the year end exchange rate.
The revenues and expenses of these companies are translated
at the weighted average exchange rate for the year. Where
differences arise between these rates, they are recognised in the
translation reserve within equity and other comprehensive income.
The cash flows of these companies are translated at the weighted
average exchange rate for the year.
In the consolidated financial statements, currency translation gains
and losses on external loans and borrowings and on long-term
inter-company loans that form part of the net investment in the
subsidiaries are recognised directly in the translational reserve
within equity and other comprehensive income.
In respect of all overseas companies, only those translation
differences arising since 1 January 2004, the date of transition
to IFRS, are presented as a separate component of equity.
On disposal of such a company, the related translation reserve
is released to the Income Statement as part of the gain or loss
on disposal.
Annual Report & Accounts 2013 88
Section 1 – Basis of preparation
Critical accounting judgements and estimates
The following provides information on those policies that the
Directors consider critical because of the level of judgement and
estimation required which often involves assumptions regarding
future events which can vary from what is anticipated. The
Directors review the judgements and estimates on an ongoing
basis with revisions to accounting estimates recognised in the
period in which the estimates are revised and in any future periods
affected. The Directors believe that the consolidated financial
statements reflect appropriate judgements and estimates and
provide a true and fair view of the Group’s performance and
financial position.
Working capital
Provisions over trade receivables are maintained to reflect
expected credit losses based on collection history and specific
risks identified on a customer-by-customer basis. Provisions
against slow-moving, excess and obsolete inventory are estimated
to reflect its net realisable value. Details about the provisions
recorded are set out in note 3.3 “Working capital”.
Pension benefits
The actuarial valuations associated with the pension schemes
involve making assumptions about discount rates, expected
rates of return on assets, future salary increases, future pension
increases and mortality rates. All assumptions are reviewed at
each reporting date. Further details about the assumptions
used are set out in note 5.2 “Pensions”.
Impairment testing
Goodwill is tested annually for impairment. Tests for impairment
are based on discounted cash flows and assumptions (including
discount rates, timing and growth prospects) which are inherently
subjective. Details about the assumptions used are set out in
note 3.1 “Intangible assets”.
Acquisitions
Acquisitions are accounted for under the acquisition method,
based on the fair value of the consideration paid. Assets and
liabilities are measured at fair value and the purchase price is
allocated to assets and liabilities based on these fair values.
IFRS 3 requires the identification of acquired intangible assets
as part of a business combination. The methods used to value
such intangible assets require the use of estimates including
forecast performance. Accordingly determining the fair values
of assets and liabilities acquired involves the use of significant
estimates and assumptions (including discount rates, asset
lives and recoverability). Similarly determining the fair value
of deferred and contingent consideration requires the use of
estimates and judgements, in particular concerning future
performance and growth. Details concerning the acquisition
made in the year are set out in note 3.4 “Acquisitions
and disposals”.
Tax
The Group is subject to income taxes in a number of jurisdictions.
Management is required to make judgements and estimates in
determining the provisions for income taxes, deferred tax assets
and liabilities recognised in the consolidated financial statements.
Tax benefits are recognised to the extent that it is probable that
sufficient taxable income will be available in the future against
which temporary differences and unused tax losses can be
utilised. Details on the tax charge and assets and liabilities
recorded are set out in note 2.4 “Tax”.
Application of new or amended EU endorsed
accounting standards
IAS 19 “Employee Benefits (2011)”
The principal changes require the replacement of the interest
income on plan assets and the interest charge on pension
liabilities with a single net financing cost, based on the discount
rate. Previously, the Group determined interest income on
plan assets based on their long-term rate of expected return.
The change had no significant impact on the consolidated
financial statements, and accordingly, the 2012 comparatives
have not been restated.
IFRS 13 “Fair Value Measurement”
IFRS 13 replaces and expands the disclosure requirements in
other IFRSs, including IFRS 7 “Financial Instruments: Disclosures”.
These had no significant impact on the consolidated financial
statements, and accordingly, the Group has not provided 2012
comparatives.
IAS 1 “Presentation of financial statements”
The Group has modified the presentation of items of other
comprehensive income in its consolidated statement of other
comprehensive income, to present separately items that would
be reclassified to the consolidated income statement in the future
from those that would never be. Comparative information has also
been re-presented accordingly.
New standards and interpretations not yet adopted
There are a number of new standards, amendments to standards
and interpretations that are not yet effective for the year ended
31 December 2013, and have not been adopted early in preparing
these consolidated financial statements. None of these are
anticipated to have any material impact on these consolidated
financial statements.
The Vitec Group plc
Section 2 – Results for the year
89
This section focuses on the profitability of the Group. On the following pages you will find disclosures relating
to the following:
2.1 Profit before tax (including segmental information)
2.2 Restructuring costs and charges associated with acquired businesses
2.3 Net finance expense
2.4 Tax
2.5 Earnings per share
2.1 Profit before tax (including segmental information)
This shows the analysis of the Group’s Profit before tax by reference to its three Divisions. Further segmental information
and an analysis of key operating expenses are also shown here.
Accounting policies
Revenue recognition
Revenue is stated exclusive of sales tax and consists of sales to third parties after an allowance for returns, trade discounts
and volume rebates.
Goods and services sold
Revenue from the sale of goods is recognised when both the significant risks and rewards of ownership have been transferred
to the customer and the amount of revenue can be measured reliably. This is normally when title passes to the customer.
Revenue from rental of assets is recognised over the duration of the rental contract, on a straight line basis, at the amount
billed to the customer.
Annual Report & Accounts 2013
90
Section 2 – Results for the year
2.1 Profit before tax (including segmental information)
Segment reporting
The Group has three reportable segments which are reported in a manner that is consistent with the internal reporting provided to the
Chief Operating Decision Maker (considered to be the Board). Further details on the nature of these segments and the products and
services they provide are contained in the Strategic Report.
Revenue from external customers:
Sales
Services
Total revenue from external customers
Inter-segment revenue (2)
Total revenue
Segment result
Restructuring costs
Fair value adjustment to contingent consideration on
previous acquisitions
Transaction costs relating to acquisitions
Impairment of goodwill
Amortisation of acquired intangible assets
Operating profit
Net finance expense
Loss on disposal of Staging business
Taxation
Profit for the year
Segment assets
Unallocated assets
Cash and cash equivalents
Current tax assets
Deferred tax assets
Total assets
Segment liabilities
Unallocated liabilities
Bank overdrafts
Interest-bearing loans and borrowings
Current tax liabilities
Deferred tax liabilities
Total liabilities
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Capital expenditure
Property, plant and equipment
Software and development costs
Videocom
Imaging (1)
Services
Corporate and
unallocated
Consolidated
2013
£m
2012
£m
2013
£m
2012
£m
2013
£m
2012
£m
2013
£m
2012
£m
2013
£m
2012
£m
140.0
3.1
137.1
9.1
141.2
-
166.1
-
143.1
2.2
145.3
146.2
2.5
148.7
141.2
0.6
141.8
166.1
0.2
166.3
9.4
21.7
31.1
-
31.1
7.0
26.0
33.0
0.1
33.1
-
-
-
-
290.6
24.8
310.2
35.1
-
(2.8)
(2.8)
-
(2.8)
(2.8)
315.4
-
315.4
345.3
-
345.3
17.9
(5.3)
15.8
-
20.1
(5.6)
22.3
-
1.5
(0.5)
1.2
-
(0.8)
(0.4)
-
(2.2)
(1.2)
(0.3)
(8.8)
(3.1)
-
-
(0.4)
0.2
-
-
(0.5)
-
-
-
-
-
-
-
-
9.2
2.4
14.1
22.0
1.0
1.2
-
-
-
(6.4)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
39.5
(11.4)
39.3
-
(0.8)
(0.4)
-
(2.6)
24.3
(3.9)
-
(6.4)
14.0
(1.0)
(0.3)
(8.8)
(3.6)
25.6
(3.1)
(6.4)
(10.2)
5.9
120.5
111.6
85.5
90.8
26.2
22.4
5.3
4.5
237.5
229.3
27.0
23.1
25.3
27.2
6.6
3.9
7.1
4.4
66.0
58.6
12.9
2.7
14.0
10.0
1.0
14.4
12.9
2.7
14.0
267.1
10.0
1.0
14.4
254.7
-
74.4
5.2
1.3
0.7
73.0
6.6
1.2
-
74.4
5.2
1.3
146.9
0.7
73.0
6.6
1.2
140.1
14.8
(13.5)
-
2.8
(14.2)
-
15.3
(5.8)
-
13.1
(6.8)
-
6.8
(7.8)
-
5.4
(5.3)
-
3.4
(0.3)
(9.0)
3.2
(0.1)
5.6
40.3
(27.4)
(9.0)
24.5
(26.4)
5.6
3.7
1.7
3.1
0.6
4.2
1.6
4.2
0.6
11.4
0.1
6.8
0.1
-
-
0.1
-
19.3
3.4
14.2
1.3
(1) 2012 includes Staging business, which was sold by the Group during the second half of 2012.
(2) Inter-segment pricing is determined on an arm’s length basis.
No individual customer accounted for more than 10% of external revenue in either 2013 or 2012.
The Vitec Group plc
Geographical segments
Analysis of revenue from external customers, by location of customer
United Kingdom
The rest of Europe
North America
Asia Pacific
The rest of the World
Total revenue from external customers
91
2013
£m
2012
£m
26.5
71.6
142.0
56.8
18.5
315.4
32.9
79.4
155.5
60.4
17.1
345.3
The Group’s operating segments are located in several geographical locations, and sell products and services on to external customers
in all parts of the world.
Operating expenses
Analysis of operating expenses
- Restructuring costs and charges associated with acquired businesses (1)
- Other administrative expenses
Administrative expenses
Marketing, selling and distribution costs
Research, development and engineering costs
Operating expenses
(1) Of the total £11.4 million restructuring costs, £6.9 million is included in operating expenses and the remaining £4.5 million in cost of sales.
Operating profit
The following items are included in operating profit
Fees payable to the Company’s auditors for the audit of the Company’s annual financial statements
Fees payable to the Company’s auditors and its associates for other services
- The audit of the Company’s subsidiaries pursuant to legislation
- Transaction and other services
2013
£m
2012
£m
10.7
43.7
54.4
46.0
9.4
109.8
13.7
48.2
61.9
48.6
11.1
121.6
2013
£m
2012
£m
0.1
0.1
0.4
0.2
0.3
0.1
Annual Report & Accounts 2013
92
Section 2 – Results for the year
2.2 Restructing costs and charges associated with acquired businesses
Restructuring costs and charges associated with acquired businesses are excluded from key performance measures in
order to more accurately show the underlying current business performance of the Group in a consistent manner and reflect
how the business is managed and measured on a day-to-day basis. Restructuring costs include employment termination,
streamlining of operations, relocation of certain manufacturing activities to Costa Rica, improvement of systems and
processes, and inventory write off. Charges associated with acquired businesses include non-cash charges such as
impairment of goodwill and amortisation of acquired intangible assets, and cash charges such as transaction costs
and fair value adjustments to contingent consideration since date of acquisition.
Restructuring costs (1)
Contingent consideration since date of acquisition (2)
Transaction costs relating to acquisitions (3)
Impairment of goodwill
Amortisation of acquired intangible assets
Restructuring costs and charges associated with acquired businesses, before tax
Tax on restructuring costs and charges associated with acquired businesses
Restructuring costs and charges associated with acquired businesses, net of tax
2013
£m
(11.4)
(0.8)
(0.4)
-
(2.6)
(15.2)
4.6
(10.6)
2012
£m
-
(1.0)
(0.3)
(8.8)
(3.6)
(13.7)
1.3
(12.4)
(1) One-off restructuring costs of £11.4 million relate to the Group streamlining certain operations by downsizing selected activities in the UK, Italy, Israel and US and
expanding its manufacturing capabilities in Costa Rica to further shift to lower cost manufacturing. This includes employment termination costs of £6.2 million
and other site rationalisation and closure costs of £5.2 million. Of the total £11.4 million restructuring costs, £4.5 million is included in cost of sales of which
£0.9 million represents inventory write off, and the remaining £6.9 million in operating expenses. A provision of £2.7 million has been recognised at the end of
the period in relation to restructuring primarily related to committed redundancy costs. These actions have better positioned the Group for the future.
(2) A fair value adjustment of £0.8 million has been provided for in respect of contingent consideration of Haigh-Farr, a prior period acquisition. This is included
within administrative expenses, in the restructuring costs and charges associated with acquired businesses.
(3) £0.4 million transaction costs were incurred in relation to the acquisition of Teradek. See note 3.4 “Acquisitions and disposals”.
2.3 Net finance expense
This note details the finance income and expense generated from the Group’s financial assets and liabilities.
Accounting policies
Net finance expense comprises:
- interest payable on borrowings and interest receivable on funds invested;
- the amortisation of loan costs;
- foreign exchange gains and losses on cash and inter-company loans that are not net investment hedges; and
- net interest expense on net defined benefit scheme liabilities.
Net finance expense
Finance income
Net currency translation gains
Finance expense
Interest payable on interest-bearing loans and borrowings
Net interest expense on net defined benefit pension scheme liabilities (1)
Net finance expense
(1) See note 5.2 “Pensions”.
2013
£m
2012
£m
-
0.3
(3.6)
(0.3)
(3.9)
(3.9)
(3.2)
(0.2)
(3.4)
(3.1)
The Vitec Group plc
93
2.4 Tax
This note lays out the tax accounting policies, the total tax charge or credit in the Income Statement, and tax assets and
tax liabilities in the Balance Sheet. This includes amounts relating to deferred tax.
Accounting policies
Income tax
The tax expense in the Income Statement represents the sum of tax currently payable and deferred tax.
Current tax is the expected tax payable on the taxable income for the year, and any adjustment to tax payable in respect of previous
years. Deferred tax is provided using the Balance Sheet liability method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred
tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax
rates substantively enacted at the Balance Sheet date.
Deferred tax assets are recognised for all deductible temporary differences and carried forward unused tax credits and unused
tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences,
and the carry forward of unused tax credits and unused tax losses, can be utilised.
The carrying amount of deferred income tax assets is reviewed at each Balance Sheet date and increased or reduced to the extent
of the probable level of taxable profit that would be available to allow all or part of the deferred income tax asset to be utilised.
Deferred tax liabilities are not recognised for the following temporary differences:
- Goodwill not deductible for tax purposes on the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss; and
- Differences relating to investments in subsidiaries to the extent that the timing of the reversal is controlled by the
Company and they will probably not reverse in the foreseeable future.
Tax - Income Statement
The total taxation charge/(credit) in the Income Statement is analysed as follows:
Before restructuring costs, charges associated with acquired businesses and disposal of business
Current tax
Deferred tax
Restructuring costs, charges associated with acquired businesses and disposal of business
Current tax (1)
Deferred tax (2)
Summarised in the Income Statement as follows
Current tax
Deferred tax
2013
£m
2012
£m
11.2
(0.2)
11.0
(4.6)
-
(4.6)
6.6
(0.2)
6.4
9.8
2.1
11.9
-
(1.7)
(1.7)
9.8
0.4
10.2
(1) Current tax credits of £4.6 million were recognised in respect of restructuring costs, charges associated with acquired businesses and disposal of businesses.
This tax credit is split between restructuring costs (£3.5 million) and amortisation of intangible assets in the period (£1.1 million).
(2) No overall net deferred tax charge or credit arises from restructuring costs, charges associated with acquired businesses and disposal of businesses in 2013.
In 2012, deferred tax credits of £1.7 million were recognised; £1.3 million related to the deferred tax impacts of the amortisation of intangible assets and the
remaining £0.4 million related to the deferred tax impact of the Staging disposal.
Annual Report & Accounts 2013
94
Section 2 – Results for the year
2.4 Tax
Current tax expense
Charge for the year
Adjustments in respect of prior years
2013
£m
6.8
(0.2)
6.6
2012
£m
10.0
(0.2)
9.8
The UK current tax charge represents £0.1 million of the total Group current tax charge of £6.6 million with the remaining charge
of £6.5 million relating to overseas tax. The UK corporate tax rate reduced from 24% to 23% on 1 April 2013 and further reductions
in the rate to 21% with effect from 1 April 2014 and 20% from 1 April 2015 have been substantively enacted.
Deferred tax expense
Origination and reversal of temporary differences
2013
£m
2012
£m
(0.2)
0.4
The UK deferred tax credit represents £0.4 million of the total Group deferred tax credit of £0.2 million. The remaining charge of
£0.2 million relates to overseas tax.
Tax charge/(credit) recognised in the Statement of Changes in Equity (SOCIE)
Current tax recognised in SOCIE (3)
Deferred tax recognised in SOCIE (4)
2013
£m
2012
£m
(1.4)
0.5
(0.9)
-
-
-
(3) Excess current tax deductions of £1.4 million related to share-based payments on exercised options have been reflected in the SOCIE.
(4)) Deferred tax charges relating to the UK defined benefit pension scheme of £0.4 million and the impact of cash flow hedges of £0.2 million have been partially
offset by a £0.1 million credit in respect of the estimated excess tax deductions related to share-based payments, have been reflected in the SOCIE.
Reconciliation of Group tax charge
Profit before tax
Income tax using the domestic corporation tax rate at 23.3% (2012: 24.5%)
Effect of tax rates in foreign jurisdictions
Non-deductible expenses
Impact of business disposal
Impact of tax credits in respect of prior years
Impact of goodwill impairment
Impact of tax losses not recognised
Other
Total income tax expense in Income Statement
2013
£m
2012
£m
20.4
16.1
4.7
-
0.6
-
(0.4)
-
1.2
0.3
6.4
4.0
(1.3)
1.0
2.5
(0.7)
3.3
1.5
(0.1)
10.2
The Vitec Group plc
95
Tax - Balance Sheet
Current tax
The current tax liability of £5.2 million (2012: £6.6 million) represents the amount of income taxes payable in respect of current and prior
periods. The current tax assets of £2.7 million (2012: £1.0 million) mainly relates to income tax receivable in Germany and the UK.
Deferred tax assets and liabilities
Assets
Inventories
Intangible assets
Tax value of loss carry-forwards recognised
Property, plant, equipment and other
Liabilities
Intangible assets
Net
Assets
Inventories
Intangible assets
Tax value of loss carry-forwards recognised
Property, plant, equipment and\ other
Liabilities
Intangible assets
Net
Recognised Recognised
on
in
income acquisitions
£m
£m
2013
£m
Eliminated
on
Exchange
disposals movements
£m
£m
2.9
(2.1)
4.1
9.1
14.0
(1.3)
(1.3)
12.7
(0.3)
(0.5)
0.1
1.1
0.4
(0.2)
(0.2)
0.2
0.3
(0.4)
0.1
-
(0.5)
(0.5)
-
-
-
(0.5)
0.1
(0.1)
(0.3)
(0.3)
0.1
0.1
(0.2)
Recognised Recognised
on
in
acquisitions
income
£m
£m
2012
£m
Eliminated
on
Exchange
disposals movements
£m
£m
2.9
(1.3)
4.1
8.7
14.4
(1.2)
(1.2)
13.2
0.7
0.7
0.6
(1.9)
0.1
(0.5)
(0.5)
(0.4)
-
(0.7)
-
-
(0.7)
-
-
(0.7)
-
-
-
(0.3)
(0.3)
-
-
(0.3)
-
-
(0.1)
(0.4)
(0.5)
-
-
(0.5)
2012
£m
2.9
(1.3)
4.1
8.7
14.4
(1.2)
(1.2)
13.2
2011
£m
2.2
(1.3)
3.6
11.3
15.8
(0.7)
(0.7)
15.1
Deferred tax assets have been offset against liabilities where assets and liabilities arise in the same jurisdiction and there is a legal
right of offset.
Deferred tax assets totalling £9.0 million (2012: £9.2 million) have been recognised in the US on the basis that future profits are
expected to be made in the US businesses such that it is probable that these assets will be utilised in the foreseeable future.
Deferred tax assets have not been recognised in respect of the following items:
Losses
Temporary differences on share options
Total
2013
£m
8.9
0.2
9.1
2012
£m
7.7
1.2
8.9
Deferred tax assets have not been recognised in respect of these items because it is not sufficiently probable that these assets will reverse in
the foreseeable future.
No taxes have been provided for liabilities which may arise on the distribution of unremitted earnings of subsidiaries on the basis of control,
except where distributions of such profits are planned. Cumulative unremitted earnings of overseas subsidiaries and associates totalled
approximately £13.5 million at 31 December 2013 (2012: £61.2 million). It is not practical to calculate the tax which would arise on remittance
of these amounts and, as dividends remitted from overseas subsidiaries to the UK should be exempt from additional UK tax, no significant tax
charges would be expected.
Annual Report & Accounts 2013
96
Section 2 – Results for the year
2.5 Earnings per share
Earnings per share (“EPS”) is the amount of post-tax profit attributable to each share.
Basic EPS is calculated on the profit for the year divided by the weighted average number of ordinary shares in issue
during the year.
Diluted EPS is calculated on the profit for the year divided by the weighted average number of ordinary shares in issue
during the year, but adjusted for the effects of dilutive share options. The key features of share option contracts are
described in note 5.3 “Share-based payments”.
The Adjusted EPS measure is used by management to assess the underlying performance of the ongoing businesses, and
therefore excludes restructuring costs, charges associated with acquired businesses and disposal of business, both net of tax.
The calculation of basic, diluted and adjusted EPS is set out below:
Profit
Profit for the financial year
Add back:
Restructuring costs and charges associated with acquired businesses, net of tax
Loss on disposal of Staging business, net of tax
Earnings before restructuring costs, charges associated with acquired businesses and disposal of business
2013
£m
14.0
10.6
-
24.6
2012
£m
5.9
12.4
6.0
24.3
Basic
Dilutive potential ordinary shares
Diluted
Weighted average number
of shares ’000
Adjusted earnings
per share
Earnings per share
2013
Number
43,869
204
44,073
2012
Number
43,520
426
43,946
2013
pence
56.1
(0.2)
55.9
2012
pence
55.8
(0.5)
55.3
2013
pence
31.9
(0.1)
31.8
2012
pence
13.6
(0.2)
13.4
The Vitec Group plc
Section 3 – Operating assets and liabilities
97
This section shows the assets and liabilities used to
generate the Group’s trading performance. Liabilities
relating to the Group’s financing activities are addressed
in Section 4. Current tax and deferred tax assets and
liabilities are shown in note 2.4 “Tax”.
On the following pages, there are disclosures covering
the following:
3.1 Intangible assets
3.2 Property, plant and equipment
3.3 Working capital
3.4 Acquisitions
3.5 Provisions
3.1 Intangible assets
This shows the non-physical assets used by the Group
to generate revenues and profits. These assets include
the following:
- Goodwill
- Acquired intangible assets
- Capitalised software
- Capitalised development costs
Accounting policies
Goodwill
The goodwill recognised by the Group has all arisen as a result of
acquisitions and is stated at cost less any accumulated impairment
losses. Impairment losses on goodwill are not reversed. From
1 January 2004 (IFRS transition date), goodwill is allocated on
acquisition to cash-generating units that are anticipated to benefit
from the combination, and is not subject to amortisation but is
tested annually for impairment. Impairment is determined by
assessing the recoverable amount of the cash-generating unit to
which the goodwill relates. This estimate of recoverable amount
is determined at each Balance Sheet date.
The estimate of recoverable amount requires significant
assumptions to be made and is based on a number of factors
such as the near-term business outlook for the cash-generating
unit, including both its operating profit and operating cash
flow performance. Where the recoverable amount of the cash-
generating unit is less than the carrying amount, an impairment
loss is recognised.
All acquisitions that have occurred since 1 January 2010 are
accounted for by applying the acquisition method. Goodwill on
these acquisitions represents the excess of the fair value of the
acquisition over the fair value to the Group, of the identifiable net
assets acquired, all measured at the acquisition date. Subsequent
adjustments to the fair values of net assets acquired can be
made within twelve months of the acquisition date where original
fair values were determined provisionally. These adjustments are
accounted for from the date of acquisition. Transaction costs that
the Group incurs in connection with an acquisition, such as legal
fees, due diligence fees and other professional and consulting fees,
are expensed as incurred.
Other intangible assets
The other intangible assets are either acquired or internally
generated (such as capitalised software and capitalised
development costs).
Acquired intangible assets
Other intangible assets acquired as part of a business combination
are shown at fair value at the date of acquisition less accumulated
amortisation at the rates indicated below:
Order backlog
Brand
Customer relationships
Technology
up to 2 years
3 to 15 years
3 to 10 years
3 to 10 years
Capitalised software
The cost of acquiring software (including associated
implementation and development costs where applicable) is
classified as an intangible asset. Costs that are directly associated
with the production of identifiable and unique software products
controlled by the Group, and that are assessed as likely to
generate economic benefits exceeding costs beyond one year,
are also capitalised and recognised as intangible assets. Costs
associated with maintaining computer software programmes
are recognised as an expense as incurred. Capitalised software
expenditure is amortised over its estimated useful life of between
3 to 5 years, and is stated at cost less accumulated amortisation
and impairment losses.
Capitalised development costs
Research and development costs are charged to the Income
Statement in the year in which they are incurred unless
development expenditure meets the criteria for capitalisation.
Once detailed and strict criteria have been met that confirm that
the product or process is both technically and commercially
feasible and the Group has sufficient resources to complete
the project, any further expenditure incurred on the project is
capitalised. The capitalised expenditure includes the cost of
materials, direct labour and an appropriate portion of overheads.
Capitalised expenditure is amortised over the life of the project,
and is stated at cost less accumulated amortisation and
impairment losses.
Annual Report & Accounts 2013
98
Section 3 – Operating assets and liabilities
3.1 Intangible assets
Impairment tests for cash-generating units (CGUs)
containing goodwill
In accordance with the requirements of IAS 36, Impairment
of Assets, goodwill is allocated to the Group’s CGUs which
are identified by the way goodwill is monitored for impairment.
The most significant elements of the Group’s total consolidated
goodwill of £56.0 million at 31 December 2013 are allocated
to: Vitec Videocom: £23.4 million (2012: £23.4 million); Imaging:
£12.6 million (2012: £12.7 million); and Haigh-Farr: £12.5 million
(2012: £12.7 million). Vitec Videocom and Haigh-Farr CGUs sit
within the Videocom segment and the Imaging CGU sits within
the Imaging segment. The remaining goodwill relates to CGUs
which are not individually significant. Each CGU is assessed for
impairment annually and whenever there is a specific indication
of impairment. The carrying value of the remaining CGUs exceed
their recoverable amounts.
As part of the annual impairment test review, the carrying value
of goodwill has been assessed with reference to value in use over
a projected period of five years together with a terminal value.
This reflects the projected cash flows of each CGU based on the
actual operating results, the most recent Board approved budget,
strategic plans and management projections.
The key assumptions on which the value in use calculations are
based relate to business performance over the next five years,
long-term growth rates beyond 2018 and the discount rates
applied. The key judgements are the level of revenue and
operating margins anticipated and the proportion of operating
profit converted to cash in each year. Forecasts are based on
past experience and take into account current and future
market conditions and opportunities.
Growth rates for the period beyond 2018 are assumed to be
2% (2012: 2%), which is considered to be at or below long-term
market trends for significant CGUs.
The cash flow projections have been discounted to present value
using the Group’s post-tax weighted average cost of capital
adjusted for economic and CGU specific risk factors including
markets and size of business. Pre-tax rates of 10% to 12%
(2012: 9% to 14%) reflecting different geographies have been
used for impairment testing (10% applied to the Haigh-Farr CGU
and 12% applied to the Vitec Videocom and Imaging CGUs).
The following specific individual sensitivities have been considered
for each CGU in relation to the value in use calculations, resulting
in the carrying amount not exceeding the recoverable amount:
- if the long-term growth rate assumption was reduced to 1%;
and
- a 1% point increase in the discount rate was applied.
The Vitec Group plc
99
Total
£m
Goodwill
£m
Acquired
intangible
assets
£m
Capitalised
Capitalised development
costs
£m
software
£m
134.2
(4.8)
2.0
(0.6)
(12.1)
8.1
126.8
126.8
(2.6)
3.5
(0.4)
10.6
137.9
59.2
(2.6)
5.2
8.8
(12.0)
58.6
58.6
(1.2)
4.5
(0.3)
61.6
75.0
68.2
76.3
70.2
(2.3)
0.7
-
(8.2)
5.0
65.4
65.4
(1.1)
0.1
-
4.5
68.9
13.1
(0.6)
-
8.8
(8.2)
13.1
13.1
(0.2)
-
-
12.9
57.1
52.3
56.0
48.0
(2.0)
-
-
(3.1)
3.1
46.0
46.0
(1.4)
-
-
6.1
50.7
35.1
(1.6)
3.6
-
(3.1)
34.0
34.0
(1.0)
2.6
-
35.6
12.9
12.0
15.1
13.8
(0.4)
1.0
(0.6)
(0.8)
-
13.0
13.0
-
1.0
(0.4)
-
13.6
10.3
(0.4)
1.0
-
(0.7)
10.2
10.2
-
1.2
(0.3)
11.1
3.5
2.8
2.5
2.2
(0.1)
0.3
-
-
-
2.4
2.4
(0.1)
2.4
-
-
4.7
0.7
-
0.6
-
-
1.3
1.3
-
0.7
-
2.0
1.5
1.1
2.7
Intangible assets
Cost
At 1 January 2012
Currency translation adjustments
Additions
Disposals
Disposals - on divestment of business
Acquisitions
At 31 December 2012
At 1 January 2013
Currency translation adjustments
Additions (1)
Disposals
Acquisitions (2)
At 31 December 2013
Amortisation and impairment losses
At 1 January 2012
Currency translation adjustment
Amortisation in the year
Impairment charge
Disposals - on divestment of business
At 31 December 2012
At 1 January 2013
Currency translation adjustment
Amortisation in the year
Disposals
At 31 December 2013
Carrying amounts
At 1 January 2012
At 31 December 2012 and 1 January 2013
At 31 December 2013
(1) The increase in goodwill of £0.1 million arose from the final fair value adjustment to the net assets of Camera Corps, acquired in April 2012.
(2) Goodwill of £4.5 million and acquired intangible assets of £6.1 million arose on the acquisition of Teradek. See note 3.4 “Acquisitions and disposals”.
Annual Report & Accounts 2013
100
Section 3 – Operating assets and liabilities
3.2 Property, plant and equipment
This shows the physical assets used by the Group to generate revenues and profits. These assets include the following:
- Land and buildings
- Plant, machinery and vehicles
- Equipment, fixtures and fittings
Accounting policies
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Certain land and buildings
that had been revalued to fair value prior to 1 January 2004, the date of transition to IFRS, are measured on the basis of deemed cost,
being the revalued amount less depreciation up to the date of transition.
Rental assets are recorded as plant and machinery.
Depreciation
Depreciation is provided to write off the cost of property, plant and equipment, less estimated residual value, on a straight line basis
over their estimated useful lives. The annual depreciation charge is sensitive to the estimated useful life of each asset and expected
residual value at the end of its life. The major categories of property, plant and equipment are depreciated as follows:
Freehold land
Freehold and long leasehold buildings
Leasehold improvements
Plant and machinery
Motor vehicles
Equipment, fixtures and fittings
Rental assets
not depreciated
up to 50 years
shorter of estimated useful life or remaining period of the lease
4 to 10 years
3 to 4 years
3 to 10 years
3 to 6 years
Impairment of assets
Property, plant and equipment that is subject to depreciation is reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. Indicators of impairment may include changes
in technology and market conditions.
The Vitec Group plc
101
Land
and
buildings
£m
Plant,
machinery
and
vehicles
£m
Equipment,
fixtures
and
fittings
£m
30.5
(0.7)
-
1.5
(0.2)
(1.5)
-
29.6
29.6
0.2
-
1.5
(0.2)
31.1
12.9
(0.2)
-
1.4
(0.2)
(0.9)
13.0
13.0
0.1
-
1.4
(0.1)
14.4
17.6
16.6
16.7
100.1
(3.6)
(1.3)
10.7
(5.4)
(3.4)
0.7
97.8
97.8
-
(0.1)
17.0
(18.9)
95.8
72.3
(2.6)
(1.0)
9.5
(4.5)
(2.9)
70.8
70.8
0.5
(0.2)
9.6
(17.5)
63.2
27.8
27.0
32.6
14.3
(0.6)
1.3
2.0
(0.6)
(0.5)
0.1
16.0
16.0
(0.1)
0.1
0.8
(1.1)
15.7
9.6
(0.4)
1.0
1.7
(0.6)
(0.3)
11.0
11.0
(0.1)
0.2
1.4
(1.0)
11.5
4.7
5.0
4.2
Total
£m
144.9
(4.9)
-
14.2
(6.2)
(5.4)
0.8
143.4
143.4
0.1
-
19.3
(20.2)
142.6
94.8
(3.2)
-
12.6
(5.3)
(4.1)
94.8
94.8
0.5
-
12.4
(18.6)
89.1
50.1
48.6
53.5
Property, plant and equipment
Cost
At 1 January 2012
Currency translation adjustments
Transfers between asset categories
Additions
Disposals
Disposals - on divestment of business
Acquisitions
At 31 December 2012
At 1 January 2013
Currency translation adjustments
Transfers between asset categories
Additions
Disposals
At 31 December 2013
Depreciation
At 1 January 2012
Currency translation adjustment
Transfers between asset categories
Depreciation charge in the year
Disposals
Disposals - on divestment of business
At 31 December 2012
At 1 January 2013
Currency translation adjustment
Transfers between asset categories
Depreciation charge in the year
Disposals
At 31 December 2013
Carrying amounts
At 1 January 2012
At 31 December 2012 and 1 January 2013
At 31 December 2013
Plant, machinery and vehicles includes broadcast equipment rental assets with an original cost of £42.5 million (2012: £45.2 million)
and accumulated depreciation of £24.8 million (2012: £31.4 million).
Capital commitments at 31 December 2013 for which no provision has been made in the accounts amount to £0.5 million
(2012: £0.7 million).
Annual Report & Accounts 2013
102
Section 3 – Operating assets and liabilities
3.3 Working capital
Working capital represents the assets and liabilities the Group generates through its trading activities. The Group therefore
defines working capital as inventory, trade and other receivables, and trade and other payables.
Careful management of working capital is vital as it ensures that the Group can meet its trading and financing obligations
within its ordinary operating cycle.
Accounting policies
Inventories
Inventories and work in progress are carried at the lower of cost and net realisable value. Inventory acquired as part of business combinations
is valued at fair value. Cost represents direct costs incurred and, where appropriate, production or conversion costs and other costs to bring
the inventory to its existing location and condition. In the case of manufacturing inventory and work in progress cost includes an appropriate
share of production overheads based on normal operating capacity. Inventory is accounted for on an average cost or first-in, first-out method
as appropriate. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and selling expenses. Provisions for inventories are recognised when the book value exceeds its net realisable value.
In the ordinary course of business, the Group makes provision for slow-moving, excess and obsolete inventory as appropriate.
Trade and other receivables
Trade and other receivables are recognised at the invoice value less provision for impairment. The carrying value of trade receivables is
considered to approximate fair value.
A provision for impairment is established when there is objective evidence that amounts due will not be collected according to the original
terms of the receivables. Significant financial difficulties of the debtor and default or delinquency in payments are considered indicators that
the trade receivable is impaired.
Amounts recoverable on contracts are included in trade receivables and represent revenue recognised in excess of payments on account.
Trade and other payables
Trade payables are recognised at the value of the invoice received from a supplier.
Inventories
Raw materials and components
Work in progress
Finished goods
Inventories, net of impairment provisions
Impairment provisions against inventory
Balance at 1 January
Net increase during the year (1)
Utilised during the year
Disposals - on divestment of business
Currency translation adjustments
Balance at 31 December
2013
£m
14.8
9.3
31.2
55.3
2012
£m
15.9
11.8
31.8
59.5
2013
£m
2012
£m
17.0
5.5
(3.6)
-
(0.2)
18.7
20.9
3.6
(6.0)
(0.8)
(0.7)
17.0
(1) Of the £5.5 million net increase in inventory impairment provision, £0.9 million relates to restructuring costs. See note 2.2 “Restructuring costs and charges
associated with acquired businesses”.
The Vitec Group plc
Trade and other receivables
Short-term receivables
Trade receivables, net of impairment provisions
Other receivables
Prepayments and accrued income
Long-term receivables
Other receivables
Total receivables
Gross trade receivables - days overdue (1)
Current
1-30 days
31-60 days
61-90 days
over 90 days
Gross trade receivables
(1) Days overdue are measured from the date an invoice was due to be paid.
Impairment provisions against trade receivables
Balance at 1 January 2013
Net increase during the year
Utilised during the year
Currency translation adjustments
Balance at 31 December 2013
Trade and other payables
Current trade and other payables
Trade payables
Other tax and social security costs
Other non-trade payables, accruals and deferred income
Long-term payables
Other non-trade payables, accruals and deferred income
Total payables
103
2012
£m
38.2
9.5
2.4
50.1
0.5
50.6
2012
£m
32.4
6.6
1.6
0.3
0.9
41.8
2013
£m
35.8
8.9
3.8
48.5
0.4
48.9
2013
£m
30.2
5.8
1.2
0.4
1.4
39.0
Total
£m
Bad debts
£m
Sales
returns and
discounts
£m
3.6
4.2
(4.5)
(0.1)
3.2
1.5
0.8
(0.4)
(0.1)
1.8
2.1
3.4
(4.1)
-
1.4
2013
£m
25.1
2.6
20.4
48.1
0.8
48.9
2012
£m
22.4
3.3
18.7
44.4
1.0
45.4
Annual Report & Accounts 2013
104
Section 3 – Operating assets and liabilities
3.4 Acquisitions and disposals
This note outlines how the Group has accounted for businesses that it has acquired.
Acquisitions are accounted for under the acquisition method of accounting. As part of the acquisition accounting the
Group has adopted a process to identify the fair values of the assets acquired and liabilities assumed, including the
separate identification of intangible assets and to allocate the consideration paid. This process continues as information
is finalised, and accordingly the fair value adjustments presented in the tables below are provisional. In accordance with
IFRS 3 until the assessment is complete the allocation period will remain open up to a maximum of 12 months from the
acquisition date so long as information remains outstanding. Acquisition-related costs are recognised in the Income
Statement as incurred in accordance with IFRS 3.
Acquisitions provide opportunities for further development of the Group’s activities and create enhanced returns.
Such opportunities and the workforces inherent in each of the acquired businesses represent much of the assessed
value of goodwill.
Acquisition of Teradek
On 28 August 2013, the Group acquired the partnership interests in Teradek, LLC (Teradek), a private company based in Irvine,
California, US.
Teradek is a world leader in the design and manufacture of wireless video devices and platforms that are used by broadcasters,
businesses and web channels to transmit images wirelessly. Its products are used in live electronic news gathering, real-time monitoring
and recording, aerial visual capture and webcasting. The acquisition complements the Group’s existing video activities including its range
of broadcast microwave systems and its products are marketed through the Group’s global distribution network. Teradek operates within
the Videocom Division.
The acquisition was funded in part by the issue of 214,847 new Vitec ordinary shares worth US$2.0 million (£1.3 million) to be
held in escrow for two years post-completion, and net cash consideration of US$11.3 million (£7.3 million) after taking account of
US$0.5 million (£0.3 million) of cash in the business at the acquisition date.
A summary of the effect of the acquisition of Teradek is detailed below:
value at
Book Provisional Fair value of
net assets
acquired
£m
fair value
acquisition adjustments
£m
£m
Net assets acquired
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Provisions
Cash
Goodwill
Consideration
Satisfied by
- Issue of new ordinary shares
- Deferred and contingent consideration
- Cash consideration
-
0.3
1.6
0.8
(1.0)
-
0.3
2.0
6.1
(0.3)
(0.3)
-
-
(0.1)
-
5.4
6.1
-
1.3
0.8
(1.0)
(0.1)
0.3
7.4
4.5
11.9
1.3
3.0
7.6
11.9
The trade receivables acquired had a fair value of £0.7 million and a gross contractual value of £0.8 million. No net deferred tax asset or
liability has arisen on the net assets acquired.
Of the US$4.7 million (£3.0 million) deferred and contingent consideration, US$3.2 million (£2.1 million) is due to be paid on 31 March
2014 dependent upon the results of Teradek for the year ended 31 December 2013 and is subject to final agreement. The remaining
US$1.5 million (£0.9 million) is payable over a two year period after the acquisition date.
The Vitec Group plc
105
Under the terms of the acquisition, there is a total potential contingent consideration of US$15.5 million that is dependent on the
performance against certain EBIT targets over the three year period to 31 December 2015. Management’s assessment at the acquisition
date is that US$3.2 million is payable relating to Teradek’s performance in 2013 (as described on the previous page) and that no further
payments are payable relating to Teradek’s performance for the years ending 31 December 2014 and 2015. This reflects that the targets
for 2014 and 2015 are over and above those included in the Board approved acquisition projections and confirmed by the approved
2014 budget. Any payment that would be made relating to 2014 and/or 2015 shall be charged to the Income Statement as and when
incurred. Up to a third of any deferred consideration paid to the vendors may be satisfied by issuing new Vitec ordinary shares with the
remainder paid in cash. The recipients of these shares are required to hold them for a certain period under the terms of this acquisition.
The results of Teradek have been included in the Videocom Division and comprise:
Revenue
Operating profit (1)
2013
£m
4.9
1.0
(1) Operating profit is stated before amortisation of intangible assets and after allocation of Head Office costs.
Had the acquisition been made at the beginning of the year (i.e. 1 January 2013) it would have contributed £12.6 million to revenue
and £2.0 million to the operating profit (1) of the Group.
An analysis of the cash flows relating to acquisitions is provided below:
Net outflow of cash in respect of acquisition
Total purchase consideration
Issue of new ordinary shares
Deferred and contingent consideration
Cash consideration
Transaction costs
Cash acquired
Net cash outflow in respect of 2013 acquisition
Contingent consideration in relation to Haigh-Farr, acquired in December 2011
Net cash outflow in respect of acquisitions (2)
2013
£m
11.9
(1.3)
(3.0)
7.6
0.4
(0.3)
7.7
1.2
8.9
(2) Of the £8.9 million net cash outflow in respect of acquisitions, transaction costs of £0.4 million are included in cash flows from operating activities and the net cash
consideration paid of £8.5 million is included in cash flows from investing activities.
Annual Report & Accounts 2013
106
Section 3 – Operating assets and liabilities
3.4 Acquisitions and disposals
Acquisition of Camera Corps
On 10 April 2012, the Group acquired the whole of the share capital of Camera Corps Ltd (“Camera Corps”). Based in the UK,
Camera Corps is a world leading provider of speciality remote camera systems used by broadcasters for capturing high quality images.
This includes the Q-Ball™ which provides high definition images from a small, highly flexible and easy to operate camera system that
is being increasingly used at events from top sporting events such as the Olympics to reality TV shows. The acquisition complements
the Group’s existing range of broadcast equipment and its products are being marketed through the Group’s global distribution network.
The Group’s Services Division is the existing US distributor of the Q-Ball™. Camera Corps operates within the Videocom Division.
The acquisition was funded from existing cash resources.
A summary of the effect of the acquisition of Camera Corps is detailed below:
Net assets acquired
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Cash
Deferred tax
Goodwill
Cash consideration
2012
Book
value at
acquisition
£m
2012
Provisional
fair value
adjustments
£m
2012
Fair value of
net assets
acquired
£m
-
1.1
0.4
0.8
(1.2)
0.7
(0.1)
1.7
3.1
(0.3)
(0.1)
-
(0.1)
-
(0.6)
2.0
3.1
0.8
0.3
0.8
(1.3)
0.7
(0.7)
3.7
5.0
8.7
The value of the gross trade receivables at the acquisition date amounted to £0.3 million reflecting management’s estimate of the fair value
to be attributed.
An analysis of the cash flows relating to acquisitions is provided below:
Total purchase consideration
Transaction costs
Cash acquired
Net cash outflow in respect of 2012 acquisition
Contingent consideration in relation to Litepanels, acquired in August 2008
Contingent consideration in relation to Manfrotto Lighting (previously Lastolite), acquired in March 2011
Working capital adjustment in relation to Haigh-Farr, acquired in December 2011
Cash paid in 2012 in respect of prior year acquisitions
Net cash outflow in respect of acquisitions (1)
2012
£m
8.7
0.3
(0.7)
8.3
1.5
0.5
0.6
2.6
10.9
(1) Transaction costs of £0.3 million are included in cash flows from operating activities and net cash consideration paid of £10.6 million is included in cash flows
from investing activities.
Disposals in 2012
During the second half of 2012 the Group sold its Staging business, which was previously included in the Imaging Division.
The Staging companies were based in the UK, US, Mexico, Italy and Slovakia.
The disposal was completed on 13 August 2012. The net cash outflow, after transaction costs, was £2.1 million resulting in a loss
on disposal of £6.4 million after taking into account transaction costs together with the net assets disposed (£6.3 million) offset
by cash consideration (£0.3 million) and the previously recorded foreign exchange gain that has been recycled to the Income
Statement (£2.0 million).
The Vitec Group plc
107
3.5 Provisions
A provision is recognised by the Group where an obligation exists, relating to events in the past, and it is probable that an
outflow of economic benefits will be required to settle it.
Accounting policies
Provisions
Provisions are recognised in the Balance Sheet when the Group has a present legal or constructive obligation as a result of a past event,
and it is probable that an outflow of economic benefits will be required to settle it. If the effect is material, provisions are determined by
discounting the expected future cash flows at an appropriate discount rate.
Provisions for warranties, based on historical warranty data, are recognised when the underlying products or services are sold.
Obligations arising from restructuring plans are recognised when detailed formal plans have been established and the restructuring
has either commenced or has been announced.
Provisions for onerous contracts are recognised when the unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it.
Total
£m
Warranty Restructuring
£m
£m
Onerous
Deferred and
contingent
lease consideration
£m
£m
At 1 January 2013
Charged to the Income Statement
Provisions utilised during the year
Provisions reversed during the year
Acquisition of subsidiary undertaking
Currency translation adjustments
At 31 December 2013
Current
Non-current
3.7
12.7
(11.2)
(0.1)
3.1
(0.3)
7.9
6.5
1.4
7.9
1.3
0.5
(0.6)
-
0.1
-
1.3
0.8
0.5
1.3
0.6
11.4
(9.2)
-
-
(0.1)
2.7
2.5
0.2
2.7
0.6
-
(0.2)
(0.1)
-
-
0.3
0.2
0.1
0.3
1.2
0.8
(1.2)
-
3.0
(0.2)
3.6
3.0
0.6
3.6
Warranty provisions
Warranties over the Group’s products typically cover periods of between one and five years. The provision represents management’s
best estimate of the Group’s liability based on past experience.
Restructuring
The restructuring provision is in relation to the Group streamlining certain operations by downsizing selected activities mainly in
the UK, Italy, Israel and US and expanding its manufacturing capabilities in Costa Rica to further shift to lower cost manufacturing.
These planned actions are intended to better position the Group for the future. The restructuring provision which principally relates
to committed redundancy costs is expected to be utilised by 2015.
Onerous lease contracts
The onerous lease contracts provision is in relation to non-cancellable leases on vacant property that the Group entered into in
previous years. Utilisation of the provision will be over the anticipated life of the lease up to two years, or earlier if exited.
Deferred and contingent consideration
The Group paid £1.2 million of contingent consideration provided for at 31 December 2012 in relation to Haigh-Farr, acquired in
December 2011.
Of the £3.6 million deferred and contingent consideration provision at 31 December 2013, £0.7 million is in respect of a prior period
acquisition, Haigh-Farr (see note 2.2 “Restructuring costs and charges associated with acquired businesses”) and £2.9 million relates
to amounts payable in respect of Teradek (see note 3.4 “Acquisitions and disposals”).
Annual Report & Accounts 2013
108
Section 4 – Capital structure
This section outlines the Group’s capital structure. The Group defines its capital structure as its equity and non-current
interest-bearing loans and borrowings, and aims to manage this to safeguard its ability to continue as a going concern,
so that it can continue to provide returns to shareholders and benefits for other stakeholders. The Group manages the
capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics
of the underlying assets. In order to maintain or adjust the capital structure, it may return capital to shareholders, through
dividends and share buy backs, issue new shares or sell assets to reduce debt. The Group considers its dividend policy at
least twice a year ahead of announcing results in the context of its ability to continue as a going concern and deliver its
business plan. The Group focuses on leverage, credit ratings and interest cost, particularly when considering investment.
On the following pages there are disclosures concerning the following:
4.1 Net debt
4.2 Financial instruments
4.3 Share capital and reserves
4.1 Net debt
The Group’s net debt comprises of the following:
- Interest-bearing loans and borrowings
- Cash and cash equivalents (cash on hand and demand deposits at banks)
- Bank overdrafts that are payable on demand
Accounting policies
Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet represent cash on hand and demand deposits at banks. Demand deposits are
short-term highly liquid investments that are readily convertible to known amounts of cash without penalty and that are subject to
an insignificant risk of changes in value.
Cash and cash equivalents in the statement of cash flows includes bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management.
Interest-bearing loans and borrowings
Interest-bearing borrowings are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial
recognition, these transaction costs are recognised in the Income Statement over the term of the related borrowings.
Analysis of net debt
The table below analyses the Group’s components of net debt and their movements in the year.
Increase in cash and cash equivalents
Proceeds from interest-bearing loans and borrowings
Decrease/(increase) in net debt resulting from cash flows
Effect of exchange rate fluctuations on cash held
Effect of exchange rate fluctuations on debt held
Effect of exchange rate fluctuations on net debt
Movements in net debt in the year
Net debt at 1 January
Net debt at 31 December
Cash and cash equivalents in the Balance Sheet
Bank overdrafts
Cash and cash equivalents in the Statement of Cash Flows
Interest-bearing loans and borrowings
Net debt at 31 December
2013
£m
3.9
(1.9)
2.0
(0.3)
0.5
0.2
2.2
(63.7)
(61.5)
12.9
-
12.9
(74.4)
(61.5)
2012
£m
3.7
(18.8)
(15.1)
(0.6)
2.4
1.8
(13.3)
(50.4)
(63.7)
10.0
(0.7)
9.3
(73.0)
(63.7)
The Vitec Group plc
109
4.2 Financial instruments
This provides details on:
- Financial risk management
- Derivative financial instruments
- Fair value hierarchy
- Interest rate profile
- Maturity profile of financial liabilities
Financial risk management
The Group’s multinational operations and debt financing
expose it to a variety of financial risks. In the course of its
business, the Group is exposed to foreign currency risk,
interest rate risk, liquidity risk and credit risk.
Financial risk management is an integral part of the way
the Group is managed. Financial risk management policies
are set by the Board. These policies are implemented by
a central treasury department that has formal procedures
to manage foreign currency risk, interest rate risk and
liquidity risk, including, where appropriate, the use of
derivative financial instruments. The Group has clearly
defined authority and approval limits built into
these procedures.
Foreign currency risk
Foreign currency risk arises both where sale or purchase
transactions are undertaken in currencies other than the
respective functional currencies of Group companies (transactional
exposures) and where the results of overseas companies are
consolidated into the Group’s reporting currency of Sterling
(translational exposures).
The Group has businesses that operate around the world and
accordingly record their results in a number of different functional
currencies. Some of these operations also have some customers
or suppliers that transact in a foreign currency. The Group’s results
which are reported in Sterling are therefore exposed to changes
in foreign currency exchange rates across a number of different
currencies with the most significant exposures relating to the US
Dollar, Euro and Japanese Yen. The Group pro-actively manages
a proportion of its short-term transactional foreign currency
exposures using derivative financial instruments, but remains
exposed to the underlying translational movements which
remain outside the control of the Group.
The Group manages its transactional exposures to foreign
currency risks through the use of forward exchange contracts
including the US Dollar, Euro and Japanese Yen. Forward
exchange contracts are typically used to hedge approximately
75% of the Group’s forecasted foreign currency exposure in
respect of forecast cash transactions for the following 12 months
and a proportion of the Group’s forecasted foreign currency
exposure in respect of forecast cash transactions for the following
12 to 24 months. These contracts have maturities of less than
one year and between one and two years at the Balance Sheet
date respectively.
The Group’s translational exposures to foreign currency risks
relate to both the Income Statement and net assets of overseas
subsidiaries which are converted into Sterling on consolidation.
The Group does not seek to hedge the translational exposure that
arises primarily to changes in the exchange rates of the US Dollar,
Euro and Japanese Yen against Sterling. However the Group does
finance overseas investments partly through the use of foreign
currency borrowings in order to provide a net investment hedge
over the foreign currency risk that arises on translation of its foreign
currency subsidiaries.
The Group ensures that its net exposure to foreign denominated
cash balances is kept to an acceptable level by buying or selling
foreign currencies at spot rates when necessary to address short-
term imbalances. In addition the Group manages the denomination
of surplus cash balances across the overseas subsidiaries to allow
natural hedging where effective in any particular country.
It is estimated that the Group’s operating profit before restructuring
costs and charges associated with acquired businesses for the
year ended 31 December 2013 would have increased/decreased
by approximately £1.3 million from a ten cent stronger/weaker US
Dollar against Sterling, by approximately £1.5 million from a ten
cent stronger/weaker Euro against Sterling and by approximately
£0.4 million from a ten Yen stronger/weaker Japanese Yen
against Sterling. This reflects the impact of the sensitivities to the
translational exposures and to the proportion of the transactional
exposures that is not hedged. The Group, in accordance with its
policy, does not use derivatives to manage the translational risks.
During 2013 the Group’s operating profit benefitted from a net gain
of £1.7 million (2012: £0.8 million loss) upon the crystallisation of
forward exchange contracts as described later in this note.
Interest rate risk
Interest rate risk comprises of both the interest rate price risk
that results from borrowing at fixed rates of interest and also the
interest cash flow risk that results from borrowing at variable rates.
For the year ended 31 December 2013, it is estimated that a
general increase/decrease of one percentage point in interest
rates, would decrease/increase the Group’s profit before tax by
approximately £0.8 million.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due.
On 19 July 2012 the Group signed a five year £100 million
Multicurrency Revolving Credit Facility Agreement with a syndicate
comprising of five banks: three UK banks, one American bank,
and one European bank. The Group was utilising 44% of the
£100 million Multicurrency Revolving Credit Facility at 31 December
2013. In 2011 the Group drew down US$50 million from a Private
Placement shelf facility with repayment due in May 2017.
Annual Report & Accounts 2013
110
Section 4 – Capital structure
4.2 Financial instruments
Credit risk
Credit risk arises because a counterparty may fail to meet its
obligations. The Group is exposed to credit risk on financial
assets such as trade receivables, cash balances and derivative
financial instruments. The Group’s maximum exposure to credit
risk is represented by the carrying amount of each financial
asset, including derivative financial instruments, in the Group
Balance Sheet.
Accounting policies
Derivative financial instruments
In accordance with Board approved policies, the Group
uses derivative financial instruments to hedge its exposure to
fluctuations in foreign exchange rates arising from operational
activities. It does not hold or use derivative financial instruments
for trading or speculative purposes.
a) Trade receivables
The Group’s credit risk is primarily attributable to its trade
receivables. Trade receivables are subject to credit limits, and
control and approval procedures in the operating companies.
Due to its large geographic base and number of customers,
the Group is not exposed to material concentrations of credit
risk on its trade receivables.
b) Cash balances and derivative financial instruments
Credit risk associated with cash balances is managed by
transacting with a number of major financial institutions worldwide
and periodically reviewing their credit worthiness. Transactions
involving derivative financial instruments are managed centrally.
These are only with banks that are part of the Group’s £100 million
Multicurrency Revolving Credit Facility Agreement. Accordingly,
the Group’s associated credit risk is limited. The Group has no
significant concentration of credit risk.
Derivative financial instruments
This is a summary of the derivative financial instruments
that the Group holds and uses to manage risk. The value
of these derivatives change over time in response to
underlying variables such as exchange rates and are
carried in the Balance Sheet at fair value.
The fair value of forward exchange contracts is determined
by estimating the market value of that contract at the
reporting date. Derivatives with a positive fair value are
recorded as assets and negative fair values as liabilities,
and presented as current or non-current based on their
contracted maturity dates.
Cash flow hedge accounting
Derivative financial instruments are used to hedge the variability
in cash flows of highly probable forecast transactions or a
recognised asset or liability, caused by changes in exchange rates.
Where a derivative financial instrument is designated in a cash
flow hedge relationship with a highly probable forecast transaction,
the effective part of any gain or loss arising is recognised in the
cash flow hedging reserve within equity, via the Statement of
Comprehensive Income. The ineffective part of any gain or loss is
recognised in the Income Statement within net finance expense.
When the forecast transaction subsequently occurs and results
in the recognition of a financial asset or liability that impacts on
the Income Statement, the associated cumulative gain or loss
is removed from the hedging reserve and presented within the
Income Statement.
If a hedging instrument expires or is sold but the hedged forecast
transaction is still expected to occur, the cumulative gain or loss
at that point remains in equity and is recognised in accordance
with the above policy when the transaction occurs. If the hedged
transaction is no longer expected to take place, the cumulative
unrealised gain or loss recognised in equity is recognised
immediately in the Income Statement.
Where a derivative is used to hedge economically the foreign
exchange exposure of a recognised monetary asset or liability,
no hedge accounting is applied and any gain or loss on the
hedging instrument is recognised in the Income Statement.
If a derivative financial instrument is not formally designated
in a cash flow hedge relationship, any change in fair value is
recognised in the Income Statement.
The Vitec Group plc
111
Forward exchange contracts
The following table shows the forward exchange contracts in place at the Balance Sheet date. These contracts mature in the next
24 months, therefore the cash flows and resulting effect on profit and loss are expected to occur within the next 24 months.
Cash flow hedging contracts
USD / GBP forward exchange contracts
USD / EUR forward exchange contracts
USD / RMB forward exchange contracts
EUR / GBP forward exchange contracts
JPY / GBP forward exchange contracts
JPY / EUR forward exchange contracts
As at 31
December
2013
millions
Average
exchange
rate of
contracts
As at 31
December
2012
millions
Average
exchange
rate of
contracts
Currency
USD
USD
USD
EUR
JPY
JPY
13.5
56.2
-
17.2
506.9
618.0
1.56
1.32
-
1.20
143.7
121.5
17.3
61.2
3.0
18.4
361.1
491.0
1.57
1.29
6.40
1.21
123.0
101.0
A net gain of £1.7 million (2012: £0.8 million loss) relating to forward exchange contracts that crystallised during the year was charged
to the Income Statement.
Fair value hierarchy
The following summarises financial instruments carried at fair values and the major methods and assumptions used in
estimating these fair values.
The different levels of fair value hierarchy have been defined as follows:
Level 1
Fair value measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2
Fair values measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3
Fair values measured using inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The table below shows the carrying values and fair values of financial assets and liabilities.
Forward exchange contracts - assets
Forward exchange contracts - liabilities
Cash at bank and in hand
Net trade receivables
Trade payables
Fixed rate borrowings
Floating rate borrowings
Carrying
value
2013
£m
Fair value
2013
£m
Carrying
value
2012
£m
Fair value
2012
£m
3.5
(0.1)
12.9
35.8
(25.1)
(30.2)
(44.2)
(47.4)
3.5
(0.1)
12.9
35.8
(25.1)
(31.7)
(44.2)
(48.9)
2.4
(0.1)
10.0
38.2
(22.4)
(30.8)
(42.9)
(45.6)
2.4
(0.1)
10.0
38.2
(22.4)
(32.7)
(42.9)
(47.5)
The fair value of floating rate borrowings approximates to the carrying value because interest rates are at floating rates where
payments are reset to market rates at intervals of less than one year.
The fair value of fixed rate borrowings is estimated by discounting the future contracted cash flow, using appropriate yield curves,
to the net present values.
All financial instruments are deemed Level 2.
Annual Report & Accounts 2013
112
Section 4 – Capital structure
4.2 Financial instruments
Interest rate profile
The table below analyses the Group’s interest rate exposure arising from bank loans by currency.
Accounting policies
Net investment hedge accounting
The Group uses US Dollar, Euro and Japanese Yen denominated borrowings as a hedge against the translation exposure on the Group’s
net investment in overseas companies.
Where the hedge is fully effective at hedging the variability in the net assets of such companies caused by changes in exchange rates,
the changes in value of the borrowings are recognised in the translation reserve within equity, via the Statement of Comprehensive
Income. The ineffective part of any change in value caused by changes in exchange rates is recognised in the Income Statement.
The effective portion will be recycled into the Income Statement on the sale of the foreign operation.
Interest-bearing loans and borrowings
The table below analyses the Group’s interest-bearing loans and borrowings, by currency.
US Dollar
Euro
Sterling
Japanese Yen
At 31 December 2013
US Dollar
Euro
Sterling
Japanese Yen
At 31 December 2012
Total
£m
44.1
16.6
12.0
1.7
74.4
39.4
20.2
12.0
2.1
73.7
Fixed rate
borrowings
£m
Floating rate
borrowings
£m
30.2
-
-
-
30.2
30.8
-
-
-
30.8
13.9
16.6
12.0
1.7
44.2
8.6
20.2
12.0
2.1
42.9
The floating rate borrowings comprise borrowings bearing interest at rates based on LIBOR. The fixed rate borrowings are due for
repayment on 11 May 2017.
The Vitec Group plc
113
Maturity profile of financial liabilities
The table below analyses the Group’s financial liabilities and derivative financial liabilities into relevant maturity groupings
based on the period remaining until the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows (including interest), so will not always reconcile with the carrying amounts disclosed on the
Balance Sheet.
The following are the contractual maturities of financial liabilities, including undiscounted future interest payments.
2013
Unsecured bank loans/overdrafts
Trade payables
Forward exchange contracts
2012
Unsecured bank loans/overdrafts
Trade payables
Forward exchange contracts
Carrying
amount
£m
Total
contractual
cash flows
£m
(74.4)
(25.1)
(0.1)
(99.6)
(82.8)
(25.1)
(0.1)
(108.0)
Within
one year
£m
(2.2)
(25.1)
(0.1)
(27.4)
From one
to five
years
£m
From five
to ten
years
£m
(80.6)
-
-
(80.6)
-
-
-
-
Carrying
amount
£m
(73.7)
(22.4)
(0.1)
(96.2)
Total
contractual
cash flows
£m
(84.4)
(22.3)
(0.1)
(106.8)
Within
one year
£m
(2.9)
(22.3)
(0.1)
(25.3)
From one
to five
years
£m
From five
to ten
years
£m
(81.5)
-
-
(81.5)
-
-
-
-
The Group had the following undrawn borrowing facilities at the end of the year:
Expiring in:
Less than one year
- Uncommitted facilities
More than one year but not more than two years
- Uncommitted facilities
More than one year but not more than five years
- Committed facilities
Total
2013
£m
2012
£m
10.8
25.4
-
-
55.8
66.6
57.8
83.2
Annual Report & Accounts 2013
114
Section 4 – Capital structure
4.3 Share capital and reserves
This note explains the movements in share capital, and the nature and purpose of other reserves forming part of equity.
The movements in reserves are set out in the Consolidated Statement of Changes in Equity.
The Group utilises share award schemes as part of its employee remuneration packages. Options that have been granted
and remain outstanding at 31 December 2013 are set out below. The various share-based payment schemes are explained
in note 5.3 “Share-based payments”.
Share capital
Issued and fully paid
At 1 January 2013
Consideration for acquisition
Exercise of share options
At 31 December 2013
Number of
shares
Nominal
value
£m
43,690,968
214,847
154,803
44,060,618
8.8
-
-
8.8
Each ordinary share carries one vote, participates equally with the other ordinary shares in distribution of dividends and capital
(including on a winding up) and is not redeemable.
At 31 December 2013 the following options had been granted and remained outstanding under the Company’s share option schemes:
UK Sharesave Schemes
International Sharesave Schemes
Other Reserves
Number
of shares
Exercise
prices
Dates
normally
exercisable
396,712 131p-543p 2014-2018
371,568 131p-577p 2014-2018
768,280
The nature and purpose of other reserves forming part of equity are as follows:
Translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of
foreign subsidiaries, including gains or losses arising on net investment hedges.
Cash flow hedging reserve
This reserve records the cumulative net change in the fair value of forward exchange contracts where they are designated as effective
cash flow hedge relationships.
Own shares held
Own shares held by the Company’s Employee Benefit Trust are recognised as a deduction from retained earnings. As at 31 December
2013 the Company’s Employee Benefit Trust held 83,150 ordinary shares.
Dividends
After the Balance Sheet date the following final dividend for the year ended 31 December 2013 was recommended by the Directors and
subject to approval by shareholders at the AGM on 8 May 2014 will be paid on 9 May 2014. The dividend has not been provided for at
the year end and there are no tax consequences.
14.1p per ordinary share (2012: 13.5p per ordinary share)
2013
£m
6.2
2012
£m
5.9
The Vitec Group plc
Section 5 – Other supporting notes
This section explains items that are not explained elsewhere in the financial statements.
5.1 Employees
Employee costs, including Directors’ remuneration, comprise:
Wages and salaries
Employers’ social security costs
Employers’ pension costs - defined benefit schemes
Employers’ pension costs - defined contribution schemes
Other employment benefits
Share-based payment charge
115
2013
£m
73.9
11.5
1.1
1.5
3.1
1.4
92.5
2012
£m
77.9
11.6
1.0
1.4
3.2
1.8
96.9
Details of Directors’ remuneration and share incentives are disclosed in the Remuneration Report. Employee costs exclude employment
termination costs.
Average number of employees during the year
Videocom
Imaging
Services
Head Office
2013
£m
2012
£m
921
781
175
21
1,898
920
960
183
22
2,085
Annual Report & Accounts 2013
116
Section 5 – Other supporting notes
5.2 Pensions
This note explains the accounting policies governing the Group’s treatment of the pension schemes, followed by an
analysis of these schemes.
Accounting policies
The Group has adopted IAS 19 Employee Benefits (2011) as of 1 January 2013. The principal changes require the replacement of
the interest income on plan assets and the interest charge on pension liabilities of defined benefit pension schemes with a single net
financing cost, based on the discount rate. Previously, the Group determined interest income on plan assets based on their long-term
rate of expected return. The change had no significant impact on the consolidated financial statements, and accordingly, the 2012
comparatives have not been restated.
Defined contribution schemes
The assets are held separately from those of the Group in independently administered funds. The costs of providing pensions for
employees under defined contribution schemes are expensed as incurred.
Defined benefit schemes
The Group operates pension schemes providing benefits based on final pensionable pay. The assets of the schemes are held separately
from those of the Group. The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan
by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods.
That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is
determined by reference to market yields at the Balance Sheet date on high quality corporate bonds.
The calculation is performed by a qualified actuary using the projected unit credit method. Actuarial gains and losses are recognised
in full in the period in which they arise in the Statement of Comprehensive Income.
The Group recognises the on-going service cost in the Income Statement as part of operating profit. The Group recognises the unwinding
of the discount (above) and the return on plan assets in the Income Statement as part of net financial expense. Past-service costs and
any cost or income relating to the curtailment or settlement of a pension scheme is recognised immediately in the Income Statement.
Pension schemes
The Group has defined benefit pension schemes in the UK, Italy, Germany, Japan, Israel and France. The UK defined benefit scheme
was closed to future benefit accrual with effect from 31 July 2010. All UK employees of the Group are now offered membership of the
defined contribution pension scheme. Other overseas subsidiaries have their own defined contribution schemes.
Defined contribution schemes
The total Income Statement charge of the defined contribution schemes for the year ended 31 December 2013 was £1.6 million
(2012: £1.4 million). There were no outstanding or prepaid contributions to these plans as at 31 December 2013 (or at 31 December 2012).
Defined benefit schemes
The Group’s defined benefit schemes are disclosed below.
Amounts recognised on the Group Balance Sheet
Plan assets
- Equities
- Bonds
- Other
Total fair value of plan assets
Present value of defined benefit obligation
Net deficit recognised in the Group Balance Sheet
2013
£m
2012
£m
24.0
23.2
3.0
50.2
(59.3)
(9.1)
21.4
24.9
2.7
49.0
(58.4)
(9.4)
The Vitec Group plc
117
2013
£m
2012
£m
(5.1)
(4.0)
(9.1)
(4.8)
(4.6)
(9.4)
2013
£m
2012
£m
1.2
(0.1)
1.1
0.3
1.4
1.2
(0.2)
1.0
0.2
1.2
Analysis of net recognised deficit
Total funded plan (UK Pension scheme)
Total unfunded plans (non-UK Pension schemes)
Liability recognised on the Group Balance Sheet
Amounts recognised in the Income Statement
- Administration costs incurred during the period
- Past service gain
Included in operating costs
Net interest expense on net defined benefit pension scheme liabilities
Total amounts charged to the Income Statement
UK pension scheme
The UK pension scheme, being significant, is disclosed below.
The nature of the UK scheme is a funded final salary scheme closed to future benefit accrual with effect from 31 July 2010. As a
result, since that date, no contributions are payable in respect of future accrual of benefits. As the 5 April 2013 funding valuation of the
scheme disclosed a funding surplus, no recovery plan is required under the Pensions Act 2004. For these reasons, expected member
and employer contributions to the scheme over the year to 31 December 2014 are £nil. The scheme is subject to all legislation and
regulations that apply to UK occupational pension schemes.
The main risk to which the Group is exposed to by the scheme is that the cost of the benefits provided by the scheme is greater than
expected, for example due to lower than expected investments returns or members of the scheme living longer than expected, which
may result in additional contributions being required from the Group.
Impact on defined benefit obligation (DBO) of changes in the three key individual assumptions
Discount rate increased by 0.1% points
RPI inflation increased by 0.1% points (1)
Long-term rate of future improvements in mortality reduced by 0.25% points
(1) This change has been carried through to assumed CPI inflation and pension increases, as appropriate.
-2.0%
+1.5%
-1.5%
Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation
of the sensitivity of the assumptions shown.
Assumptions used by the actuary to value the liability of the defined benefit plan, on 31 December were:
Price inflation (RPI)
Price inflation (CPI)
- Discretionary (pre - 6 April 1997 accrual in excess of GMP)
- Guaranteed LPI 5% (6 April 1997 - 30 June 2008)
- Guaranteed LPI 2.5% (accrual from 1 July 2008)
Rate of increase for deferred pensions
Discount rate
2013
% pa
2012
% pa
3.3
2.3
3.2
3.2
2.4
2.3
4.5
2.8
2.1
2.7
2.7
2.4
2.1
4.4
Annual Report & Accounts 2013
118
Section 5 – Other supporting notes
5.2 Pensions
The assumptions relating to longevity underlying the pension liabilities at the Balance Sheet date are based on standard actuarial
mortality tables and include an allowance for future improvements in longevity. The assumptions are equivalent to expected longevity
at age 65 for members in normal health approximately as follows:
- Pensioners currently aged 65: ranging from 22.6 to 24.9 years
- Non-pensioners currently aged 50: ranging from 23.6 years to 26.1 years
2013
£m
2012
£m
Change in DBO for the year to 31 December
Present value of DBO at start of year
Interest cost
Actuarial (gain)/loss - experience
Actuarial loss on demographic assumptions
Actuarial loss on financial assumptions
Actual benefit payments
Past service gains
Present value of DBO at end of year
53.8
2.3
(1.9)
0.7
1.9
(1.4)
(0.1)
55.3
At 31 December 2013, the weighted-average duration of the scheme’s DBO was 19 years (2012: 19 years).
The proportion of DBO in respect of pensions in payment is 50% and that in respect of deferred pensioners is 50%.
Scheme assets and proportion which have quoted market price, at 31 December
Equities
Bonds
Property
Cash/non-cash assets
Insurance policies
Total value of assets
Note: The asset values shown are, where relevant, estimated bid values of market securities.
Change in fair value of assets for the year to 31 December
Fair value of assets at start of year
Interest income on scheme assets
Return on scheme assets greater/(less) than discount rate
Actual benefit payments
Administration expenses paid
Fair value of assets at end of year
Fair
value
2013
£m
24.0
23.2
2.2
0.5
0.3
50.2
Quoted
split
%
Unquoted
split
%
77
70
-
-
-
23
30
100
100
100
49.3
2.3
0.3
-
3.6
(1.6)
(0.1)
53.8
Fair
value
2012
£m
21.4
24.9
2.0
-
0.7
49.0
2013
£m
2012
£m
49.0
2.1
0.7
(1.4)
(0.2)
50.2
48.9
2.2
(0.5)
(1.4)
(0.2)
49.0
The Vitec Group plc
119
2013
£m
2012
£m
(55.3)
50.2
(5.1)
(53.8)
49.0
(4.8)
2013
£m
2012
£m
(4.8)
(0.3)
-
(5.1)
(0.4)
-
(4.4)
(4.8)
2013
£m
2012
£m
0.2
(0.1)
0.1
0.2
0.3
2013
£m
(1.9)
2.6
0.7
(0.7)
-
2013
£m
0.2
(0.1)
0.2
-
0.3
-
(0.1)
(0.1)
0.1
-
2012
£m
0.3
3.6
3.9
0.5
4.4
2012
£m
-
(0.1)
0.1
4.4
4.4
Development of net balance sheet position at 31 December
Present value of defined benefit obligation
Assets at fair value
Net defined benefit liability
Reconciliation of net balance sheet position
Net defined benefit liability at start of year
Total amounts charged to the Income Statement
Remeasurement effects recognised in Other Comprehensive Income (OCI)
Defined benefit liability at end of year
Amounts recognised in the Group Income Statement
- Administration costs incurred during the period
- Past service gains
Included in operating costs
Net interest expense on net defined benefit pension scheme liability
Total amounts charged to the Income Statement
Amounts recognised in OCI
Actuarial (gain)/loss due to liability experience
Actuarial loss due to liability assumption changes
Actuarial loss arising during the period
Return on scheme assets (less)/greater than discount rate
Remeasurement effects recognised in OCI
Defined benefit pension scheme cost
Administration costs incurred during the period
Past service gains
Net interest expense on net defined benefit pension scheme liability
Remeasurement effects recognised in OCI
Total defined benefit pension scheme cost
Annual Report & Accounts 2013
120
Section 5 – Other supporting notes
5.3 Share-based payments
Group employees participate in a number of employee incentive schemes including a Sharesave Scheme, an Unapproved
Share Option Plan, a Long Term Incentive Plan and a Deferred Bonus Plan.
This note explains the accounting policy governing share-based payments and the impact of various share schemes
operated by the Group.
Accounting policies
Share-based payments
The Group operates a number of share-based incentive schemes. The fair value of the equity-settled employee share option grants
is calculated at grant date and charged to the Income Statement over the vesting period of the schemes, with a corresponding
adjustment to equity. The value of the charge is adjusted to reflect expected and actual levels of options that will vest, except
where forfeiture arises from share prices not achieving the threshold for vesting.
The fair values of options are calculated using Black-Scholes or Monte Carlo simulation models. Vesting conditions are limited
to non-market based conditions such as service conditions and performance conditions (adjusted earnings per share targets).
Any potential employer’s Social Security liability on options granted is calculated based on the estimated fair value of the options
and charged to the Income Statement over the vesting period of the schemes.
Exercises of share options granted to employees can be satisfied by market purchase or issue of new shares. Shares purchased
in the market are held in the Company’s Employee Benefit Trust.
A description of each type of share-based payment arrangement that existed at any time during the period, including the general
terms and conditions of each arrangement, such as vesting requirements, the maximum term of options granted, and the method
of settlement (for example whether in cash or equity) is set out in the Remuneration Report with the exception of the Unapproved Share
Option Plan. None of the Directors participated in this plan, hence it is not described in the Remuneration Report. No awards have been
made under the Unapproved Share Option Plan since 2008 and its rules expired in 2012. The remaining awards under the Unapproved
Share Option Plan were exercised by certain employees during the year ended 31 December 2013.
Share-based payments expense
The amount recognised in the Income Statement for share-based payment transactions with employees for the year ended 31 December
2013 was £1.3 million (2012: £2.0 million), of which £0.1 million credit (2012: £0.2 million charge) related to employers’ tax liability.
The outstanding employers’ tax liability recognised in the Balance Sheet for UK awards was £0.2 million (2012: £0.5 million) and for
non-UK awards £nil (2012: £0.1 million).
Share options outstanding at the end of the period
Options outstanding under the 2002 UK Sharesave Scheme, 2002 International Sharesave Plan, 2011 UK Sharesave Scheme and
2011 International Sharesave Plan as at 31 December 2013, together with their exercise prices and vesting periods, are as follows:
Range of exercise prices
£1.30 - £1.40
£3.01 - £4.00
£4.51 - £5.00
£5.01 - £5.50
£5.51 - £6.00
Total
Weighted
average
Weighted
average
remaining
exercise contractual
life (years)
price (£)
1.31
3.49
4.72
5.25
5.77
4.41
1
2
1
3
1
2
Number
outstanding
171,798
10,650
58,102
362,381
156,482
759,413
The Vitec Group plc
121
Options granted, exercised and lapsed during the years ended 31 December 2012 and 2013 under these share option plans
were as follows:
Weighted
average
Exercise
Price (£)
Weighted
average
Exercise
Price (£)
USOP
3.46
4.04
-
-
3.03
3.03
-
-
-
-
2005
Deferred
Bonus
Plan
Awards at 31 December 2011
Exercised during 2012
Lapsed during 2012
Granted during 2012
Awards at 31 December 2012
Exercised during 2013
Lapsed during 2013
Granted during 2013
Awards at 31 December 2013
Awards exercisable at 31 December 2013
Sharesave
1,405,746
(878,490)
(53,137)
415,362
889,481
(195,242)
(132,576)
197,750
759,413
-
1.97
1.38
3.46
5.59
4.14
3.49
5.05
5.06
4.14
-
109,658
(47,237)
-
-
62,421
(62,421)
-
-
-
-
The weighted average share price at the date of exercise for share options exercised during the year was £6.00 (2012: £6.49).
Arrangement
Nature of arrangement
Date of grant
Number of instruments granted
Exercise price
Share price at date of grant
Contractual life (yrs)
Expected option life (yrs)
Vesting conditions
Settlement
Expected volatility (1)
Risk free interest rate
Expected dividend yield
Expected departures
(per annum from grant date)
Expected outcome of
non-market based related
performance condition
Fair value per granted
instrument determined
at the grant date
Valuation model
2011
International
Sharesave
Plan 2 Year
“Save as you
earn scheme”
25 Sep 2013
75,301
£5.33
£6.81
2.3
2.3
2011 UK and
International
Sharesave
Scheme 3 Year
“Save as you
earn scheme”
25 Sep 2013
103,211
£5.02
£6.81
3.6
3.3
2011 UK and
International
Sharesave
Scheme 5 Year
“Save as you
earn scheme”
25 Sep 2013
19,238
£5.02
£6.81
5.6
5.3
2 year service
period and savings
requirement
Shares
28.0%
0.50%
3.50%
3 year service
period and savings
requirement
Shares
28.0%
0.85%
3.50%
5 year service
period and savings
requirement
Shares
28.0%
1.57%
3.50%
2005
Long Term
Incentive
Plan
Share award
plan
21 March 2013
523,018
n/a
£6.45
n/a
n/a
Relative TSR
performance against
comparator group,
and adjusted
EPS growth
Shares
25.3%
n/a
n/a
Share award
plan
08 April 2013
44,792
n/a
£6.30
n/a
n/a
Relative TSR
performance against
comparator group,
and adjusted
EPS growth for
matching awards
Shares
25.3%
n/a
n/a
5%
n/a
5%
n/a
5%
n/a
10%
79%
15%
81%
£1.56
Black Scholes
£1.79
Black Scholes
£1.88
Black Scholes
£6.45/£3.50 (2)
Monte Carlo (3)
£6.30/£3.53 (2)
Monte Carlo (3)
(1) The expected volatility is based on historical volatility determined by the analysis of daily share prices over a period commensurate with the expected lifetime of
the award and ending on the date of grant of the award. Due to significant fluctuations in Vitec’s share price during the year a uniform rate has been used for all
the Sharesave options as a reasonable estimate of volatility going-forward.
(2) The first figure represents fair value of awards subject to adjusted EPS growth criteria and the second figure represents fair value of awards subject to TSR criteria.
(3) For the 2005 LTIP and 2005 DBP matching awards, a Monte-Carlo simulation has been used. Under this valuation method, the share price for Vitec is projected
at the end of the performance period as the TSR for Vitec and the companies in the comparator group. Based on these projections, the number of awards that
will vest is determined. Thousands of simulations are run and the fair value of the award is calculated as the product of the vesting probability and the share price
at the date of grant.
Annual Report & Accounts 2013
122
Section 5 – Other supporting notes
5.4 Leases
Operating leases primarily relate to the Group’s properties, which principally comprise offices, warehouses and factory
facilities. None of the leases include contingent rentals.
Accounting policies
Leases
Operating leases are those which do not transfer substantially all the risks and rewards of ownership to the lessee, the rentals of which
are charges to the Income Statement on a straight line basis over the lease term.
Total commitments under non-cancellable operating leases
Expiring within one year
Expiring two to five years
Expiring after five years
Land and
buildings
£m
0.4
8.5
9.0
17.9
Other
£m
0.1
1.0
-
1.1
Total
2013
£m
0.5
9.5
9.0
19.0
Land and
buildings
£m
0.7
9.5
10.2
20.4
Other
£m
0.2
1.0
-
1.2
Total
2012
£m
0.9
10.5
10.2
21.6
During the year £5.0 million (2012: £5.9 million) was recognised in the Income Statement in respect of operating lease payments.
5.5 Related party transactions
A related party relationship is based on the ability of one party to control or significantly influence the other.
The Group has identified the Board, the Vitec Group Pension Scheme and members of the Operations Executive as related
parties to the Company under IAS 24, Related Party Disclosures.
Transactions with key management personnel
Details of Directors’ remuneration along with their pension, share incentive and bonus arrangements are shown in detail in the
Remuneration Report.
The compensation of the seven (2012: ten) members of the Operations Executive during the year, including the Executive Directors
is shown in the table below.
Salaries
Performance-related bonuses
Share-based payment charge (1)
Other short-term employee benefits
Post employment benefits
(1) IFRS 2 charge recognised in the Income Statement for share-based payment transactions with members of the Operations Executive.
2013
£m
1.7
1.5
0.6
0.2
0.2
2012
£m
2.1
1.5
1.1
0.2
0.3
The Vitec Group plc
123
5.6 Principal Group investments
The Group’s principal subsidiaries as at 31 December 2013 are listed below. All subsidiaries are 100% owned within the Group.
Vitec Group US Holdings, Inc
Vitec Group Holdings Limited (1)
Vitec Investments Limited
Videocom
Autoscript Limited
Vitec Videocom Limited (1)
Vitec Videocom, Inc (2)
Vitec Videocom Limitada
Integrated Microwave Technologies, LLC
Haigh-Farr, Inc
Camera Corps Ltd
Teradek, LLC
Imaging
Manfrotto Distribution, Inc
Manfrotto Distribution KK
Vitecgroup Italia SpA
Manfrotto UK Limited (3)
Manfrotto Bags Ltd
Services
Vitec Broadcast Services Inc
Country of incorporation
US
Guernsey
UK
UK
UK
US
Costa Rica
US
US
UK
US
US
Japan
Italy
UK
Israel
US
(1) Indicates companies directly owned by the parent company.
(2) Formerly called Anton/Bauer Inc - name changed with effect from 3 January 2014
(3) Formerly called Manfrotto Lighting Limited - name changed with effect from 7 January 2014.
Exemption has been taken under section 410 of the Companies Act 2006 to list all the subsidiary undertakings of the Group.
A full list of related subsidiary undertakings will be included in the Company’s next annual return filed with the Registrar of Companies.
5.7 Subsequent events
There were no events after the Balance Sheet date that require disclosure.
Annual Report & Accounts 2013
124
Company Balance Sheet
As at 31 December 2013
Fixed assets
Tangible fixed assets
Investments in subsidiary undertakings
Current assets
Debtors
Cash at bank and in hand
Liabilities falling due within one year
Creditors
Provisions
Net current assets
Total assets less current liabilities
Liabilities falling due after one year
Creditors
Provisions
Net assets
Capital and reserves
Called up share capital
Share premium account
Revaluation reserve
Merger and other reserves
Profit and loss account
Equity shareholders’ funds
Approved by the Board on 25 February 2014 and signed on its behalf by:
Paul Hayes
Group Finance Director
The Vitec Group plc
Registered in England and Wales no. 227691
Notes
2013
£m
2012
£m
f)
g)
h)
i)
j)
i)
j)
k)
l)
l)
l)
l)
1.4
398.3
399.7
1.6
389.1
390.7
6.9
13.9
20.8
(11.4)
(0.2)
(11.6)
9.2
7.0
11.9
18.9
(14.8)
(0.2)
(15.0)
3.9
408.9
394.6
(105.1)
(0.1)
(105.2)
303.7
8.8
12.1
0.9
55.3
226.6
303.7
(103.0)
(0.4)
(103.4)
291.2
8.8
10.4
0.9
55.3
215.8
291.2
The Vitec Group plc
Reconciliation of Movements
in Shareholders’ Funds
For the year ended 31 December 2013
Profit for the financial year
Dividends paid
Retained profit for the year
Own shares purchased
Share-based payment charge, net of tax
New shares issued
Net increase in shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
125
2013
£m
19.2
(9.8)
9.4
(1.5)
2.9
1.7
12.5
291.2
303.7
2012
£m
112.1
(9.1)
103.0
(4.8)
1.8
0.7
100.7
190.5
291.2
Annual Report & Accounts 2013
126
Notes to the Company financial statements
a) Basis of preparation
These accounts have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP).
Under section 408 (3) of the Companies Act 2006, the Company is exempt from the requirement to present its own profit and loss account.
Under FRS 1 (revised) the Company is exempt from the requirement to present a cash flow statement on the grounds that its cash
flows are included in the Group consolidated financial statements.
Under FRS 29 the Company is exempt from the requirement to provide its own financial instruments disclosures, on the grounds
that it is included in publicly available consolidated financial statements which include disclosures that comply with the IFRS
equivalent to that standard.
Under FRS 8 the Company is exempt from the requirement to disclose transactions or balances with wholly owned subsidiaries
which form part of the Group.
b) Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation
to the financial statements.
Foreign currencies
Transactions in foreign currencies are translated at the exchange rate on that day. Foreign currency monetary assets and liabilities are
translated at the year end exchange rate. Where there is a movement in the exchange rate between the date of the transaction and
the year end, a currency translation gain or loss may arise. Any such differences are recognised in the profit and loss account.
Fixed assets and depreciation
Depreciation is provided to write off the cost or valuation of property, plant and equipment, less estimated residual value, on a straight line
basis over their estimated useful lives. No depreciation is provided on freehold land. Other fixed assets are depreciated as follows:
Freehold buildings
Leasehold improvements
Motor vehicles
Equipment, fixtures and fittings
up to 50 years
over the remaining period of the lease
3 to 4 years
3 to 10 years
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 been subsequently revalued.
Fixed asset investments
Investments in subsidiaries are stated at cost less where appropriate, provisions for impairment. A list of principal subsidiaries directly
owned by the Company is contained within note 5.6 “Principal Group investments” of the Group’s consolidated financial statements.
Leases
Annual payments under operating leases are charged to the profit and loss account on a straight line basis.
Pensions
The Company participates in the Group’s defined benefit scheme operated in the UK, which was closed to future benefit accrual
with effect from 31 July 2010. All UK employees of the Company are now offered membership of a defined contribution scheme.
The assets of the schemes are held separately from those of the Company. The Company is unable to identify its share of the Group
defined benefit scheme’s underlying assets and liabilities and therefore accounts for it as a defined contribution scheme. The amounts
charged against profits represent contributions payable to the schemes in respect of the accounting period.
Further details of the UK pension scheme are disclosed in note 5.2 “Pensions” of the Group’s consolidated financial statements.
Share-based payments
The Group operates a number of share-based incentive schemes. Further details are disclosed in note 5.3 “Share-based payments”
of the Group’s consolidated financial statements.
Dividends
Dividends are recognised through equity on the earlier of their approval by the Company’s shareholders or their payment.
The Vitec Group plc
127
2013
£m
3.3
0.4
0.1
1.4
5.2
2012
£m
3.2
0.3
0.1
1.8
5.4
2013
21
2012
22
c) Employees
Employee costs comprise:
Wages and salaries
Employers’ social security costs
Employers’ pension costs - defined contribution schemes
Share-based payment charge (1)
(1) Share-based payment charge represents the Group total.
Average number of employees during the year
Further details of Directors’ remuneration and share incentives are disclosed in the Remuneration Report.
d) Audit fees
The audit fee in respect of the parent company was £0.1 million.
Further details of the Group audit fee are disclosed in note 2.1 “Profit before tax” of the Group’s consolidated financial statements.
e) Dividends
The aggregate amount of dividends comprises
Final dividends paid in respect of prior year but not recognised as liabilities in that year
Interim dividends paid in respect of the current year
A final dividend of 14.1p per share has been recommended by the Board.
2013
£m
5.9
3.9
9.8
2012
£m
5.4
3.7
9.1
Annual Report & Accounts 2013
128
Notes to the Company financial statements
f) Tangible fixed assets
Cost or valuation
At 1 January 2013 and 31 December 2012
Depreciation
At 1 January 2013
Charge for the year
At 31 December 2013
Net book value
At 1 January 2013
At 31 December 2013
Freehold
land and
buildings
£m
Leasehold
buildings
£m
Equipment,
fixtures and
fittings
£m
Total
£m
3.2
2.6
0.5
0.1
1.6
0.2
1.8
1.6
1.4
1.4
0.1
1.5
1.2
1.1
0.1
0.1
0.2
0.4
0.3
0.1
-
0.1
-
-
Freehold land and buildings disclosed at a revalued net book value of £1.2 million would have been stated under historical cost
at £0.7 million and a net book value of £nil.
The revalued amount of the land and buildings has been retained as allowed for by the transitional provisions set out in FRS 15
Tangible Fixed Assets.
The Company had the following commitments during the following year, under non-cancellable operating leases:
Expiring in two to five years
g) Investments in subsidiary undertakings
Cost
At 1 January 2013
Additions
Disposals
At 31 December 2013
Provisions
At 1 January 2013 and 31 December 2013
Net book value
At 1 January 2013
At 31 December 2013
Land and buildings
2013
£m
0.3
2012
£m
0.3
Investment
in other
shares
£m
Total
£m
389.7
23.9
(14.7)
398.9
328.7
22.1
(14.7)
336.1
Loans
£m
61.0
1.8
-
62.8
0.6
0.6
-
389.1
398.3
328.1
335.5
61.0
62.8
The additions and disposals in investments during the year reflect the Company’s restructuring of certain subsidiary holding and
financing companies.
The Vitec Group plc
h) Debtors
Amounts falling due within one year
Amount owed by subsidiary undertakings
Corporation tax
Other debtors
Derivative financial instruments - forward exchange contracts
Deferred tax assets
Prepayments and accrued income
i) Creditors
Amounts falling due within one year
Amounts owed to subsidiary undertakings
Derivative financial instruments - forward exchange contracts
Other creditors
Accruals and deferred income
Amount falling due after more than one year
Bank loans (unsecured)
Amounts owed to subsidiary undertaking
Contingent liabilities
There are no contingent liabilities at 31 December 2013 (2012: £nil).
j) Provisions
At 1 January 2013
Provisions utilised during the year
Provisions reversed during the year
At 31 December 2013
Due within one year
Due after more than one year
129
2013
£m
2012
£m
0.2
1.2
1.6
3.4
0.3
0.2
6.9
2013
£m
5.1
3.4
0.1
2.8
11.4
2.6
-
1.8
2.4
-
0.2
7.0
2012
£m
9.2
2.4
1.8
1.4
14.8
74.4
30.7
105.1
73.0
30.0
103.0
Onerous
lease
£m
0.6
(0.2)
(0.1)
0.3
0.2
0.1
0.3
The onerous lease contracts provision is in relation to non-cancellable leases on vacant property that the Company entered into in
previous years. Utilisation of the provision will be over the anticipated life of the lease or earlier if exited.
Annual Report & Accounts 2013
130
Notes to the Company financial statements
k) Called up share capital
Issued and fully paid
At 1 January 2013
Consideration for acquisitions
Exercise of share options
At 31 December 2013
Number of
shares
Nominal
value £m
43,690,968
214,847
154,803
44,060,618
8.8
-
-
8.8
Details of share-based payments and share options are stated in note 5.3 “Share-based payments” of the Group’s consolidated financial
statements.
l) Reserves
At 1 January 2013
Dividends paid
Own shares (Employee Benefit Trust) purchased
Share-based payment charge, net of tax
New shares issued
Profit for the year
At 31 December 2013
Share
premium Revaluation
reserve
account
£m
£m
Merger
and other
reserves
£m
Profit
and loss
account
£m
10.4
-
-
-
1.7
-
12.1
0.9
-
-
-
-
-
0.9
55.3
-
-
-
-
-
55.3
215.8
(9.8)
(1.5)
2.9
-
19.2
226.6
Other reserves represents the capitalisation of the share premium account, £22.7 million in 1989 and £37.3 million in 1995 less
£16.0 million of share repurchases in 1995.
m) Related party transactions
The Company has identified a related party relationship with its Board, the Vitec Group Pension Scheme and members of
the Operations Executive as disclosed in the Remuneration Report and note 5.5 “Related party transactions” of the Group’s
consolidated financial statements. There are no other related party transactions to disclose.
n) Post Balance Sheet events
The financial statements were authorised for issue by the Board on 25 February 2014. There were no events after the Balance
Sheet date that require disclosure.
The Vitec Group plc
Five Year Financial Summary
Years ended 31 December
Revenue
Operating profit (1)
Net interest on interest-bearing loans and borrowings
Other financial (expense)/income
Profit before tax (1)
Cash generated from operating activities
Net interest paid
Tax paid
Operating cash flow
Net capital expenditure on property, plant and equipment and intangible assets
Free cash flow (2)
Capital employed
Intangible fixed assets
Tangible fixed assets
Other net assets
Financed by
Shareholders’ funds - equity
Net debt
Deferred tax
Statistics
Operating profit (%) (1)
Effective tax rate (%) (1)
Adjusted basic earnings per share (p) (3)
Basic earnings per share (p)
Dividends per share (p)
Year-end mid-market share price (p)
131
2009
£m
315.1
24.5
(1.6)
(0.2)
22.7
42.8
(2.1)
(4.3)
36.4
(13.7)
22.7
58.2
54.6
21.9
134.7
111.2
40.6
(17.1)
134.7
7.8
31.7
36.5
7.5
18.3
389.0
2013
£m
315.4
39.5
(3.6)
(0.3)
35.6
52.4
(3.6)
(8.5)
40.3
(18.9)
21.4
76.3
53.5
39.2
169.0
120.2
61.5
(12.7)
169.0
12.5
30.9
56.1
31.9
23.0
639.0
2012
£m
345.3
39.3
(3.2)
0.1
36.2
38.4
(3.1)
(10.8)
24.5
(13.7)
10.8
68.2
48.6
48.3
165.1
114.6
63.7
(13.2)
165.1
11.4
32.9
55.8
13.6
22.0
635.3
2011
£m
351.0
34.5
(1.9)
0.4
33.0
39.1
(1.8)
(11.1)
26.2
(9.7)
16.5
75.0
50.1
39.5
164.6
129.3
50.4
(15.1)
164.6
9.8
32.7
51.4
34.7
20.5
555.7
2010
£m
309.6
27.7
(1.2)
0.2
26.7
34.6
(1.2)
(0.9)
32.5
(14.5)
18.0
51.8
53.4
27.0
132.2
124.3
28.1
(20.2)
132.2
8.9
33.0
41.9
42.8
19.0
585.0
(1) Before restructuring costs, charges associated with acquired businesses and disposal of business in 2013, 2012 and 2011; and before significant items
in 2010 and 2009.
(2) Free cash flow is the cash generated from operations less interest, tax and capital expenditure on property, plant and equipment and intangible assets
excluding goodwill.
(3) Differences between adjusted basic and basic earnings per share arise from restructuring costs, charges associated with acquired businesses and
disposal of business in the years in question.
Annual Report & Accounts 2013
132
Shareholder Information and Financial Calendar
Shareholder enquiries
For enquiries about your shareholding, such as dividends or lost
share certificate(s), or any of the items detailed below, please
contact the Company’s registrar:
Capita Asset Services (“Capita”)
Website
Email
Address
www.capitashareportal.com
shareholderenquiries@capita.co.uk
The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU
Phone from UK
0871 664 0300*
Phone from overseas
+44 (0)20 8639 3399**
* Calls cost 10p per minute plus any network extras. Lines are open from 9.00am
to 5.30pm Monday to Friday.
** Calls will be charged at standard overseas rates.
Dividend reinvestment plan
The Company, in conjunction with Capita, offers a Dividend
Reinvestment Plan that enables shareholders to reinvest cash
dividends into additional shares in the Company. You must arrange
for your Dividend Reinvestment Plan application form to be
received by Capita no later than Monday, 14 April 2014 to join the
plan for the final dividend for the year ended 31 December 2013.
Online services and electronic voting
You can check your shareholding, make a transaction or dividend
payment enquiry, add or change a dividend mandate or change
your registered address by logging in to your on-line account with
Capita via the website address above. The Company will again
be making use of Capita’s electronic voting facility. By selecting
The Vitec Group plc via Capita’s website you will find details of
the 2014 Annual General Meeting, including the venue and detail
of resolutions. Shareholders have the option to vote for, against
or withhold their vote on the resolutions and can split or restrict
votes, appoint the Chairman of the meeting or a third party as
their proxy and include any instruction text. Shareholders who
hold their shares through CREST may use the CREST voting
facility as provided by Euroclear UK & Ireland Limited. To log in
on-line, shareholders will need to input a unique User ID that 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. User IDs previously
issued will still be valid.
International dividend payment service
Overseas shareholders may wish to consider electing to receive their
dividends in a local currency instead of in Sterling and you can find
out more about this by calling the international phone number above
or by visiting http://international.capitaregistrars.com. Any election to
receive dividends in local currency in respect of the final dividend for
the year ended 31 December 2013 payable on Friday, 9 May 2014
must be received by Capita no later than the record date for the final
dividend, Friday, 11 April 2014.
Share price information
The closing middle market price of a share of The Vitec Group
plc on 31 December 2013 was £6.39. During the year, the share
price fluctuated between £5.59 and £7.26. 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 website: www.ft.com, with a similar delay.
Up-to-date market information and the Company’s share
price is also available from the Cityline service operated by
the Financial Times by telephoning 09058 171 690.
The Company sends to its shareholders each year an
Annual Report. Copies of this and of public announcements
and financial results are published on the Company’s website,
www.vitecgroup.com.
Share scams
Shareholders should be aware that fraudsters may try and
use high pressure tactics to lure investors into share scams.
Information on share scams can be found on the Financial
Conduct Authority’s website: www.fca.org.uk/scams or via
their consumer helpline: 0800 111 6768.
Financial calendar
Ex-dividend date for 2013 final dividend
Record date for 2013 final dividend
Annual General Meeting
2013 final dividend payment date
Announcement of 2014 half year results
Proposed 2014 interim dividend payment date
9 April 2014
11 April 2014
8 May 2014
9 May 2014
14 August 2014
October 2014
Analysis of shareholdings as at 31 December 2013
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
508
266
60
68
20
51
52.2
27.3
6.2
7.0
2.1
5.2
192,926
644,832
448,964
1,538,607
1,490,170
39,745,119
973
100
44,060,618
0.4
1.5
1.0
3.5
3.4
90.2
100
323
33.2
41,794,192
94.9
650
973
66.8
100
2,266,426
44,060,618
5.1
100
Find out more
www.vitecgroup.com/Investors/Shareholderservices.aspx
The Vitec Group plc
The Vitec Group plc
Inside this report
Strategic Report
01 Highlights
02 Chairman’s Statement
04 Vitec Group overview
06 What we do
08 Our business model
10 Group Chief Executive’s Review
12 Market update: Broadcast & Video
14 Market update: Photographic
16 Market update: Military, Aerospace
and Government
17 Our world class brands
18 Financial Review
24 Videocom Division
26
Imaging Division
28 Services Division
29 Operations Executive
30 Board of Directors
32 Directors’ Report
Remuneration
Report
34 Annual Statement by the Chairman
of the Renumeration Committee
35 Remuneration Policy Report
44 Annual Report on Remuneration
Corporate
Responsibility
54 Vitec’s commitment to corporate
responsibility
55 Business Ethics
56 Environment
58 Employees
61 Community & Charitable Donations
Corporate
Governance
62 Chairman’s Report
73 Audit Committee Report
Independent
Auditor’s Report
77
Independent Auditor’s Report
Financial Statements
81 Table of contents
82 Primary Statements
87 Section 1 - Basis of preparation
89 Section 2 - Results for the year
97 Section 3 - Operating assets and liabilities
108 Section 4 - Capital structure
115 Section 5 - Other supporting notes
124 Company Financial Statements
131 Five Year Financial Summary
132 Shareholder Information and
Financial Calendar
Key Performance
Indicators
The Board and Operations Executive
monitor a number of financial and non-
financial KPIs to measure performance
over time. Details of the KPIs can be
found on the following pages:
19 Financial
51 Total Shareholder Return
57 Environmental
58 Health & Safety
The Vitec Group plc website
www.vitecgroup.com
Annual Report & Accounts online
www.vitecgroup.com/annual_report_2013
Cautionary statement: Statements made in the Strategic Report and Directors’ Report (pages 1 to
33) contain forward-looking statements that are subject to risk factors associated with, among other
things, the economic and business circumstances occurring from time to time in the countries and
sectors in which the Group operates. It is believed that the expectations reflected in these statements
are reasonable but they may be affected by a wide range of variables which could cause actual results
to differ materially from those currently anticipated. Nothing in this Annual Report and Accounts should
be construed as a profit forecast.
Where
the story
comes to
life
Designed and produced by Design Motive Ltd
Printed and bound in the UK by CPI Colour Ltd
The Vitec Group plc
Annual Report
& Accounts
2013
The Vitec Group plc
Bridge House
Heron Square
Richmond
TW9 1EN
United Kingdom
T +44 (0)20 8332 4600
F +44 (0)20 8948 8277
info@vitecgroup.com
www.vitecgroup.com
Registered in England and Wales no. 227691
The Vitec Group plc Annual Report & Accounts 2013