Directors' Report
The directors present their report and the audited accounts of the Group for the year ended 31 December 2005.
Review of the Group and its activities
The performance and activities of the Group during the year are set out in the Chairman’s and Chief Executive’s Statement, the Financial Review and the Business Review pages.
On 31 May 2005 the Group completed the acquisition of the business and assets of Kata International Limited and Kata Professional (Kimchi & Tishler) Limited for an initial cash consideration of US$8.5 million (£4.7 million) and contingent consideration of up to US$13 million (£7.1 million) conditional upon future sales and profitability targets.
On 19 December 2005 the Group signed an agreement to purchase the Petrol Bags business of Band Pro Digital and Video Inc. The acquisition was completed on 16 January 2006.
Results and dividends
The Group’s profit on ordinary activities before tax and significant items amounted to £18.4 million (2004: £16.5 million). Profit from continuing operations, but after significant items, amounted to £17.1 million (2004: £14.2 million).
The directors recommend a final dividend of 9.4p per share (2004: 8.9p). If approved, the dividend per share for the year will total 15.5p (2004: 15p). Subject to approval by shareholders, the final dividend will be paid on 26 May 2006 to shareholders on the register on 28 April 2006.
Post balance sheet events
The acquisition of the Petrol Bags business was completed on 16 January 2006.
Future development
The Group’s continuing strategy is to grow its businesses through organic expansion and carefully planned acquisitions principally in areas related to its existing businesses, customers, markets and skills.
Research, development and engineering
The management of the Group continues to recognise that new products are essential to its long-term success and considerable emphasis is placed on active product development programmes in the manufacturing companies. In 2005 those companies spent £7.8 million (2004: £7.9 million) on research, development and engineering.
Financial instruments
For further information on financial instruments see Note 19 to the Consolidated Accounts.
Share capital
Details of shares issued during the year are set out in Note 25 to the Consolidated Accounts. An analysis of shareholdings is shown here. The middle market price of a share of the Company on 31 December 2005, the last day of dealing in 2005, together with the range during the year, is shown here. For details of own shares held see Note 13 to the Company Accounts.
Substantial shareholdings
As at 28 March 2006, the Company had been notified of the following interests of 3% or more of its issued share capital:
| |
Number of shares |
% |
| Harris Associates |
4,108,107 |
9.99 |
| Baring Trustees (Guernsey) Limited |
2,698,374 |
6.58 |
| Manfrotto SA |
2,478,374 |
6.05 |
| Prudential plc |
2,225,651 |
5.42 |
| Hermes UK Small Companies Focus Fund (SCFF)1,2 |
2,056,234 |
5.01 |
| Deutsche Bank AG and its subsidiary companies |
2,001,162 |
4.87 |
| Legal & General Investment Management Limited |
1,549,620 |
3.77 |
| Artisan Partners Limited Partnership |
1,264,915 |
3.08 |
1 The notification by Hermes disclosed that these shares are held through an interest in a UK Limited Partnership, in which Hermes Focus Asset Management Limited is a General Partner and Hermes SLP Limited is a Limited Partner. Hermes Investment Management Limited is a General Partner in SCFF. Britel Fund Trustees Limited is a Limited Partner in SCFF, through which some of the assets of the BT Pension scheme are invested.
2 Each of the following has an interest in the Company’s shares by virtue of an interest in SCFF:
Britel Fund Trustees Limited, The Trustees of BT Pension Scheme3
Royal Mail Pensions Trustees Limited and Possfund Custodian Trustee Limited4 Devon County Council
The Essex County Council Pension Fund
Nottinghamshire County Council
Ram Trust Services Inc.
3 Has also disclosed interests totalling a further 422,178 shares in the Company; the aggregate interest is 6.02%.
4 Has also disclosed an interest of 162,108 shares in the Company; the aggregate interest is 5.40%.
Directors
The directors during the whole of the year were Gareth Rhys Williams, Alastair Hewgill, Michael Harper, Sir David Bell, Nigel Moore, John Potter and Will Wyatt.
A new non-executive director, Simon Beresford-Wylie, was appointed to the Board on 1 March 2006. He was also appointed to the Audit, Nominations and Remuneration Committees on the same date.
As announced in the Interim Report 2005, John Potter, who has completed just over seven years as a non-executive director, will be standing down immediately after the Annual General Meeting for 2006.
The remuneration of the directors is set out in the Remuneration Report
Photographs and biographies of the current directors are set out here
Committees of the Board
Details of the Audit Committee, the Nominations Committee and the Remuneration Committee are contained in the Corporate Governance section of this annual report and in the Remuneration Report.
Payments to suppliers
It continues to be the Group’s policy that the Company and individual subsidiary companies are responsible for negotiating terms and conditions under which suppliers operate. Once agreed, payments to suppliers are made in accordance with those terms and conditions, subject always to the supplier having complied with them. That policy will continue for the financial year ending 31 December 2006. For the financial year ended 31 December 2005 the Company paid its suppliers on average within 21 days (2004: 16 days) of date of invoice.
Directors' shareholdings
The following table sets out the beneficial interests of those persons who were directors at the end of the financial year. The interests in the Company’s shares are shown as at 31 December 2005 and 1 January 2005 or subsequent date of appointment. Details of the directors’ other interests in the Company’s shares are set out in the Remuneration Report
| Directors' shareholdings |
31 December
2005 |
1 January 2005
or subsequent
date of
appointment |
| Chairman |
|
|
| Michael Harper |
30,000 |
15,000 |
| Executive Directors |
|
|
| Gareth Rhys Williams |
43,2022 |
27,7051 |
| Alastair Hewgill |
24,6072 |
15,6511 |
| Non-executive Directors |
|
|
| David Bell |
- |
- |
| Nigel Moore |
5,695 |
5,695 |
| John Potter |
3,000 |
3,000 |
| Will Wyatt |
675 |
675 |
|
107,179 |
67,726 |
1 Includes interests of 7,705 shares by Gareth Rhys Williams and 1,651 shares by Alastair Hewgill purchased in the market using funds supplied by the two directors and held by Mourant & Co Trustees Limited, the trustee used to hold shares in respect of awards made under the Deferred Bonus Plan.
2 Includes interests of 18,202 shares by Gareth Rhys Williams and 8,707 shares by Alastair Hewgill purchased in the market, in respect of awards made under the Deferred Bonus Plan, using funds supplied by the two directors and held by Mourant & Co Trustees Limited.
Corporate Social Responsibility Report
The Group’s report on social, environmental and ethical matters is set out here. The Group has policies in respect of the following key areas: risk and fraud, employment (including employees and employee communication), whistleblowing, environment, human rights, community impact and involvement, relationships with suppliers, customers and other stakeholders. It regularly reviews those policies and revises them when necessary.
Donations
During 2005 donations totalling £52,896 were made to charities by the Group (2004: £3,700). Like all companies, the Group has limited resources and the amount of money available for charitable purposes varies from time to time. No donations were made to any political party. For further information on donations refer to the section on Community Impact and Involvement set out in the Corporate Social Responsibility Report.
Annual General Meeting
The Annual General Meeting for 2006 will be held on 24 May 2006 at the offices of Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB.
The Chairmen of the Board and of each of its Committees will be in attendance at the Annual General Meeting to answer questions from shareholders.
The Company will again be making use of the electronic voting facility provided by its registrars, Capita Registrars. The facility has now been extended to include CREST voting for members holding their shares in uncertificated form. For further information please refer to the section in Online Services and Electronic Voting set out here.
The business of the Annual General Meeting will include the consideration by shareholders of the report and accounts for the year ended 31 December 2005, the Remuneration Report, the proposed dividend, election of a director, re-election of three directors, the re-election of the auditors and the following further items of business.
A resolution renewing the directors’ authority to allot shares for cash, as if the pre-emption provisions of Section 89 of the Companies Act 1985 did not apply. The first part of the resolution deals with the allotment of shares for cash under a rights issue, giving power to make adjustments to deal with overseas shareholders, fractions of shares and similar matters. The second part renews the power of the directors to allot shares for cash, limited to 5% of the issued share capital at 6 March 2006. The authority will expire at the end of the Company’s next Annual General Meeting or, if earlier, on 24 August 2007.
The directors have no present intention of issuing or granting rights over the unissued share capital, except in relation to the Company’s adopted employee share incentive arrangements and no share issue will be made which will effectively alter the control of the Company without prior approval of the shareholders in general meeting.
Any shares held in treasury and used by the Company for the purposes of or pursuant to the employee share schemes operated by the Company will, so long as required under institutional guidelines, count towards the limits on the number of new shares that may be issued under the rules of such employee share schemes.
A resolution for a general authority for the Company to make market purchases of its own shares was first passed at the 1998 Annual General Meeting and has been renewed by shareholders at each subsequent annual general meeting. The directors believe it is desirable to have the power to make market purchases in the event of suitable opportunities arising. Accordingly, a resolution to again renew the authority will be proposed at the Annual General Meeting. The authority to purchase shares would only be exercised if there was a resultant increase in earnings per share, and it would be in the best interests of the Company. Should the directors exercise such authority, any shares so purchased may be placed in treasury in accordance with The Companies (Acquisition of Own Shares)(Treasury Shares) Regulations 2003, as amended and subsequently cancelled or transferred to satisfy awards arising under the Company’s employee share schemes or issued for cash as provided for by the Regulations.
Auditors
The auditors, KPMG Audit Plc, are willing to continue in office. A resolution will be put to the Annual General Meeting to reappoint the auditors and to authorise the Board to agree their remuneration.
By order of the Board
Roland Peate
Secretary
6 March 2006
Information correct at 26/04/2006