ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 MARCH 2008
DISTRIBUTION OF TECHNOLOGY…
ACAL PLC
HIGHLIGHTS 1
CHAIRMAN’S STATEMENT 2
CHIEF EXECUTIVE’S REVIEW 4
FINANCE DIRECTOR’S REVIEW 8
DIRECTORS 12
CORPORATE INFORMATION 13
DIRECTORS’ REPORT 14
BOARD REPORT ON CORPORATE GOVERNANCE 16
DIRECTORS’ REMUNERATION REPORT 20
CORPORATE SOCIAL RESPONSIBILITY 24
STATEMENT OF DIRECTORS’ RESPONSIBILITIES 25
REPORT OF THE AUDITORS – GROUP 27
CONSOLIDATED INCOME STATEMENT 28
CONSOLIDATED STATEMENT OF RECOGNISED
INCOME AND EXPENSE 29
CONSOLIDATED BALANCE SHEET 30
CONSOLIDATED CASH FLOW STATEMENT 31
NOTES TO THE GROUP FINANCIAL STATEMENTS 32
REPORT OF THE AUDITORS – COMPANY 64
COMPANY BALANCE SHEET 65
NOTES TO THE COMPANY
FINANCIAL STATEMENTS 66
FIVE YEAR RECORD 71
PRINCIPAL LOCATIONS 72
THE GROUP HAS APPROXIMATELY 700 EMPLOYEES LOCATED IN
OFFICES THROUGHOUT WESTERN EUROPE WHO SERVE AND
SUPPORT SALES TO CUSTOMERS FROM CONCEPT TO FULFILMENT.
THE BUSINESS PROVIDES OPPORTUNITIES FOR GROWTH, A HIGH
RETURN ON CAPITAL EMPLOYED AND A POSITIVE CASH FLOW. THE
STRATEGY IS TO INVEST IN FURTHER DEVELOPMENT ORGANICALLY
OR BY ACQUISITION WHERE THIS COMPLEMENTS OUR CURRENT
ACTIVITIES. THIS WILL ENHANCE SHAREHOLDER VALUE AND
PROVIDE FURTHER OPPORTUNITIES FOR OUR STAFF, OUR
CUSTOMERS AND OUR SUPPLIERS.
A LEADING PAN-EUROPEAN
VALUE-ADDED DISTRIBUTOR
PROVIDING SPECIALIST DESIGN-IN
SALES AND MARKETING SERVICES
FOR INTERNATIONAL SUPPLIERS.
2 CHANCELLOR COURT
OCCAM ROAD
SURREY RESEARCH PARK
GUILDFORD
SURREY GU2 7AH
TELEPHONE +44 (0)1483 544500
FACSIMILE +44 (0)1483 544550
EMAIL info@acalplc.co.uk
www.acalplc.co.uk
ACAL PLC ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008 ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 MARCH 2008
DISTRIBUTION OF TECHNOLOGY…
ACAL PLC
HIGHLIGHTS 1
CHAIRMAN’S STATEMENT 2
CHIEF EXECUTIVE’S REVIEW 4
FINANCE DIRECTOR’S REVIEW 8
DIRECTORS 12
CORPORATE INFORMATION 13
DIRECTORS’ REPORT 14
BOARD REPORT ON CORPORATE GOVERNANCE 16
DIRECTORS’ REMUNERATION REPORT 20
CORPORATE SOCIAL RESPONSIBILITY 24
STATEMENT OF DIRECTORS’ RESPONSIBILITIES 25
REPORT OF THE AUDITORS – GROUP 27
CONSOLIDATED INCOME STATEMENT 28
CONSOLIDATED STATEMENT OF RECOGNISED
INCOME AND EXPENSE 29
CONSOLIDATED BALANCE SHEET 30
CONSOLIDATED CASH FLOW STATEMENT 31
NOTES TO THE GROUP FINANCIAL STATEMENTS 32
REPORT OF THE AUDITORS – COMPANY 64
COMPANY BALANCE SHEET 65
NOTES TO THE COMPANY
FINANCIAL STATEMENTS 66
FIVE YEAR RECORD 71
PRINCIPAL LOCATIONS 72
THE GROUP HAS APPROXIMATELY 700 EMPLOYEES LOCATED IN
OFFICES THROUGHOUT WESTERN EUROPE WHO SERVE AND
SUPPORT SALES TO CUSTOMERS FROM CONCEPT TO FULFILMENT.
THE BUSINESS PROVIDES OPPORTUNITIES FOR GROWTH, A HIGH
RETURN ON CAPITAL EMPLOYED AND A POSITIVE CASH FLOW. THE
STRATEGY IS TO INVEST IN FURTHER DEVELOPMENT ORGANICALLY
OR BY ACQUISITION WHERE THIS COMPLEMENTS OUR CURRENT
ACTIVITIES. THIS WILL ENHANCE SHAREHOLDER VALUE AND
PROVIDE FURTHER OPPORTUNITIES FOR OUR STAFF, OUR
CUSTOMERS AND OUR SUPPLIERS.
A LEADING PAN-EUROPEAN
VALUE-ADDED DISTRIBUTOR
PROVIDING SPECIALIST DESIGN-IN
SALES AND MARKETING SERVICES
FOR INTERNATIONAL SUPPLIERS.
2 CHANCELLOR COURT
OCCAM ROAD
SURREY RESEARCH PARK
GUILDFORD
SURREY GU2 7AH
TELEPHONE +44 (0)1483 544500
FACSIMILE +44 (0)1483 544550
EMAIL info@acalplc.co.uk
www.acalplc.co.uk
ACAL PLC ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008 ACAL’S BUSINESS ELECTRONICS DIVISION
UNPARALLELED EXPERTISE PAN-EUROPEAN FOOTPRINT EXPANDING OUR SOLUTIONS... EXTENDING OUR PORTFOLIO...
PARTS SERVICES DIVISION
Acal’s key differentiators compared to others in the same fields
are its unparalleled expertise in the design-in philosophy of
Electronic Components and the processes required from
planning to fulfilment of Parts Services.
Acal’s pan-European coverage ensures that service and support
can be provided wherever customers may be located in Europe.
This capability is also valuable to suppliers who look for a
common sales and marketing message for the European market.
TECHNICAL & MARKET KNOWLEDGE CUSTOMER RESPONSE
Acal sales teams possess in-depth knowledge of their markets
and customers and are supported by technical and application
engineers to assist in some of the most demanding requirements.
Acal has over 20 offices in Western Europe staffed with direct
sales, sales support and customer service personnel who have
many years experience of the varied purposes for which our
products and services are required, ensuring that response
times are both rapid and accurate
2007
2008
UK – 46%
CONTINENTAL EUROPE – 50%
REST OF WORLD – 4%
UK – 39%
CONTINENTAL EUROPE – 57%
REST OF WORLD – 4%
GEOGRAPHIC COVERAGE OF SALES
EXCLUDING ASSOCIATES
LOCATIONS
BY DIVISION
SALES
BY DIVISION
Acal’s largest division and Europe’s premier, technical, demand
creation Electronic Component distributor. With operations in
11 countries this business has pan-European coverage,
centralised logistics and local customer interface.
The 2:1 ratio of Field Sales Engineer to Product Management
and Application Engineers is key to our ability to service the
demand creation role that is a major differentiator between
Acal and others in the sector.
Apart from the product knowledge/intellectual property value-
add, there is significant physical added value in the form of
semiconductor programming, microsystem configuration and
electromechanical component assembly, all to provide bespoke
solutions for our customers.
OUR MARKETS AND CUSTOMERS
The customer profile of this division contains all the major
electronic equipment manufacturers in Europe as well as
thousands of SMEs and contract manufacturers. The market
place that these customers occupy is today extremely wide.
Having just 4/5 years ago been dominated by the major
telecommunication companies it is now spread across such
diverse activities as aerospace, broadcasting, metering, medical,
automation, transportation, communications, industrial
controls, motor controls and security.
OUR SUPPLIERS AND PRODUCTS
Our product profile is divided into seven generic groups:
Semiconductors Passive components
Power products Frequency control components
RF & Wireless Electromechanical components
Boards and Systems
We focus on a maximum of 10 specialist suppliers in each of
the above with an emphasis on specialist rather than
commodity product. Thus we have developed a high class
franchise portfolio which guarantees no overlap and therefore
a unique share of mind for our suppliers.
OUR STRATEGY
With the product profile now available, our sales and
marketing activities are geared to ensuring that we succeed in
promoting increasing numbers of products with each new
customer design. This strategy is enhanced with the extension
of our semiconductor portfolio which accounts for in excess of
50% of the available electronic components market.
Acal Parts Services (APS) provides spare parts, logistics planning
and added value services to pan-European Field Services
organisations in the IT and ATM marketplace. With offices in
the UK and Germany, the Group sells and manages stock in
locations all over Europe and as far afield as Australia, South
Africa and the Americas.
APS has developed into a services based organisation that has
become an integral part of our customers’ supply chain
resulting from our ability to assess demand patterns based on
host equipment to be supported.
OUR MARKETS AND CUSTOMERS
APS operates in three fields:
• SPARE PARTS SUPPLY FOR FIELD SERVICE ORGANISATIONS
We work with our clients to ensure that the spare parts they
need to maintain their customers’ IT and ATM infrastructure
are always available.
• ADDED VALUE DISTRIBUTION
We provide distribution and services such as warranty
management, engineering and performance reporting to
leading Printer and PC manufacturers.
• REFURBISHMENT AND RE-SALE
We help several of the leading OEMs to manage their
returned equipment and gain maximum financial return by
refurbishing and re-selling it for them.
OUR PRODUCTS AND SUPPLIERS
APS sources its products worldwide. Parts are tested and
backed by our quality assurance and warranty programmes.
We supply parts for everything from PCs right up to Mainframe
Computers. In the ATM field we sell parts for the major brands
and supply second user ATM machines into emerging markets.
Our newest product area is the retail Point of Sale (POS)
equipment.
Our unique engineering expertise and quality standards and the
fact that we have become a ‘one-stop shop’ for many of our
customers has been one of the cornerstones of our success.
OUR STRATEGY
APS has become a key part of our customers’ supply chain and
we see this outsourcing trend continuing and expanding
beyond IT, ATM and POS hardware.
PARTS SERVICES
UNITED KINGDOM
GERMANY
ELECTRONICS
UNITED KINGDOM
BELGIUM
FRANCE
GERMANY
ITALY
NETHERLANDS
SWEDEN
NORWAY
FINLAND
DENMARK
SPAIN
ELECTRONICS
£111.2m
PARTS SERVICES
£48.3m
EBIT
BY DIVISION
ELECTRONICS
£3.3m
PARTS SERVICES
£2.8m
SPAIN
ITALY
FINLAND
NORWAY
DENMARK
BELGIUM
NETHERLANDS
GERMANY
UK
ELECTRONICS
PARTS SERVICES
BANGALORE
SHANGHAI
SINGAPORE
ASSOCIATE COMPANY OFFICES
SWEDEN
TAIWAN
HONG KONG
BANGKOK
SELANGOR
JOHAR BAHRU
PENANG
SHENZHEN
SUZHOU
FRANCE
INTERNATIONAL LOCATIONS ACAL’S BUSINESS ELECTRONICS DIVISION
UNPARALLELED EXPERTISE PAN-EUROPEAN FOOTPRINT EXPANDING OUR SOLUTIONS... EXTENDING OUR PORTFOLIO...
PARTS SERVICES DIVISION
Acal’s key differentiators compared to others in the same fields
are its unparalleled expertise in the design-in philosophy of
Electronic Components and the processes required from
planning to fulfilment of Parts Services.
Acal’s pan-European coverage ensures that service and support
can be provided wherever customers may be located in Europe.
This capability is also valuable to suppliers who look for a
common sales and marketing message for the European market.
TECHNICAL & MARKET KNOWLEDGE CUSTOMER RESPONSE
Acal sales teams possess in-depth knowledge of their markets
and customers and are supported by technical and application
engineers to assist in some of the most demanding requirements.
Acal has over 20 offices in Western Europe staffed with direct
sales, sales support and customer service personnel who have
many years experience of the varied purposes for which our
products and services are required, ensuring that response
times are both rapid and accurate
2007
2008
UK – 46%
CONTINENTAL EUROPE – 50%
REST OF WORLD – 4%
UK – 39%
CONTINENTAL EUROPE – 57%
REST OF WORLD – 4%
GEOGRAPHIC COVERAGE OF SALES
EXCLUDING ASSOCIATES
LOCATIONS
BY DIVISION
SALES
BY DIVISION
Acal’s largest division and Europe’s premier, technical, demand
creation Electronic Component distributor. With operations in
11 countries this business has pan-European coverage,
centralised logistics and local customer interface.
The 2:1 ratio of Field Sales Engineer to Product Management
and Application Engineers is key to our ability to service the
demand creation role that is a major differentiator between
Acal and others in the sector.
Apart from the product knowledge/intellectual property value-
add, there is significant physical added value in the form of
semiconductor programming, microsystem configuration and
electromechanical component assembly, all to provide bespoke
solutions for our customers.
OUR MARKETS AND CUSTOMERS
The customer profile of this division contains all the major
electronic equipment manufacturers in Europe as well as
thousands of SMEs and contract manufacturers. The market
place that these customers occupy is today extremely wide.
Having just 4/5 years ago been dominated by the major
telecommunication companies it is now spread across such
diverse activities as aerospace, broadcasting, metering, medical,
automation, transportation, communications, industrial
controls, motor controls and security.
OUR SUPPLIERS AND PRODUCTS
Our product profile is divided into seven generic groups:
Semiconductors Passive components
Power products Frequency control components
RF & Wireless Electromechanical components
Boards and Systems
We focus on a maximum of 10 specialist suppliers in each of
the above with an emphasis on specialist rather than
commodity product. Thus we have developed a high class
franchise portfolio which guarantees no overlap and therefore
a unique share of mind for our suppliers.
OUR STRATEGY
With the product profile now available, our sales and
marketing activities are geared to ensuring that we succeed in
promoting increasing numbers of products with each new
customer design. This strategy is enhanced with the extension
of our semiconductor portfolio which accounts for in excess of
50% of the available electronic components market.
Acal Parts Services (APS) provides spare parts, logistics planning
and added value services to pan-European Field Services
organisations in the IT and ATM marketplace. With offices in
the UK and Germany, the Group sells and manages stock in
locations all over Europe and as far afield as Australia, South
Africa and the Americas.
APS has developed into a services based organisation that has
become an integral part of our customers’ supply chain
resulting from our ability to assess demand patterns based on
host equipment to be supported.
OUR MARKETS AND CUSTOMERS
APS operates in three fields:
• SPARE PARTS SUPPLY FOR FIELD SERVICE ORGANISATIONS
We work with our clients to ensure that the spare parts they
need to maintain their customers’ IT and ATM infrastructure
are always available.
• ADDED VALUE DISTRIBUTION
We provide distribution and services such as warranty
management, engineering and performance reporting to
leading Printer and PC manufacturers.
• REFURBISHMENT AND RE-SALE
We help several of the leading OEMs to manage their
returned equipment and gain maximum financial return by
refurbishing and re-selling it for them.
OUR PRODUCTS AND SUPPLIERS
APS sources its products worldwide. Parts are tested and
backed by our quality assurance and warranty programmes.
We supply parts for everything from PCs right up to Mainframe
Computers. In the ATM field we sell parts for the major brands
and supply second user ATM machines into emerging markets.
Our newest product area is the retail Point of Sale (POS)
equipment.
Our unique engineering expertise and quality standards and the
fact that we have become a ‘one-stop shop’ for many of our
customers has been one of the cornerstones of our success.
OUR STRATEGY
APS has become a key part of our customers’ supply chain and
we see this outsourcing trend continuing and expanding
beyond IT, ATM and POS hardware.
PARTS SERVICES
UNITED KINGDOM
GERMANY
ELECTRONICS
UNITED KINGDOM
BELGIUM
FRANCE
GERMANY
ITALY
NETHERLANDS
SWEDEN
NORWAY
FINLAND
DENMARK
SPAIN
ELECTRONICS
£111.2m
PARTS SERVICES
£48.3m
EBIT
BY DIVISION
ELECTRONICS
£3.3m
PARTS SERVICES
£2.8m
SPAIN
ITALY
FINLAND
NORWAY
DENMARK
BELGIUM
NETHERLANDS
GERMANY
UK
ELECTRONICS
PARTS SERVICES
BANGALORE
SHANGHAI
SINGAPORE
ASSOCIATE COMPANY OFFICES
SWEDEN
TAIWAN
HONG KONG
BANGKOK
SELANGOR
JOHAR BAHRU
PENANG
SHENZHEN
SUZHOU
FRANCE
INTERNATIONAL LOCATIONS 1 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
HIGHLIGHTS
• EBIT OF ONGOING ACTIVITIES UP 8.9% AT £6.1M, DESPITE 3.0%
LOWER TURNOVER
• PROFIT BEFORE TAXATION AND EXCEPTIONALS OF ONGOING
ACTIVITIES UP 19.6% AT £6.1M
• EPS OF ONGOING ACTIVITIES UP 14.2% AT 14.5p PER SHARE
• TOTAL DIVIDENDS FOR YEAR MAINTAINED AT 21.9p PER SHARE
• STRONG FINANCIAL POSITION AND CASH RESOURCES MEAN
ACAL IS WELL-PLACED TO TAKE ADVANTAGE OF OPPORTUNITIES
TO GROW AND DEVELOP
2008 2007
restated**
£m £m Change
Turnover – ongoing activities*** 159.5 164.5 –3.0%
EBIT* – ongoing activities 6.1 5.6 +8.9%
Profit before tax:
– ongoing activities (excluding exceptionals) 6.1 5.1 +19.6%
– including disposed activities 33.4 14.8
Basic earnings per share:
– ongoing activities (excluding exceptionals) 14.5p 12.7p +14.2%
– including disposed activities 97.5p 44.4p
Dividends per share – relating to year 21.9p 21.9p –
* EBIT – Earnings before interest, tax, the Group’s share of profit of associated companies and exceptional items stated after
full allocation of central costs
** The restatement of the prior year’s figures arises from the reclassification of the IT Solutions Business (“ITS”) as discontinued,
the inclusion of the medical instrumentation business under Electronics following that reclassification and the reallocation
of central costs
*** Disposed activities represent the sold AC&R and IT Solutions businesses and ongoing activities represent the remaining
business of the Group “OUR CORE BUSINESS OF ELECTRONICS
AND PARTS SERVICES CONTINUES TO
HAVE OPPORTUNITIES TO GROW,
ORGANICALLY BY GAINING MARKET
SHARE AND BY ACQUISITION.”
CHAIRMAN’S STATEMENT
“OUR CORE BUSINESS OF ELECTRONICS
AND PARTS SERVICES CONTINUES TO
HAVE OPPORTUNITIES TO GROW,
ORGANICALLY BY GAINING MARKET
SHARE AND BY ACQUISITION.”
The past year has seen the company successfully implement
a major element of its strategic plan with the sale of the IT
Solutions business to Avnet in December 2007 for £41m
cash. This enables us to concentrate on growing the
Electronics and Parts Services businesses whilst considerably
strengthening the company’s balance sheet at a time when
there is uncertainty in financial markets.
Sales from our ongoing business activities declined 3.0% to
£159.5m reflecting the tough trading environment of the
European distribution market. However, EBIT for the year
grew by 8.9% to £6.1m as reduction in operating costs
continue to benefit the overall profitability of the company.
The group made a 31% return on average capital employed,
before exceptional items.
Profit before taxation and exceptional items of ongoing
activities grew by 19.6% from £5.1m to £6.1m with a
reduced net interest charge as a result of the disposal of IT
Solutions. The earnings per share of ongoing activities
excluding exceptional items were 14.5p.
DIVIDEND
The Board is recommending a final dividend of 14.7p per
share payable to shareholders on the register as at 13 June
2008. This, together with the interim dividend of 7.2p will
make a total of 21.9p for the year, the same as last year.
Although the year’s dividend is covered by earnings including
discontinued activities, it is not covered by earnings of
ongoing activities before exceptional items. The Board will
keep Acal’s dividend policy under review recognising that, in
the longer term, distributions are only sustainable if covered
by earnings.
BOARD COMPOSITION AND GOVERNANCE
There have been no changes to the composition of the
Board or any of its Committees during the year. The
Directors remain of the view that the Board, as currently
constituted, is appropriate for a company of Acal's size and
incorporates a suitable balance of skills; the matter is,
however, kept under review. Acal continues to strive for
standards of corporate governance which are high for a
company of its size and full details of which are set out in
the governance statement included as part of the Annual
Report and Accounts.
2 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008 EMPLOYEES
The ongoing changes to the structure of the Acal group and
the continued challenges in our chosen markets place large
demands on our staff. We are fortunate in having a dedicated
workforce that is committed to continuous business
improvement and I thank them personally and on behalf of
the Board for their continued hard work and support.
STRATEGY AND THE FUTURE
Whilst we have experienced weak market conditions
throughout the year ended 31 March 2008, in recent
months there has been some stability in those conditions,
although little sign of improvement at this stage.
Our strategy remains as previously stated: to concentrate on
Europe, selectively expanding our supplier base in Electronics
demand creation distribution whilst extending our offerings
to the supply chain in Parts Services.
In Electronics we are seeing the growing success of our
newer semiconductor product lines; with a strong “funnel”
of new designs and an expanding customer base we remain
confident of our ability to succeed in the longer term.
We are winning new business in Parts Services and have
recently secured a major new contract which commenced in
May 2008 and which will increase the turnover of the
division. Work continues on other opportunities although
experience shows that it can take time to convert
opportunities into contracts.
On 12 May 2008, I wrote to shareholders with a copy of an
announcement about our review of corporate strategy. There
is nothing further to report in relation to that at this stage.
Our core businesses of Electronics and Parts Services
continue to have opportunities to grow, organically by
gaining market share and by acquisition.
Although we remain cautiously optimistic, in the near-term
the current general economic uncertainties and the effects
of the problems in the credit markets may affect trading
conditions in our markets. However, with the disposal of the
IT Solutions business we have a strong financial position as
well as cash resources, amounting to £25.6m at 31 March
2008, and therefore we are well placed to take advantage of
opportunities to grow and develop the business.
RICHARD MOON
CHAIRMAN
2 JUNE 2008
3 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008 CHIEF EXECUTIVE’S REVIEW
The Group is a leading distributor of electronic components
and IT parts services throughout Europe.
PERFORMANCE REVIEW TABLE
The performance of Acal’s ongoing activities in each of the
years ending 31 March 2008 and 2007 is set out below.
Our results for the year were affected by weak and
demanding conditions in both the Electronics and IT
markets. However, although turnover at £159.5m was down
3% from the £164.5m of the prior year, EBIT increased
8.9% from £5.6m to £6.1m as a result of the effective
management of gross margins and operating costs.
The implementation of our strategy to narrow our focus and
concentration was continued with the successful completion
on 17 December 2007 of the sale of our IT Solutions
business to Avnet. This followed the sale in 2006 of the Air
Conditioning and Refrigeration business.
As a consequence we have significantly strengthened our
balance sheet with the proceeds of this sale with the express
intention of using the funds to invest in the ongoing
Electronics and Parts Services businesses, both organically
and by acquisition.
ELECTRONICS
THE ONLY PAN-EUROPEAN DEMAND CREATION DISTRIBUTOR
Sales Down 1% from £112.6m to £111.2m
EBIT Up 6% from £3.1m to £3.3m
The last year has been a difficult one for the European
electronics industry in general with statistics showing a
double digit percentage reduction in sales year-on-year.
Acal in contrast has only been down 1% indicating an
improvement in our market share. Our successes in the
Netherlands, Belgium, Norway and the UK have unfortunately
been offset by poor results in Sweden, France, Germany and
Italy where in the latter two countries we had made major
investments in people. As a consequence, we have
restructured the business and its cost base, largely in
Continental Europe with a view to ensuring a significant
improvement is made this year.
One of the most gratifying results of the past year has been
the growth of our specialist Semiconductor business which
now accounts for approximately 32% of total sales, up 6%
in the year and a direct result of the demand creation
approach now beginning to generate both new sales and
increased opportunities for the future.
4 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
“EBIT INCREASED 8.9% FROM £5.6M
TO £6.1M AS A RESULT OF THE
EFFECTIVE MANAGEMENT OF GROSS
MARGINS AND OPERATING COSTS.”
“EBIT INCREASED 8.9% FROM £5.6M
TO £6.1M AS A RESULT OF THE
EFFECTIVE MANAGEMENT OF GROSS
MARGINS AND OPERATING COSTS.”
PERFORMANCE REVIEW TABLE
2008 2007
Sales EBIT* Sales EBIT*
as % as % as % as %
£m of Group £m of Sales £m of Group £m of Sales
Electronics 111.2 70% 3.3 3.0% 112.6 68% 3.1 2.8%
Parts Services 48.3 30% 2.8 5.8% 51.9 32% 2.5 4.8%
159.5 100% 6.1 3.8% 164.5 100% 5.6 3.4%
* EBIT = Earnings before interest, tax, the Group’s share of profit of associates and exceptional items, stated after full
allocation of central costs. The centralisation of most of the back-office functions has
continued throughout the year and is now almost complete
with purchasing, inventory management, logistics and many of
the product management and finance functions being carried
out centrally. This ensures an efficient and cost effective
resource to support all the local sales teams across Europe.
Since the sale of the IT Solutions division, Vertec, our medical
instrumentation business, is now reported as part of
Electronics. Vertec again put in an excellent performance,
particularly in the UK, whilst the South African unit achieved
a profitable first full year of trading.
PARTS SERVICES
EUROPE’S PREMIER IT PARTS MANAGEMENT COMPANY
Sales Down 7% from £51.9m to £48.3m
EBIT Up 12% from £2.5m to £2.8m
2007/8 proved to be another difficult year with further price
erosion affecting all the division’s operations and a lack of
any significant new contracted business. Not withstanding
these difficulties, overheads have been carefully managed to
ensure another creditable overall EBIT return of 5.8% after
the allocation of central costs.
As a result of much work by key members of the Acal Parts
Services management team there are now several outsource
contracts that are just coming to fruition. The largest of
these, with Torex, is anticipated to generate around £4m of
sales per annum when it is fully operational. This contract
started in May 2008. It also takes us into a new area, point-
of-sale equipment, which is closely allied to our main IT
sector and thus provides an ability to grow in this market,
thereby leveraging our knowledge base.
With the ‘outsource move’ now generating real momentum
we are enhancing our implementation team to ensure that
we remain in prime position to secure new business. We are
working with new and existing customers who are going
through this change as well as major logistics companies
that are an integral part of delivering effective solutions.
ASSOCIATES
Westech Electronics Ltd, in which we have a 30%
shareholding, is the Singapore based, Asia-Pacific electronic
component distributor that has been an Associate since our
investment in 1995. Its sales and pre-tax profit both
continued to grow in the year to 31 March 2008 with sales
up 32% to S$423m (approximately £143m) and PBT up
15% to S$9.0m (approximately £3.0m).
APPRECIATION
On behalf of the Board I would like to thank the
management and staff of your company who have risen
to the challenges of both these tough times and the many
changes to our processes. Their commitment, hard work and
dedication are, and will continue to be, so important in
achieving success.
A J LAUGHTON
CHIEF EXECUTIVE
2 JUNE 2008
5 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008 CASE STUDIES
6 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
ELECTRONICS
COBHAM DEFENCE COMMUNICATIONS
Cobham Defence Communications is a highly regarded
defence manufacturer and a recent winner of the Queens
Award for Enterprise in International Trade. Foremost of
their products is ROVIS an innovative vehicle intercom
system, successfully in service throughout the world and
in particular with the US army. Acal helped in enabling the
product to reduce the threat to vehicle crew by assisting
in the specification and supply of specialist semiconductors
(Actel Field Programmable Gate Arrays) which play a central
role in the emerging digitized battle space. Key to the
design were systems emphasis situational
awareness, rapid distribution of data and
flexibility of product usage between
platforms and crew members.
“THE ELECTRONICS DIVISION IS
EUROPE’S STRONGEST MULTI-
DISCIPLINED DESIGN-IN DISTRIBUTOR
OPERATING IN ELEVEN COUNTRIES
ACROSS WESTERN EUROPE AND WITH
SALES IN EXCESS OF £100M.” 7 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
PARTS SERVICES
TOREX
Torex is the leading European based global provider of best
in class software and solutions to the extended retail market
place including point of sale and merchandising as well as
back office planning and scheduling. Torex customers
include Tesco, Selfridges, McDonalds and Argos.
Torex has entered into a strategic partnership with Acal
Parts Services bringing together their solutions skills
with Acal’s supply chain management expertise. Acal
is supplying all the spare parts to support the Torex UK
service division providing access to a broader range
and increased product availability. This in turn will
enable Torex to extend and enhance maintenance
services for its UK customers whilst ensuring that
those services are of a reliable and consistent quality.
“THE IT PARTS SERVICES DIVISION
PROVIDES SPARE PARTS TO FIELD
SERVICE ORGANISATIONS AND IS
A SUPPLIER TO VIRTUALLY EVERY
LEADING COMPANY WITHIN
THAT MARKET.” FINANCE DIRECTOR’S REVIEW
DISPOSALS AND ONGOING ACTIVITIES
Acal plc announced the disposal of its IT Solutions business
(“ITS”) on 27 September 2007. The consideration was £41
million, on a cash and debt free basis. The sale was
completed on 17 December 2007 and the consideration
received in cash on that date.
In the year ended 31 March 2007, the Group’s Air
Conditioning and Refrigeration business (“AC&R”) was sold.
Thus in the financial statements for the year ended 31
March 2008, and the comparative figures for the prior year,
ITS and AC&R have been described as “disposed activities”
and the remainder of the Group’s business as “ongoing
activities”. Following the disposal of ITS, the Group’s medical
instrumentation business has been included under the
Electronics division for reporting purposes.
Figures for the year ended 31 March 2007 have been
restated to reflect the reclassification of ITS as discontinued,
in the light of its disposal, the inclusion of the medical
instrumentation business under Electronics and the
reallocation of central costs.
RESULTS OF ONGOING ACTIVITIES
The Group’s ongoing activities have experienced weak
market conditions throughout the year under review. Thus,
sales of the ongoing activities for the year ended 31 March
2008, at £159.5m, were 3.0% lower than the £164.5m for
the prior year. However earnings before interest, tax, the
Group’s share of associated companies and exceptional items
(“EBIT”) increased by 8.9% from £5.6m to £6.1m as a result
of the effective management of gross margins and operating
costs. Further information on the performance of the Group’s
two divisions is set out in the Chief Executive’s Review.
Although most international business in the electronics
industry is denominated in US dollars, the principal exchange
rate which affects the translation of the results of the Group’s
non-UK activities is that between the Euro and Sterling.
During the year ended 31 March 2008 sterling was on
average 4.3% weaker against the Euro and 5.4% stronger
against the US dollar. There was a benefit of approximately
2% from movements in exchange rates in the translation of
sales for the year but an insignificant effect on profits.
Overall, average gross margin for the Group’s ongoing
activities was 28.7% for the year ended 31 March 2008 as
compared to 29.1% for the year before. Although margins
were maintained in Electronics, price erosion in Parts Services
led to a small decrease in that division.
8 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
JIM VIRDEE
FINANCE DIRECTOR “ACAL’S EARNINGS PER SHARE FROM
ONGOING ACTIVITIES BEFORE
EXCEPTIONAL ITEMS WERE14.5p
FOR THE YEAR ENDED 31 MARCH
2008 AS COMPARED TO 12.7p FOR
THE PREVIOUS YEAR.”
“ACAL’S EARNINGS PER SHARE FROM
ONGOING ACTIVITIES BEFORE
EXCEPTIONAL ITEMS WERE 14.5p
FOR THE YEAR ENDED 31 MARCH
2008 AS COMPARED TO 12.7p FOR
THE PREVIOUS YEAR.”
Acal’s ongoing activities incurred net operating costs,
excluding exceptional items, of £39.7m in the year to 31
March 2008 as compared to £42.2m in the prior year, the
reduction coming entirely from administration costs. The
main contributor to operating costs is people-related costs.
In the year under review the average number of people
employed in the ongoing activities was 731 having been 757
in the year before. The year to 31 March 2007 saw a major
investment in additional resources to support the Group’s
expanding specialist semiconductor portfolio. In the year
ended 31 March 2008 we reduced manning levels in those
underperforming areas which are unlikely to show growth in
the future and also as a consequence of centralising support
functions. Further benefits of these reductions are likely to
arise in future periods.
The exceptional item of £0.4m arising from ongoing
activities in the year ended 31 March 2007 represented the
recovery of a receivable which was previously considered
impaired and hence provided against.
The Group’s main associated company is Westech Electronics
Limited which distributes electronic components in the Asia-
Pacific region, excluding Japan, and is head-quartered in
Singapore. Westech’s sales grew from S$321m
(approximately £108m) for the year ended 31 March 2007
to S$423m (approximately £143m) for the year to 31 March
2008. In the corresponding periods, the Group’s share of
profits of associated companies, which under International
Financial Reporting Standards is shown after tax, increased
from £0.6m to £0.7m.
Net interest cost for the year was £0.7m (before IAS19
financing cost of £nil) in comparison to the prior year’s
figure of £0.9m (before IAS19 financing cost of £0.2m).
The reduction reflected the receipt of cash following the
completion of the sale of the IT Solutions business in
December 2007.
The Group’s effective tax rate for the year ended 31 March
2008, calculated on the basis of profit before taxation from
ongoing activities excluding the Group’s share of post-tax
profit from associates was 41.9% (2007: 35.2%). The
relatively higher rate reflects unrelieved losses in some
Continental European companies as well as the adjustment
of deferred tax balances to the new lower rate of
corporation tax in the United Kingdom.
The table below explains the effect of the Group’s disposed
activities on the results.
9 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
2008 2007
Before tax Tax After tax Before tax Tax After tax
£m £m £m £m £m £m
Trading profit for the year
ITS 1.7 (0.8) 0.9 4.7 (1.4) 3.3
AC&R –– – 0.4 (0.2) 0.2
Profit on disposal
ITS 29.1 (5.4) 23.7 –– –
AC&R –– – 6.0 (0.1) 5.9
Provision for retained
obligations
ITS (3.5) 0.8 (2.7) –– –
AC&R –– – (1.8) 0.5 (1.3)
Total trading assets 27.3 (5.4) 21.9 9.3 (1.2) 8.1 “RETURN ON AVERAGE CAPITAL EMPLOYED
OF THE GROUP’S ONGOING ACTIVITIES WAS
31% FOR THE YEAR TO 31 MARCH 2008 AS
COMPARED TO 29% FOR THE YEAR BEFORE.”
FINANCE DIRECTOR’S REVIEW CONTINUED
“RETURN ON AVERAGE CAPITAL EMPLOYED
OF THE GROUP’S ONGOING ACTIVITIES WAS
31% FOR THE YEAR TO 31 MARCH 2008 AS
COMPARED TO 29% FOR THE YEAR BEFORE.”
The provisions for retained obligations referred to in the
table above cover certain obligations of the disposed
activities which were retained by the Group following their
disposal. These obligations represent costs relating to the
impairment of IT systems, properties and people. As
explained in the circular to shareholders dated 28 September
2007 which sought approval for the disposal of that
business, in the case of ITS these are estimated to amount in
aggregate to approximately £3.5 million.
The Group purchased the minority interest in Computer
Parts International Ltd, which is part of the Parts Services
division, in October 2006 and hence the minority interest in
the Group’s profit ceased to arise from that time onwards.
Acal’s earnings per share from ongoing activities before
exceptional items, were 14.5p for the year ended 31 March
2008 as compared to 12.7p for the previous year. Basic
earnings per share, including disposed activities were 97.5p
(2007: 44.4p).
The interim and proposed final ordinary dividends for the
year to 31 March 2008 will absorb £5.8m (2007: £5.8m).
These are covered 4.4 times (2007: 2.0 times) by basic
earnings including disposed activities and 0.7 times (2007:
0.6 times) by earnings from ongoing activities before
exceptional items.
WORKING CAPITAL AND BALANCE SHEET
The Group continues to place particular emphasis on the
management of working capital. For this purpose it uses a
model which compares each item of trading assets to the
three-month moving average of sales (TMMA). The table
below shows the target model in comparison to the actual
achievement.
The above table shows, for example, that our target is for
stock to represent 1.4 months of sales and the actual level of
stock at 31 March 2008 represented 1.3 months (2007: 1.2
months) of sales.
As reported last year the level of working capital at 31
March 2007 had benefited from a number of short-term
factors which were not sustainable and reversed in the
period after the year-end. This effect was estimated to have
10 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
31 March 31 March
Target 2008 2007
Ongoing activities TMMA ratio TMMA ratio TMMA ratio
Trading fixed assets 0.5 0.4 0.6
Current assets:
Stock 1.4 1.3 1.2
Debtors 2.2 2.4 2.2
Current liabilities:
Creditors (2.0) (2.5) (2.2)
Tax (0.1) (0.3) (0.2)
Total trading assets 2.0 1.3 1.6
Note: This trading assets model excludes goodwill, investments,
non-current tax assets, net debt/cash and long-term liabilities. amounted to around £4m to £5m and was reflected in the
net debt of £5.4m at that time. In the year to 31 March
2008, the TMMA ratio for creditors has increased as a result
of provisions, particularly relating to retained obligations of
ITS, although the ratio for underlying creditors has reduced.
The increase in the ratio for debtors reflects a higher level of
sales in the last two months of the year.
The Group’s debt is provided principally under bilateral bank
facilities negotiated centrally in the UK and locally in the
territories where Acal operates. There are committed
facilities of £25m available to the Group as well as
uncommitted facilities which are used mainly for short-term
working capital requirements.
Capital expenditure of the Group’s ongoing activities for the
year ended 31 March 2008 was £1.1m (2007: £1.4m). The
charge to profit in respect of depreciation and amortisation
of fixed assets amounted to £4.3m (2007: £2.2m) for the
same period, the increase from last year largely representing
the exceptional impairment of IT systems arising from the
disposal of ITS.
It has always been Acal’s policy that its pension schemes
should be of the defined contribution type so that the extent
of the Group’s financial liabilities can be clearly ascertained.
However, when Sedgemoor Limited, then a listed public
company, was acquired in June 1999, it brought with it
certain defined benefit schemes, the principal one of which
was the Sedgemoor Group Pension Fund (together “the
Sedgemoor Scheme”). Soon after acquisition the Sedgemoor
Scheme was curtailed and all future service accrual ceased. A
triennial actuarial valuation of the Sedgemoor Scheme was
conducted as at 31 March 2006.
At 31 March 2008 the gross pension liability under IAS19
was £3.8m (2007: £7.4m) and net of the relevant deferred
tax was £2.7m (2007: £5.2m). The improvement over the
year reflects mainly an increase in bond yields, and hence
discount rates, as well as the contributions made.
Shareholders funds at 31 March 2008 amounted to
£100.7m (2007: £75.8m), the improvement primarily
reflecting the profit on the disposal of the ITS business. On
the same date there were net cash balances of £25.6m
(2007: net debt of £5.4m) reflecting the receipt of the
proceeds of the sale of the ITS business.
RETURN ON CAPITAL EMPLOYED
Return on average capital employed of the Group’s ongoing
activities, which is calculated using operating profit before
exceptional items and net assets excluding goodwill and net
cash or net debt, was 31% for the year to 31 March 2008 as
compared to 29% for the year before.
JIM VIRDEE
FINANCE DIRECTOR
2 JUNE 2008
11 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008 12 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
DIRECTORS
AUDIT COMMITTEE
E A Barton
G J Williams
REMUNERATION COMMITTEE
G J Williams
E A Barton
R J Moon
NOMINATION COMMITTEE
R J Moon
E A Barton
G J Williams
A J Laughton
R J MOON NON-EXECUTIVE CHAIRMAN
Joined the Board in September 2004 and became Chairman
in April 2005. He was formally a director of Racal Electronics
plc and Chief Executive of Thales plc. He holds non-executive
positions in a number of companies.
A J LAUGHTON CHIEF EXECUTIVE
Founded his first electronic component business in 1975.
This became the forerunner of Centre Industries which in
turn became part of Acal in 1987. Initially he was Chief
Operating Officer, then Managing Director and has been
Chief Executive since August 2001.
J S VIRDEE FCA MA MSc FINANCE DIRECTOR
Was director of Kleinwort Benson Limited (now Dresdner
Kleinwort Wasserstein) until 1989. Before joining Acal in
1993, he was finance director of Grosvenor Estate Holdings
and Sycamore Taverns Limited.
E A BARTON MA NON-EXECUTIVE DIRECTOR
Appointed August 2002, was a director of 3i plc between
1986 and 1999. He has experience as a Non-executive
Director across a number of public and private companies.
G J WILLIAMS MBA CA NON-EXECUTIVE DIRECTOR
Appointed December 2003, gained his early business
experience in private equity with Charterhouse and
Barclays Private Equity, both in the UK and France. He
was on the Board of Hays plc for 19 years both as a private
and public company. 13 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
FINANCIAL CONTENTS AND CORPORATE INFORMATION
SECRETARY AND REGISTERED OFFICE
N Rowe MA LLM ACIS
2 Chancellor Court
Occam Road
Surrey Research Park
Guildford
Surrey GU2 7AH
Registered number 2008246
STOCKBROKERS
JPMorgan Cazenove
PRINCIPAL BANKERS
Barclays Bank PLC
Lloyds TSB Bank plc
AUDITORS
Ernst & Young LLP
REGISTRARS
Equiniti Limited
FINANCIAL CALENDAR 2008/2009
Annual General Meeting 24 July 2008
RESULTS
Interim report for the six months
to 30 September 2008 Late November 2008
Preliminary announcement
for the year to 31 March 2009 Early June 2009
Annual Report 2009 Late June 2009
DIVIDEND PAYMENTS
Final dividend 2007/2008 29 July 2008
Interim dividend 2008/2009 Late January 2009
Final dividend 2008/2009 Late July 2009
FINANCIAL CONTENTS
Directors’ report 14
Board report on corporate governance 16
Directors’ remuneration report 20
Corporate social responsibility 24
Statement of directors’ responsibilities 25
Report of the auditors – Group 27
Consolidated income statement 28
Consolidated statement of recognised
income and expense 29
Consolidated balance sheet 30
Consolidated cash flow statement 31
Notes to the group financial statements 32
Report of the auditors – Company 64
Company balance sheet 65
Notes to the company financial statements 66
Five year record 71
Principal locations 72 14 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
The Directors present their Annual Report with the audited financial statements for the year ended 31 March 2008.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
Acal plc is the parent company of a sales, marketing and services group with two divisions: Electronics, and Parts
Services. During the year the Group disposed of its IT Solutions business to Avnet Inc. Further details of the disposal are
set out in note 12 to the financial statements. There were no other major changes to the Group’s activities during the
year under review and there have been no such changes since the end of that year. On a regular basis the Board
reviews all businesses within the Group to ensure that its strategy is being delivered and to examine other opportunities
to enhance shareholder value. At the date of this report the Board had taken no decisions which could result in any
significant changes in activities during the current financial year.
The key measures of the performance of the Group relate to the level of sales, gross margins, net margins and the
return achieved on the capital employed.
During the year the Group’s turnover on ongoing activities decreased by 3% over the prior year whilst profit before tax
on ongoing activities before exceptional items increased by 19.6%. Return on average capital employed on ongoing
activities was 31% as compared to 29% in the previous year. The balance sheet as at the year-end and the equivalent
statement as at 31 March 2007 are shown on page 30. Further detailed analyses of the development and performance
of the Group’s businesses over the year are contained in the Chairman’s Statement, Chief Executive’s Review and
Finance Director’s Review on pages 2 to 11.
The principal risks and uncertainties affecting the Group are:
a) the state of the markets in which it operates and the competitive pressures within those markets;
b) the strength of relationships with major suppliers and customers and
c) the ability to recruit, retain and motivate key employees.
In developing its strategy and plans Acal takes full account of the need to minimise any adverse impact of the risks
associated with its business. Acal’s relationships with suppliers and customers and the skills of the employees are
fundamental to the development and growth of its business.
The Group is committed to the principle of equal opportunity in employment. Employment policies are fair, equitable
and consistent with the skills and abilities of the employees and the needs of the Group’s business. These policies
ensure that everyone is accorded equal opportunity for recruitment, training and promotion. The Group remains
supportive of the employment and advancement of disabled persons.
It is Group policy to communicate with employees on major matters to encourage them to take an interest in the affairs
of their employing company and the Group. It is the responsibility of each of the Group’s operating companies to
develop effective arrangements in this regard.
Acal plc recognises the importance of its responsibilities in relation to the environment as well as to its employees and
further information is included in the corporate social responsibility statement on page 24.
RESULTS
The results of activities of the Group for the year to 31 March 2008 are set out in detail in the consolidated income
statement on page 28. A review of the results and future developments is included in the Chairman’s Statement, the
Chief Executive’s Review and the Finance Director’s Review.
The Directors recommend a final dividend of 14.7p per share (2007: 14.7p). The final dividend together with the interim
dividend of 7.2p (2007: 7.2p) makes a total dividend for the year of 21.9p per ordinary share (2007: 21.9p). The total
dividends on ordinary shares will absorb £5,786,000 (2007: £5,786,000).
The Directors have taken all steps that they ought to have in order to make themselves aware of any relevant audit
information and to establish that the Company’s auditors are aware of that information. As far as the Directors are
aware there is no relevant audit information of which the Company’s auditors are unaware.
FIXED ASSETS
The Directors are of the opinion that the market value of land is not significantly different from its book value.
DIRECTORS
The current Directors of the Company are detailed in the Corporate Governance Report on page 16. Directors’
remuneration, service contracts and interests are disclosed in the Directors’ Remuneration Report on pages 20 to 23.
The Articles of Association of the Company contain an indemnity in favour of the Directors which is a Qualifying Third
Party Indemnity within the meaning of s. 309 (c) of the Companies Act 1985.
ISSUE OF SHARES UNDER SHARE OPTION SCHEMES
No shares were issued during the year under the Group’s executive share option scheme.
DIRECTORS’ REPORT 15 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
SUBSTANTIAL SHAREHOLDINGS
As at 2 June 2008 the Company had been notified of the following major shareholdings (in addition to those of
Mr A J Laughton which are shown in the Directors’ Remuneration Report) equal to or in excess of three per cent of
the issued share capital.
Holdings of
ordinary shares (5p)
Aberforth Partners LLP 4,256,174
J A H Curry 2,190,000
Artemis Investment Management Ltd 1,798,519
Capital Group International Inc 1,715,549
Liontrust Investment Services Ltd 1,599,939
M&G Investment Funds 3 1,400,000
In certain cases the holdings above are for investment management clients of the groups specified.
DONATIONS
During the year £1,000 (2007: nil) was donated by Group companies for charitable purposes. No contributions
(2007: £nil) were made for political purposes.
AUDITORS
A resolution is to be proposed at the forthcoming Annual General Meeting for the re-appointment of Ernst & Young LLP
as auditors of the Company.
SUPPLIER PAYMENTS
The Group makes arrangements for payment of suppliers in the ordinary course of its business, taking into account local
good practice. It is the Group’s policy to adhere to agreed arrangements, which can vary from supplier to supplier and
territory to territory, when goods or services have been delivered satisfactorily.
Trade creditors of the Group at 31 March 2008 were equivalent to 79 days purchases (2007: 69). The Company has no
trade creditors.
ADDITIONAL INFORMATION FOR SHAREHOLDERS
The following provides the additional information required for shareholders as a result of the implementation of the
Takeover Directive into UK Law.
As at 31 March 2008 the Company’s issued share capital consisted of 26,418,354 ordinary shares of 5p each. On a
show of hands at a general meeting of the Company every holder of ordinary shares present in person is entitled to
vote on a show of hands and on a poll every member present in person or by proxy and entitled to vote has one vote
for every ordinary share held. There are no restrictions on the transfer of ordinary shares in the Company other than
those that may be imposed by law or regulation from time to time.
The Company’s Articles of Association may be amended by a special resoluition at a general meeting of the
shareholders. Directors are appointed by ordinary resolution at a general meeting of the shareholders. The Board can
appoint a Director but anyone so appointed must be elected by an ordinary resolution at the next general meeting. Any
Director who has held ofice for more than three years since their last appointment must offer themselves for re-election
at the next annual general meeting.
The Directors have power to manage the Company’s business subject to the provision of the Comapny’s Articles of
Association, law and applicable regulations. The Directors have power to issue and buyback shares in the Company pursuant
to the terms and limitations of resolutions passed by shareholders at each annual general meeting of the Company.
Directors’ interests in the share capital of the Company are shown in the table on page 22. Substantial shareholder
interests of which the Company has been notified are shown above.
The Company is party to a number of commercial agreements which, in line with normal practice in the industry, may be
affected by a change of control following a takeover bid. There are no agreements between the Company and its directors
or employees providing for compensation for loss of office of employment that occurs because of a takeover bid.
USE OF FINANCIAL INSTRUMENTS
A statement in relation to the use of financial instruments by the Group is shown in note 2 to the Accounts on page 54.
By order of the Board 2 Chancellor Court
N ROWE Occam Road
SECRETARY Surrey Research Park
2 JUNE 2008 Guildford
Surrey GU2 7AH
DIRECTORS’ REPORT CONTINUED 16 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
The Acal Group is committed to effective corporate governance and continues to operate principles and procedures that
are appropriate to its business. This statement describes how Acal applies the principles of the revised combined code
(the ‘Code’) by considering each of the main headings included within the Code. Acal complied with all provisions of
the Code throughout the year to 31 March 2008.
THE BOARD
Acal is led by a strong and experienced Board with a broad range of business and financial skills. Throughout the year
under review it consisted of Mr R J Moon as Non-Executive Chairman, Mr A J Laughton as Chief Executive, and
Mr J S Virdee as Finance Director together with Messrs E A Barton and G J Williams as Non-Executive Directors. The
size and composition of the Board is considered to be appropriate to the Group’s business at present although this is
kept under review by the Nomination Committee.
The Board operates within a framework of controls used to minimise the adverse impact of any risks, including a formal
schedule of matters reserved for its decision. These are matters of a material nature and include the determination of
the Group’s overall strategy, the approval of financial statements, dividends, significant accounting policies, annual
operating plans, significant financial matters, major capital expenditure and any litigation of a material nature. The
schedule is reviewed on a regular basis. The Non-Executive Directors challenge management proposals where
appropriate and carefully monitor management performance and reporting throughout the year.
Certain matters are as detailed below, delegated to the Audit, Remuneration and Nomination committees. The Board
also has a General Purposes Committee consisting of any two directors of the Company which has delegated authority
to approve certain defined and routine matters between Board meetings. The Board met formally on seven occasions
during the year to 31 March 2008, with all Directors attending all meetings with the exception of one meeting which
Mr. G. J. Williams was unable to attend. All Directors attended the meetings of all committees on which they serve.
The Company maintains appropriate Directors’ and Officers’ liability insurance.
CHAIRMAN AND CHIEF EXECUTIVE
The Company has both a Chairman and Chief Executive. There is a clear division of responsibilities which has been
agreed by the Board and is available from the Company on request. The Chairman is responsible for running the Board
which includes the operation of the Board’s overall procedures, providing a forum for constructive discussion and
ensuring receipt of clear and timely information. The Chief Executive is responsible for the management of the Group’s
businesses and reporting their progress to the Board. Major decisions have to be made by the Board as a whole, and no
one individual has unfettered power of discretion.
BOARD BALANCE AND INDEPENDENCE
As noted above the Board currently comprises two Executive Directors and, including the Chairman, three Non-Executive
Directors. Each Director has a role, and no individual or small group of individuals determines the Board’s decision-making.
No Non-Executive Director who served during the year:
• has been an employee of the Group within the last five years;
• has, or has had within the last three years, a material business relationship with the Group;
• receives remuneration other than a director’s fee;
• has close family ties with any of the Group’s advisers, directors or senior employees;
• holds cross-directorships or has significant links with other directors through involvement in other companies or
bodies; or
• represents a significant shareholder; and
• has served on the Board for more than nine years.
The Non-Executive Directors of the company are, therefore, considered to be independent.
Mr E A Barton is the Senior Independent Director and is available to shareholders should they have concerns that
cannot be resolved through other channels.
The Chairman meets with the Non-Executive Directors, but without the Executive Directors present, as and when
required. The Non-Executive Directors meet when required without the Chairman present and, as stated below, the
Senior Independent Director leads the process of appraising the Chairman’s performance in conjunction with the other
Non-Executive Director.
APPOINTMENTS TO THE BOARD
The Nomination Committee leads the process for ensuring that an appropriate balance of skills is retained on the Board
and appropriate succession planning is in place.
The Nomination Committee is chaired by Mr R J Moon. The Company’s two Non-Executive Directors and the Chief
Executive are the other members of the Committee.
BOARD REPORT ON CORPORATE GOVERNANCE 17 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
Before any appointment to the Board is considered, a job specification is prepared and agreed by the Nomination
Committee. Unless the appointment is as an Executive Director for which a suitable candidate is available from within
the Group, appropriate executive search or other organisations with databases of candidates are consulted before a
short-list of suitable candidates is produced for agreement by the Nomination Committee. Candidates meet all
members of the Nomination Committee which then makes recommendations to the Board. All members of the Board
would usually meet with the relevant candidate before an appointment is finally made. No appointments were,
however, made in the year under review.
On the appointment of Mr R J Moon as Chairman an assessment was made of the time commitment expected and
Mr Moon’s other significant commitments. Mr Moon continues to hold non-executive positions with Planet Holdings
Limited, Oxford Bio-Signals Limited, t+ Medical Holdings Limited and Software Radio Technology plc.
The Nomination Committee met formally once during the year. The terms of reference for the Nomination Committee
are available on request.
INFORMATION AND PROFESSIONAL DEVELOPMENT
Papers are circulated well in advance of Board and Committee meetings, and Directors are invited to request such
further information as they may require ensuring that proper consideration can be given to all matters. Between
meetings, Directors are kept abreast of progress by circulation of monthly reports together with ad hoc meetings and
briefings as and when required. Copies of management committee meetings, press announcements and stockbrokers’
reports to which the Company has access, are also circulated to the Board. A procedure is in place whereby directors
may have access to independent professional advice at the Company’s expense and directors have access to the advice
and services of the Company Secretary. The appointment or removal of the Company Secretary would be a matter for
the Board as a whole. An induction process is in place for any new director joining the Board which would include
meeting with the Company’s senior management and visits to key locations as well as a comprehensive briefing pack.
PERFORMANCE EVALUATION
During the year the Board repeated the process of evaluating its own performance, together with that of its
Committees and individual Directors, including the Chairman. Each Director is asked to prepare an appraisal of each of
these areas. The Chairman co-ordinates discussion with individual Directors as to their performance and the Senior
Independent Director co-ordinates discussion with the Chairman. The results of the process are then summarised for
presentation to the Board and areas for improvement identified. These are then discussed by the Board as a whole and
any necessary action taken.
RE-ELECTION OF DIRECTORS
The Company’s Articles of Association require that one third of the Directors retire by rotation each year and seek
re-election. In addition, any Director appointed by the Board must retire and seek re-election at the next Annual General
Meeting. It is Acal’s policy to operate these provisions in a manner which ensures that each Director faces re-election at
least once every three years.
At the next Annual General Meeting of the Company, resolutions will be proposed for the re-election of Mr E A Barton
and Mr A J Laughton. Having taken into account the formal evaluation of their performance, the Board believes that
both make an effective contribution to the Board, demonstrate commitment to their roles and can be recommended for
re- election. Biographical details are shown on page 12.
THE LEVEL AND MAKE-UP OF DIRECTORS’ REMUNERATION
The level and make-up of Directors’ remuneration is set out in the Directors’ Remuneration Report. As this shows, a
proportion of Executive Directors’ remuneration is linked to corporate performance through the Annual Bonus Scheme
and share incentive schemes.
PROCEDURE ON BOARD REMUNERATION
The remuneration of the Executive Directors is the responsibility of the Remuneration Committee, as is more fully
described in the Directors’ Remuneration Report. The remuneration of the Non-Executive Directors is determined by the
Non-Executive Directors’ Remuneration Committee which consists of the Executive Directors. No Director is involved in
deciding his own remuneration.
FINANCIAL REPORTING
The Directors have acknowledged in the Statement of Directors’ Responsibilities their responsibility for preparing the financial
statements of the Company and the Group. The Auditors have included in their report a statement of their responsibilities.
The Directors are also responsible for the publication of the interim report of the Group, covering the first six months
of the year, which in their opinion provides a balanced and understandable assessment of the Group’s financial
performance and position. In accordance with the requirements of the Transparency Directive, the Directors also issue
an Interim Management Statement twice in each financial year.
Having taken into account the cash flow projections of the Group and the banking facilities available to it, the Directors
are satisfied that it is appropriate to prepare the financial statements on a going concern basis.
BOARD REPORT ON CORPORATE GOVERNANCE CONTINUED 18 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
INTERNAL CONTROLS
The Combined Code includes a requirement that the Board reviews the Group’s system of internal controls. This
requirement covers all controls including operational, compliance and risk management as well as financial controls.
Formal guidance on the review of non-financial controls was published by the Institute of Chartered Accountants in
England & Wales in September 1999 and subsequently revised in October 2005, following which the Board approved a
framework for the implementation of this guidance. The relevant procedures have been in place throughout the year
ended 31 March 2008 and up to the date of this annual report.
The Board has overall responsibility for the Group’s system of internal controls and regularly reviews the effectiveness of
the system. Whilst no system of controls can provide absolute assurance against material misstatement or loss, the
Group’s system is designed to provide reasonable assurance that any problems are identified on a timely basis and dealt
with appropriately. In establishing and reviewing the system of internal controls, the Audit Committee, on behalf of the
Board, has regard to the significance of the risks involved, the likelihood of a loss being incurred and the costs of the
relevant controls.
The foundation of the Group’s system of internal controls is the value which it places on the quality and integrity of its
employees. Its principal components are:
• a clearly defined organisation structure with short and clear reporting lines;
• an ongoing process for the identification, regular review and management of the principal risks and issues affecting
the business, both at Group and operating levels;
• a regular review of the principal suppliers and customers of the Group, and how each impacts upon the Group’s
business;
• a comprehensive planning process which starts with a strategic plan and culminates in an annual budget;
• regular forecasting throughout the year of orders, sales, profitability, cash flow and balance sheets;
• regular review of actual performance against budget and forecasts;
• clearly defined procedures for the authorisation of major new investments and commitments;
• a requirement for each operating company to maintain a system of internal controls appropriate to its own local
business environment.
In addition to the above, and on an annual basis, all operating companies undertake a comprehensive review of the
effectiveness of their internal controls. The results of these reviews are then consolidated before being considered by
the Audit Committee and the Board.
The above procedures encompass Acal plc and its subsidiary companies, but do not include the Group’s associated
undertakings which operate their own individual systems of internal control. Acal endeavours to persuade associated
undertakings to comply with similar standards of internal control to its subsidiaries.
The Board receives regular submissions from management concerning the matters set out above and other matters
relevant to internal controls and the identification, evaluation and management of risk. In addition, the Audit
Committee, on behalf of the Board, has conducted a specific annual review of the effectiveness of the Group’s system
of internal controls and risk management. The Group has embedded internal control and risk management into the
operations of the business and continues to deal with areas of improvement which come to the attention of
management and the Board. The Audit Committee, on behalf of the Board, has further considered the need for
separate internal audit personnel and concluded that this is not necessary at present as the objectives, processes and
responsibilities of such a function have been built into the review, control and monitoring roles of financial managers
who are based at Head Office and are independent of operating entities for which they have responsibility. In addition,
the external auditors report to the Audit Committee on any inconsistencies between what they find in the course of
their work and the internal control system of the Group.
AUDIT COMMITTEE AND AUDITORS
The Audit Committee is comprised of Mr E A Barton, who is the Chairman, together with Mr G J Williams. The Finance
Director attends meetings although no Executive Director has a right of attendance. The Board is satisfied that both
members of the Committee have recent and relevant financial experience. In addition Mr G. J. Williams is a qualified
chartered accountant.
The Committee is responsible for reviewing the scope and results of the audit, the accounting policies and systems of
internal control of the Group as well as the effectiveness and cost-efficiency of the audit. In addition it considers and
monitors the independence and objectivity of the auditors as well as the extent of any non-audit services provided by
the auditors and the need or otherwise for an internal audit function. The interim statement, the preliminary
announcement of results and the annual financial statements are considered by the Audit Committee prior to their
approval by the Board. The Chairman of the Audit Committee maintains direct communication with the external
auditors, independently of the management of the Company.
BOARD REPORT ON CORPORATE GOVERNANCE CONTINUED 19 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
The Audit Committee met on three occasions during the year and its principal activities during the period included:
• a review of the interim and full year results;
• a review of the internal control and risk management systems of the Company;
• a review of the scope and results of the external audit;
• ensuring the continued independence and objectivity of the external auditors, including the understanding of the
external auditors’ own standards and procedures for maintaining the independence and reviewing the level of
non-audit services provided by the auditors in order to ensure that these were not significant enough to prejudice
their independence and objectivity;
• a review of the need for an internal audit function;
• reviewing the performance of the external auditors and making a recommendation as to their re-appointment.
• a review of arrangements whereby staff may raise, in confidence, any concern they may have about possible
improprieties.
Part of at least one meeting a year is held with only representatives from the external auditors’ present providing an
opportunity for any concerns to be raised without executive management present.
The Chairman of the Audit Committee reports to the Board on any significant matters arising from the activities of the
Committee.
The only non-audit services provided by Ernst & Young LLP relate to certain aspects of taxation. The Committee has
formed the view that given the size of the Company and the detailed level of understanding of the Group’s business
that is required, the provision of these specific tax services by a third party is inappropriate. As stated above, however,
the matter is monitored by the Committee to ensure that Auditors’ objectivity and independence is not prejudiced.
The Audit Committee has written terms of reference which are available on request.
DIALOGUE WITH INSTITUTIONAL SHAREHOLDERS
The Board believes that it is an important part of its responsibilities to maintain effective and timely communications
with the Company’s shareholders and institutional investors. The Company’s Annual Report includes a statement from
the Chairman, a review by the Chief Executive and a financial review by the Finance Director. At the half year an Interim
Report is published.
Throughout the year regular meetings are held with institutional shareholders as well as stockbroking analysts. These
meetings would include discussion of governance and strategy as required and it is the responsibility of the Chairman to
ensure that shareholder views are communicated to the Board as a whole. Investor relations information as well as
presentations and news releases are made available on the Company’s website (address: www.acalplc.co.uk). Members
of the Board and the Chairman of the Remuneration and Audit Committees are available at the Annual General
Meeting to answer any questions and throughout the year the Company responds to any questions from shareholders
generally. The Senior Independent Director is available to deal with issues which cannot be resolved through the
Chairman or executive management.
Any feedback received by the Company from meetings with institutional shareholders and stockbroking analysts is
discussed at financial management meetings and the relevant minutes are circulated to the Board. Periodically the
Company’s stockbrokers and public relations advisers follow up meetings held with institutional investors and
stockbroking analysts in order to try and obtain feedback on these meetings which may not have been provided directly
to the Company. The results of such follow-up discussions are circulated to the Board.
ANNUAL GENERAL MEETING
The level of proxy voting together with the number of votes cast for and against each resolution together with
abstentions will be made available at the AGM after voting is completed on a show of hands and will be published on
the Company’s website. A separate resolution has been presented on each substantially separate issue and the
Chairman of each Board Committee will attend the meeting. The proxy form relating to the AGM includes an option for
votes to be withheld. Notice of the meeting has been sent to shareholders at least 20 working days before the meeting.
BOARD REPORT ON CORPORATE GOVERNANCE CONTINUED 20 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
This report has been prepared in accordance with the provisions of Schedule 7A of the Companies Act 1985. It also meets
the relevant requirements of the Listing Rules of the UK Listing Authority and describes how the Board has applied the
principles of Good Governance relating to Directors’ remuneration. As required by regulation, a resolution to approve the
report will be proposed at the Annual General Meeting of the Company at which the financial statements will be approved.
UNAUDITED INFORMATION
REMUNERATION COMMITTEE
The Remuneration Committee comprises Mr G J Williams as Chairman of the Committee, Mr E A Barton, and
Mr R J Moon. The Committee determines the remuneration of Executive Directors on behalf of the Board and keeps
remuneration payable to other members of the senior management team under review. The Committee held four
formal meetings during the year to 31 March 2008, and its terms of reference are available on request.
The Committee takes advice from external consultants as and when it is deemed necessary. During the year under
review the Committee took advice from Halliwell Consulting who they appointed for this purpose. It is the Committee’s
policy that any consultants that are used do not provide other services to the Acal Group. The Committee also took
advice from the Group Chief Executive in relation to the remuneration of other senior executives in the Group.
Remuneration of the Executive Directors centres on ensuring that packages are sufficiently competitive in both fixed and
variable terms to attract, retain and motivate senior management of the right calibre. To achieve this, it is necessary to
provide packages that reflect individual experience and performance as well as taking account of local market practice
and the specific characteristics of the Company. The ability to recruit high quality staff in new and higher technology
areas is critical to the Group’s growth. The four main elements of the remuneration package for Executive Directors
and senior management are:
• Basic annual salary and benefits
• Annual bonus payments (short-term incentives)
• Equity Incentive Schemes (long-term incentives)
• Pension arrangements
Each of the above is described in detail below.
Executive Directors may accept non-executive appointments outside the Company with the consent of the Board. The
Board requires to be satisfied that the time commitment involved is consistent with the responsibilities of the relevant
Executive Director. Where fees from such appointments are not required to be accounted for to the Company, the
relevant time commitment is taken into account in determining the relevant director’s remuneration.
The remuneration of the Non-Executive Directors is determined on behalf of the Board by the Non-Executive Directors’
Remuneration Committee. The Committee consists of Mr A J Laughton as Chairman and Mr J S Virdee. Fees paid to
Non-Executive Directors are set out in the audited section below.
As outlined below, shareholders are being asked to approve a new Long Term Incentive Plan in which directors and
other senior employees will participate. Other than this it is not envisaged that remuneration policy for the year to
31 March 2008 will differ materially from that which applied during the year under review.
SALARIES, FEES AND BENEFITS
An Executive Director’s basic salary is reviewed by the Committee prior to the beginning of each year and when an
individual changes position or responsibility. In deciding appropriate levels, the Committee considers the role and
responsibilities of the relevant Director as well as his experience and performance, and if considered necessary takes
appropriate external advice. In addition to basic salary, the Executive Directors receive certain benefits-in-kind, principally
comprising a car or car allowance, life assurance and private medical insurance.
Fees for Non-Executive Directors are determined by the Non-Executive Directors’ Remuneration Committee having regard
to fees paid to Non-Executive Directors in other similarly sized UK quoted companies, the time commitment and the
responsibilities of the role. Non-Executive Directors cannot participate in any of the Company’s share option schemes.
SHORT-TERM INCENTIVE ARRANGEMENTS
The Company’s policy is that a substantial proportion of the Executive Directors’ remuneration should be performance-
related. The Committee reviews and determines the financial objectives that must be met before the start of each
financial year.
Whilst the principal long-term measure of shareholder interests is total shareholder return, the Company believes that for
the purposes of determining annual bonuses, account has to be taken of those aspects of trading performance which
senior management can influence by their actions. Thus annual bonuses depend on specific targets including growth in
sales and profits as well as the achievement of other objectives which may be relevant for the year in question. Bonus
payments to Executive Directors are capped at a level agreed by the Remuneration Committee from time to time.
SHARE INCENTIVE SCHEMES
The Group has operated an approved and an unapproved executive share option scheme, the rules of which are similar
in all material respects. The grant of options to Executive Directors and senior management is recommended by the
Committee on the basis of their contribution to the Group’s success. The exercise of options is subject to the meeting of
DIRECTORS’ REMUNERATION REPORT performance targets set by the Committee. Although there will be variations in numbers of options granted from year
to year depending upon circumstances, it is Acal’s policy to grant options to employees on a phased and regular basis
and not in one block. However, at certain times, particularly when recruiting new people or to reward major
achievements, it has been necessary to apply the policy flexibly. It is has also been Acal’s policy not to grant executive
share options at a discount to market price.
The performance criterion that must be met in relation to the executive share option was determined when the relevant
schemes were established, and requires that the growth in the Company’s earnings per share in any three-year period
before exercise must have exceeded the percentage increase in the Retail Price Index over the same period plus two per
cent per annum. This criterion has been kept under review.
At the Annual General Meeting shareholders will be asked to approve a new Long Term Incentive Plan (‘LTIP’) which will
replace the Company’s existing equity incentive arrangements. The proposed LTIP will involve a conditional award of
shares or grant of a nil-cost option. It is proposed that future equity incentives are delivered through the LTIP rather
than a share option scheme as the former provides a better link between management performance and reward whilst
encouraging key executives to build and maintain a significant shareholding.
In each year, an individual would be eligible to receive an award of shares worth up to 150 per cent of base salary.
Subject to this limitation, actual grant levels will be determined by the Remuneration Committee.
Half of the awards will be subject to the Company’s average Return on Capital Employed performance over a three-year
period and half of the awards will be subject to the Company’s Total Shareholder Return performance compared to the
FTSE SmallCap Index. The first awards under the LTIP will, subject to shareholder approval, be made in July or August 2008
following the Annual General Meeting. In subsequent years they would normally be made following the announcement
of results. In 2008, the Committee intends to make awards under the LTIP with a maximum value of 100% of salary.
Full details of the LTIP are contained in the Notice of Annual General Meeting sent with the Report and Accounts.
PENSION ARRANGEMENTS
Under the terms of the Group’s pension scheme the Company makes contributions of one per cent of pensionable
salary plus the amount of an employee’s own contribution provided the Company’s contribution does not exceed 6.5%
of pensionable salary. Pensionable salary generally includes payments made to employees under annual bonus schemes.
Given that the scheme operates on a defined contribution basis and that the Company’s maximum percentage
contribution of 6.5% is relatively low, it is considered that the inclusion of bonus payments for pension purposes, both
for Directors and employees, is not unreasonable. Bonuses paid to Executive Directors in the year under review were
not, however, pensionable. In recognition of long service, special contributions of £10,000 and £8,000 were made by
the Company in respect of Mr A J Laughton and Mr J S Virdee respectively in the year to 31 March 2008. Mr J S Virdee
participated in the Group’s pension scheme throughout the year under review. In respect of Mr A J Laughton the
Company has made and will continue to make such contributions to a personal pension arrangement established by
Mr Laughton as it would otherwise have made to the Group pension scheme.
PERFORMANCE GRAPH
The following graph compares the Company’s performance, measured by total shareholder return, with the performance
of the FTSE mid 250 index also measured by total shareholder return. The FTSE mid 250 index is made up of companies in
the FTSE 350, excluding those in the FTSE 100 index. Total shareholder return measures share price growth with dividends
deemed to be reinvested gross on the ex-dividend date and the data points are shown using a moving one-month
average. Although Acal plc is not a member of the FTSE 250, it is considered to be a reasonable comparator.
TOTAL SHAREHOLDER RETURN FOR PERIOD 1 APRIL 2003 TO 31 MARCH 2008
21 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
DIRECTORS’ REMUNERATION REPORT CONTINUED
350
300
250
200
150
100
50
0
2003 2004 2005 2006 2007 source: Thomson Datastream
Acal plc
FTSE 250
TSR index at 1.4.03 =100 22 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
DIRECTORS’ CONTRACTS
It is the Company’s policy that Executive Directors should have service contracts incorporating a maximum period of one
year’s notice. However, it may be necessary occasionally to apply this policy flexibly and offer longer initial notice periods
to new Directors. Any termination payments are not agreed in advance and are determined in accordance with the
director’s contractual rights taking account of the circumstances and the director’s duty to mitigate loss.
Mr A J Laughton and Mr J S Virdee each has a service contract dated 21 March 2002
incorporating a notice period of one year. The following letters of appointment are in place in relation to the
Chairman and Non-Executive Directors.
(i) An agreement with Synergie Business Limited for the provision of the services of Mr R J Moon dated 31 March 2005
which expires on 31 March 2009 and which may be terminated by six months notice.
(ii) An agreement with Mr E A Barton for his services dated 31 May 2008 which expires on 30 June 2009 and which
may be terminated by three months notice.
(iii) An agreement with Mr G J Williams for his services dated 29 September 2003 which expires on 30 June 2009 and
which may be terminated by three months notice.
Other than their service contracts, no contract of significance to which any member of the Acal Group is a party and in
which a Director is or was materially interested, subsisted at the end of, or during the year.
DIRECTORS’ INTERESTS
The interests of the Directors who served during the year (including family interests) in the shares of the Company were
as follows:
At 31 March 2008 At 31 March 2007
Ordinary shares (5p) fully paid Ordinary shares (5p) fully paid
Beneficial Non-beneficial Beneficial Non-beneficial
A J Laughton 1,400,900 – 1,400,900 –
J S Virdee 105,778 – 105,778 –
R J Moon 10,000 – 10,000 –
G J Williams 1,000 – 1,000 –
E A Barton 1,000 – 1,000 –
The interests of Directors in the shares of the Company at 2 June 2008 are unchanged from those at 31 March 2008.
AUDITED INFORMATION
The total amounts for Directors’ remuneration were as follows:
2008 2007
£ £
Fees 189,000 189,000
Salary and benefits 554,437 526,408
Performance-related bonuses 200,000 102,290
Money purchase pension contributions 57,799 51,720
Compensation for loss of office – –
1,001,236 869,418
DIRECTORS’ REMUNERATION REPORT CONTINUED 23 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
Details of the remuneration of Directors who served during the years ended 31 March 2008 and 31 March 2007 are as
follows:
Total emoluments Pension contribution
Salary 2008 2007
or fees Bonus Benefits 2008 2007 Total Total
£ ££ £ £ £ £
Executive directors
A J Laughton 310,000 111,111 16,590 437,701 377,760 34,143 30,953
J S Virdee 200,000 88,889 27,847 316,736 250,938 23,656 20,767
Non-executive directors
R J Moon* 131,000 –– 131,000 131,000 – –
G J Williams 28,000 –– 28,000 28,000 – –
E A Barton* 30,000 –– 30,000 30,000 – –
699,000 200,000 44,437 943,437 817,698 57,799 51,720
* The fees in respect of Mr R J Moon were paid to Synergie Business Limited a company in which he has an interest.
Mr A J Laughton was the highest paid Director (both including and excluding pension contributions) in the year ended
31 March 2008 (2007: Mr A J Laughton). No Director made any gain on exercise of share options during the year or in
the prior year.
Movements in the Directors’ holding of options under the Acal plc Executive Share Option Scheme during the year were
as follows:
Number Movements Number
held at during the year held at Exercise
Director 1.04.07 Granted Exercised Lapsed 31.03.08 Date of grant price When exercisable
A J Laughton 50,000 –– 50,000 – July 2000 517.5p July 2003 to July 2007
A J Laughton 34,000 –– – 34,000 July 2001 537.5p July 2004 to July 2008
A J Laughton 23,000 –– – 23,000 June 2002 586.5p June 2005 to June 2009
A J Laughton 20,000 –– – 20,000 June 2003 525.0p June 2006 to June 2010
A J Laughton 15,000 –– – 15,000 July 2004 480.0p July 2007 to July 2011
A J Laughton 15,000 –– – 15,000 June 2005 335.0p June 2008 to June 2012
A J Laughton 15,000 –– – 15,000 June 2006 367.5p June 2009 to June 2013
A J Laughton – 75,000 –– 75,000 June 2007 387.25p June 2010 to June 2014
J S Virdee 35,000 –– 35,000 – July 2000 517.5p July 2003 to July 2007
J S Virdee 18,000 –– – 18,000 July 2001 537.5p July 2004 to July 2008
J S Virdee 13,000 –– – 13,000 June 2002 586.5p June 2005 to June 2009
J S Virdee 12,000 –– – 12,000 June 2003 525.0p June 2006 to June 2010
J S Virdee 10,000 –– – 10,000 July 2004 480.0p July 2007 to July 2011
J S Virdee 10,000 –– – 10,000 June 2005 335.0p June 2008 to June 2012
J S Virdee 10,000 –– – 10,000 June 2006 367.5p June 2009 to June 2013
J S Virdee – 50,000 –– 50,000 June 2007 387.25p June 2010 to June 2014
The market price of the shares at 31 March 2008 was 163.50p and the range during the year ended on that date was
133p to 447.25p. The performance conditions in relation to the Acal plc Executive Share Option Scheme are described
in the unaudited section of the report above.
APPROVAL
This Directors’ Remuneration Report has been approved by the Board and signed on its behalf by
N ROWE
SECRETARY
2 JUNE 2008
DIRECTORS’ REMUNERATION REPORT CONTINUED While the management of Acal is primarily accountable to its shareholders, in managing the business it takes into
account all stakeholders in Acal including employees, customers and suppliers, as well as the local communities and
environment in which it operates. In a balanced way, without unnecessarily restricting the optimisation of returns, it
endeavours to identify and manage any risks to the value of Acal’s business from social, environmental and ethical
matters, and to take any opportunities presented by a sensible and considerate approach to such matters to enhance
shareholder value. The Board of Acal has adopted policies in relation to corporate social matters, and day-to-day
responsibility for implementation of these policies is delegated to the management of Acal’s operating companies. In
implementing these policies the Group endeavours to ensure that the cost of managing risks is proportionate to their
significance to Acal and its business partners. More specifically, Acal’s policies cover the following:
GENERAL
Management at all levels in the organisation is committed to taking account of its corporate social responsibility in its
actions and endeavours to show due respect for human rights and works to high standards of integrity and ethical
propriety. As a multinational organisation, Acal takes account of cultural differences between the various territories in
which it operates.
EMPLOYEES, HEALTH AND SAFETY
Acal provides equal opportunities to all employees and prospective employees, and does not discriminate on grounds of
colour, ethnic origin, gender, age, religion, political or other opinion, disability or sexual orientation.
Clear and fair terms of employment as well as a fair and competitive remuneration policy are put in place. Employees
are encouraged to develop their knowledge and skills and to progress their careers to the mutual benefit of themselves
and the companies they work for. It is the responsibility of management to ensure that they comply with all local
regulations including those relating to the employment of underage staff. Local business units are responsible for
developing and implementing effective arrangements for employee communication.
A great deal of importance is attached to the provision of clean, healthy and safe working conditions. In addition to
compliance with all local regulations, Acal promotes working practices which protect the health and safety of its
employees and other persons who come on to its premises. The Group endeavours to protect employees from and does
not tolerate any sexual, physical or mental harassment. Heath and safety matters are kept under regular review by local
management and by the Group management committees.
The Group operates a ‘whistle-blowing’ policy whereby employees may report in confidence any suspected wrongdoing.
BUSINESS RELATIONSHIPS
All Acal Group members seek to be honest, fair and competitive in their relationships with all customers and suppliers.
Every attempt is made to ensure that products and services are provided to the agreed standards and all reasonable
steps are taken to ensure the safety and quality of the goods and services provided. Payment is made to suppliers in
accordance with the agreed terms, the relevant goods or services having been satisfactorily delivered. It is Acal’s policy
that no one in the Group should offer or accept any bribes or other corrupt payments, engage in any anti-competitive
practices or knowingly be involved in any fraud or money laundering.
So far as it is able to and taking into account local cultural and regulatory differences, Acal encourages the
organisations and people with whom it does business to abide by principles of good practice in relation to their
corporate social responsibility.
COMMUNITY AND ENVIRONMENT
Each Acal Group company aims to be sensitive to the local community’s cultural, social and economic needs, and seeks
to ensure that its activities do not harm the communities as places to work and live in. The Group seeks to ensure that
its operations do not have a negative impact on the environment. Apart from compliance with all local environmental
regulations, Group companies endeavour to promote the effective management of natural resources and encourage
energy efficient as well as waste minimisation and recycling where economically viable means of doing so are available.
Although the vast majority of products Acal deals with are non-hazardous, where such products are involved it
minimises the environmental risks by use of appropriate labelling and technical information in conjunction with proper
training and procedures for the handling, storage and disposal of such products. The Group has implemented
procedures to ensure compliance with the Restriction of the Use of Hazardous Substances in Electrical and Electronic
Equipment Regulations 2004, the Waste Electrical and Electronic Equipment Regulations and the Producer Responsibility
Obligations (Packaging Waste) Regulations 2005.
24 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
CORPORATE SOCIAL RESPONSIBILITY 25 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
United Kingdom company law requires the Directors to prepare the Annual Report and financial statements for each
financial year which give a true and fair view of the state of affairs of the Company and the Group and of the profit or
loss and cash flows of the Group for that period. In preparing those financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed, subject to any material departures disclosed
and explained in the financial statements; and
• use the going concern basis unless it is inappropriate to presume that the Company and the Group will continue
in business.
To the best of the knowledge and belief of the Directors:
• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or loss of the issuer and the undertakings included in the
consolidation taken as a whole; and
• the management reports include a fair review of the development and performance of the business and the position
of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any
time the financial position of the Company and the Group and to enable them to ensure that the financial statements
comply with the Companies Act 1985, and for the Group, Article 4 of the IAS Regulation. They have general
responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES 26 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
ACAL PLC
GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2008 REPORT OF THE AUDITORS
27 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ACAL PLC
We have audited the group financial statements of Acal plc for the year ended 31 March 2008 which comprise the
Consolidated Income Statement, the Consolidated Statement of Recognised Income and Expense, the Consolidated
Balance Sheet, the Consolidated Cash Flow Statement and the related notes 1 to 38. These group financial statements
have been prepared under the accounting policies set out therein.
We have reported separately on the parent company financial statements of Acal plc for the year ended 31 March 2008
and on the information in the Directors’ Remuneration Report that is described as having been audited.
This report is made solely to the company’s members, as a body, in accordance with Section 235 of the Companies Act
1985. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors’ responsibilities for preparing the Annual Report and the group financial statements in accordance with
applicable United Kingdom law and International Financial Reporting Standards (IFRSs) as adopted by the European
Union are set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the group financial statements in accordance with relevant legal and regulatory
requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the group financial statements give a true and fair view and whether the
group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of
the IAS Regulation. We also report to you whether in our opinion the information given in the directors’ report is
consistent with the financial statements.
In addition we report to you if, in our opinion, we have not received all the information and explanations we require for
our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects the company’s compliance with the nine provisions of
the 2006 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report
if it does not. We are not required to consider whether the Board’s statements on internal control cover all risks and
controls, or form an opinion on the effectiveness of the group’s corporate governance procedures or its risk and control
procedures.
We read other information contained in the Annual Report and consider whether it is consistent with the audited group
financial statements. The other information comprises only the Directors’ Report, the Chairman’s Statement, the Chief
Executive’s Review, the Finance Director’s Review, the Board Report on Corporate Governance and the Directors’
Remuneration Report. We consider the implications for our report if we become aware of any apparent misstatements
or material inconsistencies with the group financial statements. Our responsibilities do not extend to any other
information.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in
the group financial statements. It also includes an assessment of the significant estimates and judgments made by the
directors in the preparation of the group financial statements, and of whether the accounting policies are appropriate to
the group’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the group financial
statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of the presentation of information in the group financial statements.
OPINION
In our opinion:
• the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union,
of the state of the group’s affairs as at 31 March 2008 and of its profit for the year then ended;
• the group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article
4 of the IAS Regulation; and
• the information given in the directors’ report is consistent with the group financial statements.
ERNST & YOUNG LLP
REGISTERED AUDITOR
LONDON
2 JUNE 2008 28 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2008
Ongoing Disposed 2008 2007
activities activities Total
notes £m £m £m £m
Continuing operations
Revenue 4,5 159.5 – 159.5 164.5
Cost of sales (113.7) – (113.7) (116.7)
Gross profit 45.8 – 45.8 47.8
Selling and distribution costs (24.4) – (24.4) (24.0)
Administrative expenses (15.4) – (15.4) (18.4)
Other operating income 7 0.1 – 0.1 0.6
Other operating expenses – (3.5) (3.5) (1.8)
Operating profit 8 6.1 (3.5) 2.6 4.2
Analysed between:
Operating profit before exceptional items 5 6.1 – 6.1 5.6
Exceptional items – provision for retained obligations 6 – (3.5) (3.5) (1.8)
Exceptional items – recovery of impaired receivable 6 –– – 0.4
Share of post-tax profits from associates 19 0.7 – 0.7 0.6
Finance costs 10 (1.5) – (1.5) (1.5)
Finance revenue 10 0.8 – 0.8 0.4
Profit before tax 6.1 (3.5) 2.6 3.7
Analysed between:
Profit before taxation before exceptional items 6.1 – 6.1 5.1
Exceptional items – provision for retained obligations 6 – (3.5) (3.5) (1.8)
Exceptional items – recovery of impaired receivable 6 –– – 0.4
Corporation tax expense:
United Kingdom taxation (2.8) 0.8 (2.0) (1.4)
Overseas taxation 0.5 (0.6) (0.1) 0.2
11 (2.3) 0.2 (2.1) (1.2)
Analysed between:
Taxation before exceptional items (2.3) – (2.3) (1.6)
Exceptional items – taxation credit arising consequent
on the disposal – 0.2 0.2 0.5
Exceptional items – taxation charge arising on recovery
of impaired receivable –– – (0.1)
Profit after taxation for the year from
continuing operations 3.8 (3.3) 0.5 2.5
Discontinued operations
Profit for the year from discontinued operations 12 – 25.2 25.2 9.4
Profit for the year 3.8 21.9 25.7 11.9
Attributable to:
Equity holders of the parent 25.7 11.7
Minority interests – 0.2
25.7 11.9 29 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2008 CONTINUED
Ongoing Disposed 2008
activities activities Total 2007
notes £m £m £m £m
Earnings per share 14
Continuing operations
Basic – including exceptional items 14.5p (12.5p) 2.0p 13.8p
– excluding exceptional items 14.5p – 14.5p 12.7p
Diluted – including exceptional items 14.5p (12.5p) 2.0p 13.8p
– excluding exceptional items 14.5p – 14.5p 12.7p
Including discontinued operations
Basic 97.5p 44.4p
Diluted 97.5p 44.4p
Dividends 13
Dividends per share declared in respect of the year 21.9p 21.9p
Dividends per share paid in the year 21.9p 21.6p
Dividends paid in the year £5.8m £5.7m
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE YEAR ENDED 31 MARCH 2008
2008 2007
notes £m £m
Actuarial gain on defined benefit pension scheme 35 2.0 0.9
Deferred tax relating to pension scheme 11 (0.7) (0.5)
Foreign currency translation differences 32 1.5 (0.6)
Net income and expense recognised directly in equity 2.8 (0.2)
Profit for the year 25.7 11.9
Total recognised income and expense 28.5 11.7
Total recognised income and expense attributable to:
Equity holders of the parent 28.5 11.5
Minority interests – 0.2
28.5 11.7 30 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
CONSOLIDATED BALANCE SHEET
AT 31 MARCH 2008
2008 2007
notes £m £m
Non-current assets
Property, plant and equipment 15 4.4 6.3
Goodwill 16 53.4 53.5
Intangible assets – software 18 1.1 3.9
Investments in associates 19 5.7 5.0
Financial assets 20 0.3 0.3
Deferred tax assets 11 3.4 4.0
68.3 73.0
Current assets
Inventories 21 19.3 23.7
Trade and other receivables 22 36.0 58.8
Current tax assets 0.6 0.4
Cash and cash equivalents 23 35.6 11.9
91.5 94.8
Current liabilities
Trade and other payables 29 (34.2) (58.9)
Short-term borrowings 24 (9.9) (7.2)
Current tax liabilities (5.2) (2.8)
Provisions 26 (3.2) (2.1)
(52.5) (71.0)
Net current assets 39.0 23.8
Non-current liabilities
Long-term borrowings 24 (0.1) (10.1)
Pension liability 35 (3.8) (7.4)
Deferred tax liabilities 11 (1.2) (1.6)
Provisions 26 (1.5) (1.9)
(6.6) (21.0)
Net assets 100.7 75.8
Equity
Share capital 30 1.3 1.3
Share premium account 31 38.0 38.0
Other reserves 32 4.9 1.2
Retained earnings 31 56.5 35.3
Total equity 31 100.7 75.8
These financial statements were approved by the Board of Directors on 2 June 2008 and signed on its behalf by:
R J Moon J S Virdee
Chairman Finance Director 31 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2008
2008 2007
notes £m £m
Profit for the year 25.7 11.9
Taxation expense (includes £5.6m (2007: £1.7m) from discontinued operations) 7.7 2.9
Share of results of associates (0.7) (0.6)
Net finance costs 1.0 1.3
Depreciation of property, plant and equipment 1.6 1.9
Amortisation of intangible assets – software 3.0 1.2
Change in provisions 0.3 2.3
Gain on disposal of businesses (29.1) (6.0)
Loss on disposal of property, plant and equipment 0.1 –
Pension scheme funding (1.6) (1.0)
Equity-settled share-based payment expense 0.1 0.1
Operating cash flows before changes in working capital 8.1 14.0
Decrease/(increase) in inventories 0.8 (2.5)
Decrease/(increase) in trade and other receivables 3.7 (1.9)
(Decrease)/increase in trade and other payables (5.9) 1.6
Increase in working capital (1.4) (2.8)
Cash generated from operations 6.7 11.2
Interest paid (2.1) (1.5)
Income taxes paid (5.7) (3.4)
Net cash flows from operating activities (1.1) 6.3
Cash flows from investing activities
Acquisition of shares in subsidiaries – (6.7)
Proceeds from sale of businesses (net of costs) 12 38.5 8.3
Net overdrafts disposed of with businesses – 0.4
Purchases of property, plant and equipment (1.2) (1.8)
Proceeds from sale of property, plant, equipment and intangibles 0.5 0.2
Purchase of intangible assets – software (0.2) (0.4)
Interest received 0.9 0.4
Dividends received from associates 0.2 0.2
Net cash inflow from investing activities 38.7 0.6
Cash flows from financing activities
Repayments of borrowings (10.1) (7.1)
Dividends paid to company’s shareholders 13 (5.8) (5.7)
Dividends paid to minority interests – (0.1)
Net cash outflow from financing activities (15.9) (12.9)
Net increase/(decrease) in cash and cash equivalents 21.7 (6.0)
Cash and cash equivalents at 1 April 4.8 10.8
Effect of exchange rate fluctuations (0.7) –
Cash and cash equivalents at 31 March 25.8 4.8
Reconciliation to cash and cash equivalents in the balance sheet
Cash and cash equivalents shown above 25.8 4.8
Add back overdrafts 9.8 7.1
Cash and cash equivalents shown within current assets in the balance sheet 23 35.6 11.9 32 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS
1 AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS
The consolidated financial statements of Acal plc for the year ended 31 March 2008 were authorised for issue by the
Board of directors on 2 June 2008. Acal plc is a public limited company incorporated and domiciled in England and
Wales. The Company’s ordinary shares are traded on the London Stock Exchange.
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted for use in the European Union and as applied in accordance with the provisions of the Companies Act 1985.
The significant accounting policies adopted by the Group are set out in note 2.
2 ACCOUNTING POLICIES
BASIS OF PREPARATION
The consolidated financial statements of Acal plc and all its subsidiaries have been prepared in accordance with
International Financial Reporting Standards (IFRS).
The consolidated financial statements are presented in pounds sterling and all values are rounded to the nearest
hundred thousand except when otherwise indicated.
The Group has adopted the following new IFRS:
IFRS7 Financial Instruments: Disclosures. This standard requires disclosures that enable users of the financial statements
to evaluate the significance of the Group’s financial instruments and the nature and extent of risks arising from those
financial instruments. The new disclosures are included throughout the financial statements. While there has been no
effect on the financial position or results, comparative information has been revised where necessary.
BASIS OF CONSOLIDATION
The Group’s financial statements consolidate the financial statements of Acal plc, entities controlled by the Company
(its subsidiaries) and include the Group’s share of the results of associates.
SUBSIDIARIES AND ASSOCIATES
A subsidiary is an entity controlled by Acal plc, i.e. the Company has the power to control the entity’s financial and
operating policies. The financial statements of subsidiaries are prepared for the same reporting year as the parent company.
Subsidiaries are consolidated from the date on which control is obtained by the Group and cease to be consolidated
from the date on which the Group no longer retains control. All intra-Group transactions, balances, income and
expenses are eliminated on consolidation.
An associate is an undertaking in which the Group has significant influence and which is neither a subsidiary nor joint
venture. Significant influence is the power and the ability to participate in its financial and operating policy decisions,
but not control or joint control of those decisions.
Acal’s investments in its associates are accounted for under the equity method of accounting. Under the equity method,
investments in associates are carried in the Group balance sheet at cost plus post-acquisition changes in the Group’s
share of net assets of the associate, less distributions received and less any impairment in value.
MINORITY INTERESTS
Minority interests represent the interests of non-Group shareholders in subsidiaries not wholly owned by the Group.
Minority interests are presented within equity in the Group balance sheet, separately from the parent shareholders’ equity.
BUSINESS COMBINATIONS AND GOODWILL
Goodwill represents the excess of the cost of the business combination over the fair value of the Group’s share of the
identifiable assets less liabilities and contingent liabilities of the acquired entity at the date of acquisition.
After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being
reviewed for impairment, at least annually and whenever events or changes in circumstances indicate that the carrying
value may be impaired.
At the acquisition date, goodwill acquired is recognised as an asset and is allocated to each of the cash-generating units
expected to benefit from the combination’s synergies. Goodwill is reviewed for impairment at least annually by
assessing the recoverable amount of the related cash-generating units monitored by management. Where the
recoverable amount of the cash-generating units is less than the carrying amount, an impairment loss is recognised
immediately in profit or loss and is not subsequently reversed. Goodwill arising on the acquisition of associates is
included within the carrying value of the investment.
Any intangible assets acquired as part of a business combination are recognised separately from goodwill if the asset is
separable or arises from contractual or other legal rights and its fair value can be measured reliably.
On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on
disposal. 33 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
2 ACCOUNTING POLICIES CONTINUED
Goodwill arising on acquisitions before 1 April 2004 (the date of transition to IFRS) has been retained at the previous
UK GAAP amounts having been tested for impairment at that date.
INTANGIBLE ASSETS – SOFTWARE
Implementation costs of IT systems, and computer software, are amortised on a straight-line basis over their estimated
useful lives at rates of 12.5-33%. Software is assessed for impairment in accordance with IAS 36, Impairment of Assets,
when there are events or changes in circumstances that indicate that the carrying value may not be recoverable.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment assets are carried at cost less accumulated depreciation and any accumulated impairment
losses.
Depreciation is provided on a straight-line basis to write off the cost, less residual value, over the estimated useful life of
the asset at the following rates:
Freehold land nil
Freehold buildings 2-3%
Leasehold improvement costs 10-20% or over the life of the lease
Plant, equipment and IT hardware 10-33%
All property, plant and equipment assets are reviewed for impairment in accordance with IAS 36, Impairment of Assets,
when there are events or changes in circumstances that indicate that the carrying value may not be recoverable.
IMPAIRMENT
At each balance sheet date, the Group reviews the carrying value of its assets to determine whether there is any indication
that the assets have suffered an impairment loss. If any such indication exists, or when annual testing for an asset is
required, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.
Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset (or
cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating
unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment
losses may no longer exist or may have decreased. If such indication exists, an impairment loss is reversed to the extent
that the asset’s carrying value does not exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised. Such reversals are recognised in the income statement.
FINANCIAL ASSETS
Investments are initially recognised at cost, being the fair value of the consideration given and including directly attributable
transaction costs associated with the investment.
After initial recognition, investments in equity shares are treated as available for sale financial assets and are measured at
their fair value with any gains or losses recognised in equity. When the investment is derecognised or impaired, the
cumulative gain or loss previously reported in equity is included in the income statement.
Investments in equity instruments that do not have a quoted market price in an active market and whose fair value can not
be reliably valued are measured at cost.
Loans and receivables are non-derivative financial assets with fixed or determinable payments. They are included in current
assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets.
Loans and receivables are included in trade and other receivables in the balance sheet.
Other financial assets are assessed for impairment in accordance with IAS 39, Impairment of Assets, when there are events
or changes in circumstances that indicate that the carrying value may not be recoverable.
INVENTORIES
Inventories comprise goods held for resale and are stated at the lower of weighted average cost and net realisable value
after making allowance for any obsolete or slow moving items. Cost includes carriage incurred.
TRADE AND OTHER RECEIVABLES
Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectable amounts.
An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written
off when identified.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an
original maturity of three months or less. For the purposes of the consolidated cash flow statement, cash and cash
equivalents comprise cash and cash equivalents as defined above, net of outstanding bank overdrafts. 34 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
2 ACCOUNTING POLICIES CONTINUED
BORROWINGS
Borrowings are initially recognised at fair value net of any associated issue costs. Borrowings are subsequently recorded
at amortised cost, with any difference between the amount initially recorded and the redemption value recognised in the
income statement using the effective interest method.
PROVISIONS
Provisions for warranties, onerous contracts and restructuring costs are recognised when the Group has a present legal
or constructive obligation as a result of a past event; it is probable that an outflow of resources will be required to settle
the obligation; and a reliable estimate can be made of the amount of the obligation.
Provisions are discounted to present value where the effect is material using a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability. The amortisation of the discount is
recognised as a finance cost.
EXCEPTIONAL ITEMS
The Group presents on the face of the income statement those items which are separately identifiable by virtue of their
size or incidence so as to allow a better understanding of the underlying trading performance of the Group.
FOREIGN CURRENCY TRANSLATION
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of
exchange ruling at the balance sheet date and gains or losses on translation are included in the Income Statement.
Currency gains and losses arising from the retranslation of the opening net assets of foreign operations are recorded as
a movement on reserves, net of tax. The differences that arise from translating the results of overseas businesses at
average rates of exchange, and their assets and liabilities at closing rates, are dealt with in a separate currency
translation reserve. All other currency gains and losses are dealt with in the Income Statement.
REVENUE RECOGNITION
Revenue represents the invoiced value of goods, commission and other services provided to third parties, after deducting
discounts, VAT and similar taxes levied overseas. Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured. In particular:
a Revenue from the sale of products is recognised upon transfer to the customer of the significant risks and rewards of
ownership. This is generally when goods are despatched to customers.
b Revenue from service contracts is recognised over the life of the contract reflecting performance of the contractual
obligations to the customer.
c Interest income is recognised as the interest accrues using the effective interest method.
d Dividend income is recognised when the shareholders’ right to receive the payment is established.
DIVIDENDS
Dividends are recognised when they meet the criteria for recognition as a liability. In relation to final dividends, this is
when approved by the shareholders in general meeting, and in relation to interim dividends, when paid.
LEASES
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the
lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance
charges and reduction of the lease obligations so as to achieve a constant rate of interest on the remaining balance of
the liability.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
BORROWING COSTS
Borrowing costs are recognised as an expense in the period in which they are incurred.
PENSIONS
Payments to defined contribution schemes are charged as an expense as they fall due.
In respect of defined benefit pension schemes, the obligation recognised in the balance sheet represents the present
value of the defined benefit obligation as adjusted for any unrecognised past service cost, reduced by the fair value of
the scheme assets. The cost of providing benefits is determined using the projected unit credit actuarial valuation
method. Actuarial gains and losses are recognised in full in the period in which they occur in the Statement of
Recognised Income and Expense. 35 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
2 ACCOUNTING POLICIES CONTINUED
SHARE-BASED PAYMENTS
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which
they are granted, calculated using an option pricing model, and is recognised as an expense over the vesting period,
which ends on the date on which the relevant employees become fully entitled to the award. In valuing equity-settled
transactions, no account is taken of non-market vesting conditions.
No expense is recognised for awards that do not ultimately vest. At each balance sheet date before vesting, the
cumulative expense is calculated, representing the extent to which the vesting period has expired and management’s
best estimate of the achievement or otherwise of non-market conditions and hence the number of equity instruments
that will ultimately vest. The movement in cumulative expense since the previous balance sheet date is recognised in the
income statement, with a corresponding entry in equity.
The Group has taken advantage of the exemption permitted under IFRS 1in respect of equity-settled awards and IFRS 2
has only been applied to options awarded on or after 7 November 2002 that had not vested before 1 January 2005.
TAXATION
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the financial statements, with the following exceptions:
• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination that at the time of the transaction affects neither accounting nor
taxable profit or loss;
• in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the
timing of the reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future; and
• deferred tax assets are recognised only to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply
when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at
the balance sheet date.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity.
Otherwise income tax is recognised in the income statement.
DERIVATIVE FINANCIAL INSTRUMENTS
The Group principally uses forward currency contracts to hedge risks associated with foreign currency fluctuations.
Assets and liabilities covered by forward exchange contracts are initially recognised at fair value on the date on which a
contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair
value is positive and as liabilities when the fair value is negative.
The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts
with similar maturity profiles. For those derivatives designated as hedges and for which hedge accounting is required,
the hedging relationship is documented at its inception. This documentation identifies the hedging instrument, the
hedged item or transaction, the nature of the risk being hedged and how effectiveness will be measured throughout its
duration. Such hedges are expected at inception to be highly effective.
For the purpose of hedge accounting, hedges are classified as cash flow hedges when hedging exposure to variability in
cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a probable
forecast transaction.
Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are
taken to the income statement.
For cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly in equity,
while the ineffective portion is recognised in profit or loss.
Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss,
such as when a forecast sale or purchase occurs. Where the hedged item is the cost of a non-financial asset or liability,
the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer
meets the criteria for hedge accounting. Any amounts previously recognised in equity remain in equity until the forecast
transaction occurs. If a forecast transaction is no longer expected to occur, amounts previously recognised in equity or
as an asset or liability are transferred to profit or loss. 36 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
3 NEW ACCOUNTING STANDARDS AND FINANCIAL REQUIREMENTS
NEW STANDARDS AND INTERPRETATIONS NOT APPLIED
The IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of
these financial statements:
effective date
International Accounting Standards (IAS/IFRS)
IFRS 8 Operating Segments 1 January 2009
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction 1 January 2008
The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on
the Group’s financial statements in the period of initial application.
4 REVENUE
An analysis of the Group’s revenue is as follows:
2008 2007
£m £m
Sale of goods 156.6 161.7
Rendering of services 2.9 2.8
Total revenue 159.5 164.5
5 SEGMENTAL ANALYSIS
A business segment is a group of assets and operations engaged in providing products or services that are subject to
risks and returns that are different from those of other segments.
A geographical segment is engaged in providing products or services within a particular economic environment that is
subject to risks and returns that are different from those of segments operating in other economic environments.
For management purposes, the group is organised into two business segments – Electronics and Parts Services. These
business segments are the basis on which the group reports its primary segment information. Further information on
these segments is shown on pages 2 and 3.
Secondary segment information is based on geographic location; the group has activities in Europe and sales to the Rest
of the World, according to the location of the markets and customers.
There are immaterial sales between business segments. Segment assets include intangible assets, property, plant and
equipment, inventories, trade and other receivables. Segment liabilities include trade and other payables and other
provisions. Capital expenditure comprises the balance sheet additions for property, plant and equipment and intangible
assets.
The following tables present revenue and profit information and certain asset and liability information regarding
business segments for the years to 31 March 2008 and 31 March 2007. Discontinued operations relates to the IT
Solutions and the air conditioning and refrigeration businesses – see note 12. 37 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
5 SEGMENTAL ANALYSIS CONTINUED
YEAR TO 31 MARCH 2008
Total
Parts ongoing Disposed Total
Electronics Services activities activities operations
£m £m £m £m £m
Revenue 111.2 48.3 159.5 67.0 226.5
Segment result 3.3 2.8 6.1 2.0 8.1
Provision for retained obligations – (3.5) (3.5)
Profit on disposal of activities – 29.1 29.1
Net finance costs (0.7) (0.3) (1.0)
Share of post-tax profits of associates 0.7 – 0.7 – 0.7
Profit before taxation 6.1 27.3 33.4
Taxation (2.3) (5.4) (7.7)
Profit for the year 3.8 21.9 25.7
The figures for total operations in the table above may be analysed between continuing and discontinued operations
as follows:
Continuing Discontinued Total
operations operations operations
£m £m £m
Revenue 159.5 67.0 226.5
Segment result 6.1 2.0 8.1
Provision for retained obligations (3.5) – (3.5)
Profit on disposal of activities – 29.1 29.1
Net finance costs (0.7) (0.3) (1.0)
Share of post-tax profits of associates 0.7 – 0.7
Profit before taxation 2.6 30.8 33.4
Taxation (2.1) (5.6) (7.7)
Profit for the year 0.5 25.2 25.7 38 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
5 SEGMENTAL ANALYSIS CONTINUED
ASSETS AND LIABILITIES
Total
Parts continuing Discontinued Total
Electronics Services operations operations operations
£m £m £m £m £m
Segment assets (excluding
goodwill and associates) 43.3 16.1 59.4 – 59.4
Goodwill 37.0 16.4 53.4 – 53.4
Investment in associates 5.7 – 5.7 – 5.7
86.0 32.5 118.5 – 118.5
Corporate assets 37.3
Current/deferred tax assets 4.0
Total assets 159.8
Segment liabilities (23.3) (7.6) (30.9) – (30.9)
Corporate liabilities (18.0)
Pensions (3.8)
Current/deferred tax liabilities (6.4)
Total liabilities (59.1)
Net assets 62.7 24.9 87.6 – 100.7
Corporate net assets comprise certain property, plant and equipment, intangibles, cash and all borrowings.
OTHER SEGMENT INFORMATION
Total
Parts continuing Discontinued Total
Electronics Services operations operations operations
£m £m £m £m £m
Capital expenditures:
Property, plant and equipment 0.6 0.3 0.9 0.3 1.2
Intangible fixed assets – 0.2 0.2 – 0.2
Depreciation 0.9 0.4 1.3 0.3 1.6
Amortisation 2.0 1.0 3.0 – 3.0
Change in provisions 0.6 0.2 0.8 1.8 2.6
Net inventory write downs 0.4 1.3 1.7 0.2 1.9
YEAR TO 31 MARCH 2007
Total
Parts ongoing Disposed Total
Electronics Services activities activities operations
£m £m £m £m £m
Revenue 112.6 51.9 164.5 101.7 266.2
Segment result 3.1 2.5 5.6 5.3 10.9
Exceptional item – recovery of impaired receivable 0.4 – 0.4
Provision for retained obligations – (1.8) (1.8)
Profit on disposal of activities – 6.0 6.0
Net finance costs (1.1) (0.2) (1.3)
Share of post-tax profits of associates 0.6 – 0.6 – 0.6
Profit before taxation 5.5 9.3 14.8
Taxation (1.7) (1.2) (2.9)
Profit for the year 3.8 8.1 11.9 39 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
5 SEGMENTAL ANALYSIS CONTINUED
The figures for total operations in the table above may be analysed between continuing and discontinued operations
as follows:
Continuing Discontinued Total
operations operations operations
£m £m £m
Revenue 164.5 101.7 266.2
Segment result 5.6 5.3 10.9
Exceptional item – recovery of impaired receivable 0.4 – 0.4
Provision for retained obligations (1.8) – (1.8)
Profit on disposal of activities – 6.0 6.0
Net finance costs (1.1) (0.2) (1.3)
Share of post-tax profits of associates 0.6 – 0.6
Profit before taxation 3.7 11.1 14.8
Taxation (1.2) (1.7) (2.9)
Profit for the year 2.5 9.4 11.9
ASSETS AND LIABILITIES
Total
Parts continuing Discontinued Total
Electronics Services operations operations operations
£m £m £m £m £m
Segment assets (excluding goodwill and associates) 41.6 18.9 60.5 35.4 95.9
Goodwill 36.8 16.4 53.2 0.3 53.5
Investment in associates 5.0 – 5.0 – 5.0
83.4 35.3 118.7 35.7 154.4
Corporate assets 9.0
Current/deferred tax assets 4.4
Total assets 167.8
Segment liabilities (25.5) (5.8) (31.3) (26.6) (57.9)
Corporate liabilities (22.3)
Pensions (7.4)
Current/deferred tax liabilities (4.4)
Total liabilities (92.0)
Net assets 57.9 29.5 87.4 9.1 75.8
OTHER SEGMENT INFORMATION
Total
Parts continuing Discontinued Total
Electronics Services operations operations operations
£m £m £m £m £m
Capital expenditures:
Property, plant and equipment 0.9 0.2 1.1 0.7 1.8
Intangible fixed assets 0.2 0.2 0.4 – 0.4
Depreciation 0.7 0.4 1.1 0.8 1.9
Amortisation 0.7 0.4 1.1 0.1 1.2
Change in provisions 2.2 1.2 3.4 0.2 3.6
Net inventory write downs 0.2 0.1 0.3 1.0 1.3 40 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
5 SEGMENTAL ANALYSIS CONTINUED
GEOGRAPHICAL SEGMENTS
REVENUE BY GEOGRAPHIC MARKET
2008 2007
£m £m
Europe 152.5 158.5
Rest of the World 7.0 6.0
159.5 164.5
Revenue by geographic markets is analysed further elsewhere in the report and accounts to provide additional
information to users of these accounts.
CAPITAL EXPENDITURE BY GEOGRAPHIC ORIGIN
2008 2007
£m £m
Europe 1.4 2.2
Rest of the World – –
1.4 2.2
Capital expenditure comprises additions of property, plant and equipment and intangible assets (excluding goodwill).
ASSETS BY GEOGRAPHIC ORIGIN
2008 2007
£m £m
Europe 87.3 96.4
Rest of the World 0.3 0.1
Operating assets by segment 87.6 96.5
Corporate assets 37.3 9.0
Corporate liabilities (18.0) (22.3)
Pensions (3.8) (7.4)
Net tax liabilities (2.4) –
Total net assets 100.7 75.8
6 EXCEPTIONAL ITEMS
2008 2007
£m £m
Other operating income:
Recovery of impaired receivable – 0.4
Other operating expenses:
Provision for retained obligations (3.5) (1.8)
7 OTHER OPERATING INCOME
2008 2007
£m £m
Net gains on disposal of property, plant and equipment – 0.1
Recovery of impaired receivable – 0.4
Other 0.1 0.1
0.1 0.6 41 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
8 OPERATING PROFIT
AMOUNTS CHARGED/(CREDITED) TO THE INCOME STATEMENT ARE AS FOLLOWS:
2008 2007
£m £m
Employee costs (note 9) 34.8 37.6
Depreciation of property, plant and equipment (note 15) 1.6 1.9
Amortisation of intangible assets (note 18) 3.0 1.2
Inventories (amounts included in cost of sales):
Cost of inventories 159.2 196.8
Write-down of inventories 1.8 2.0
Reversal of prior year write-down of inventories* (0.3) (0.5)
Operating lease rentals:
Minimum lease payments recognised as an operating lease expense 3.8 4.0
Audit of the financial statements 0.1 0.1
Other fees to auditors – local statutory audits for subsidiaries 0.2 0.2
Fees in relation to tax services are £39,000 (2007: £30,000).
* Reversal relates to sales of goods previously written down.
9 EMPLOYEE COSTS
INCLUDING DISCONTINUED OPERATIONS
2008 2007
£m £m
Wages and salaries 29.3 31.8
Social security costs 4.1 4.4
Pension costs 1.3 1.3
Equity settled share-based payments 0.1 0.1
34.8 37.6
The average monthly number of employees (including Executive Directors) during the year was as follows:
2008 2007
Number Number
Marketing, sales and service 712 791
Administration 156 175
868 966
Details of Directors’ emoluments are disclosed in the remuneration report on pages 20 to 23.
10 FINANCE COSTS/(REVENUE)
INCLUDING DISCONTINUED OPERATIONS
2008 2007
£m £m
Interest expense on bank loans and overdrafts 1.8 1.3
Net pension finance charge – 0.2
Finance costs 1.8 1.5
Interest receivable and similar income (0.8) (0.4)
Finance revenue (0.8) (0.4) 42 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
11 TAXATION
The major components of corporation tax expense for the years ended 31 March 2008 and 2007 are:
CONSOLIDATED INCOME STATEMENT FOR TOTAL OPERATIONS
2008 2007
£m £m
Current taxation
UK corporation tax 5.4 3.0
UK adjustments in respect of prior years 0.1 0.1
5.5 3.1
Overseas tax 2.1 1.0
Overseas adjustments in respect of prior years 0.3 (0.3)
2.4 0.7
Total current taxation 7.9 3.8
Deferred taxation
Origination and reversal of temporary differences within the UK (0.1) (0.9)
Origination and reversal of temporary differences overseas (0.1) –
Total deferred taxation (0.2) (0.9)
Tax reported in the consolidated income statement 7.7 2.9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2008 2007
£m £m
Decrease in deferred tax asset on pension deficit 0.7 0.5
Tax reported in equity 0.7 0.5 43 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
11 TAXATION CONTINUED
Taxation for the year is lower (2007: lower) than the standard rate of taxation in the UK (30%). A reconciliation of the
tax charge applicable to profit before tax at the statutory tax rate to the actual tax charge at the Group’s effective tax
rate for the years ended 31 March 2008 and 31 March 2007 respectively was as follows:
2008 2007
£m £m
Profit on continuing business before tax 2.6 3.7
Profit on discontinued business before tax 1.7 5.1
Profit on disposal before tax 29.1 6.0
Accounting profit before tax 33.4 14.8
Profit before taxation multiplied by standard rate of corporation tax
in the UK of 30% (2006: 30%) 10.0 4.4
Effect of:
Different tax rates in overseas companies (0.7) 0.1
Associate companies (0.2) (0.2)
Utilisation of tax losses not previously recognised (0.3) (0.1)
Current year losses not recognised 1.2 0.5
Non taxable gain on disposal of business (2.9) (1.7)
Non-deductible expenses 0.4 0.1
Adjustments to tax expense in respect of prior years 0.2 (0.2)
At effective tax rate of 23.0% (2006: 19.6%) 7.7 2.9
Tax expense reported in the consolidated income statement for continuing operations 2.1 1.2
Tax expense attributable to discontinued operations 5.6 1.7
Tax reported in the consolidated income statement 7.7 2.9
The current tax asset represents advance payments receivable within one year.
DEFERRED TAX
Deferred tax at 31 March 2008 relates to the following:
2008 2007
£m £m
Deferred tax liabilities
Accelerated capital allowances (0.4) (0.5)
Undistributed earnings of overseas associates (0.5) (0.5)
Other temporary differences (0.3) (0.6)
Gross deferred tax liabilities (1.2) (1.6)
Deferred tax assets
Pensions 1.1 2.2
Tax losses 0.4 0.2
Other temporary differences 1.9 1.6
Gross deferred tax assets 3.4 4.0 44 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
11 TAXATION CONTINUED
DEFERRED TAX IN THE INCOME STATEMENT
2008 2007
£m £m
Consolidated income statement – total operations
Deferred tax credit
Accelerated capital allowances (0.6) (0.2)
Other temporary differences 0.4 (0.7)
(0.2) (0.9)
At 31 March 2008, the Group had recognised a deferred tax asset of £nil million (2007: £0.2 million) in respect of tax
losses of about £nil million (2007: £0.7million). These losses may all be carried forward indefinitely. At 31 March 2008
the Group had not recognised any deferred tax asset in respect of tax losses of approximately £12.0 million (2007: £7.2
million). Deferred tax assets are not recognised where there is insufficient evidence that losses will be utilised.
At 31 March 2008, there was no recognised deferred tax liability (2007 – nil) for taxes that would be payable on the
remittance of certain of the Group’s overseas subsidiaries’ unremitted earnings, as the Group has determined that the
undistributed profits of its overseas subsidiaries will not be distributed in the near future where an additional tax charge
would arise.
The Finance Act 2007 reduced the rate of Corporation Tax to 28% with effect from 1 April 2008. The effect of the
reduced rate is a credit of £0.1 million.
12 DISCONTINUED OPERATIONS
On 27 September 2007, the Company announced that it had conditionally agreed to sell its IT Solutions business
(“ITS”) to Avnet, Inc. The sale was completed on 17 December 2007 for a cash consideration of £41 million. The results
of ITS have been presented under discontinued operations in the consolidated income statement. The comparative
income statements have been restated to show ITS as a discontinued operation.
The results of discontinued operations for the comparative period also include the results of the Air Conditioning and
Refrigeration (“AC&R”) business which was sold in July 2006.
2008 2007
£m £m
Sale proceeds 41.0 8.3
Sale costs (2.8) –
Total net assets sold (9.1) (2.3)
29.1 6.0
Tax effect of disposal (4.8) (0.1)
Profit on disposal 24.3 5.9
In addition a provision of £3.5 million (charged to continuing operations) has been made to cover certain obligations
and costs relating to the disposed activities which have been retained by the Group. These obligations represent costs
relating to people, properties and impairment of IT systems.
On the face of the consolidated cash flow statement disposals of businesses reported as disposed activities are net of
cash proceeds £41.0 million and cash costs of disposal of £2.5 million. 45 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
12 DISCONTINUED OPERATIONS CONTINUED
Total net assets sold comprised the following assets and liabilities
2008 2007
£m £m
Non current assets 4.0 0.1
Inventories 4.7 2.0
Trade and other receivables 22.2 4.4
Cash – 0.3
Total assets sold 30.9 6.8
Bank overdrafts – (0.7)
Creditors (21.8) (3.8)
Total liabilities sold (21.8) (4.5)
Total net assets sold 9.1 2.3
Profit from discontinued operations comprises:
2008 2007
£m £m
Profit on disposal of IT Solutions business 24.3 –
Profit for the period from trading of IT Solutions business 0.9 3.3
Profit on disposal of Air Conditioning and Refrigeration business – 5.9
Profit for the period from trading of Air Conditioning and Refrigeration business – 0.2
Profit for the year from discontinued operations 25.2 9.4
The profit for the year from discontinued operations is derived as follows:
2008 2007
£m £m
Revenue – sale of goods 67.0 101.7
Expenses (65.0) (96.4)
Profit before financing and tax 2.0 5.3
Finance costs (net) (0.3) (0.2)
Profit before tax 1.7 5.1
Income tax expense (0.8) (1.6)
Profit for the year from discontinued operations 0.9 3.5
Cash flows relating to discontinued operations are as follows:
2008 2007
£m £m
Net cash inflows from operating activities 0.7 0.3
Net cash outflows from investing activities – (0.7)
Net increase/(decrease) in cash and cash equivalents 0.7 (0.4) 46 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
13 DIVIDENDS
AMOUNTS RECOGNISED IN EQUITY AS DISTRIBUTIONS TO EQUITY HOLDERS IN THE YEAR
2008 2007
£m £m
Equity dividends on ordinary shares:
Final dividend for the year ended 31 March 2007 of 14.7p (2006: 14.4p) 3.9 3.8
Interim dividend for the year ended 31 March 2008 of 7.2p (2007: 7.2p) 1.9 1.9
Total amounts recognised as equity distributions during the year 5.8 5.7
PROPOSED FOR APPROVAL AT THE AGM
2008 2007
£m £m
Equity dividends on ordinary shares:
Final dividend for the year ended 31 March 2008 of 14.7p (2007: 14.7p) 3.9 3.9
14 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is the basic earnings per share after allowing for the dilutive effect of the conversion into
ordinary shares of the weighted average number of options outstanding during the period.
Basic and diluted earnings per share on discontinued operations is 95.5p (2007: 35.2p).
In addition earnings per share from ongoing activities including exceptional items of 14.5p (2007: 13.8p) and excluding
exceptional items of 14.5p (2007: 12.7p) have been presented to provide additional information to shareholders. These
have been calculated on attributable ongoing profits of £3.8m (2007: £3.8m) and exceptional items net of tax £nil
(2007: £0.3m).
The following reflects the income and share data used in the basic and diluted earnings per share computations:
2008 2007
£m £m
Profit for the year from ongoing activities attributable to equity shareholders of
the parent – before exceptionals 3.8 3.3
Exceptional items net of tax – ongoing activities – 0.3
Profit for the year from ongoing activities attributable to equity holders of the parent 3.8 3.6
Profit for the year from disposed activities attributable to equity holders of the parent (3.3) (1.3)
Profit for the year from continuing operations 0.5 2.3
Profit for the year from discontinued operations attributable to equity holders of
the parent 25.2 9.4
Profit for the year attributable to equity holders of the parent 25.7 11.7
2008 2007
million million
Weighted average number of shares for basic earnings per share 26.4 26.4
Effect of dilution – share options – –
Adjusted weighted average number of shares for diluted earnings per share 26.4 26.4
At the year end there were 1.1 million ordinary share options in issue that could potentially dilute earnings per share in
the future but are not included in the calculation at the year end because they are anti-dilutive (2007: 1.0 million). 47 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
15 PROPERTY, PLANT AND EQUIPMENT
Freehold Leasehold Plant and
property improvements equipment Total
£m £m £m £m
Cost
At 1 April 2006 2.6 3.0 13.1 18.7
Additions 0.1 – 1.7 1.8
Disposals –– (1.3) (1.3)
Exchange adjustments –– (0.2) (0.2)
At 31 March 2007 2.7 3.0 13.3 19.0
Additions – 0.2 1.0 1.2
Disposals –– (1.6) (1.6)
Business disposals – (1.1) (3.2) (4.3)
Exchange adjustments 0.3 – 0.6 0.9
At 31 March 2008 3.0 2.1 10.1 15.2
Depreciation
At 1 April 2006 1.0 1.9 9.1 12.0
Charge for the year – 0.3 1.6 1.9
Disposals –– (1.2) (1.2)
Exchange adjustments –– ––
At 31 March 2007 1.0 2.2 9.5 12.7
Charge for the year 0.1 0.3 1.2 1.6
Disposals –– (1.1) (1.1)
Business disposals – (0.8) (2.1) (2.9)
Exchange adjustments 0.1 – 0.4 0.5
At 31 March 2008 1.2 1.7 7.9 10.8
Net book amount at 31 March 2008 1.8 0.4 2.2 4.4
Net book amount at 31 March 2007 1.7 0.8 3.8 6.3
Net book amount at 31 March 2006 1.6 1.1 4.0 6.7
Freehold property includes land with a cost of £0.5 million (2007: £0.5 million) that is not subject to depreciation.
Assets held under finance leases with a net book amount of £nil (2007: £nil) are included in plant and equipment.
CAPITAL EXPENDITURE COMMITMENTS
2008 2007
£m £m
Capital expenditure commitments for tangible fixed assets for which
no provision has been made 0.1 0.2 48 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
16 GOODWILL
£m
Deemed cost
At 1 April 2006 48.8
Exchange adjustments (0.1)
Acquisition of shares in a subsidiary 4.8
At 31 March 2007 53.5
Exchange adjustments 0.2
Disposal of shares in a subsidiary (0.3)
At 31 March 2008 53.4
Goodwill is not amortised but is subject to annual impairment testing.
Goodwill disposed of in the year relates to Headway Mediagraph SA which is part of the IT Solutions division.
17 IMPAIRMENT TESTING OF GOODWILL
The carrying amount of goodwill is divided as follows:
2008 2007
£m £m
ATM Parts Company Limited 5.4 5.4
Computer Parts International Limited 8.9 8.9
UK electronics businesses 35.0 34.4
Other 4.1 4.8
53.4 53.5
Goodwill acquired through business combinations is allocated to cash-generating units (CGUs).
The recoverable amount of a CGU is based upon value in use calculations based upon the three year business plans
approved by the Board. The key assumptions in these calculations relate to revenue and gross margins. The calculation
is most sensitive to revenue assumptions, however senior management believe that the assumptions used are
reasonable. Cash flows beyond the plan period are extrapolated using a 2.5% growth rate (2007: 3%). This is based on
the historic performance of the group. This rate is believed to be reasonable in the light of historical experience of the
markets in which the group operates. This rate does not exceed the average long-term growth rate for the relevant
markets. The discount rate applied to cash flow projections, based upon management’s expectations of the weighted
average cost of capital, is 11.6% (2007: 11.6%).
The impairment review results in no impairment of the goodwill carrying value. 49 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
18 INTANGIBLE ASSETS – SOFTWARE
£m
Cost
At 1 April 2006 8.8
Additions 0.4
Disposals (0.4)
At 31 March 2007 8.8
Business disposals (0.1)
Additions 0.2
Disposals (0.2)
Exchange adjustment 0.2
At 31 March 2008 8.9
Amortisation
At 1 April 2006 4.0
Amortisation 1.2
Disposals (0.3)
At 31 March 2007 4.9
Business disposals –
Amortisation 3.0
Disposals (0.2)
Exchange adjustment 0.1
At 31 March 2008 7.8
Net book amount at 31 March 2008 1.1
Net book amount at 31 March 2007 3.9
Net book amount at 31 March 2006 4.8
Included in amortisation is an accumulated impairment to date of £2.4 million. The charge for the year is £2.0 million
(2007: £0.2 million) and is reflected in other operating expenses.
As a result of the disposal of the IT Solutions business, the company has recognised an impairment loss of £2.0 million
based on the value in use of capitalised computer software that related to the Electronics and IT Solutions businesses.
The discount rate applied to cash flow projections is 11%.
The computer software capitalised principally relates to the implementation of one system through the majority of the
Electronics businesses. The ERP system has a carrying amount of £1.3 million (2007: £3.3 million) and a remaining
amortisation period of 3.4 years.
Capital expenditure commitments in relation to IT software at 31 March 2008 were £nil (2007: £nil)
19 INVESTMENTS IN ASSOCIATES
2008 2007
£m £m
Cost
At 1 April 2007 5.0 4.7
Share of profit for the year 0.7 0.6
Exchange adjustments 0.3 (0.1)
Dilution of investment in associate (0.1) –
Dividends received from associates (0.2) (0.2)
At 31 March 2008 5.7 5.0 50 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
19 INVESTMENTS IN ASSOCIATES CONTINUED
Country of % equity interest
incorporation 2008 2007
Principal associates
Ceratech Holdings PLC* England 30 30
Scientific Digital Business (Pte) Ltd Singapore 40 40
Westech Electronics (Pte) Ltd Singapore 30.1 36.3
* Indirectly held.
Westech Electronics Limited, an electronics and engineering solutions provider, is listed on the Singapore Stock
Exchange. The investment had a book value at 31 March 2008 of £5.2 million (2007: £4.4.million) and a market value
of £3.2 million (2007:£3.6 million).
The other associates are private entities which are not listed on any public exchange and therefore there is no published
quotation price for the fair value of these investments.
The investments are held by Acal plc and Centre Industries Limited.
The following tables provide summarised information on the Group’s investment in associate undertakings:
Share of associates’ balance sheets
2008 2007
£m £m
Current assets 12.9 10.7
Non-current assets 1.0 1.4
Share of gross assets 13.9 12.1
Current liabilities (5.8) (7.0)
Non-current liabilities (2.4) (0.1)
Share of gross liabilities (8.2) (7.1)
Share of net assets 5.7 5.0
Summarised income statement information in respect of the Group’s associates is set out below:
SHARE OF ASSOCIATES’ REVENUE AND PROFIT
2008 2007
£m £m
Revenue 47.2 39.9
Profit 0.7 0.6
20 FINANCIAL ASSETS
2008 2007
£m £m
Cost at 1 April and 31 March 0.3 0.3
Non-current 0.3 0.3
Available-for-sale financial assets consist of investments in ordinary shares, and therefore have no fixed maturity date or
coupon rate.
They are unlisted securities and are stated at cost as management believes that there is no readily available fair value. 51 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
21 INVENTORIES
2008 2007
£m £m
Finished goods and goods for resale 19.3 23.7
22 TRADE AND OTHER RECEIVABLES
2008 2007
£m £m
Trade receivables 32.3 51.0
Amounts owed by associates 0.1 0.1
Other receivables 2.3 1.6
Prepayments and accrued income 1.3 6.1
36.0 58.8
Trade receivables are non-interest bearing and are generally on 30-60 days’ terms and are shown net of a provision for
impairment. As at 31 March 2008, trade receivables at nominal value of £0.6m (2007: £0.8m) were impaired and fully
provided for. Movements in the provision for impairment of receivables were as follows:
2008 2007
£m £m
At 1 April 0.8 0.9
Charge for the year 0.2 0.1
Amounts written off (0.3) (0.1)
Unused amounts reversed (0.1) (0.1)
At 31 March 0.6 0.8
As at 31 March, the analysis of trade receivables that were past due but not impaired is as follows:
Neither past
due nor Past due but not impaired
impaired <30 days 30-60 days 60-90 days 90-120 days >120 days
£000 £000 £000 £000 £000 £000 £000
2008 32.3 25.2 4.9 1.0 0.4 0.4 0.4
2007 51.0 39.1 8.9 2.1 0.3 0.3 0.3
23 CASH AND CASH EQUIVALENTS
2008 2007
£m £m
Cash at bank and in hand 11.5 11.9
Short-term deposits 24.1 –
35.6 11.9
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying
periods of between one day and three months depending on the immediate cash requirements of the Group. They earn
interest at the respective short-term deposit rates. The fair value of cash and cash equivalents is £35.6m (2007: 11.9m). 52 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
24 FINANCIAL LIABILITIES
Current Non-current
Effective
interest rate 2008 2007 2008 2007
% Maturity £m £m £m £m
Bank overdrafts Variable On demand 9.8 7.1 – –
Secured:
Bank loans See below 0.1 0.1 0.1 0.1
Unsecured:
Revolving credit facility (£25m) Variable 1 Oct 2008 – – – 10.0
Total 9.9 7.2 0.1 10.1
Interest on overdrafts is based on floating rates linked to LIBOR.
Interest rates on floating rate loans are all linked to LIBOR.
SECURED BANK LOANS
The secured bank loans comprise a euro denominated loan of £0.2m which carries a fixed interest rate 4.95%. The
debt is secured on certain property, plant and equipment.
REVOLVING CREDIT FACILITY (£25M)
The revolving credit facility was entered into on 12 February 2004 and runs until 1st October 2008. Loans have variable
interest rates linked to LIBOR.
FINANCIAL COVENANTS
REVOLVING CREDIT FACILITIES
The debt is subject to certain financial covenants relating to gearing and net worth. In the event of a breach of these
covenants, and during the period that the breach continues, the debt and any outstanding interest may become due
and payable immediately on demand from the banks. In addition the facilities may be repaid with 14 days notice.
The maturity of the borrowings is as follows:
YEAR ENDED 31 MARCH 2008
Within 2-5 Over 5
1 year years years Total
£m £m £m £m
Floating rate 9.9 0.1 – 10.0
YEAR ENDED 31 MARCH 2007
Within 2-5 Over 5
1 year years years Total
£m £m £m £m
Floating rate 7.2 10.1 – 17.3
The carrying amount of the Group’s borrowings is denominated in the following currencies:
2008 2007
£m £m
Pound sterling 0.2 10.5
Euro 7.8 2.8
US dollar 1.3 3.6
Other currencies 0.7 0.3
10.0 17.3
At 31 March 2008, the Group had available £25.0m (2007: £15.0m) of undrawn committed borrowing facilities in
respect of which all conditions precedent had been met. 53 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
25 MOVEMENTS IN CASH AND NET DEBT
YEAR TO 31 MARCH 2008
31 March Foreign 31 March
2007 Cash flow exchange 2008
£m £m £m £m
Cash at bank and in hand 11.9 35.6
Overdrafts (7.1) (9.8)
Cash and cash equivalents 4.8 21.7 (0.7) 25.8
Bank loans under one year (0.1) (0.1)
Bank loans over one year (10.1) (0.1)
Total loan capital (10.2) 10.1 (0.1) (0.2)
Net (debt)/cash (5.4) 31.8 (0.8) 25.6
YEAR TO 31 MARCH 2007
31 March Foreign 31 March
2006 Cash flow exchange 2007
£m £m £m £m
Cash at bank and in hand 16.9 11.9
Overdrafts (6.1) (7.1)
Cash and cash equivalents 10.8 (6.0) – 4.8
Loan capital under one year (5.1) (0.1)
Loan capital over one year (12.2) (10.1)
Total loan capital (17.3) 7.1 – (10.2)
Net debt (6.5) 1.1 – (5.4)
26 PROVISIONS
Onerous Severance
contracts indemnity Other Total
£m £m £m £m
At 1 April 2007 2.2 0.7 1.1 4.0
Arising during the year 1.1 1.2 0.3 2.6
Utilised (1.0) (0.4) (0.5) (1.9)
At 31 March 2008 2.3 1.5 0.9 4.7
Analysis of total provisions:
2008 2007
£m £m
Current 3.2 2.1
Non-current 1.5 1.9
4.7 4.0
ONEROUS CONTRACTS
The onerous contracts provision relates to lease obligations in respect of unoccupied properties. Onerous contract
provisions are expected to be used over periods of up to 5 years. 54 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
26 PROVISIONS CONTINUED
SEVERANCE INDEMNITY
The severance indemnity provision relates to severance costs payable to employees. The majority of the provisions are
expected to be used up within one year.
OTHER
The other provision relates to other claims and is expected to be utilised within one year.
27 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments, other than forward currency contracts, comprise bank loans, overdraft
facilities, cash and short-term deposits. The Group’s financial instrument policies can be found in the accounting policies
in note 2. The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk and credit risk.
The Board agrees policies for managing each of these risks and they are summarised below:
INTEREST RATE RISK
The Group’s exposure to market risk for changes in interest rates relates to the Group’s debt obligations. The Group has
not hedged against interest rate risk. Based on the Group’s net cash position at the year end, a 1% change in interest
rates would affect interest income by approximately £259,000 (2007: £52,000 charge).
LIQUIDITY RISK
The Group mitigates liquidity risk by managing the cash generation of its operations, combined with bank borrowings
and long-term debt. In its funding strategy the Group’s objective is to maintain a balance between the continuity of
funding and flexibility through the use of overdrafts and bank loans.
Excess cash used in managing liquidity is placed on interest-bearing deposit with maturities fixed at no more than three
months.
CREDIT RISK
There are no significant concentrations of credit risk within the Group.
The Group is exposed to some credit risk that is primarily attributable to its trade and other receivables. This is
minimised by dealing with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to
trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an
ongoing basis with the result that the Group’s exposure to bad debts is not significant. The amounts included in the
balance sheet are net of allowances for doubtful debts, which have been estimated by management based on prior
experience and known factors at the balance sheet date which may indicate that a provision is required. The maximum
exposure is the carrying amount as disclosed in note 22.
With respect to credit risk relating to cash and cash equivalents the Group’s exposure to credit risk arises from default of
the counterparty, with the maximum exposure equal to the carrying amount of these instruments. Risk is limited as the
Group only maintains liquid funds with banks with high credit ratings.
CURRENCY RISK
Currency risk is managed through the use of forward exchange contracts and are fair valued in the income statement.
CAPITAL MANAGEMENT
The Group aims to maximise shareholder value by maintaining an appropriate debt/equity capital structure. It uses a
number of mechanisms to manage debt/equity levels, as appropriate, in the light of economic and trading conditions,
and the future capital investment requirements of the business.
28 FINANCIAL ASSETS AND LIABILITIES
FAIR VALUES
Set out below is a comparison by category of carrying amounts and fair values of all the Group’s financial instruments
that are carried in the financial statements.
Carrying Fair Carrying Fair
amount value amount value
2008 2008 2007 2007
£’000 £’000 £’000 £’000
Financial assets
Cash and cash equivalents 35.6 35.6 11.9 11.9
Other financial assets 0.3 0.3 0.3 0.3
Financial liabilities
Bank overdrafts and short-term borrowings (9.9) (9.9) (7.2) (7.2)
Interest bearing loans and borrowings
Floating rate borrowings –– (10.0) (10.0)
Fixed rate borrowings (0.1) (0.1) (0.1) (0.1)
Short term trade receivables and payables have been excluded from the above table as book values approximate fair values. 55 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
29 TRADE AND OTHER PAYABLES
2008 2007
£m £m
Trade payables 21.7 37.1
Other payables 4.8 5.0
Accrued expenses and deferred income 7.7 16.8
34.2 58.9
Trade payables are non-interest bearing and are settled taking into account local good practice.
Other payables are non-interest bearing and settled throughout the year.
Accruals are non-interest bearing and settled throughout the year.
Deferred income is recognised throughout the year.
30 SHARE CAPITAL
AUTHORISED
2008 2007
million million
Ordinary shares of 5p each 1.75 1.75
ALLOTTED, CALLED UP AND FULLY PAID
2008 2007
Number £m Number £m
Ordinary shares of 5p each 26,418,354 1.3 26,418,354 1.3
26,418,354 1.3 26,418,354 1.3
There were no shares issued during the year (2007: 1,500).
31 RECONCILIATION OF MOVEMENTS IN EQUITY
Attributable to equity holders of the parent Minority Total
interests equity
Issued Share Retained Other
capital premium earnings reserves Total
£m £m £m £m £m £m £m
At 1 April 2006 1.3 38.0 28.8 1.8 69.9 1.8 71.7
Total recognised income and expense for the year –– 12.1 (0.6) 11.5 0.2 11.7
Share-based payments –– 0.1 – 0.1 – 0.1
Equity dividends –– (5.7) – (5.7) – (5.7)
Dividends paid to minority interests –– ––– (0.1) (0.1)
Acquisition of minority interests –– ––– (1.9) (1.9)
At 31 March 2007 1.3 38.0 35.3 1.2 75.8 – 75.8
Total recognised income and
expense for the year –– 27.0 1.5 28.5 – 28.5
Share-based payments –– 0.1 – 0.1 – 0.1
Equity dividends –– (5.8) – (5.8) – (5.8)
Goodwill written back on disposal –– – 2.2 2.2 – 2.2
Dilution of associates –– (0.1) – (0.1) – (0.1)
At 31 March 2008 1.3 38.0 56.5 4.9 100.7 – 100.7 56 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
32 OTHER RESERVES
Currency
Merger translation
reserve reserve Total
£m £m £m
At 1 April 2006 0.8 1.0 1.8
Total recognised income and expense for the year – (0.6) (0.6)
At 31 March 2007 0.8 0.4 1.2
Total recognised income and expense for the year – 1.5 1.5
Goodwill written back on disposal 2.2 – 2.2
At 31 March 2008 3.0 1.9 4.9
NATURE AND PURPOSE OF OTHER RESERVES
MERGER RESERVE
The merger reserve arose as a consequence of the acquisition in 1987 of Centre Industries Limited and Acal Auriema Limited.
FOREIGN CURRENCY TRANSLATION RESERVE
The foreign currency translation reserve is used to record exchange differences arising from the translation of the
financial statements of foreign subsidiaries and other foreign currency investments.
33 COMMITMENTS AND CONTINGENCIES
OPERATING LEASE COMMITMENTS
The Group leases various buildings under non-cancellable operating lease agreements. The leases have varying terms,
escalation clauses and renewal rights.
The Group also leases certain motor vehicles and items of machinery. These leases have an average life of between
3 and 5 years with no renewal option included in the contracts. There are no restrictions placed upon the lessee by
entering into these leases.
Future minimum rentals payable under non-cancellable operating leases are as follows:
2008 2007
£m £m
Due within one year 3.2 3.9
Due after one year but not more than five years 7.0 9.2
Due after more than five years 2.9 4.6
13.1 17.7
CONTINGENT LIABILITIES
There were no material contingent liabilities at 31 March 2008 or 31 March 2007.
GUARANTEES
The Group has given guarantees and offset arrangements to support bank facilities made available to subsidiary
undertakings. As at 31 March 2008 the relevant subsidiary bank borrowings amounted to £8.3 million (2007: £2.3 million). 57 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
34 SHARE-BASED PAYMENT PLANS
The Group operates an approved and an unapproved executive share option scheme, the rules of which are similar in all
material respects. The grant of options to executive directors and senior management is recommended by the
Remuneration Committee on the basis of their contribution to the Group’s success. The options vest after three years.
The exercise price of the options is equal to the closing mid-market price of the shares on the trading day previous to the
date of the grant. The exercise of options is subject to the meeting of performance criterion; namely, that the growth
in the company’s earnings per share in any three year period before exercise must have exceeded the percentage
increase in the Retail Price Index over the same period plus two per cent per annum. Exercise of an option is subject to
continued employment. The life of each option granted is seven years. There are no cash settlement alternatives.
Options are valued using the Black-Scholes option-pricing model. No non-market performance conditions were included
in the fair value calculations. The fair value per option granted and the assumptions used in the calculation are as follows:
Grant date 14 June 2007 30 June 2006 12 July 2005
Share price at grant date £3.8725 £3.675 £3.35
Exercise price £3.8725 £3.675 £3.35
Number of employees 37 46 59
Shares under option 310,000 116,500 122,300
Vesting period (years) 33 3
Expected volatility 30.8% 30.8% 28.0%
Option life (years) 77 7
Expected life (years) 4.5 4.5 4.5
Risk free rate 5.4% 5.06% 4.8%
Expected dividends expressed as a dividend yield 5.0% 5.0% 4.3%
Fair value £0.80 £0.74 £0.70
The expected volatility is based on historical volatility over the previous five years. The expected life is the average
expected period to exercise. The risk free rate of return is the yield on zero-coupon UK government bonds of a term
consistent with the assumed option life.
The total charge for the year relating to employer share-based payment schemes was £0.1 million (2007: £0.1 million),
all of which relates to equity-settled share-based payment transactions. After deferred tax the total charge was £0.1
million (2007: £0.1 million).
OUTSTANDING SHARE OPTIONS
A summary of the options over ordinary shares that have been granted under various Group share option schemes and
remain outstanding at 31 March 2008 is given below:
Outstanding Granted Expired Forfeited Exercised Outstanding Exercise
at 31 March during the during the during the during the at 31 March price Exercise
2007 year year year year 2008 (pence) dates
225,000 – (225,000) –– – 517.50 2003-2007
52,000 –– –– 52,000 537.50 2004-2008
137,500 –– (16,000) – 121,500 515.00 2004-2008
167,000 –– (10,000) – 157,000 586.50 2005-2009
132,000 –– (8,300) – 123,700 525.00 2006-2010
103,750 –– (12,000) – 91,750 480.00 2007-2011
106,800 –– (8,250) – 98,550 335.00 2008-2012
112,000 –– (2,000) – 110,000 367.50 2009-2013
– 310,000 –– – 310,000 387.25 2010-2014
1,036,050 310,000 (225,000) (56,550) – 1,064,500
As part of the acquisition of Sedgemoor, certain option holders in Sedgemoor converted their holdings to options in
Acal. The movements on these options are as follows:
Outstanding Lapsed Exercised Outstanding
at 31 March during the during the at 31 March Exercise price
2007 year year 2008 (pence) Exercise dates
2,139 –– 2,139 465.72 2001-2008 58 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
34 SHARE-BASED PAYMENT PLANS CONTINUED
CHANGES IN SHARE OPTIONS
A reconciliation of option movements over the year to 31 March 2008 is shown below:
2008 2007
Weighted Weighted
average average
Number exercise Number exercise
(000) price (000) price
Outstanding at 1 April 2007 1,038 £4.91 1,136 £5.02
Granted 310 £3.87 116 £3.68
Exercised –– (1) £3.35
Expired (225) £5.18 (108) £4.63
Forfeited (56) £4.90 (105) £4.95
Outstanding at 31 March 2008 1,067 £4.56 1,038 £4.91
Exercisable at 31 March 2008 546 £5.34 713 £5.36
The weighted average remaining contractual life for the share options outstanding as at 31 March 2008 is 3.5 years
(2007: 2.7 years).
The range of exercise prices for options outstanding at the end of the year was £3.35 to £5.865 (2007: £3.35 to £5.865).
35 PENSIONS
DEFINED CONTRIBUTION SCHEMES
The Group makes payments to various defined contribution pension schemes, the assets of which are held in separately
administered funds. In the United Kingdom the relevant scheme is the Acal Group Employee Pension Scheme (‘the Acal
scheme’). Contributions by both employees and Group companies are held in externally invested trustee-administered
funds.
The Group contributes a specified percentage of earnings for members of the Acal scheme, and thereafter has no
further obligations in relation to the Acal scheme. The total cost charged to income in relation to the UK based Acal
scheme was £579,000 (2007: £646,000). Employer contributions in respect of overseas pension schemes were
£710,000 (2007: £689,000). Total contributions payable in the next financial year are expected to be at rates broadly
similar to those in 2007/8 but based on actual salary levels in 2008/9.
At the year end, 237 employees were active members of the scheme (2007: 254).
DEFINED BENEFIT SCHEMES
The acquisition of the Sedgemoor Group in June 1999 brought with it certain defined benefit pension schemes, the
principal one of which was the Sedgemoor Group Pension Fund (together ‘the Sedgemoor Scheme’). The Sedgemoor
Scheme is funded by the Company, provides retirement benefits based on final pensionable salary and its assets are held
in a separate trustee-administered fund.
Following the acquisition of Sedgemoor, the Sedgemoor Scheme was closed to new members. Shortly thereafter
employees were given the opportunity to join the Acal Scheme and future service benefits ceased to accrue to members
under the Sedgemoor Scheme.
Contributions to the Sedgemoor Scheme are determined in accordance with the advice of independent, professionally
qualified actuaries. 59 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
35 PENSIONS CONTINUED
The latest actuarial valuation of the scheme was carried out as at 31 March 2006 and updated to 31 March 2008 by a
qualified actuary. The main actuarial assumptions used are set out as follows:
2008 2007
Rate of increase of salaries n/a n/a
Rate of increase of pensions in payment 3.7% 3.1%
Discount rate 6.6% 5.4%
Inflation assumption 3.7% 3.1%
The discount rate is based on over 15 year AA grade sterling corporate bond yields at the balance sheet date. The
expected rate of return on scheme assets is derived as an average, weighted according to the portfolio allocation at the
balance sheet date. The expected rates of return on each class of asset are shown below. Pensioner mortality
assumptions are based on the ‘92 series’ tables, issued by the Institute and Faculty of Actuaries, appropriate to the
member’s year of birth rated up by one year.
The amounts recognised in the income statement in respect of defined benefit schemes are as follows:
2008 2007
£m £m
Expected return on scheme assets 1.8 1.7
Interest cost on scheme liabilities (1.9) (1.9)
Gains on settlements 0.1 –
Other finance costs (note 10) – (0.2)
The net finance cost is reported within interest expense.
The amounts taken to the statement of recognised income and expense are as follows:
2008 2007
£m £m
Actual return on scheme assets (0.4) 1.3
Less: expected return on scheme assets (1.8) (1.7)
(2.2) (0.4)
Actuarial gains on scheme liabilities 4.2 1.3
Actuarial gains recorded in the statement of recognised income and expense 2.0 0.9
Since the date of transition the cumulative value of actuarial gains and losses recorded in the statement of recognised
income and expense is £0.5 million loss.
The fair value of assets and expected rates of return are used to determine the amounts recognised in the balance sheet
as follows:
2008 2008 2007 2007
£m £m
Equities 8.1% 14.8 7.6% 15.9
Gilts 5.1% 13.0 4.6% 14.1
Cash 4.7% 0.1 4.7% 0.5
Fair value of scheme assets 27.9 30.5
Present value of funded defined benefit obligations (31.7) (37.9)
Liability recognised in the balance sheet (3.8) (7.4) 60 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
35 PENSIONS CONTINUED
Changes in the present value of the defined benefit obligation are as follows:
2008 2007
£m £m
Opening defined benefit obligation 37.9 39.2
Net interest cost 1.9 1.9
Actuarial gains on scheme liabilities (4.2) (1.3)
Settlements (2.1) –
Benefits paid (1.8) (1.9)
Closing defined benefit obligation 31.7 37.9
Changes in the fair value of the scheme assets are as follows:
2008 2007
£m £m
Opening fair value of plan assets 30.5 30.1
Expected returns on scheme assets 1.8 1.7
Actuarial losses on scheme assets (2.2) (0.4)
Contributions 1.3 1.0
Settlements (1.7) –
Benefits paid (1.8) (1.9)
Closing fair value of plan assets 27.9 30.5
HISTORY OF EXPERIENCE GAINS AND LOSSES
2008 2007 2006 2005 2004
£m £m £m £m £m
Fair value of scheme assets 27.9 30.5 30.1 27.1 25.9
Defined benefit obligations (31.7) (37.9) (39.2) (33.5) (32.8)
Deficit in the scheme (3.8) (7.4) (9.1) (6.4) (6.9)
Experience adjustments on scheme assets (2.2) (0.4) 3.3 0.7 2.4
Experience adjustments on scheme liabilities 4.2 1.3 (6.7) (0.7) (1.1) 61 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
36 RELATED PARTY DISCLOSURES
The Group’s principal subsidiaries are listed in the following table:
Group effective shareholding held
Country of incorporation by Parent by Subsidiary
Name and nature of business and registration Type of share Company Undertakings
Agency, marketing and distribution
Acal Technology Ltd England Ordinary Shares – 100%
ATM Parts Company Ltd England Ordinary Shares 100% –
Computer Parts International Ltd England Ordinary Shares 100% –
EAF (UK) Ltd England Ordinary Shares – 100%
Stortech Electronics Ltd England Ordinary Shares – 100%
Vertec Scientific Ltd England Ordinary Shares – 100%
Vertec Scientific SA South Africa Ordinary Shares – 100%
Acal SAS France Ordinary Shares – 100%
Acal NV/SA Belgium Ordinary Shares – 100%
Acal GmbH Germany Ordinary Shares – 100%
EAF Computer Service Supplies GmbH Germany Ordinary Shares – 100%
Acal Technology AB Sweden Ordinary Shares – 100%
Acal Technology BV Netherlands Ordinary Shares – 100%
Acal Italia Srl Italy Ordinary Shares – 100%
Acal Iberia SL Spain Ordinary Shares – 100%
Management services
Acal Management Services Ltd England Ordinary Shares 100% –
All subsidiaries operate in their country of incorporation. All subsidiaries have a 31 March year end and have the same
voting rights as the effective interest.
The following table provides the total amount of transactions which have been entered into with related parties for the
relevant year.
RELATED PARTY
Sales to Amounts owed
related by related
parties parties
£m £m
Associates
2007/8 0.5 0.1
2006/7 0.5 –
The Group considers key management personnel as defined under IAS 24 Related Party Disclosures to be the Directors
of the Group. Disclosures on directors’ remuneration are set out in the remuneration report on pages 20 to 23.
ASSOCIATES
For details of the Group’s investments in associates see note 19.
TERMS AND CONDITIONS OF TRANSACTIONS WITH RELATED PARTIES
All transactions with related parties were on an arms length basis. Outstanding balances at year-end are unsecured and
settlement occurs in cash.
TRANSACTIONS WITH OTHER RELATED PARTIES
Details of transactions with Directors are detailed in the remuneration report on pages 20 to 23. 62 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
37 EVENTS AFTER THE BALANCE SHEET DATE
A final dividend of 14.7p per share (2007: 14.7p) amounting to a dividend of £3.9m (2007: £3.9m) was declared by the
Directors at their meeting on 22 May 2008. These financial statements do not reflect this dividend payable.
38 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
ESTIMATION UNCERTAINTY
Key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date,
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year. The most significant areas in which assumptions are made and estimates used are in determining:
• the useful economic lives of property, plant and equipment and intangible assets
• any impairment of assets including goodwill and inventories
• the quantification of provisions
• the fair values of assets acquired in a business combination
• the underlying assumptions inherent in the calculation of the pension liability
The carrying values of goodwill are disclosed in more detail in note 17, whilst notes 18 and 35 describe the assumptions
used in impairment testing and in accounting for the pension liability, respectively.
The Group’s accounting policies applied in respect of the above are set out in note 2 to these financial statements. 63 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
ACAL PLC
COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2008 64 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
REPORT OF THE AUDITORS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ACAL PLC
We have audited the parent company financial statements of Acal plc for the year ended 31 March 2008 which
comprise the Balance Sheet and the related notes 1 to 13. These parent company financial statements have been
prepared under the accounting policies set out therein. We have also audited the information in the Directors’
Remuneration Report that is described as having been audited.
We have reported separately on the group financial statements of Acal plc for the year ended 31 March 2008.
This report is made solely to the company’s members, as a body, in accordance with Section 235 of the Companies Act
1985. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the parent
company financial statements in accordance with applicable United Kingdom law and Accounting Standards (United
Kingdom Generally Accepted Accounting Practice) as set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the parent company financial statements and the part of the Directors’ Remuneration
Report to be audited in accordance with relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the parent company financial statements give a true and fair view and
whether the parent company financial statements and the part of the Directors’ Remuneration Report to be audited
have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our
opinion the information given in the directors’ report is consistent with the parent company financial statements.
In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not
received all the information and explanations we require for our audit, or if information specified by law regarding
directors’ remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the audited
parent company financial statements. The other information comprises only the Directors’ Report, the Chairman’s
Statement, the Chief Executive’s Review, the Finance Director’s Review, the Board Report on Corporate Governance and
the unaudited part of the Director’s Remuneration Report. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the parent company financial statements. Our
responsibilities do not extend to any other information.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in
the parent company financial statements and the part of the Directors’ Remuneration Report to be audited. It also
includes an assessment of the significant estimates and judgments made by the directors in the preparation of the
parent company financial statements, and of whether the accounting policies are appropriate to the company’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the parent company financial
statements and the part of the Directors’ Remuneration Report to be audited are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of
the presentation of information in the parent company financial statements and the part of the Directors’ Remuneration
Report to be audited.
OPINION
In our opinion :
• the parent company financial statements give a true and fair view, in accordance with United Kingdom Generally
Accepted Accounting Practice, of the state of the company’s affairs as at 31 March 2008;
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited have
been properly prepared in accordance with the Companies Act 1985; and
• the information given in the directors’ report is consistent with the parent company financial statements.
ERNST & YOUNG LLP
REGISTERED AUDITOR
LONDON
2 JUNE 2008 65 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
COMPANY BALANCE SHEET
AT 31 MARCH 2008
2008 2007
notes £m £m
Fixed assets
Investments 4 119.6 123.4
Current assets
Debtors 5 0.1 0.9
Cash at bank and in hand 29.7 0.3
Total current assets 29.8 1.2
Creditors: Amounts falling due within one year 6 (47.8) (24.3)
Net current liabilities (18.0) (23.1)
Total assets less current liabilities 101.6 100.3
Creditors: Amounts falling due after more than one year 6 – (10.0)
Net assets 101.6 90.3
Capital and reserves
Called up share capital 8 1.3 1.3
Share premium account 9 38.0 38.0
Merger reserve 9 3.0 3.0
Profit and loss account 9 59.3 48.0
Equity shareholders’ funds 101.6 90.3
These financial statements were approved by the Board of Directors on 2 June 2008 and signed on its behalf by:
R J Moon J S Virdee
Chairman Finance Director NOTES TO THE COMPANY FINANCIAL STATEMENTS
66 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
1 BASIS OF ACCOUNTING
The financial statements are prepared under the historical cost convention and in accordance with applicable UK
accounting standards.
The Company has taken advantage of the provisions of FRS 1 (revised) which exempts companies which are part of a
group for which a consolidated cash flow statement is prepared, from preparing a cash flow statement. The required
consolidated cash flow statement has been included within the consolidated financial statements of the Group.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME RECOGNITION
Dividend income from subsidiary and associated undertakings is recognised in the profit and loss account on receipt of
the cash.
FIXED ASSET INVESTMENTS
Investments in subsidiary and associate undertakings are stated initially at cost being the fair value of the consideration
given and including directly attributable transaction costs. The carrying values are reviewed for impairment if events or
changes in circumstances indicate the carrying values may not be recoverable.
FINANCIAL ASSETS
Investments are initially recognised at cost, being the fair value of the consideration given and including directly
attributable transaction costs associated with the investment.
After initial recognition, investments in equity shares are treated as available for sale financial assets and are measured
at their fair value with any gains or losses recognised in equity. When the investment is derecognised or impaired, the
cumulative gain or loss previously reported in equity is included in the income statement.
Investments in equity instruments that do not have a quoted market price in an active market and whose fair value can
not be reliably valued are measured at cost.
At each balance sheet date, the Group reviews the carrying value of its assets to determine whether there is any indication
that the assets have suffered an impairment loss. If any such indication exists or when annual testing for an asset is
required, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.
SHARE-BASED PAYMENT SCHEME
In preparing the financial statements the Company has adopted FRS20 ‘share-based payments’. Although the Company
does not incur a charge under this standard, the issuance by the Company to its subsidiaries of a grant over the
Company’s options, represents additional capital contribution by the Company in its subsidiaries. The additional capital
contribution is based on the fair value of the grant issued, allocated over the underlying grant’s vesting period.
3 PROFIT OF THE PARENT COMPANY
The profit of the parent company for the financial year amounted to £17.0 million (2007: £8.3 million). By virtue of
section 230(4) of the Companies Act 1985, the Company is exempt from presenting a separate profit and loss account.
Fees paid to Ernst & Young LLP for non-audit services to the Company itself are not disclosed in the individual accounts of
Acal plc because group financial statements are prepared which are required to disclose such fees on a consolidated basis.
Deferred tax liabilities of the Company are not disclosed separately in the accounts on the grounds of materiality.
4 FIXED ASSET INVESTMENTS
Subsidiary Associated
undertakings undertakings Other Total
£m £m £m £m
At 1 April 2006 114.2 2.1 0.3 116.6
Additions 6.7 –– 6.7
Share-based payments 0.1 –– 0.1
At 31 March 2007 121.0 2.1 0.3 123.4
Disposals (3.9) –– (3.9)
Share-based payments 0.1 –– 0.1
At 31 March 2008 117.2 2.1 0.3 119.6
Details of the principal subsidiary and associate undertakings are provided in notes 36 and 19 of the Group accounts. NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
67 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
5 DEBTORS
2008 2007
£m £m
Amounts falling due within one year:
Amounts owed by subsidiary undertakings 0.1 –
Corporation tax – 0.9
0.1 0.9
6 CREDITORS
2008 2007
£m £m
Amounts falling due within one year:
Bank loans and overdrafts – 0.8
Amounts owed to subsidiary undertakings 44.7 22.8
Other creditors 1.0 –
Corporation tax 1.0 –
Provisions 0.4 –
Accruals and deferred income 0.7 0.7
47.8 24.3
Amounts falling due after more than one year:
Unsecured borrowings:
Term loans at market interest rates:
Repayable 1-2 years – 10.0
7 DERIVATIVES AND FINANCIAL INSTRUMENTS
The Company’s principal financial instruments comprise bank loans, overdraft facilities, bank balances and amounts due
from its subsidiary companies. The main purpose of these financial instruments is to provide finance for the Company
and its subsidiaries’ operations.
The main risks arising from the Company’s financial instruments are interest rate risk, liquidity risk and credit risk.
INTEREST RATE RISK
The Company borrows at floating rates of interest. The company has not hedged against interest rate risk.
CREDIT RISK
With respect to credit risk relating to cash and cash equivalents the Company’s exposure to credit arises from default of
the counter party, with the maximum exposure equal to the carrying amount of these instruments.
FOREIGN CURRENCY RISK
The Company has not hedged against foreign currency exposure due to its minimal exposure to foreign currency
movements as its business is conducted primarily in UK sterling.
MARKET RISK
At 31 March 2008, £nil million (2007: £10.8 million) of the Company’s revolving credit and overdraft facilities has been
drawn. These borrowings are at a floating interest rate of LIBOR plus margin and are therefore subject to market risk
through interest rate fluctuations. NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
68 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
7 DERIVATIVES AND FINANCIAL INSTRUMENTS CONTINUED
INTEREST RATE RISK
The following table sets out the carrying amount, by maturity, of the Company’s financial instruments that are exposed
to interest rate risk:
YEAR ENDED 31 MARCH 2008
Within 1-2 2-3 3-4 4-5 More than
1 year years years years years 5 years Total
£m £m £m £m £m £m £m
Floating rate 29.7 – –– –– 29.7
YEAR ENDED 31 MARCH 2007
Within 1-2 2-3 3-4 4-5 More than
1 year years years years years 5 years Total
£m £m £m £m £m £m £m
Floating rate
Cash at bank and in hand 0.3 –– ––– 0.3
Bank overdrafts (0.8) –– ––– (0.8)
Term bank loans – (10.0) –– –– (10.0)
(0.5) (10.0) –– –– (10.5)
Due to the short term trading nature of debts due from/due to subsidiary undertakings no interest is charged.
The Company borrows in UK sterling at LIBOR or base rates plus a margin.
BORROWING FACILITIES
The Company has revolving credit facilities which provide available facilities of £25 million. (2007: £25 million).
Additionally, the Company has overdraft facilities of £9.6 million (2007: £9.6 million) to support the future
activities of the business.
The available but undrawn committed facilities at 31 March in respect of which all conditions had been met at that
date are as follows:
YEAR ENDED 31 MARCH 2008
Within 1-2 2-3 3-4 4-5 More than
1 year years years years years 5 years Total
£m £m £m £m £m £m £m
Unsecured banking facilities 25.0 –– ––– 25.0 NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
69 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
7 DERIVATIVES AND FINANCIAL INSTRUMENTS CONTINUED
YEAR ENDED 31 MARCH 2007
Within 1-2 2-3 3-4 4-5 More than
1 year years years years years 5 years Total
£m £m £m £m £m £m £m
Unsecured banking facilities – 25.0 –– –– 25.0
Drawn bank loans – (10.0) –– –– (10.0)
Bank overdrafts 8.8 –– ––– 8.8
8.8 15.0 –– –– 23.8
FAIR VALUES
Set out below is a comparison by category of book values and fair values of all the Company’s financial assets and
liabilities as at 31 March:
Book value Fair value
2008 2007 2008 2007
£m £m £m £m
Primary financial instruments
Financial liabilities
Bank overdrafts – 0.8 – 0.8
Amounts owed to subsidiary undertakings 44.7 22.8 44.7 22.8
Bank loans – 10.0 – 10.0
Financial assets
Cash at bank and in hand 29.7 0.3 29.7 0.3
8 SHARE CAPITAL
Allotted, Allotted,
called up called up
and fully and fully
Authorised Authorised paid paid
Number £m Number £m
At 1 April 2007 and at 31 March 2008 35,000,000 1.75 26,418,354 1.3
At 31 March 2008 there were outstanding options for employees to purchase up to 1,066,639 (2007: 1,038,189)
ordinary shares of 5p each between 2008 and 2014 at prices ranging from £3.35 per share to £5.865 per share. During
the year to 31 March 2008 no options were exercised by employees under the terms of the various share option
schemes (2007: none). NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
70 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
9 RECONCILIATION OF SHAREHOLDERS’ FUNDS AND MOVEMENTS ON RESERVES
Share
Called up premium Merger Profit and
share capital account reserve loss account Total
£m £m £m £m £m
At 1 April 2006 1.3 38.0 3.0 45.3 87.6
Profit for the year –– – 8.3 8.3
Dividends to shareholders (restated) –– – (5.7) (5.7)
Share-based payments –– – 0.1 0.1
At 1 April 2007 1.3 38.0 3.0 48.0 90.3
Profit for the year –– – 17.0 17.0
Dividends to shareholders –– – (5.8) (5.8)
Share-based payments –– – 0.1 0.1
At 31 March 2008 1.3 38.0 3.0 59.3 101.6
11 RELATED PARTIES
The Company has taken advantage of the exemption given in FRS 8 not to disclose transactions with other
Group companies.
12 SHARE-BASED PAYMENTS
For detailed disclosures of share-based payments refer to Acal plc consolidated accounts, note 34.
13 CONTINGENT LIABILITIES
The parent company has given guarantees and offset arrangements to support bank facilities made available to subsidiary
undertakings. As at 31 March 2008 the relevant subsidiary bank borrowings amounted to £8.3 million (2007: £2.3 million). 71 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
FIVE YEAR RECORD
2008 2007 2006 2005 2004
(IFRS) (IFRS) (IFRS) (IFRS) (UK GAAP)
£m £m £m £m £m
Group income statement
Turnover – ongoing activities 159.5 164.5 257.0 243.7 268.4
Profit before tax, goodwill and exceptionals 6.1 5.1 8.6 9.9 12.6
Amortisation of goodwill – –– – (2.9)
Exceptionals – 0.4 (0.2) – (0.6)
Profit before tax 6.1 5.5 8.4 9.9 9.1
Tax (2.3) (1.7) (2.7) (3.3) (4.2)
Profit after tax from ongoing activities 3.8 3.8 5.7 6.6 4.9
Disposed activities 21.9 8.1 0.9 0.8 –
Profit for the year 25.7 11.9 6.6 7.4 4.9
Attributable to:
Equity holders of the parent 25.7 11.7 6.0 7.0 4.7
Minority interests – 0.2 0.6 0.4 0.2
Group balance sheet
Net cash/(debt) 25.6 (5.4) (6.5) (12.3) (15.2)
Equity shareholders’ funds 100.7 75.8 69.9 71.3 66.7
Statistics
Earnings per ordinary share 97.5p 44.4p 22.3p 26.6p 17.9p
Earnings per share before goodwill amortisation 97.5p 44.4p 22.3p 26.6p 29.0p
Dividends per share – relating to the period 21.9p 21.9p 21.6p 21.6p 21.0p
Return on capital employed* 31% 29% 37% 35% 40%
* Return on capital employed is based on profit before interest, goodwill amortisation and tax and net tangible assets adding back net debt.
For 2007 and 2008, the figures reported relate to the ongoing activities. 72 ACAL PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008
PRINCIPAL LOCATIONS
Country Company/division Locations
ELECTRONICS
United Kingdom Acal Technology Ltd Wokingham, Berkshire
Stortech Electronics Ltd Harlow, Essex
Acal TC Leicester
Vertec Scientific Ltd Aldermaston, Berkshire
Belgium Acal NV/SA Brussels
France Acal SAS Paris
Germany Acal GmbH Flein/Heilbronn
Munich
Hamburg
Italy Acal Italia Srl Milan
Netherlands Acal Technology BV Eindhoven
Sweden Acal Technology AB Stockholm
Norway Acal Technology AB Honefoss
Finland Acal Technology AB Helsinki
Denmark Acal Technology AB Copenhagen
Spain Acal Iberia SL Madrid
South Africa Vertec Scientific SA (pty) Ltd Randburg
PARTS SERVICES
United Kingdom EAF (UK) Ltd Wokingham, Berkshire
ATM Parts Company Ltd Camberley, Surrey
Computer Parts International Ltd Nottingham
Germany EAF Computer Service Supplies GmbH Goch
Further details of the Group’s locations can be found on the Acal plc website
www.acalplc.co.uk ACAL’S BUSINESS ELECTRONICS DIVISION
UNPARALLELED EXPERTISE PAN-EUROPEAN FOOTPRINT EXPANDING OUR SOLUTIONS... EXTENDING OUR PORTFOLIO...
PARTS SERVICES DIVISION
Acal’s key differentiators compared to others in the same fields
are its unparalleled expertise in the design-in philosophy of
Electronic Components and the processes required from
planning to fulfilment of Parts Services.
Acal’s pan-European coverage ensures that service and support
can be provided wherever customers may be located in Europe.
This capability is also valuable to suppliers who look for a
common sales and marketing message for the European market.
TECHNICAL & MARKET KNOWLEDGE CUSTOMER RESPONSE
Acal sales teams possess in-depth knowledge of their markets
and customers and are supported by technical and application
engineers to assist in some of the most demanding requirements.
Acal has over 20 offices in Western Europe staffed with direct
sales, sales support and customer service personnel who have
many years experience of the varied purposes for which our
products and services are required, ensuring that response
times are both rapid and accurate
2007
2008
UK – 46%
CONTINENTAL EUROPE – 50%
REST OF WORLD – 4%
UK – 39%
CONTINENTAL EUROPE – 57%
REST OF WORLD – 4%
GEOGRAPHIC COVERAGE OF SALES
EXCLUDING ASSOCIATES
LOCATIONS
BY DIVISION
SALES
BY DIVISION
Acal’s largest division and Europe’s premier, technical, demand
creation Electronic Component distributor. With operations in
11 countries this business has pan-European coverage,
centralised logistics and local customer interface.
The 2:1 ratio of Field Sales Engineer to Product Management
and Application Engineers is key to our ability to service the
demand creation role that is a major differentiator between
Acal and others in the sector.
Apart from the product knowledge/intellectual property value-
add, there is significant physical added value in the form of
semiconductor programming, microsystem configuration and
electromechanical component assembly, all to provide bespoke
solutions for our customers.
OUR MARKETS AND CUSTOMERS
The customer profile of this division contains all the major
electronic equipment manufacturers in Europe as well as
thousands of SMEs and contract manufacturers. The market
place that these customers occupy is today extremely wide.
Having just 4/5 years ago been dominated by the major
telecommunication companies it is now spread across such
diverse activities as aerospace, broadcasting, metering, medical,
automation, transportation, communications, industrial
controls, motor controls and security.
OUR SUPPLIERS AND PRODUCTS
Our product profile is divided into seven generic groups:
Semiconductors Passive components
Power products Frequency control components
RF & Wireless Electromechanical components
Boards and Systems
We focus on a maximum of 10 specialist suppliers in each of
the above with an emphasis on specialist rather than
commodity product. Thus we have developed a high class
franchise portfolio which guarantees no overlap and therefore
a unique share of mind for our suppliers.
OUR STRATEGY
With the product profile now available, our sales and
marketing activities are geared to ensuring that we succeed in
promoting increasing numbers of products with each new
customer design. This strategy is enhanced with the extension
of our semiconductor portfolio which accounts for in excess of
50% of the available electronic components market.
Acal Parts Services (APS) provides spare parts, logistics planning
and added value services to pan-European Field Services
organisations in the IT and ATM marketplace. With offices in
the UK and Germany, the Group sells and manages stock in
locations all over Europe and as far afield as Australia, South
Africa and the Americas.
APS has developed into a services based organisation that has
become an integral part of our customers’ supply chain
resulting from our ability to assess demand patterns based on
host equipment to be supported.
OUR MARKETS AND CUSTOMERS
APS operates in three fields:
• SPARE PARTS SUPPLY FOR FIELD SERVICE ORGANISATIONS
We work with our clients to ensure that the spare parts they
need to maintain their customers’ IT and ATM infrastructure
are always available.
• ADDED VALUE DISTRIBUTION
We provide distribution and services such as warranty
management, engineering and performance reporting to
leading Printer and PC manufacturers.
• REFURBISHMENT AND RE-SALE
We help several of the leading OEMs to manage their
returned equipment and gain maximum financial return by
refurbishing and re-selling it for them.
OUR PRODUCTS AND SUPPLIERS
APS sources its products worldwide. Parts are tested and
backed by our quality assurance and warranty programmes.
We supply parts for everything from PCs right up to Mainframe
Computers. In the ATM field we sell parts for the major brands
and supply second user ATM machines into emerging markets.
Our newest product area is the retail Point of Sale (POS)
equipment.
Our unique engineering expertise and quality standards and the
fact that we have become a ‘one-stop shop’ for many of our
customers has been one of the cornerstones of our success.
OUR STRATEGY
APS has become a key part of our customers’ supply chain and
we see this outsourcing trend continuing and expanding
beyond IT, ATM and POS hardware.
PARTS SERVICES
UNITED KINGDOM
GERMANY
ELECTRONICS
UNITED KINGDOM
BELGIUM
FRANCE
GERMANY
ITALY
NETHERLANDS
SWEDEN
NORWAY
FINLAND
DENMARK
SPAIN
ELECTRONICS
£111.2m
PARTS SERVICES
£48.3m
EBIT
BY DIVISION
ELECTRONICS
£3.3m
PARTS SERVICES
£2.8m
SPAIN
ITALY
FINLAND
NORWAY
DENMARK
BELGIUM
NETHERLANDS
GERMANY
UK
ELECTRONICS
PARTS SERVICES
BANGALORE
SHANGHAI
SINGAPORE
ASSOCIATE COMPANY OFFICES
SWEDEN
TAIWAN
HONG KONG
BANGKOK
SELANGOR
JOHAR BAHRU
PENANG
SHENZHEN
SUZHOU
FRANCE
INTERNATIONAL LOCATIONS ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 MARCH 2008
DISTRIBUTION OF TECHNOLOGY…
ACAL PLC
HIGHLIGHTS 1
CHAIRMAN’S STATEMENT 2
CHIEF EXECUTIVE’S REVIEW 4
FINANCE DIRECTOR’S REVIEW 8
DIRECTORS 12
CORPORATE INFORMATION 13
DIRECTORS’ REPORT 14
BOARD REPORT ON CORPORATE GOVERNANCE 16
DIRECTORS’ REMUNERATION REPORT 20
CORPORATE SOCIAL RESPONSIBILITY 24
STATEMENT OF DIRECTORS’ RESPONSIBILITIES 25
REPORT OF THE AUDITORS – GROUP 27
CONSOLIDATED INCOME STATEMENT 28
CONSOLIDATED STATEMENT OF RECOGNISED
INCOME AND EXPENSE 29
CONSOLIDATED BALANCE SHEET 30
CONSOLIDATED CASH FLOW STATEMENT 31
NOTES TO THE GROUP FINANCIAL STATEMENTS 32
REPORT OF THE AUDITORS – COMPANY 64
COMPANY BALANCE SHEET 65
NOTES TO THE COMPANY
FINANCIAL STATEMENTS 66
FIVE YEAR RECORD 71
PRINCIPAL LOCATIONS 72
THE GROUP HAS APPROXIMATELY 700 EMPLOYEES LOCATED IN
OFFICES THROUGHOUT WESTERN EUROPE WHO SERVE AND
SUPPORT SALES TO CUSTOMERS FROM CONCEPT TO FULFILMENT.
THE BUSINESS PROVIDES OPPORTUNITIES FOR GROWTH, A HIGH
RETURN ON CAPITAL EMPLOYED AND A POSITIVE CASH FLOW. THE
STRATEGY IS TO INVEST IN FURTHER DEVELOPMENT ORGANICALLY
OR BY ACQUISITION WHERE THIS COMPLEMENTS OUR CURRENT
ACTIVITIES. THIS WILL ENHANCE SHAREHOLDER VALUE AND
PROVIDE FURTHER OPPORTUNITIES FOR OUR STAFF, OUR
CUSTOMERS AND OUR SUPPLIERS.
A LEADING PAN-EUROPEAN
VALUE-ADDED DISTRIBUTOR
PROVIDING SPECIALIST DESIGN-IN
SALES AND MARKETING SERVICES
FOR INTERNATIONAL SUPPLIERS.
2 CHANCELLOR COURT
OCCAM ROAD
SURREY RESEARCH PARK
GUILDFORD
SURREY GU2 7AH
TELEPHONE +44 (0)1483 544500
FACSIMILE +44 (0)1483 544550
EMAIL info@acalplc.co.uk
www.acalplc.co.uk
ACAL PLC ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008