MALLETT PLC
Annual Report
and Accounts 2008 Contents
Highlights 01
Mallett at a Glance 02
Chairman’s Statement 06
Chief Executive’s Report 08
Board of Directors 10
Report of the Directors 11
Corporate Governance 15
Directors’ Remuneration Report 17
Independent Auditors’ Report to the
Members of Mallett PLC 22
Consolidated Income Statement 23
Consolidated Statement of Income
and Expense 23
Consolidated Balance Sheet 24
Company Balance Sheet 25
Consolidated Cash Flow Statement 26
Company Cash Flow Statement 27
Notes to the Accounts 28
Five Year Record 43
Notice of Annual General Meeting 44
Financial Calendar 46
Form of proxy 47
Mallett is one of the oldest established
antiques dealers in the United Kingdom
and specialises in the finest pieces
of furniture and works of art, primarily
from the 18th century and Regency periods.
MALLETT PLC
Annual Report and Accounts 2008
Mnemos_01 (from the Meta collection).
A pillbox made of solid gold, it opens on nearly
invisible hinges with the lightest pressure
applied to a discrete point. The covers open
to reveal an ornately hand-engraved interior,
a masterful conjunction of sumptuous detail
and articulated precision.
Asymptote explores the beauty of apparent
fluidity with this seemingly molten gold box.
A specialist Parisian atelier, drawing on the
tradition of Napoleonic bôites d’or, crafted these
eloquent explorations of form and geometry. • Two new businesses, Meta & James Harvey
British Art, launched in April
• Group attended 9 fairs in 4 countries and held
4 exhibitions of specific ranges of stock
• Following operational review, decision taken to
seek to relocate London showroom and restructure
cost base
• New management team now in place focused on
re-energising the business
• Turnover £12.1m
• £0.7m operating loss in respect of the antique
and fine art business
• £1.9m operating loss in respect of Meta
• £3.3m inventory provision booked (17% of
inventory cost)
Highlights
Operational
Highlights
Financial
MALLETT PLC
Annual Report and Accounts 2008
01
A set of six superb Neapolitan tortoiseshell
objects forming a set for a dressing table, each
piece inlaid throughout with minutely detailed
pink gold piqué work of the finest quality.
Piqué work is a technique said to have
originated in Naples in mid-17th century.
It consists of inlaying the tortoiseshell with thin
pieces of gold or silver, and it can be of two
types: piqué posé and piqué clouté or point.
The first consists of cut designs inlaid in the
shell while the latter is small pins inlaid in
order to create patterns and delicate decorative
motifs. The better examples combine the two
techniques, just as this fine suite of pieces,
where the artist applied elegantly the profuse
rococo motifs with small inlaid dots, for
example, in the shell in the side of the tray. MALLETT PLC
Annual Report and Accounts 2008
Mallett at a Glance
02
One of the world’s pre-eminent antiques
houses, specialising in English and
Continental furniture and objects from the
18th century and Regency periods
London and New York, established 1865
Private collectors as well as many of the
world’s great museums, from the Victoria and
Albert Museum in London to the Metropolitan
Museum in New York, look to Mallett for
exemplary pieces that represent an object’s
design, execution and pedigree.
Contribution to Group sales
85%
• Exhibited at fairs in London, New York,
Palm Beach, San Francisco and Maastricht
• Produced and distributed 4 catalogues
of differing themes displaying a variety
of stock items
• Announced intention to seek to relocate
London showroom to new premises in
Mayfair area
What
Where, when
Strategy
How much
Highlights MALLETT PLC
Annual Report and Accounts 2008
03
One of the world’s longest established
restorers of furniture and works of art
London, established 1834
With a reputation for skilled workmanship
restoring and conserving furniture and works
of art for Royal, private and museum collections
throughout the world, the business is now
based in a fine 18th century building in
Clapham, London, from where its highly
experienced and skilled craftsmen restore a
wide range of items from the decorative arts.
Contribution to Group sales
2%
• Profitable in first full year of operation
since merger
• Attended Decorex fair in September
British Art from the 17th century to the
present day
London, established 2008
Dedicated to promoting British Artists from
the 17th century to the present day. With an
emphasis on less established names of the
18th and 19th centuries, the gallery will also
promote traditional figurative contemporary
art, thus displaying an eclectic mix of
paintings that are united through their British
origin and quality.
Contribution to Group sales
10%
• Launched in April in new gallery in
Chelsea, London
• Held 3 exhibitions in the gallery and one
in Mallett’s New York showroom during
the year
• Produced and distributed 2 catalogues
and 2 single artist brochures
Contemporary objects and furniture,
combining exquisite materials and master
craftsmanship
London and New York, established 2008
Dedicated to combining exquisite materials
and master craftsmanship from the heights of
the decorative arts with 21st century design.
A group of leading designers, including
Asymptote, Edward Barber and Jay Osgerby,
Tord Boontje, Matali Crasset and Wales &
Wales have been commissioned to
collaborate with over 50 master craftsmen.
Contribution to Group sales
3%
• Launched in April at the Salone del Mobile
in Milan
• Held exhibitions in New York in May and
in Mallett’s London showroom in October
during Frieze week
• Attended, in conjunction with Mallett,
Art Basel Miami in December, the most
important contemporary Art Show in the
United States
• Winner of Japan’s Pen magazine Best
Design for Furniture Brand 2008/9
• Fig leaf cabinet on shortlist for Designs
of the year 2008 at Design Museum in
London
• On target to meet sales budget for first
12 months of trading MALLETT PLC
Annual Report and Accounts 2008
04 MALLETT PLC
Annual Report and Accounts 2008
05 Trading performance
The Group made a total operating loss for the
year of £6.0m (2007 – operating profit of
£0.9m) on sales of £12.1m (2007 - £17.5m).
The principal reasons for the decrease, which
are discussed in more detail below, were:
• £0.7m loss in respect of Mallett’s antique
and fine art business;
• £3.3m loss in respect of write downs in
the cost of the Group’s antique and fine
art inventory;
• £1.9m loss in respect of Meta.
Antiques and Fine Art
In the first half of the year, turnover of £8.0m
(2007 - £10.7m) was only 6% down on the
same period for the prior year, after excluding
the £2.2m generated from the auction of 550
items at Sotheby’s in March 2007. However,
in the second half of the year turnover fell to
£3.8m (2007 - £6.8m) which represents a
43% decline on the same period for the prior
year. The majority of this decrease occurred
in the final quarter of the year and was a direct
result of the severe downturn in economic
conditions which led to a number of deferred
and cancelled sales.
The geographical split of turnover remained
relatively constant between the UK and US
showrooms, with the UK generating 65% of
the Group’s turnover and the US generating
35%. The US benefited from a strengthening
of the dollar against the pound towards the
end of the year, but felt the impact of the
recession earlier than the UK. James Harvey
British Art enjoyed a good start to trading as
a separate entity, with sales for the year of
£1.2m, although the economic downturn
caused sales to slow in the final quarter.
Hatfields continues to grow with turnover
increasing to £1.1m from £0.5m in 2007.
The change in trading conditions in the final
quarter had a direct impact on the Group’s
operating results and led to the Group,
excluding Meta, moving from an operating profit
of £0.5m for the first 6 months of the year to
an operating loss, before inventory provisions,
for the full year of £0.7m (2007 – operating
profit of £0.9m).
Inventory provisions
In response to the significantly changed
market conditions in the antique and fine art
market, the Board decided to carry out a full
internal and external revaluation of the Group’s
inventory. As a result of this the Board has
decided to write down the cost of a number
of items of stock by a total of £3.3m. This
represents 17% of the inventory cost and the
Board believes represents a prudent revaluation
of stock held given the current market
conditions and difficult selling environment.
Meta
Meta is a new business launched by Mallett
in 2008 after three years of planning and
preparation. It is focused on the creation of
contemporary objects and furniture of the
highest quality. The first Meta collection, which
was launched to critical acclaim in April 2008,
consists of 11 exemplary pieces that are
offered for sale in numbered editions. Meta
complements the Mallett brand, enabling
Mallett to develop new relationships with key
influencers and target new clients in both
traditional and new markets.
Meta is an unprecedented undertaking in
contemporary design and the execution of its
first collection presented remarkable technical
challenges. The initial launch, planned for
December 2007, was delayed for four months
while these were resolved. Sales in the
8 months since launch in April were £305,000,
with a further £140,000 of confirmed orders
in production. Total expenditure by the Group
for the year on Meta was £2.2m, which
represents £1.3m of costs up to and including
launch (compared to the £1m originally
budgeted) and a further £0.9m on production,
distribution and marketing costs since launch,
resulting in an operating loss for Meta of
£1.9m. Following cost-cutting it is envisaged
that Meta will make a small profit in 2009.
No costs have been capitalised in respect
of Meta, and no new collection is planned
for 2009.
MALLETT PLC
Annual Report and Accounts 2008
Chairman’s Statement
06
Balance sheet
Shareholders’ equity at 31 December 2008
was £21.2m (2007 - £26.2m) which represents
a £5.0m reduction from the prior year.
Inventories at 31 December 2008 are valued
at the lower of cost and net realisable value
at £16.1m (2007 - £18.4m). At the end of the
year a full internal and external revaluation of
the Group’s inventory was carried out. This
resulted in a write-down on a number of
specific items totalling £3.3m, which
represents 17% of the inventory value before
the write-down.
Net debt at 31 December 2008 stood at
£2.3m (2007 – cash surplus of £2.0m).
The deterioration in the cash position is
largely due to the combination of poor trading
in the last quarter of the year, the launch
costs of Meta and the payment of the further
interim and final dividends in respect of 2007.
In November 2008 we increased our credit
facility with our bank, Coutts & Co, by £1m to
£3.5m in order to provide increased working
capital headroom. The Group is in compliance
with all of its covenants under the credit facility.
Dividends
The Group made a loss after tax of £4.3m
(2007 – profit after tax of £0.9m) and
therefore, taking into account the cash
position of the Group, the Board has decided
not to recommend a final dividend for the
year (2007 final dividend – 3.8 pence per share).
The Company will therefore be paying no
dividend in respect of 2008.
Corporate activity
On 31 December 2008 George Magan retired
as Chairman of the Company and left the
Board. He was succeeded as non-executive
Chairman by Lord Daresbury, who joined the
Board of the Company in 2007. On 13 January
2009 Lanto Synge stepped down as Chief
Executive of the Group. He was succeeded
by Giles Hutchinson Smith who joined the
Board in 1999. The Board of Mallett are very grateful to
George Magan and Lanto Synge for their
outstanding contribution to the Company,
George since he became Chairman in 2000
and Lanto since he joined the Company in
1969 and became Chief Executive in 1997.
Outlook for 2009
The extremely challenging economic conditions
we experienced in the later part of 2008 are
expected to persist in 2009. Although visibility
remains limited, sales have stabilised in the
first quarter of this year. Perceptions of value
in the antiques and fine art market have been
reinforced by the outcome of major fairs and
auctions in the first quarter of 2009.
This suggests that the market for antiques
and decorative arts is proving more robust in
the current environment than may have been
anticipated.
We expect to achieve cost savings of almost
£2m in 2009 through a combination of more
closely targeted marketing expenditure;
savings in staff costs (staff numbers have
been reduced by 20% since mid-2008,
including redundancies); and the non-
recurrence of our initial investment in Meta.
This year, we also plan to take appropriate
opportunities to improve our cash position
through selective stock sales. The Board
remains comfortable with the group’s working
capital outlook for the year.
We are actively examining ways of further
improving Mallett’s cost profile through
relocation to suitable premises. We continue
to review all opportunities to streamline the
business in the light of prevailing market
conditions, while ensuring that Mallett
remains well placed to achieve its longer term
potential in an evolving global marketplace.
The Lord Daresbury
Chairman
MALLETT PLC
Annual Report and Accounts 2008
07
The current environment
The market for antiques and decorative arts is
proving more robust in the current environment
than may have been anticipated.
A fine quality large-scale 19th century
Shibayama carved ivory elephant ornamented
in the traditional manner with elaborate
mother-of-pearl and semi-precious stone
enrichments. An elephant with a raised trunk
is an auspicious Asian symbol of good fortune
and hospitality.
Shibayama is an art form originating in the
town of the same name in Japan and intact
Shibayama pieces are rare and so are highly
valuable and collectable. MALLETT PLC
Annual Report and Accounts 2008
08
12
34
1. A fine architectural six branch epergne of
pagoda form with seven glass baskets, the finial
cast as a classical figure made by Joseph Preedy
of London in 1802.
2. Fig Leaf wardrobe, like the very best design,
The Fig Leaf’s beauty grows; it is a contemporary
masterpiece.
Overview
Mallett is an exceptional brand. It is a
universally recognised and respected name
with an established presence in the two key
centres of activity in the antique and fine art
world – London and New York – and it has a
committed and experienced staff recognised
for their integrity and depth of expertise.
However, it is an underexploited brand which
has significant potential for development
and growth.
Market conditions
Market conditions are changing as clients’
tastes and perceptions change and
competition evolves. New, younger wealth is
entering the market from locations other than
Mallett’s traditional base of the UK and US.
Such new clients are less formal and, whilst
often focussed more on the contemporary
style, see value as a priority. As the global
recession deepens so trust is becoming more
important and the integrity and expertise of
our staff becomes an even greater asset.
Our competitive position is strengthening as
several dealers in the UK have recently exited
the market and we enhance our reputation
and quality of offering among Upper East
Side dealers in New York. Our challenge is to
provide value compared to the auction
houses. This must be achieved through
personal relationships with our clients,
assisting with the ongoing maintenance and
development of their collections and through
meticulous research, provenance and
cataloguing, as well as through price.
Chief Executive’s Report
Business review
3. Abraham-Louis-Rodolphe Ducros
(1748-1810) view of the Temple of the Sibyl
in Tivoli. Oil on canvas, Circa 1785.
4. An early nineteenth century mahogany chaise
longue originating in France Mallett has suffered in 2008 due to the
economic downturn in the latter part of the
year, but I believe that the actions we are
taking will help position it to deliver value
to shareholders when the economic
environment improves.
Giles Hutchinson Smith
Chief Executive
Solid Foundations
Outstanding quality and exceptional details, allied
to our distinctly personal taste, will continue to form
the core of our offering.
Operational review
An operational review of the business was
undertaken during 2008. The initial focus was
the development of a strategy for long term
growth. However, the onset of the global
economic recession, and the impact it had
on our trading in the final quarter of the year,
also required us to develop a short term
strategy to withstand the downturn.
The short term requirement is to establish
an appropriate cost base for the current
business. The significant rent increase on our
Bond Street premises which was agreed in
June 2008 means that we believe the cost
now outweighs the benefit of a location on
Bond Street which has become predominantly
a fashion street. We are therefore seeking to
relocate our London showroom to new
premises in Mayfair which will significantly
reduce our property costs. We have a number
of parties interested in acquiring our Bond
Street lease and have identified several
properties for possible relocation. However, the
property market is weak and we are looking
for very specific requirements in any new
property to ensure the quality and glamour of
Mallett’s showrooms is maintained. Given
this, and the likely refurbishment that will be
needed to any new premises, we do not expect
to have relocated before the end of 2009.
Our New York showroom, which generates
approximately 35% of the Group’s turnover,
continues to be a successful portal for sales.
However, it has been impacted harder than
our London showroom by the global recession
and we are therefore looking to improve its
cost profile through the downturn. Similarly,
our marketing expenditure will be more
focussed, exhibiting only at our most successful
fairs whilst the recession continues.
MALLETT PLC
Annual Report and Accounts 2008
09
And finally, we have re-evaluated our stock
management. The current economic climate
is depressing sales, but it is also creating
and will continue to create some outstanding
buying opportunities. At the year end we
undertook a full external and internal valuation
of our inventory portfolio which resulted in
provisions totalling £3.3m being set against
a number of items of stock. In addition, we
have selected a few items to be included in
an auction at Christies in June to release
capital to take advantage of the buying
opportunities which are likely to materialise
in the second half of the year.
Long term prospects
The Group’s long term development is based
on enhancing the Mallett brand to build our
client base. This will be created through:
• the personal relationships that our sales
team develop with their clients and the
trust they generate through their integrity
and depth of knowledge and expertise;
• a marketing strategy with a simple message
of integrity, authority and style. This will
include our traditional marketing through
fairs and catalogues but will be expanded
to cover targeted PR events and the use of
online channels of communication; and
• our three new subsidiaries, Meta, James
Harvey British Art and Hatfields. All offer a
different, but related, product to the
traditional Mallett offering, thus appealing
to a wider market, but all are associated
with the highest quality and value. Secretary
Michael A. Smyth-Osbourne
Registered Office
141 New Bond Street
London W1S 2BS
Company Number
1838233
Bankers
Coutts & Co
440 Strand
London WC2R 0QS
Auditors
Menzies LLP
Kings House
12-42 Wood Street
Kingston upon Thames
Surrey KT1 1TG
Solicitors
Travers Smith
10 Snow Hill
London EC1A 2AL
Registrars
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire
HD8 0GA
Stockbrokers
Singer Capital Markets Limited
One Hanover Street
London
W1S 1YZ
Lord Daresbury
(Non-Executive Chairman), aged 55
Lord Daresbury joined the Company as a
Non-Executive Director in 2007. He was
appointed Non-Executive Chairman of the
Company on 1st January 2009 on the
retirement of George Magan. He is currently
Non-Executive Director of Jockey Club
Racecourses, Non-Executive Chairman of
Nasstar PLC and Chairman of Aintree
Racecourse Company Ltd. Formerly, he was
Chief Executive of The Greenalls Group PLC
and following the sale of the Pubs and
Restaurant Division to Scottish & Newcastle
at the end of 1999, he became
Non-Executive Chairman of the company,
which was re-named De Vere Group PLC.
He retired from De Vere Group in April 2006.
Giles Hutchinson Smith
(Chief Executive), aged 46
Giles joined the Company in 1983 before
leaving in 1987 to spend time in America and
at Aspreys in London. He re-joined the
Company in 1993 and became a director of
the Company in 1999. He was appointed
Chief Executive on the retirement of Lanto
Synge on 13th January 2009. He has been
actively involved in the buying and selling of
stock for the Group and was responsible for
the launch of Meta.
Michael Smyth-Osbourne
(Finance Director and Company Secretary),
aged 42
Michael joined the Company, as Finance
Director, in 2006. Previously he was Head of
Corporate Finance at National Grid plc and
Lattice Group plc, having qualified as a
Chartered Accountant with Deloitte & Touche
in 1992.
Henry Neville
(Sales & Marketing Director), aged 49
Henry joined the Company in 1984 and
became a director of the Company in 1999.
He is currently President of Mallett Inc with
responsibility for the Group’s New York
showroom having moved to New York in 2006
as well as being responsible for the Group’s
sales and marketing.
Thomas Woodham-Smith
(Operations Director), aged 47
Thomas joined the Company in 1985 and
became a director of the Company in 1999.
He is currently responsible for the restoration
business, Hatfields, and the buying of
continental and 20th century furniture and
works of art. Prior to the sale of Bourdon
House, he was Managing Director of Mallett
at Bourdon House.
James Heneage
(Independent Non-Executive Director and
Chairman of the Audit and Remuneration
Committees), aged 51
James was the founder of the Ottakar’s
chain of bookshops which he created in
1987, floated on the London Stock Exchange
in 1998 and sold to Waterstone’s, part of
HMV UK, in 2006. Prior to that he spent
five years in the advertising industry, ending
as an Account Director at Ogilvy and Mather.
MALLETT PLC
Annual Report and Accounts 2008
10
Board of Directors MALLETT PLC
Annual Report and Accounts 2008
11
Report of the Directors
The directors of Mallett PLC have pleasure in submitting their annual report together with the audited financial statements for the year ended
31st December 2008.
Activities and Business and Financial Review
The principal activities of the Group during the year were dealing in high quality antique furniture and works of art. A review of the activities and
financial position the Group are given in the Chairman's Statement on pages 6 to 7 and the Chief Executive’s Report on pages 8 to 9.
Results
The results for the year are set out in full on page 23. The operating loss, before interest, amounts to £5,987,000 (2007 - profit of £942,000).
After receiving net interest of £14,000 (2007 - received £376,000) the loss on ordinary activities before taxation amounts to £5,973,000 (2007 - profit
of £1,318,000). After crediting taxation of £1,694,000 (2007 - charge of £444,000), there remains a loss of £4,279,000 (2007 - profit of £874,000).
Principal Risk and Uncertainties
The Group’s operating results and liquidity are significantly influenced by a number of risk factors, many of which are not within its control.
These factors, which are not ranked in any particular order, include:
The strength of the UK and US economies and financial markets
The antique and fine art market in which the Group operates is centred on London and New York and is influenced by the overall strength of the
UK and US economies. Historically, over 80% of the Group’s sales are to UK and US clients.
The demand for antique furniture and works of art
The demand for antique furniture and works of art is influenced not only by the economic conditions but also by changing trends in the art market
as to which kinds of property are most sought after and by the collecting preferences of individual collectors, all of which can be unpredictable.
Key personnel
The ability of the Group’s sales team to develop and maintain relationships with potential buyers of antique furniture and works of art is critical to
the success of the Group. Accordingly, the Group is highly dependent upon attracting and retaining appropriately qualified personnel.
Competition
The art market is highly competitive, including competition with other art dealers and with auctioneers.
Value of artworks
The antique furniture and works of art market is not a highly liquid trading market, as a result of which the realisable value of inventory is relatively
subjective and often fluctuates over time.
Foreign currency exchange rate movements
A significant proportion of the Group’s sales and costs are in US Dollars and a number of the Group’s sales are in Euros. Accordingly, fluctuations
in exchange rates can have a significant impact on the Group’s results.
Retirement benefit pension obligations
Future costs and obligations relating to the Group’s defined benefit pension scheme are significantly influenced by changes in interest rates,
investment performance in the debt and equity markets and acturial assumptions, each of which is unpredictable.
Financial Risk Management
The main financial risks to the Group relate to the availability of funds to meet the business needs. Further disclosure on the Group’s financial risk
management can be found in note 3 and note 18 to the accounts.
Key Performance Indicators
The directors consider the following to be key performance indicators of the Group:
Financial
2008 2007
Average selling price £19,916 £16,073
Gross margin (32.92%) 14.67%
Basic earnings per share (31.47p) 6.42p
Net assets per share £1.54 £1.89 MALLETT PLC
Annual Report and Accounts 2008
12
Non financial
Customer satisfaction
We strive to improve our service to new and existing customers, ensuring high standards of customer satisfaction.
Employee development and turnover
We are committed to attracting and retaining the highest calibre of employees and developing their professional careers.
Dividends
There was no interim dividend paid in 2008 (2007 – 4.6p) and the directors do not recommend a final dividend for 2008 (2007 – 3.8p).
Directors
The names of the directors who served the Company during the year are shown below. Details of their biographies are on page 10.
G.M Magan* (retired 31st December 2008)
L.M. Synge (retired 13th January 2009)
Lord Daresbury*
J.A. Heneage*
G.H. Hutchinson Smith
E.U.P .G. Michotte* (resigned 4th November 2008)
M.H.G. Neville
M.A. Smyth-Osbourne
T.E. Woodham-Smith
* non-executive
Directors’ Interests
Details of the directors’ interests in the company’s share capital are included in the Directors Remuneration Report on page 21.
Apart from service contracts, none of the directors had a material beneficial interest in any contract in which the Company or any of its
subsidiaries was a party during the year.
There were no changes in the interests of the directors between 31st December 2008 and 20th April 2009.
Share Capital and Control
The information in this section is given pursuant to Section 992 of the Companies Act 2006.
The issued share capital of the Company consists of 13,800,060 ordinary shares of 5 pence each, 6,815,812 deferred shares of 37.45 pence
each and 67,217 B shares of 37.45 pence each. The B shares and deferred shares were created as a result of the return of cash to
shareholders that the Company undertook through a B Share scheme in 2007. Details of the share capital of the Company are set out in note
22 to the accounts on page 40.
The full rights and obligations attached to each class of shares, in addition to those conferred on their holders by law, are set out in the
Company’s Articles of Association, a copy of which can be obtained by writing to the Company Secretary. The Articles of Association also set
out the rules governing the appointment and replacement of the board members. Any changes to the Articles of Association must be approved
by special resolution of the Company.
The Group operates a Share Incentive Plan for the benefit of all its employees. The shares are held in a trust on behalf of the employees. As at
31st December 2008 the trust held 216,845 ordinary shares and any voting or other similar decisions relating to those shares would be taken
by the trustees, who may take account of the recommendation of the Company and the employees.
The Company currently does not have any authority to purchase its own shares. However, approval will be sought at the forthcoming AGM for
the Company to purchase up to 10% (1,380,006) of its ordinary share capital. The Company will only purchase its own shares if the directors
believe it is in the shareholders’ best interests and will increase earnings per share.
There are no significant agreements to which the Company is a party which take effect, alter or terminate in the event of a change of control of
the Company. There are also no agreements providing for compensation for directors or employees on change of control.
Report of the Directors MALLETT PLC
Annual Report and Accounts 2008
13
Substantial Shareholdings
As at 20th April 2009, the Company has received notification of the following substantial shareholdings amounting to more than 3 per cent of the
issued share capital of the Company:
5p Ordinary Shares %
The Weinstock Trust Additional Fund 4,130,000 29.93
Veer Palthe Voute NV 2,483,300 17.99
Church House Investments 1,150,000 8.33
P .M. Maitland 700,000 5.07
Mrs. S. Fenwick 534,000 3.87
H.M.Van Heijst 506,600 3.67
L.M. Synge 453,317 3.28
Close Company Status
The company is not a close company within the meaning of the Income and Corporation Taxes Act 1988.
Creditor Payment Policy
The Group pays its suppliers in the middle of the month following receipt of the invoice except in certain cases where special terms are agreed.
As at the financial year end the number of days purchases outstanding was thirty days, excluding transactions with special credit terms.
Approval of Directors’ Remuneration Report
In accordance with the Companies Act 1985, directors of listed companies are required to prepare a remuneration report which must be
approved by the members of the company at the meeting at which the company's annual accounts are to be laid.
The Directors’ Remuneration Report contains inter alia details of the directors, a forward looking statement of the Company's policy on directors'
remuneration for subsequent financial years, a performance graph showing the Company's total shareholder return and the return on a
hypothetical holding of similar shares to those on which a broad equity market index is calculated, details of the directors' service contracts and
specific disclosures relating to each director's remuneration.
Resolution 2 will be proposed at the 2009 Annual General Meeting as an ordinary resolution to approve the directors' remuneration report for the
year ended 31st December 2008 as set out on pages 17 to 21 of the these accounts.
Annual General Meeting
The 2009 Annual General Meeting will be held at 141 New Bond Street, London, W1S 2BS on 28th May, 2009 at 4.00 p.m. The notice for the
2009 Annual General Meeting is included in these accounts on page 44. The Business to be transacted at the Annual General Meeting includes
the following:
Resolution 4 – To authorise the allotment of shares
The Resolution asks shareholders to grant the Directors authority under Section 80 of the Companies Act 1985 (the "1985 Act") to allot shares
up to a maximum aggregate nominal value of £230,001, being one-third of the nominal value of the issued ordinary share capital of the Company.
This is the maximum permitted amount under best practice corporate governance guidelines being the lesser of the amount of: (i) the authorised
but unissued ordinary share capital; and (ii) an amount equal to one-third of the issued ordinary share capital of the Company. The current
authority lapses on 6th June 2012 but this authority is normally renewed at each Annual General Meeting so that the authority under this resolution
will replace the existing authority and will lapse on 28th May 2014. The Directors have no present intention of exercising such general authority.
Resolution 5 – To authorise the Company to make market purchases of its own shares (Special Resolution)
Resolution 5 seeks authority from holders of ordinary shares of 5p each in the capital of the Company ("ordinary shares") for the Company to
make market purchases of its own ordinary shares, such authority being limited to the purchase of 10% of the ordinary shares in issue as at
31st December 2008. The maximum price payable for the purchase by the Company of its own ordinary shares will be limited to the higher of
5% above the average of the middle market quotations of the Company's ordinary shares, as derived from the Daily Official List of the London
Stock Exchange, for the five business days prior to the purchase and the higher of the price of the last independent trade of an ordinary share
and the highest current independent bid for an ordinary share as derived from the London Stock Exchange Trading System SETS. The minimum
price payable by the Company for the purchase of its own ordinary shares will be 5p per share (being the amount equal to the nominal value of an
ordinary share). The authority to purchase the Company's own ordinary shares will only be exercised if the Directors consider that there is likely
to be a beneficial impact on earnings per ordinary share and that it is in the best interests of the Company at the time.
There were no options to subscribe for ordinary shares outstanding as at 20th April 2009 (being the latest practicable date prior to publication
of this document). MALLETT PLC
Annual Report and Accounts 2008
14
Report of the Directors
Resolution 6 – To approve the repurchase of B Shares (Special Resolution)
In June 2007 in connection with the return of approximately £8.7 million to shareholders, the Company issued one B share for every one
existing ordinary share to holders of ordinary shares. As anticipated at that time, it is now proposed to offer those shareholders that still hold B Shares a
further opportunity to sell such shares to Singer Capital Markets Limited ("Singer") following which the Company will buyback such shares from Singer.
Resolution 6 seeks authority to approve the terms of the proposed contract between Singer and the Company under which Singer will be entitled
to require the Company to repurchase the B shares acquired by Singer pursuant to the repurchase offer at 58 pence per B share plus stamp duty
(if any) payable by Singer under the final repurchase offer. Such authority will expire 18 months from the date of the passing of this resolution.
The Board believes that the resolutions to be put to the Annual General Meeting are in the best interests of the shareholders as a whole and
accordingly recommends that shareholders vote in favour of the resolutions, as the directors intend to do in respect, where applicable, of their
beneficial shareholdings in the Company.
Resolution 7 – Calling of general meetings (Special resolution)
Resolution 7 seeks authority from shareholders to hold general meetings (other than Annual General Meetings) on 14 days' clear notice. This is
permissible under the existing articles of association of the Company and the Companies Act 2006. However, pursuant to the EU Shareholders'
Rights Directive and in accordance with published guidance from the Department of Business, Enterprise and Regulatory Reform, specific
shareholder approval is required annually in order to retain this ability. The Directors believe that there may be circumstances in which it will be
important for the Company to be able to call meetings at such short notice. Accordingly, the Directors believe that it is important for the
Company to retain this flexibility.
Statement of Directors' Responsibilities
The directors are responsible for preparing the Annual Report and Accounts, including the consolidated financial statements and the Company
financial statements, in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the
Company and of the Group and of the profit or loss of the Group for that year. In preparing the Group's accounts, the directors confirm that they have:
1) selected suitable accounting policies and applied them consistently;
2) made judgements and estimates that are reasonable and prudent;
3) followed applicable accounting standards; and
4) prepared the accounts on a going concern basis.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the
group and enable them to ensure that the financial accounts comply with the Companies Act 1985 and Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the Group and for taking reasonable steps for the prevention and detection of fraud and irregularities.
In so far as the directors are aware
1) there is no relevant audit information of which the Company’s auditor is unaware; and
2) the directors’ have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish
that the auditor is aware of that information.
The directors are responsible for ensuring that publication of financial statements on the website of the Company or of a related company is in
accordance with UK legislation and for maintenance and integrity of that website. Legislation in other jurisdictions governing the preparation
and dissemination of financial statements may differ from UK legislation.
Auditors’ Independence and Objectivity
The Board recognises the importance of ensuring the independence and objectivity of the Company’s auditors. It reviews the nature and extent
of the services provided by them, the level of their fees and the element comprising non-audit fees. Details of these are disclosed in note 6.
The board also receives annual confirmation from the auditors of their independence.
Auditors
On 1 July 2008, Menzies, the Company’s auditors, transferred its business to Menzies LLP , a limited liability partnership incorporated under the
Limited Liability Partnership Act 2000. The Company’s consent has been given to treat the appointment of Menzies as extending to Menzies
LLP with effect from 1 July 2008 under the provisions of section 26(5) of the Companies Act 1989.
A resolution will be proposed at the 2009 Annual General Meeting to re–appoint Menzies LLP as auditors to the Company for the ensuing year
and authorising the directors to fix their remuneration.
By order of the Board
M.A. Smyth-Osbourne, A.C.A.
Secretary
20th April 2009 MALLETT PLC
Annual Report and Accounts 2008
15
Corporate Governance
Application of Combined Code Principles
Throughout the year, except where indicated in this report, the Company complied with the provisions of the Combined Code on corporate
governance issued by the Financial Reporting Council in June 2006 and as subsequently amended (the “Combined Code”). The Company is
committed to the principles of corporate governance contained in the Combined Code and aims to comply with established best practice,
whenever possible and where it is in the Company’s interests.
The Board
Throughout the year the Board consisted of a non-executive Chairman, separate Chief Executive, 4 other executive directors and at least two
non-executive directors. The Board considers the non-executive directors to be independent of management and free from any business or
other relationship which could interfere with the exercise of their independent judgement. They have not previously been employed by the
Company and the Board believes that their interest in receiving fees as directors does not prejudice their independence. They bring an
independent judgement to bear on issues of strategy, performance, resources, including the appointment of executive directors and other key
appointments, and standards of conduct.
For the first five months of the year the Company did not have a senior independent director. This was not in compliance with the Combined
Code which required the Board to appoint a senior independent director. James Heneage was appointed senior independent director on
1st June 2008 and the Company has been compliant with the Combined Code in this regard since that date.
Eloy Michotte resigned as a non-executive director on 4th November 2008. George Magan retired as non-executive Chairman on 31st December
2008, and Lord Daresbury was appointed as non-executive Chairman. Lanto Synge retired as Chief Executive on 13th January 2009 and Giles
Hutchinson Smith was appointed as Chief Executive. Following this re-organisation, the Board has only one independent non-executive director
and accordingly is now not in compliance with the Combined Code in this regard, which requires the Company to have two independent
non-executive directors.
The board met ten times during the year. Lanto Synge and Thomas Woodham-Smith attended all of the meetings, George Magan, Giles
Hutchinson Smith and Michael Smyth-Osbourne attended nine of the meetings, Henry Neville and James Heneage attended seven of the
meetings and Lord Daresbury attended six of the meetings. Of the eight meetings held while he was a non-executive, director Eloy Michotte
attended five of the meetings.
The board has a formal schedule of matters specifically reserved to it for decisions. This includes the determination of strategy, the approval of
business plans and budgets, the approval of acquisitions, disposal and major capital purchases, and the approval of the annual and interim reports
of the Company, including the interim dividend and recommendation of the final dividend to shareholders, and the appointment of directors.
The directors have the right to obtain external independent professional advice at the company's expense. The Company Secretary is
responsible to the board, inter alia, for ensuring that board procedures are followed and for compliance with applicable rules and regulations
including the Combined Code.
The Board has formal and informal procedures to monitor its peformance both as individuals at annual appraisals and as a Board or Committee.
Full details of the directors’ service contracts and remuneration are given in the Directors’ Remuneration Report on pages 17 to 21.
Relations with Shareholders
The Board is responsible for ensuring that the Company maintains a satisfactory dialogue with shareholders. A number of meetings were held
during the year between members of the Board and the major shareholders of the Company. There was also a presentation of the results of the
Group’s operational review by Lord Daresbury, Lanto Synge, Michael Smyth-Osbourne and James Heneage to the major shareholders in December.
The Board welcomes as many shareholders as possible to attend the Annual General Meeting and encourages discussion on issues of concern
or areas of uncertainty. Questions from shareholders are welcomed. A separate resolution will be proposed at the Annual General Meeting in
respect of each substantially separate issue. There will also be a separate resolution proposed in respect of the report and financial statements.
Audit Committee
The Audit Committee is made up of all the non–executive directors and was chaired, by Eloy Michotte. Two Audit Committee meetings were
held during the year which were attended by all members of the Audit Committee. Those meetings were also attended by the Chief Executive,
the Finance Director and the external auditors. After Eloy Michotte resigned as a non-executive director on 4th November 2008, James
Heneage has taken over as Chairman of the Audit Committee.
The Audit Committee has written terms of reference, which deal clearly with its authority and duties. The duties of the Committee include
keeping under review the scope and results of the audit, its cost effectiveness, independence and objectivity of the auditors.
Nominations Committee
No formal Nomination Committee has been set up by the Board. All matters regarding the appointment of directors are made by the Board as
a whole. In view of the size of the Company, the Board considers it appropriate to undertake this function as a whole. This is not in compliance
with the Combined Code which requires that a nomination Committee, with a majority of members being independent non-executive directors,
should lead the process of Board appointments. MALLETT PLC
Annual Report and Accounts 2008
16
Corporate Governance
Directors’ conflicts of interest
On 1 October 2008 the new conflicts of interest regime for directors contained in the Companies Act 2006 came into force. In compliance with
the new conflicts of interest regime, the Company's articles of association contain procedures to deal with directors' conflicts of interest which
the Board fully implement. The Board considers that these have operated effectively since coming into force.
Internal Control and Financial Reporting
The Company complies with the current requirements for reporting and controls and has had an Audit Committee, which is made up of all the
non–executive directors.
The board of directors has overall responsibility for the Group’s system of internal control and has reviewed the effectiveness of the Group’s
system of financial control during the year. The system is designed to provide reasonable but not absolute assurance against material
misstatement or loss.
The Group operates a comprehensive annual reporting and financial operating system which involves a review of the results with projections on
a monthly basis. At each of its meetings the Board reviews the performance of the major business units across the Group.
The Group has put in place an operational structure with clearly defined lines of authority and accountability, particularly in the areas of capital
and stock expenditure.
The effectiveness of the Group’s systems of internal control is monitored by the Audit Committee and is reviewed on a regular basis. The review
covers all controls, including financial, operational and compliance controls and risk management.
Going Concern
After making inquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational
existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts.
Corporate and Social Responsibility
The Company adopts a responsible attitude to Social Environmental and Ethical (SEE) issues. The Board has concentrated on suitable training
and health and safety measures to ensure compliance with best practice. MALLETT PLC
Annual Report and Accounts 2008
17
Directors’ Remuneration Report
The Remuneration Committee
The role of the Remuneration Committee is to establish board policy in respect of terms of employment, including remuneration packages, for
each executive director and certain senior managers, and to monitor their development programmes. The Remuneration Committee seeks to
encourage the enhancement of the group’s performance and to ensure that directors are fairly, and responsibly, rewarded for their individual
contributions. Accordingly, it can confirm that it has taken into account the provisions of the Combined Code in framing its remuneration policy.
The Remuneration Committee consults with the chief executive, who may be invited to attend some meetings, and it has access to professional
advice from both internal and external sources in order to determine and develop its policies.
During the year the Remuneration Committee was comprised of all the non-executive directors. It met once in the year and all members attended
the meeting.
The Committee members are not paid for their services relative to the amount of work undertaken and do not receive any share options, bonuses
or pension entitlements.
Directors’ Remuneration Policy
The Company’s current and ongoing policy on remuneration is to ensure that the remuneration packages for executive directors are competitive
and designed to attract, retain and motivate individuals of the highest calibre. The Remuneration Committee operates, and will continue to
operate in accordance with the following key principles:
• Remuneration packages should be competitive but not extravagant;
• should be broadly in line with average packages in the market in which Company operates, and
• There should be a clear link between performance and remuneration.
Reward Package
The remuneration policy is applied in respect of each component part of the total remuneration package as follows:
Basic Salary
Basic salaries, including benefits, are set at levels consistent with individual performance, and the market rate applicable to jobs of similar
complexity and responsibility. To measure this, the Remuneration Committee reviews the basic salaries of the executive directors annually.
Benefits
The term “benefits” includes the payment of a car allowance, private health insurance and other non-cash taxable benefits.
Bonuses
All executive directors are eligible to receive performance bonuses based on targets set relating to the profitability of the Group. Performance
bonuses are at the sole discretion of the Remuneration Committee.
Pensions
The executive directors, except M. A. Smyth-Osbourne, are members of the Group’s defined benefits pension scheme, which will provide them,
at normal retirement age (of 65 years old), with a pension of up to two thirds of their salary, subject to length of service, HM Revenue and
Customs limits and other statutory rules. Spouses are entitled to 50% of the director’s entitlement on the death of the director. This scheme is
closed to new entrants and was closed to future accrual from 30th June 2008.
On 1st July 2008 the Group set up a defined contribution scheme, the Mallett Group Personal Pension Plan, for all employees, including directors, and
the Group to contribute into. The Group contributes up to 10% of salary into the Scheme dependent on the level of contribution by the employee.
The Company contributes to a separate defined contribution scheme for M. A. Smyth-Osbourne.
Share Incentive Plan
The Group operates a share incentive plan to benefit all employees. Under this plan each director has been awarded free shares with a value of
£3,000 in 2008. The shares are held in a trust and the directors only become entitled to these shares if they remain in employment for at least
three years from the date of the award.
The plan also entitles employees, including directors, to acquire at their own expense up to £1,500 worth of shares (Partnership Shares) in any
one year to be held by the trustees under a partnership agreement. The Company has agreed to provide two matching shares (Matching
Shares) for every Partnership Share purchased on behalf of the employee.
Any dividends received by the trustees on behalf of employee shares held under the scheme are reinvested as Dividend Shares.
Details of the Directors’ interests held under the Share Incentive Plan are shown on page 21.
The entitlement of the directors under the Share Incentive Plan is not subject to any performance conditions (though they are subject to service
conditions). This is because the Share Incentive Plan is a plan for all employees of the company and no employees’ entitlement under it is
subject to performance conditions. Additionally, the aim of the plan is to encourage employee shareholding in the Company. MALLETT PLC
Annual Report and Accounts 2008
18
Reward Package continued
Long Term Incentive Plan (“LTIP”)
The LTIP provides for the Remuneration Committee to grant conditional awards over Company shares to executive directors and other
employees of the Group, selected at the discretion of the Remuneration Committee.
An individual may not be granted awards in any financial year over Company shares having a market value at the award date in excess of 100
per cent of the individual's annual base salary. On the grant of an award the Remuneration Committee shall impose performance conditions and
any further conditions on vesting which it determines to be appropriate.
Awards will normally vest at the end of a performance period of three years, as soon as the Remuneration Committee has determined the extent
to which the applicable performance conditions have been met. In the case only of awards granted in the 42 day period following the approval
of the LTIP by shareholders on 25th September 2006, the Remuneration Committee could determine that the performance period would be two
years. The Remuneration Committee may review the performance conditions for each grant of awards and may vary the conditions of such
awards, provided they remain challenging and are aligned with the interests of shareholders.
The Remuneration Committee believes that earnings per share adjusted to exclude exceptional items ("EPS") is the most appropriate
performance measure on which to set the conditions for vesting. Three awards have been made to date, 2006 Award, 2007 Award and 2009
Award. No award was made in 2008.
The performance conditions for the 2006 Award are as follows:
Average annual EPS
for the period
1st January 2007
Proportion of award vesting to 31st December 2008
0% Less than 12.5 pence
25% 12.5 pence
25%-100% pro-rata Greater than 12 .5 pence but less than 18.0 pence
100% 18.0 pence or more
The performance conditions for the 2007 Award are as follows:
Annual EPS growth above RPI
for the period
1st January 2007
Proportion of award vesting to 31st December 2009
0% Less than 3%
25% 3%
25%-100% pro-rata Greater than 3% but less than 6%
100% 6% or more
The performance conditions for the 2009 Award are as follows:
EPS for the year
Proportion of award vesting ended 31st December 2011
0% Less than 3.0 pence
25% 3.0 pence
25%-100% pro-rata Greater than 3.0 pence but less than 10.0 pence
100% 10.0 pence or more
The performance period for the 2006 Award ended on 31st December 2008. The minimum performance conditions for the 2006 Award were
not met and therefore none of the awards have vested. Furthermore, the Remuneration Committee does not expect the minimum performance
conditions for the 2007 Award to be met and therefore no provision has been made.
Fees for Non–Executive Directors
The board as a whole determines the remuneration of the non–executive directors.
Directors’ Remuneration Report continued 0
50
100
150
200
250
Mallett
Mallett (TSR)
FTSE Fledgling
FTSE Fledgling (TSR)
Value of Investment (£)
MALLETT PLC
Annual Report and Accounts 2008
19
Service Agreements
The Remuneration Committee reviews the position in respect of the length of notice of termination under directors’ service agreements and it is
current policy for the Company to appoint executive directors subject to a service agreement requiring not more than 12 months’ notice to be
given by either party. The Remuneration Committee considers that the period of notice of termination under directors’ service agreements is
appropriate in order to retain and recruit directors of a suitable calibre. These appointments are subject to election and re–election at the relevant
annual general meeting according to the memorandum and articles of association.
Details of executive directors’ service contracts are as follows:
Date of
original contract Notice period
L.M. Synge 15th March 1991 12 months
G.H. Hutchinson Smith 31st August 1999 12 months
M.H.G. Neville 31st August 1999 12 months
M.A. Smyth-Osbourne 6th November 2006 6 months
T.E. Woodham-Smith 31st August 1999 12 months
The executive directors have no contractual provisions for compensation upon early termination (with notice) of the contract. There is an
entitlement to receive salary and benefits during the period of notice, which may be paid ‘in lieu’ of all or part of any period of notice.
There are no entitlements to payments of any sort in the event that the Company summarily terminates an executive director’s employment.
Independent non-executive directors do not have service agreements and, in accordance with the articles of association, their appointment may
be terminated at any time without compensation.
Performance Graph
As required by legislation regarding the Directors’ Remuneration Report, this graph illustrates the performance of the Company measured by total
shareholder return (share price growth plus dividend paid) against a “broad equity market index” over the past 5 years. The Company has been
a constituent of the FTSE Fledgling index throughout this period, therefore this is considered to be the most appropriate benchmark.
Notes
1) The graph shows total shareholder return of a nominal holding of £100 of Mallett PLC shares measured against the total shareholder return of
an initial nominal holding £100 in the FTSE Fledgling index over a 5 year period.
2) Dividends have been reinvested. MALLETT PLC
Annual Report and Accounts 2008
20
Directors’ Remuneration Report continued
Directors’ Emoluments (audited)
The emoluments of the directors were as follows:
2008 2007
£’000 £’000
Salaries and benefits 761 775
Payments made to non-executive directors 87 58
848 833
Company pension contributions and payments 194 155
1,042 988
2008 2007 2008 2007
Basic Performance
salary and related Pension Pension
fees bonus Benefits Total Total contributions contributions
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Executive Directors:
L.M. Synge 172 — 21 193 189 60 45
G.H. Hutchinson Smith 103 — 17 120 116 36 28
M.H.G. Neville 139 — 59 198 201 35 28
M.A. Smyth-Osbourne 121 — 10 131 153 28 27
T.E. Woodham-Smith 102 — 17 119 117 35 28
Non–Executive Directors:
G.M. Magan 30 —— 30 28 — —
Lord Daresbury 15 —— 15 10 — —
J. Heneage 20 —— 20 10 — —
E. Michotte 17 —— 17 10 — —
The fees shown for G.M. Magan were paid to St. James Company Limited, a company which he controls, on his behalf.
£5,000 was paid to Daresbury Properties Limited, a company controlled by Lord Daresbury, for office expenses incurred in his role as
non-executive director of the Company.
Directors’ Pensions (audited)
Pension entitlements of the directors from the Group’s defined benefits pension scheme are set out below. In accordance with the terms of the
scheme, pensionable earnings exclude performance related bonuses and benefits.
Accumulated
total annual benefit Transfer value end Increase in
on leaving service as at 31st December transfer value
Director
Current contributions Increase At end
age during year in year of year 2008 2007
£’000 £’000 £’000 £’000 £’000 £’000
L.M. Synge 63 5 (1) 99 1,660 1,024 636
G.H. Hutchinson Smith 46 3— 27 255 170 85
M.H.G. Neville 49 —— 40 415 274 141
T.E. Woodham-Smith 46 3— 35 336 226 111
Following closure of the Group’s defined benefit pension scheme to future accrual on 30th June 2008, L.M. Synge, G.H. Hutchinson Smith and
T.E. Woodham-Smith contributed into the Group’s defined contribution scheme. In that period the Company contributed £19,000 (2007 - £nil)
in respect of those directors.
During the year M.A. Smyth-Osbourne received a pension entitlement of £27,760 (2007 - £27,000) which was paid into a defined contribution scheme. MALLETT PLC
Annual Report and Accounts 2008
21
Directors’ Interests
At 31st December 2008 the directors of the company and persons connected to them had the following interests in the company’s share capital:
31st December 2008 31st December 2007
5p ordinary shares 5p ordinary shares
Non- Non-
beneficial Beneficial beneficial Beneficial
G.M. Magan — 100,000 — 100,000
L.M. Synge — 453,317 — 450,868
Lord Daresbury —— ——
James Heneage — 10,000 — 10,000
G.H. Hutchinson Smith — 4,112 — 1,663
M.H.G. Neville — 14,112 — 11,663
M.A. Smyth-Osbourne — 4,200 — 4,200
T.E. Woodham-Smith — 5,332 — 2,883
Directors’ interests in the Share Incentive Plan (audited)
The table below gives details of the directors’ holdings of shares awarded under the Share Incentive Plan.
Total interest Number of shares acquired/awarded Total interest
as at as at End of the
01/01/08 31/12/08 period of
Number of Free Partnership Matching Dividend Number of latest
ordinary shares shares shares shares ordinary qualifying
shares Granted Exercised Granted Exercised Granted Exercised Granted Exercised shares conditions
L.M. Synge 15,914 2,400 (1,336) 2,085 (281) 4,170 (563) 1,244 (269) 23,364 01/05/12
G.H. Hutchinson Smith 15,914 2,400 (1,336) 2,085 (281) 4,170 (563) 1,244 (269) 23,364 01/05/12
M.H.G. Neville 12,844 2,400 (1,336) — (281) — (563) 966 (269) 13,761 01/05/12
M.A. Smyth-Osbourne — 2,400 — 1,485 — 2,970 — 137 — 6,992 01/05/12
T.E. Woodham-Smith 15,914 2,400 (1,336) 2,085 (281) 4,170 (563) 1,244 (269) 23,364 01/05/12
Directors’ interests in the Long Term Incentive Plan (audited)
The table below gives details of the directors’ holdings of shares awarded under the Long Term Incentive Plan.
Conditional Conditional
awards as at awards as at
Date 31st December Awards lapsed Awards vested Awards granted Market price 31st December Release
of award 2007 during year during year during year at award 2008 date
L.M. Synge Oct–06 31,528 ——— 2.585 31,528 Mar-09
Sep–07 83,643 ——— 2.000 83,643 Sep-10
115,171 ——— 115,171
G.H. Hutchinson Smith Oct–06 18,858 ——— 2.585 18,858 Mar-09
Sep–07 49,989 ——— 2.000 49,989 Sep-10
68,847 ——— 68,847
M.H.G. Neville Oct-06 18,762 ——— 2.585 18,762 Mar-09
Sep-07 49,716 ——— 2.000 49,716 Sep-10
68,478 ——— 68,478
M.A. Smyth-Osbourne Nov-06 22,771 ——— 2.585 22,771 Mar-09
Sep-07 58,875 ——— 2.000 58,875 Sep-10
81,646 ——— 81,646
T.E. Woodham-Smith Oct-06 18,762 ——— 2.585 18,762 Mar-09
Sep-07 49,716 ——— 2.000 49,716 Sep-10
68,478 ——— 68,478
Approved by the board on 20th April 2009 and signed on its behalf:
M.A. Smyth-Osbourne
Secretary MALLETT PLC
Annual Report and Accounts 2008
22
Independent Auditors’ Report to the Members of Mallett PLC
We have audited the group and parent company financial statements (the “financial statements”) of Mallett PLC for the year ended
31st December 2008, which comprise the Group Income Statement, the Group and Parent Company Balance Sheets, the Group and Parent
Company Cash Flow Statements, the Group Statement of Changes in Shareholders’ Equity and the related notes. These 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.
This report is made solely to the company’s shareholders, 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 shareholders those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s shareholders 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, the Directors’ Remuneration Report and the financial statements in accordance
with applicable law and International Financial Reporting Standards (IFRS) as adopted for use in the European Union are set out in the
Statement of Directors’ Responsibilities.
Our responsibility is to audit the 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 financial statements give a true and fair view and whether the financial statements and the part
of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985 and Article 4 of
the IAS Regulation. We also report to you if, in our opinion, the Directors’ Report is not consistent with the financial statements, if the company
has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information
specified by law regarding directors’ remuneration and other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects the company’s compliance with the nine provisions of the 2003 FRC
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 financial statements.
The other information comprises only the Directors’ Report, the unaudited part of the Directors’ Remuneration Report, the Chairman’s
Statement and the Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the 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 financial statements and the part of
the Directors’ Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group’s and 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 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 have evaluated
the overall adequacy of the presentation of information in the financial statements and the part of the Directors’ Remuneration to be audited.
Opinion
In our opinion:
• The group financial statements give a true and fair view, in accordance with IFRS as adopted for use in the European Union, of the state of
the group affairs as at 31st December 2008 and of its profit and cash flows for the year then ended.
• The parent company financial statements give a true and fair view, in accordance with IFRS as adopted for use in the European Union as
applied in accordance with the provisions of the Companies Act 1985, of the state of the parent company’s affairs as at 31st December
2008 and cash flows for the year then ended.
• The financial statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with
the Company’s Act 1985 and, as regards the group financial statements, Article 4 of the IAS Regulation, and
• The information given in the Directors Report is consistent with the financial statements.
Menzies LLP
Chartered Accountants and Registered Auditors
Kingston Upon Thames
20th April 2009 MALLETT PLC
Annual Report and Accounts 2008
23
2008 2007
Notes £’000 £’000
Revenue 5 12,109 17,488
Cost of sales (16,095) (14,922)
Gross (loss)/profit (3,986) 2,566
Other operating income 1 2
Distribution costs (300) (196)
Administrative expenses (1,702) (1,430)
Operating (loss)/profit 6 (5,987) 942
Investment income 8 89 397
Finance costs 8 (75) (21)
(Loss)/profit before tax (5,973) 1,318
Tax 9 1,694 (444)
(Loss)/profit for the period (4,279) 874
Attributable to:
Equity holders of the parent (4,273) 875
Minority interests (6) (1)
(4,279) 874
Basic and diluted earnings per share 11 (31.47p) 6.42p
All of the activities of the Group are classed as continuing.
2008 2007
£’000 £’000
(Loss)/profit for the year (4,279) 874
Exchange differences on translation of foreign operations 1,091 (237)
Actuarial (loss)/gains on the defined benefit pension scheme (1,332) 740
Movement of deferred tax on actuarial loss/(gain) 380 (222)
Merger investment costs — (52)
Net profit recognised directly in equity 139 229
Total recognised income and expenses for the year (4,140) 1,103
Consolidated Income Statement
for the year ended 31st December 2008
Consolidated Statement of Recognised Income and Expenses
for the year ended 31st December 2008 MALLETT PLC
Annual Report and Accounts 2008
24
Consolidated Balance Sheet
at 31st December 2008
2008 2007
(restated)
Notes £’000 £’000
Non-current assets
Property, plant and equipment 13 5,126 4,749
Deferred tax 20 1,763 18
6,889 4,767
Current assets
Inventories 14 16,085 18,372
Trade and other receivables 16 4,294 3,701
Cash and cash equivalents 273 2,410
20,652 24,483
Total assets 27,541 29,250
Equity
Share capital 22 3,243 3,243
Capital redemption reserve 23 2,615 2,615
Own shares 23 (442) (468)
Retained profits 23 15,795 20,761
Minority interests 23 (7) (1)
Total equity 21,204 26,150
Current liabilities
Trade and other payables 2,346 2,447
Bank overdrafts and loans 2,537 363
Tax liabilities — 86
17 4,883 2,896
Non-current liabilities
Retirement benefit pension obligations 19 1,454 204
Total liabilities 6,337 3,100
Total equity and liabilities 27,541 29,250
The financial statements were approved by the board of directors and authorised for issue on 20th April 2009.
They were signed on its behalf by:
G.H. Hutchinson Smith Director
M.A. Smyth-Osbourne Director MALLETT PLC
Annual Report and Accounts 2008
25
Company Balance Sheet
at 31st December 2008
2008 2007
(restated)
Notes £’000 £’000
Non-current assets
Investments 15 8,482 8,482
Deferred tax 20 105 —
8,587 8,482
Current assets
Trade and other receivables 16 15,273 15,546
Cash and cash equivalents 2 5
15,275 15,551
Total assets 23,862 24,033
Equity
Share capital 22 3,243 3,243
Special capital reserve 23 1,761 1,761
Capital redemption reserve 23 2,615 2,615
Retained profits 23 16,165 16,297
Total equity 23,784 23,916
Current liabilities
Trade and other payables 17 78 117
Total equity and liabilities 23,862 24,033
The financial statements were approved by the board of directors and authorised for issue on 20th April 2009.
They were signed on its behalf by:
G.H. Hutchinson Smith Director
M.A. Smyth-Osbourne Director MALLETT PLC
Annual Report and Accounts 2008
26
Consolidated Cash Flow Statement
for the year ended 31st December 2008
2008 2007
Notes £’000 £’000
Operating (loss)/profit (5,987) 942
Adjustments for:
Depreciation 262 252
Net exchange adjustments (442) —
Movements in working capital:
Decrease in inventories 2,287 661
Decrease in receivables 26 403
Decrease in payables (124) (2,249)
Cash generated by operations (3,978) 9
Tax paid (279) (3,248)
Net Cash from Operating Activities (4,257) (3,239)
Investing Activities
Interest received 89 397
Interest paid (75) (21)
Purchase of property, plant and equipment (197) (345)
Net Cash (used in)/ from Investing Activities (183) 31
Financing Activities
Purchases of own shares (83) (84)
Dividends paid (832) (1,960)
B share scheme payments (47) (8,280)
Merger investment costs — (52)
Net Cash used in Financing Activities (962) (10,376)
Net decrease in Cash and Cash Equivalents (5,402) (13,584)
Cash and Cash Equivalents at beginning of year 2,047 15,869
Effect of foreign exchange rate changes 1,091 (238)
Cash and Cash Equivalents at end of year 25 (2,264) 2,047 MALLETT PLC
Annual Report and Accounts 2008
27
Company Cash Flow Statement
for the year ended 31st December 2008
2008 2007
£’000 £’000
Operating loss (236) (147)
Movements in working capital:
Decrease in receivables 272 3,271
Increase/(decrease) in payables 8 (879)
Net Cash from Operating Activities 44 2,245
Financing Activities
Dividends received 832 8,000
Dividends paid (832) (1,960)
B share scheme payments (47) (8,280)
Net Cash used in Financing Activities (47) (2,240)
Net (decrease)/increase in Cash and Cash Equivalents (3) 5
Cash and Cash Equivalents at beginning of year 5 —
Cash and Cash Equivalents at end of year 2 5 MALLETT PLC
Annual Report and Accounts 2008
28
Notes to the Accounts
1 General Information
Mallett plc (“the Company”) is a public limited company incorporated in the United Kingdom. The address of its registered office is
141 New Bond Street, London W1S 2BS.
The principal activities of the Company and its subsidiaries (together “the Group”) are described in note 5.
2 Significant Accounting Policies
a) Basis of accounting and consolidation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International
Financial Reporting Interpretations Committee (IFRIC) interpretations endorsed by the European Union (EU) and with those parts of the
Companies Act 1985 applicable to companies reporting under IFRSs.
The Group accounts, which include the accounts of the Company and its subsidiaries, are presented on the basis of the historical cost
convention. All companies' accounts are made up to 31st December 2008.
The comparative figures for share capital and capital redemption reserve have been restated to reflect the deferred shares which were
created by the return of cash to shareholders through a B share scheme in June 2007, as share capital. This is because they are yet to
be cancelled. Previously they were included within the capital redemption reserve. Further details are shown in note 22.
b) New standards and interpretations not yet adopted
The following standards, amendments to standards and interpretations have been issued by the IASB and are not effective for 2008
and therefore have not been applied in preparing these accounts:
IFRS 2 (Amendment) - Share-based payments, amendments on vesting conditions and cancellations which is effective for periods
commencing on or after 1st January 2009.
IFRS 3 (Revised) - Business combinations (2008) and IAS 27 (Revised) - Consolidated and separate financial statements (2008), are
effective for periods commencing on or after 1 July 2009.
IFRS 8 - Operating segments: It requires segment information to be prepared on the same basis as information reported to management for
decision-making purposes. Issued in February 2007, the implementation of this standard is not expected to change the segments reported.
IAS 1 (Revised) - Presentation of financial statements, which is effective for periods commencing on or after 1st January 2009.
IAS 23 (Revised) - Borrowing costs, which is applicable to borrowing costs related to qualifying assets for which the commencement
date for capitalisation is on or after 1 January 2009.
IAS 27 (Revised) - Consolidated and separate Financial Statements (revised 2008) effective for periods commencing on or after 1st July 2009.
The Group does not anticipate that the adoption of these standards or interpretations will have any significant impact or relevance on the
Group's accounts in the period of initial application.
c) Revenue
Revenue represents the total amount receivable by the Group for goods sold and services rendered during the year, exclusive of value
added tax.
For manufactured goods the Group recognises revenue when the goods in question have finished production and passed any applicable
factory and customer acceptance tests. Where goods remain on the Group's premises at the year end at the request of the customer,
management consider the detailed criteria for the recognition of revenue from the sale of goods as set out in IAS 18. In particular,
consideration is given as to whether the significant risks and rewards of ownership are considered to have transferred to the buyer.
d) Leased assets
Rentals under operating leases are charged to the income statement as incurred.
e) Inventories
Inventories are valued at cost except where, in the directors’ opinion as experts, the net realisable value is likely to be lower. In such
circumstances stocks are valued at estimated net realisable value.
f) Depreciation
Property, plant and equipment are depreciated by equal instalments over their expected useful lives at the following rates:
Freehold land & buildings 2%
Long leasehold property 2%
Fixtures & fittings 10%
Motor vehicles 25%
Short leasehold property over the term of the lease MALLETT PLC
Annual Report and Accounts 2008
29
2 Significant Accounting Policies continued
g) Foreign currencies
Assets and liabilities of the overseas subsidiary undertaking are translated at the rates of exchange ruling at the balance sheet date.
The results of the overseas subsidiary are translated at a reasonable approximation of the date of transaction. Differences arising on
the translation of net assets of the subsidiary undertakings are taken direct to reserves.
h) Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable profits ("temporary differences"), and is
accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Where there are taxable temporary differences
arising on subsidiaries, deferred tax liabilities are recognised.
Deferred tax assets are generally recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Where there are deductible temporary differences arising on subsidiaries, deferred tax
assets are recognised only where it is probable that they will reverse in the foreseeable future and taxable profits will be available
against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.
i) Pension costs
The Group operates a defined benefit pension scheme. The funds of the scheme are administered by trustees and are separate from
the Group. The scheme is valued by a qualified actuary every three years and contributions are paid in accordance with the
recommendations of the actuary. The most recent valuation of this scheme was at 1st May 2007.
Pension costs are charged against profits in the year they arise. Actuarial gains and losses are recognised in the Statement of
Recognised Income and Expenses.
The Group also operates a defined contribution pension scheme. Pension payments to defined contribution schemes are charged to
the Income Statement as they become due.
j) Share based payments
The Group issues equity-settled share based payments through a Share Incentive Plan (“SIP”) to all employees. The payments are
measured at fair value at the date of grant and the fair value is expensed on a straight line basis over the vesting period, based on the
Group’s estimate of the shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.
The investment in shares is carried at the cost of the shares held and this investment in own shares is presented as a deduction from
shareholders’ funds.
k) Accounting for financial assets
The Group has financial assets in the following categories:
- loans and receivables
- financial assets at fair value through profit or loss
Financial assets are assigned to different categories on initial recognition, depending on the characteristics of the instrument and its
purpose. A financial instrument's category is relevant for the way it is measured and whether any resulting income and expenses are
recognised in profit or loss or directly in equity.
All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets
other than those categorised as at fair value through the profit and loss are recognised at fair value plus transaction costs. Financial
assets categorised as at fair value through profit or loss are recognised initially at fair value with transaction costs expensed through
the income statement.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
After initial recognition, these are measured at amortised cost using the effective interest method, less provision for impairment.
Any change in their value is recognised in the profit and loss. The Group’s trade and other receivables fall into this category of financial
instrument. Discounting, however, is omitted where the effect of discounting is immaterial.
Significant receivables are considered for impairment on a case-by-case basis when they are past due at the balance sheet date or when
objective evidence is received that a specific counterparty will default. All other receivables are reviewed for impairment in groups, which
are determined by reference to the industry and region of a counterparty and other available features of shared credit risk characteristics,
if any. The percentage of the write down is then based on recent historical counterparty default rates for each identified group. MALLETT PLC
Annual Report and Accounts 2008
30
Notes to the Accounts
l) Accounting for financial liabilities
Financial liabilities represent a contractual obligation for the Group to deliver cash or other financial assets. Financial liabilities are initially
recognised at fair value, net of issue costs, when the Group becomes party to the contractual agreements of the instrument. All interest-
related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included in the income
statement line items "finance costs" or "investment income".
The Group's financial liabilities include borrowings, trade and other payables, and are measured at amortised cost using the effective
interest rate method.
m) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that
are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and bank
overdrafts, where they form an integral part of the Group's cash management.
n) Equity instrument
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity
instruments issued by the the Group are recorded at the proceeds received, net of direct issue costs. The only equity instrument
applicable to the Group is its issued share capital.
o) Interest
Interest is recognised using the effective interest method which calculates the amortised cost of a financial asset or liability and allocates
the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the net carrying amount of the financial asset.
3 Financial Risk Management
The Group’s activities expose it to a variety of financial risks: foreign exchange risk, credit risk and liquidity risk. Risk management is
carried out by the board, who review the exposures of the Group on an ongoing basis and put in specific procedures to mitigate this risk
where it is felt appropriate to do so.
a) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the
US dollar and the UK pound. Foreign exchange risk arises from commercial transactions, recognised assets and liabilities and net
investments in foreign operations.
The Group manages its holding of foreign currency, specifically US dollars, to ensure that the impact of currency fluctuations on the
Group are reduced. The use of forward contracts has been considered, as a further measure to mitigate this risk. However the Group
has not entered into any contracts of this nature during the year.
b) Credit risk
The Group considers that there is low credit risk exposure. Sales of antiques are made to high net worth individuals with good credit
worthiness. The combination of this factor and the repeat sales to regular customers limit the amount of credit exposure of the Group.
c) Liquidity risk
The Group maintains sufficient cash and availability of funding through an adequate amount of committed credit facilities to ensure that
resources are available to take advantage of new business opportunities as they arise.
d) Capital management risk
The Group policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business. MALLETT PLC
Annual Report and Accounts 2008
31
4 Critical Accounting Estimates and Judgements
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal
the related actual result. Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are
discussed below.
a) Retirement benefit pension obligations
The Group’s defined benefit pension scheme liability is based on key assumptions including return on scheme assets, discount rates,
mortality rates, inflation, future salary and pension costs. Details of the key assumptions are set out in note 19. The Group takes advice
from independent actuaries as to the appropriateness of the assumptions, but these assumptions may , individually or collectively, be
different to actual outcomes.
b) Inventory valuation
Inventory is valued at the lower of cost and net realisable value. The directors regularly review the carrying value of all items in inventory
and where their estimate of the market value of the item, based on market conditions at the time and trends in customer demand, is
lower than the cost of the item, a provision is made to reduce the carrying value of the item to the estimated market value.
c) Taxation
The Group is subject to income taxes in the UK and US. At each financial period end judgement is required in determining the provision
for income taxes. The Group recognises liabilities for anticipated tax issues based on the best estimates at the balance sheet date.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the
corporation tax and deferred tax provisions in the period in which such determination is made.
5 Business and Geographical Segments
Segmental reporting
The Group’s primary format for segmental reporting is geographical segments and the secondary format is business segments. The risks
and returns of the Group’s operations are primarily determined by the different geographical locations of the Group’s operations rather
than the different products. This is reflected by the Group’s management and organisational structure.
The Group has two primary geographical regions, being the UK and the US, with separate trading subsidiaries operating from each
region. Sales are reported by location of sales outlet. The Group’s activity is split into two business segments: restoration and dealing in
antique furniture and works of art (Antique) and designing and manufacturing contemporary furniture and works of art (Meta).
Transfer pricing between segments are set on an arm’s length basis. Segmental assets and liabilities consist of property, plant and
equipment, trade receivables, payables, cash at bank and inventories.
Segment information – continuing operations
UK USA
Antique Meta Antique Meta Intra group Total
2008 £’000 £’000 £’000 £’000 £’000 £’000
Income & expenses information
External sales by sales outlet 7,716 120 4,088 185 — 12,109
Inter segment sales 2,491 — — — (2,491) —
Depreciation and amortisation (128) — (134) —— (262)
Operating profit (3,579) (1,881) (474) (60) 7 (5,987)
Balance sheet information
Capital expenditure 140 — 57 — — 197
Total assets 55,732 142 4,222 71 (32,626) 27,541
Total liabilities, excluding tax liabilities 26,976 23 4,148 126 (24,936) 6,337
2007
Income & expenses information
External sales by sales outlet 11,485 — 6,003 —— 17,488
Inter segment sales 3,968 ——— (3,968) —
Depreciation and amortisation (116) — (136) —— (252)
Operating profit 1,049 (323) 44 — 172 942
Balance sheet information
Capital expenditure 335 — 10 —— 345
Total assets 65,012 — 4,432 — (40,212) 29,232
Total liabilities, excluding tax liabilities 30,648 — 3,513 — (31,147) 3,014 MALLETT PLC
Annual Report and Accounts 2008
32
Notes to the Accounts
5 Business and Geographical Segments continued
The sales by destination of goods is as follows:
2008 2007
Antique Meta Antique Meta
£’000 £’000 £’000 £’000
United Kingdom 3,093 120 7,777 —
Rest of Europe 1,946 33 2,335 —
United States of America 6,291 152 6,925 —
Other 474 — 451 —
11,804 305 17,488 —
6 (Loss)/Profit from Operations
Operating (loss)/profit has been arrived at after charging/(crediting):
2008 2007
£’000 £’000
Depreciation of property, plant and equipment 262 252
Auditors' remuneration
- Audit fees 10 10
- Other non-audit services
- Tax services (advisory and compliance) 14 13
- Other services* 13 22
- Audit of group undertakings 30 25
- Review of interim accounts 1 2
Net foreign exchange gains (268) (7)
Lease payments 1,528 1,297
Inventory provision 3,340 92
* Other services includes work relating to a pension scheme audit work and general consultancy work.
7 Staff Costs
2008 2007
£’000 £’000
Staff costs
- wages and salaries 2,038 1,776
- social security costs 177 150
- share based payments 125 74
- pension scheme costs* (note 19) 40 156
2,380 2,156
*Includes £82,000 (2007 - £34,000) in respect of contributions to defined contribution pension schemes.
Number Number
Average number of persons (including directors and part-time employees) employed by the Group
- restoration 13 10
- selling and distribution 32 27
- administration 4 4
- non-executive directors 4 3
53 44
The number of directors with benefits accruing under the defined benefit pension scheme is as follows: 4 4
Details of directors’ emoluments are given in the Directors’ Remuneration Report on page 20. The Group believes the Directors of Mallett Plc are
the only key management personnel under the definition of IAS 24 “Related party disclosures”.
8 Net Interest
2008 2007
£’000 £’000
Bank interest receivable 89 397
Interest payable on bank loan and overdrafts within five years not by instalments (75) (21)
14 376 MALLETT PLC
Annual Report and Accounts 2008
33
9 Tax
2008 2007
£’000 £’000
Current taxation
UK corporation taxation (341) 415
Foreign tax 12 1
(329) 416
Deferred tax (note 20):
Current year (1,365) 28
(1,694) 444
UK corporation tax is calculated at 28.5% (2007 – 30.0%) of the estimated assessable (loss)/profit for the year. Tax for other jurisdictions is
calculated at the rates prevailing in the respective jurisdictions.
2008 2007
£’000 £’000
The (credit)/charge for the year can be reconciled to the (loss)/profit per the income statement as follows:
(Loss)/profit before tax (5,973) 1,318
Tax at the UK corporation tax rate of 28.5% (2007 – 30%) (1,702) 395
Effected by the tax impact of the following items:
Income not subject to tax (43) —
Expenses not deductible for tax purposes 106 30
Capital allowances in excess of depreciation 50 42
Tax losses carried forward 1,241 —
Utilisation of tax losses (carried back) 212 —
Other timing differences (193) (51)
(329) 416
Deferred tax (note 20):
Current year (1,365) 28
Total current tax (1,694) 444
In addition to the amount (credited)/charged to the income statement, deferred tax relating to actuarial gains and losses of the pension scheme
amounting to £380,000 has been credited directly to the equity reserve (see note 23) (2007 - £222,000 debit).
10 Dividends
2008 2007
£’000 £’000
Amounts recognised as distributions to equity holders in the period:
Interim dividend for the year ended 31st December 2008 of nil (2007 - 2.4p) per share — 331
Special interim dividend of nil (2007 - 5.0p) per share — 690
B share continuing dividend 4 —
Further interim dividend for the year ended 31st December 2007 of 2.2p (2006 - nil) per share 304 —
Final dividend for the year ended 31st December 2007 of 3.8p (2006 - 6.8p) per share 524 939
832 1,960
Proposed final dividend for the year ended 31st December 2008 of nil (2007 - 3.8p) per share — 524
Further interim dividend for the year ended 31st December 2008 of nil (2007 - 2.2p) per share — 304
— 828
11 Basic and Diluted Earnings Per Share
Basic and diluted earnings per share are based on the loss after tax of £4,279,000 (2007 - profit of £874,000) divided by the weighted average
number of ordinary shares in issue during the year of 13,593,840 (2007 - 13,614,386).
12 Profit for the Financial Year
The profit dealt with in the accounts of the Company, which includes dividends received from subsidiaries, was £700,000 (2007 – £7,853,000).
As permitted by section 230(4) of the Companies Act 1985 an income statement of the Company is not presented with these accounts. 13 Property, Plant and Equipment
Short Furniture,
Freehold Leasehold fixtures &
Property Property motor vehicles Total
£’000 £’000 £’000 £’000
Cost or valuation:
At 1st January 2007 1,986 3,943 121 6,050
Additions 195 10 141 346
At 31st December 2007 2,181 3,953 262 6,396
Additions 4 102 91 197
Exchange adjustments — 580 11 591
At 31st December 2008 2,185 4,635 364 7,184
Depreciation:
At 1st January 2007 — 1,287 108 1,395
Charged 44 192 16 252
At 31st December 2007 44 1,479 124 1,647
Charged 44 190 28 262
Exchange adjustments — 144 5 149
At 31st December 2008 88 1,813 157 2,058
Net book value:
At 31st December 2008 2,097 2,822 207 5,126
At 31st December 2007 2,137 2,474 138 4,749
14 Inventories
Group Company
2008 2007 2008 2007
£’000 £’000 £’000 £’000
Goods for resale 16,085 18,372 — —
During the year the Group made inventory provisions of £3,340,000 (2007 – £92,000) and £8,982,000 (2007-£10,063,000) was recognised as a
cost of sale expense in the income statement.
15 Investments
2008 2007
£’000 £’000
Company
Shares in Group undertakings
At cost
At 1st January 2007 and 31st December 2008 8,482 8,482
Percentage of
Nature of business ordinary shares held
The subsidiary undertakings are as follows:
Mallett & Son (Antiques) Limited Antique dealers 100%
Mallett Overseas Limited Antique dealers 100%
Mallett, Inc. Antique dealers 100%
Mallett at Bourdon House Limited Dormant 100%
H.J. Hatfield & Sons Limited Restorers 60%
James Harvey British Art Limited Fine Art dealers 100%
MadebyMeta Limited Dormant 100%
MadebyMeta, Inc. Contemporary design 100%
Subsidiary undertakings are registered and operate in England with the exception of Mallett, Inc. and MadebyMeta, Inc., which are incorporated
and operate in the United States of America.
Gurr Johns Limited own 40% of H.J. Hatfield & Sons Limited.
MALLETT PLC
Annual Report and Accounts 2008
34
Notes to the Accounts MALLETT PLC
Annual Report and Accounts 2008
35
16 Trade and Other Receivables
Group Company
2008 2007 2008 2007
£’000 £’000 £’000 £’000
Trade receivables 2,848 2,685 — —
Other receivables 53 98 — —
Tax and social security recoverable 619 — 10 59
Prepayments and accrued income 774 918 — 3
Amounts due from subsidiary undertakings — — 15,263 15,484
4,294 3,701 15,273 15,546
The directors consider the carrying amount of trade and other receivables approximates to their fair value. Based on prior experience, the directors
believe that the trade and other receivables are all recoverable and there is, therefore, no allowance for doubtful debts (2007 - £nil).
Included in the Group’s trade receivables balance are debtors with a carrying value of £760,000 (2007 - £731,000) which are past due at the balance
sheet date for which the Group has not provided as the amounts are still considered recoverable. The aging of these debtors is as follows:
2008 2007
£’000 £’000
0-60 days 198 323
61-120 days 167 74
>120 days 395 334
760 731
17 Current Liabilities
Group Company
2008 2007 2008 2007
£’000 £’000 £’000 £’000
Amounts falling due within one year:
Bank overdraft 2,537 363 — —
Trade payables 1,764 1,681 21 7
Taxation and social security — 86 — —
Other payables 48 123 38 86
Accruals and deferred income 534 643 19 24
4,883 2,896 78 117
The bank overdraft is repayable on demand. The overdraft facility is £3,500,000, which was increased from £2,500,000 in December 2008.
The average effective interest rate on the bank overdraft approximated to 6.1%, which is determined based on 1.5% above the Coutts & Co. base rate.
18 Financial Instruments
Capital risk management
The Group's capital management objectives are to ensure the Group's ability to continue as a going concern in order to provide returns to
shareholders and benefits for other stakeholders.
The Group manages its capital through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt,
which includes the borrowings disclosed in note 17, cash and cash equivalents and equity attributable to equity holders of the parent, comprising
issued capital, reserves and retained earnings as disclosed in note 23.
2008 2007
£’000 £’000
Debt (2,537) (363)
Cash and cash equivalents 273 2,410
Net (debt)/cash (2,264) 2,047
Equity 21,204 26,150
The Group is not subject to externally imposed capital requirements, other than the minimum capital requirements and duties regarding a serious
reduction in capital, as imposed by the Companies Act 1985 on all public limited companies. MALLETT PLC
Annual Report and Accounts 2008
36
Notes to the Accounts
18 Financial Instruments continued
The Group held the following categories of financial instruments:
2008 2007
£’000 £’000
Financial Assets
Loans and receivables:
Trade receivables 2,848 2,685
Cash and cash equivalents 273 2,410
3,121 5,095
Financial liabilities
Trade and other payables
Trade payables 1,764 1,681
Accruals and deferred income 534 643
Borrowings 2,537 363
4,835 2,687
The fair value of the financial instruments set out above is not materially different from their book value.
Financial risk management objectives
Management monitor and manage the financial risks relating to the operations of the Group through regular reports to the Board. These risks
include credit risk, liquidity risk, interest rate risk and currency risk. The Group does not enter into or trade financial instruments.
Credit risk
The Group's credit risk is primarily attributable to its trade receivables. Credit risk is managed by monitoring the aggregate amount and duration
of exposure to any one customer. The directors estimate the level of allowances required for doubtful debts based on prior experience and their
assessment of the current economic environment.
Liquidity risk
The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously monitoring forecast and actual cash
flows and by matching the maturity profiles of financial assets and liabilities.
At 31 December 2008, all the Group's liabilities had contractual maturities of less than 6 months (2007 - less than 6 months) and the Group had
undrawn borrowing facilities available of £963,000 (2007-£2,137,000). The Group also maintains foreign currency denominated bank accounts
that earn interest based on Coutts & Co base rate applicable to that currency.
Interest rate risk
The Group finances its operations where necessary through a bank overdraft facility.
If interest rates had been 1% higher/lower and all other variables were held constant, the impact on the results in the Income Statement and
equity would be an increase/decrease of £14,000.
Foreign currency risk
The Group receives payment for its products and incurs costs and inventory purchases in Pounds Sterling, US Dollars and Euros. After netting
off foreign currency receipts and payments there is a net exposure to the risk of currency movements in both US Dollars and Euros.
The carrying amounts of the Group's foreign currency denominated monetary financial assets and liabilities at the balance sheet date are as follows:
Financial Financial Financial Financial
assets assets liabilities liabilities
2008 2007 2008 2007
£’000 £’000 £’000 £’000
Euro 1 — — —
US Dollar 2,013 3,197 231 603
2,014 3,197 231 603
The Group is principally exposed to the US Dollar and a 10% weakening in Pound Sterling against the US Dollar would improve the Group’s
results by £198,000 (2007-£288,000). The use of a 10% weakening in exchange rates is considered appropriate given recent movements in
exchange rates.
The above analysis represents the Group's exposure to foreign currency risk based on monetary financial assets and liabilities outstanding at the
year end. A significant amount of the Group's sales and purchases are made in foreign currencies. The exposure to foreign exchange rates varies
throughout the year depending on the volume and timing of transactions in foreign currencies. MALLETT PLC
Annual Report and Accounts 2008
37
19 Retirement Benefit Pension Obligations
The Group operates a defined benefit pension scheme, providing benefits based on final pensionable salary. This scheme is closed to new entrants
and, on the 30th June 2008 was closed to future accrual, with effect from that date. The assets of the scheme are held separately from those
of the Group and are administered by the pension scheme trustees. The pension cost relating to the scheme is assessed in accordance with the
advice of an independent qualified actuary using the projected unit method. Actuarial valuations of the scheme are carried out tri-annually with
the latest actuarial valuation of the scheme as at 1st May 2007.
The principal actuarial assumptions at the balance sheet date were as follows:
2008 2007 2006
Financial assumptions p.a. p.a. p.a.
Rate of increase in salaries N/A 3.00% 3.00%
Rate of increase of pension in payment inexcess of GMPs for non directors 2.80% 3.00% 2.75%
Rate of revaluation of deferred pensions in excess of the GMP 2.80% 3.00% 2.75%
Discount rate 6.00% 5.80% 5.10%
Inflation assumption 2.80% 3.00% 2.75%
The assumed life expectancy for a retiree at age 65 is:
2008 2007
Male Female Male Female
years years years years
Today 22.0 24.6 20.2 23.1
In 20 years 23.3 25.7 20.2 23.1
The 2008 rates are based on the SAPS tables adjusted for each individual’s year of birth and allowing for long cohort future mortality improvements
(i.e. the S1PMA YOB LC/S1PFA YOB LC tables for male and female members respectively). The 2007 rates are based on the PMA92 tables
adjusted for calendar year 2025 (i.e. the PMA92C2025 for male and female members respectively).
The market value of the pension scheme assets and the expected rate of return were:
Expected Expected Expected
long term 2008 long term 2007 long term 2006
rate of return £’000 rate of return £’000 rate of return £’000
Equities 7.50% 2,452 8.50% 3,413 7.00% 3,265
Bonds 6.60% 1,926 5.80% 1,832 5.10% 1,631
Cash 2.00% 377 4.75% 496 4.50% 261
Weighted Average Return 6.70% 7.31% 6.27%
Total fair value of scheme assets 4,755 5,741 5,157
The expected return on scheme assets is based on market expectations at the beginning of the year for return over the entire life of the defined
benefit obligation.
2008 2007
£’000 £’000
Actual return on scheme assets (1,006) 368
The value of the defined benefit obligations are analysed as follows:
2008 2007 2006
£’000 £’000 £’000
Present value of financial obligations 6,209 5,945 6,283
Present value of unfunded obligations — ——
6,209 5,945 6,283
Profit and Loss Impact
2008 2007
£’000 £’000
Employer’s current service cost 97 125
Interest on obligations 347 322
Expected return on pension scheme assets (420) (330)
Curtailment (gains)/losses (66) —
Total included in pension scheme cash (see note 7) (42) 117 MALLETT PLC
Annual Report and Accounts 2008
38
Notes to the Accounts
19 Retirement Benefit Pension Obligations continued
The amounts included within the statement of recognised income and expenses are:
£’000
Difference between expected and actual return on scheme assets (1,426)
Experience gains on scheme liabilities 112
Changes in assumptions (18)
Actuarial loss (1,332)
Cumulative actuarial gains and losses recognised in equity at start of year 2,154
Cumulative actuarial gains and losses recognised in equity at end of year 822
Balance Sheet Impact
2008 2007 2006
£’000 £’000 £’000
Present value of defined benefit obligation 6,209 5,945 8,283
Fair value of scheme assets (4,755) (5,741) (5,157)
Unrecognised actuarial gains/(losses) 1,454 204 1,126
Unrecognised past service cost - non-vested benefits — ——
Net liability in balance sheet — ——
Deficit in scheme at 31st December 1,454 204 1,126
Movement in scheme’s deficit for the year
2008 2007 2006
£’000 £’000 £’000
Deficit in scheme at 1st January (204) (1,126) (2,208)
Movement in year:
Current service cost (97) (125) (196)
A-day adjustment — — 375
Contributions 40 299 284
Net return on investments 73 8 (34)
Curtailment gains 66 ——
Actuarial (loss)/gain (1,332) 740 653
Deficit in scheme at 31st December (1,454) (204) (1,126)
Reconciliation of Present Value of scheme Liabilities and Assets
2008 2007 2006
£’000 £’000 £’000
Change in present value of defined benefit obligation:
Present value of defined benefit obligation at start of year 5,945 6,283 6,889
Employer’s current service cost 97 125 196
Interest on obligation 347 322 324
Contributions by plan participants 17 43 59
Past service costs – vested benefits — — (376)
Curtailment gains (66) ——
Actuarial gains on obligations (94) (702) (543)
Benefits paid (37) (126) (266)
Present values of defined benefit obligation at end of year 6,209 5,945 6,283
Change in fair value of scheme assets
Fair value of plan assets at start of year 5,741 5,157 4,680
Expected return of plan assets 420 330 290
Actuarial (losses)/gains on plan assets (1,426) 38 110
Contributions by employer 40 299 284
Contributions by plan participants 17 43 59
Benefits paid (37) (126) (266)
Fair values of scheme assets at end of year 4,755 5,741 5,157 MALLETT PLC
Annual Report and Accounts 2008
39
19 Retirement Benefit Pension Obligations continued
The five year history of experience adjustments is as follows:
2008 2007 2006 2005 2004
£’000 £’000 £’000 £’000 £’000
Present value of defined benefit obligations 6,209 5,945 6,283 6,888 5,880
Fair value of scheme assets 4,755 5,741 5,157 4,680 3,751
Deficit in the scheme 1,454 204 1,126 2,208 2,129
Experience adjustments on scheme liabilities
Amount (£) 112 97 184 (140) 921
Percentage of scheme liabilities (%) 2.00% 1.60% 2.90% 2.00% 15.70%
Actual return less expected return on plan assets:
Amount (£) (1,426) 38 110 670 106
Percentage of scheme assets (%) (30.00%) 0.70% 2.10% 14.30% 2.80%
The contributions that are expected to be paid into the scheme during the current financial year are £321,000 by the company.
20 Deferred Tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior
reporting period.
Other timing Accelerated Accelerated Retirement benefit
differences tax depreciation tax losses obligations Total
£’000 £’000 £’000 £’000 £’000
At 1st January 2007 — 70 — (338) (268)
Charge/(released) to income (note 9) — (26) — 54 28
Debit to equity (note 23) —— — 222 222
At 31st December 2007 — 44 — (62) (18)
Charge/(released) to income (note 9) (93) (90) (1,217) 35 (1,365)
Credit to equity (note 23) —— — (380) (380)
At 31st December 2008 (93) (46) (1,217) (407) (1,763)
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset) for financial
reporting purposes.
Group Company
2008 2007 2008 2007
£'000 £'000 £'000 £'000
Deferred tax liabilities — 44 — —
Deferred tax assets (1,763) (62) (105) —
(1,763) (18) (105) —
21 Own Shares
Ordinary shares in Mallett PLC are held by the trustees of the Mallett Share Incentive Plan to provide long-term benefits to employees. The costs
associated with the purchase of own shares for the trust are deducted from equity.
2008 2007
No. Shares No. Shares
At 1st January 195,595 177,341
Purchased 56,806 35,706
Exercised (35,556) (17,452)
At 31st December 216,845 195,595 Notes to the Accounts
MALLETT PLC
Annual Report and Accounts 2008
40
22 Called Up Share Capital
Group Company
2008 2007 2008 2007
(restated) (restated)
£’000 £’000 £’000 £’000
Authorised:
24,000,000 Ordinary shares of 5p each 1,200 1,200 1,200 1,200
13,800,060 non-cumulative non-voting preference shares of 37.45p each 5,168 5,168 5,168 5,168
6,368 6,368 6,368 6,368
Allotted and fully paid:
13,800,060 Ordinary shares of 5p each 690 690 690 690
6,815,812 non-cumulative non-voting preference shares of 37.45p each 2,553 2,553 2,553 2,553
3,243 3,243 3,243 3,243
At an Extraordinary General Meeting on the 6th June 2007, the shareholders approved the authorised share capital of the Company being increased
from £1,200,000 to £6,368,000 by the creation on 13,800,060 non-cumulative non-voting preference shares of 37.45p each.
On the 8th June 2007 the Company issued 13,800,060 non-cumulative non-voting preference shares of 37.45 pence each (“B Shares”) to its
shareholders on the register on 7th June 2007 out of the share premium account. Those shareholders then had the choice of receiving 58 pence
per B Share by way of a dividend or by way of a repurchase offer, as set out in a Circular to Shareholders dated 14th May 2007. On 15th June
2007, following elections received from shareholders, dividends totalling £3,953,000 became payable in respect of 6,815,812 B Shares, which
were then converted into deferred shares with very limited rights and 6,836,577 B Shares were repurchased for a total cost of £3,965,000 and
were cancelled. 147,671 B Shares remained outstanding which were re-classified under current liabilities. The nominal value of the B Shares
cancelled and re-classified as current liabilities were transferred to a capital redemption reserve. On 30th June 2008 80,454 of the outstanding
B Shares were repurchased following a repurchase offer made on 16th June 2008. 67,217 B Shares remain outstanding.
The comparative figures have been restated to reflect the deferred shares as share capital as these are yet to be cancelled. Previously they were
included within the Capital Redemption Reserve.
The outstanding B Shares confer the right to the B Share Continuing Dividend at a rate of 75 per cent of 12 month LIBOR, payable annually in
arrears, on the amount of 58 pence per B Share. Subject to approval at the forthcoming AGM, a final offer will be made to repurchase the outstanding
B Shares at 58 pence per B Share. Any B Shares that remain outstanding following this repurchase offer will receive a dividend of 58 pence per
B Share and the B Shares will be converted into deferred shares. The outstanding B Shares confer no other right to participate in the profits or
assets of the Company.
The deferred shares have very limited rights. They are not listed on any stock market, confer no right to participate in the profits of the Company,
no right to attend, speak or vote at any general meeting of the Company and the Company may at any time, without obtaining the sanction of
the holders of deferred shares, purchase the deferred shares in issue for not more than 1 pence for all deferred shares purchased and cancel
them in accordance with the Companies Act. On a winding-up the holders of deferred shares shall be paid the nominal capital paid up or
credited as paid up on such deferred shares after the holders of B shares are paid 58 pence per B share and the holders of ordinary shares are
paid the nominal capital paid up or credited as paid up on the ordinary shares, together with a sum of £100,000 on each ordinary share. MALLETT PLC
Annual Report and Accounts 2008
41
23 Consolidated Statement of Changes in Shareholders Equity
Capital
Share capital Share premium redemption reserve
(restated) (restated) (restated) Own shares Retained profits Minority interests Total equity
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Group
At 1st January 2007 690 5,168 — (494) 29,897 — 35,261
Retained profit for the year 874 874
Minority interest 1 (1) —
Dividends paid in year (1,960) (1,960)
Merger investment costs (52) (52)
Actuarial gains 740 740
Deferred tax movement on actuarial gain (222) (222)
Issue of B shares and conversion to
Deferred shares on payment of B
share dividend 2,553 (2,553) —
Issue of B shares and cancellation
on repurchase (2,560) 2,560 —
Issue of B shares and reclassification
to current liabilities (55) 55 —
Return of cash to shareholders through
B share scheme (8,280) (8,280)
Net movement in own shares 26 26
Net exchange loss (237) (237)
At 31st December 2007 3,243 — 2,615 (468) 20,761 (1) 26,150
Retained loss for the year (4,279) (4,279)
Minority interest 6 (6) —
Dividends paid in year (832) (832)
Actuarial losses (1,332) (1,332)
Deferred tax movement on actuarial loss 380 380
Net movement in own shares 26 26
Net exchange gain 1,091 1,091
At 31st December 2008 3,243 — 2,615 (442) 15,795 (7) 21,204
Special capital
Share capital Share premium reserve Capital
(restated) (restated) (restated) redemption reserve Retained profits Total equity
£’000 £’000 £’000 £’000 £’000 £’000
Company
At 1st January 2007 690 5,168 1,761 — 18,684 26,303
Retained profit for the year 7,853 7,853
Dividends paid in year (1,960) (1,960)
Issue of B shares and conversion to
Deferred shares on payment of B share dividend 2,553 (2,553) —
Issue of B shares and cancellation on repurchase (2,560) 2,560 —
Issue of B shares and reclassification to current liabilities (55) 55 —
Return of cash to shareholders through B share scheme (8,280) (8,280)
At 31st December 2007 3,243 — 1,761 2,615 16,297 23,916
Retained profit for the year 700 700
Dividends paid in year (832) (832)
At 31st December 2008 3,243 — 1,761 2,615 16,165 23,784
The share premium, capital redemption reserve and special capital reserve are not available for distribution. MALLETT PLC
Annual Report and Accounts 2008
42
Notes to the Accounts
24 Lease Commitments
Group
2008 2007
£'000 £'000
Present value of the future minimum operating lease payments under non-cancellable operating leases:
Less than one year 1,665 1,814
Between two and five years 6,929 7,308
After more than five years 27,391 33,174
25 Reconciliation of Net Cash Flow to Movements in Net Funds and Analysis of Net Funds
At 1st Exchange At 31st
January 2008 Cash Flow Movement December 2008
£’000 £’000 £’000 £’000
Cash in hand and at bank 2,410 (3,228) 1,091 273
Bank overdrafts (363) (2,174) — (2,537)
2,047 (5,402) 1,091 (2,264)
26 Related Party Transactions
Key Management personnel
The Group’s key management personnel comprises of the Board executive and non-executive directors. The remuneration, benefits and share
incentive plan details of these key personnel are set out in the Directors’ Remuneration Report on page 17 to 21.
During the year the Group made sales of £59,896 to L.M. Synge and £54,500 to Lord Daresbury, and made purchases of £14,000 from L.M. Synge,
both of whom are directors of Mallett PLC. All transactions were carried out on an arms length basis under normal commercial terms.
There were no transactions in the year between the Company and its subsidiaries, which are related parties.
At the year end the following balances were outstanding to the Company:
2008 2007
£'000 £'000
Amounts owed from Group undertakings:
Mallett & Son (Antiques) Limited 14,904 15,124
Mallett Overseas Limited 360 360
15,264 15,484
Gurr Johns Limited own 40% of H.J. Hatfield & Sons Limited.
27 Capital Commitments
The Group has no capital committments at 31st December 2008 (2007 – £150,000). MALLETT PLC
Annual Report and Accounts 2008
43
Five Year Record
2008 2007 2006 2005 2004
£’000 £’000 £’000 £’000 £’000
Turnover 12,109 17,488 16,642 14,925 16,557
Profit Before Taxation (5,973) 1,318 12,671 2,008 2,605
Profit After Taxation (4,279) 874 9,927 1,401 1,744
Dividends 831 1,960 1,270 1,270 1,270
Key Ratios
Basic earnings per share (31.47p) 6.42p 72.78p 10.15p 12.64p
Basic earnings per share before restructuring (31.47p) 6.42p 11.06p 10.15p 12.64p
Net assets per share £1.54 £1.89 £2.56 £1.96 £1.97 MALLETT PLC
Annual Report and Accounts 2008
44
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the twenty fourth annual general meeting of the members of Mallett PLC will be held at 141 New Bond Street,
London W1S 2BS on 28th May 2009 at 4.00 p.m. when the resolutions set out below will be proposed:
Ordinary Business
As ordinary business to consider and, if thought fit, to pass the following Resolutions, all of which will be proposed as ordinary resolutions:
1 To receive and adopt the audited accounts for the year ended 31 December 2008, together with the directors' and auditors' reports on those
accounts and on the auditable part of the Directors' Remuneration Report.
2 To approve the Directors' Remuneration Report for the year ended 31 December 2008, as set out in the 2008 Annual Report and Accounts.
3 To re-appoint Menzies LLP as auditors of the Company until the conclusion of the next annual general meeting of the Company and to
authorise the directors to fix their remuneration.
4 That for the purposes of Section 80 Companies Act 1985 (and so that expressions used in this Resolution shall bear the same meanings as
in the said Section 80):
4.1 the Directors be and are generally and unconditionally authorised to exercise all powers of the Company to allot relevant securities up
to a maximum nominal amount of £230,001 to such persons and at such times and on such terms as they think proper during the
period expiring at the end of five years from the date of the passing of this Resolution (unless previously revoked or varied by the
Company in general meeting); and
4.2 the Company be and is hereby authorised to make prior to the expiry of such period any offer or agreement which would or might
require relevant securities to be allotted after the expiry of the said period and the Directors may allot relevant securities in pursuance
of any such offer or agreement notwithstanding the expiry of the authority given by this Resolution;
so that all previous authorities of the Directors pursuant to the said Section 80 be and are hereby revoked.
Special Business
As special business to consider and, if thought fit, to pass the following Resolutions, of which numbers 5 and 6 will be proposed as special
resolutions and number 7 will be proposed as an ordinary resolution:
5 "THAT the Company be and is hereby generally and unconditionally authorised for the purpose of section 166 Companies Act 1985 to make
market purchases (as defined in section 163 of the said Act) of ordinary shares of 5p each in the capital of the Company ("ordinary shares")
provided that:
5.1 the maximum number of ordinary shares hereby authorised to be purchased is 10% (1,380,006 ordinary shares);
5.2 the minimum price (exclusive of expenses) which may be paid for such ordinary shares is 5p per share, being the nominal amount
thereof;
5.3 the maximum price (exclusive of expenses) which may be paid for such ordinary shares shall be an amount equal to the higher of (i) 5%
above the average of the middle market quotations for such shares taken from The London Stock Exchange Daily Official List for the five
business days immediately preceding the day on which the purchase is made and (ii) the higher of the price of the last independent trade
of an ordinary share and the highest current independent bid for an ordinary share as derived from the London Stock Exchange Trading
System SETS;
5.4 the authority hereby conferred shall (unless previously renewed or revoked) expire on the earlier of the end of the next Annual General
Meeting of the Company and the date which is 18 months after the date on which this resolution is passed; and
5.5 the Company may make a contract to purchase its own ordinary shares under the authority conferred by this resolution prior to the expiry
of such authority, and such contract will or may be executed wholly or partly after the expiry of such authority, and the Company may
make a purchase of its own ordinary shares in pursuance of any such contract."
6 That the terms of the proposed contract between (1) Singer Capital Markets Limited (“Singer”) and (2) the Company, under which Singer will be
entitled to require the Company to purchase B shares from them, up to the maximum number of issued B shares (a draft of which is
produced to the meeting and signed for the purposes of identification by the Chairman) be and are hereby approved and authorised for the
purposes of section 165 of the Companies Act 1985 and otherwise but so that such approval and authority shall expire 18 months from
the date of the passing of this resolution.
7 That a general meeting of the Company other than an annual general meeting may be called on not less than 14 clear day’s notice.
By Order of the Board
M. Smyth-Osbourne
Director and Secretary
20th April 2009 MALLETT PLC
Annual Report and Accounts 2008
45
Notes:
1 A member entitled to attend and vote at the meeting may appoint one or more proxies to exercise all or any of the rights of the Member to
attend and speak and vote in his or her place. A proxy need not be a member of the Company. Completion and return of a form of proxy
will not preclude a member from attending and voting at the meeting in person.
2 A form of proxy is enclosed which shareholders of the Company are invited to complete and return. To appoint more than one proxy you may
photocopy this form. Please indicate the proxy holder's name and the number of shares in relation to which they are authorised to act as
your proxy (which, in aggregate, should not exceed the number of shares held by you). Please also indicate if the proxy instruction is one of
multiple instructions being given. All forms must be signed and should be returned together in the same envelope.
3 The instrument appointing a proxy, together with a power of attorney or other authority (if any) under which it is signed, or a notarially certified
copy of such power or authority, must be completed, signed and returned so as to reach, by hand or by post, Capita Registrars,
The Proxy Department, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, no later than 4.00 p.m. on 26 May 2009.
4 The Company, pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, specifies that only shareholders whose names
appear on the register of members of the Company as at 6.00 p.m. on 26 May 2009 shall be entitled to attend the annual general meeting
either in person or by proxy and the number of ordinary shares then registered in their respective names shall determine the number of votes
such persons are entitled to cast on a poll at the annual general meeting. If the meeting is adjourned, the time by which a person must be
entered on the register of members of the Company in order to have the right to attend and vote at the adjourned meeting is 6.00 p.m. on
the day preceding the date fixed for the adjourned meeting. Changes to the register of members after the relevant times shall be disregarded
in determining the rights of any person to attend and vote at the meeting.
5 Copies of the following documents will be available for inspection at the Registered Office of the Company during usual business hours on
any weekday until the date of the annual general meeting and thereafter at the place of the meeting for fifteen minutes prior to the meeting
and during the meeting:
(a) the register of interests of the Directors and their families in the share capital of the Company;
(b) copies of the Directors' service contracts and the letter of appointment for the Non-executive Directors;
(c) a copy of the existing Articles of Association of the Company; and
(d) the proposed contract between (1) Singer Capital Markets Limited and (2) the Company. MALLETT PLC
Annual Report and Accounts 2008
46
Half–yearly results to be announced Sep-09
Interim ordinary dividend to be paid for the year to 31st December 2009 Sep-09
Preliminary announcement of results for the year to 31st December 2009 Mar-10
Financial Calendar
DESIGN & PRODUCTION
www.ckdcorp.co.uk
TEL: 020 7566 0190
PRINT
The Colourhouse
PAPER
Printed on LumiSilk. Elemental Chlorine Free fibre
sourced from well managed forests. The paper
manufacturer and printer are accredited with IS0 14001.
The printer is also carbon neutral. Form of Proxy
for use at the Annual General Meeting of Mallett PLC (the “Company”)
To be held at 4.00p.m. on 28th May 2009
Please insert full name(s) and address(es)
I/We
(IN BLOCK CAPITALS)
of
being (a) member(s) of the above-named company HEREBY APPOINT the Chairman of the Meeting
or
as my/our proxy to vote for me/us and on my/our behalf at the annual general meeting of the company to be held on 28th May 2009 and at any
adjournment thereof and in respect of the resolutions set out in the Notice of the annual general meeting to vote as indicated below.
For Against Vote Withheld
5
Resolution 1 To receive and adopt the audited accounts.
Resolution 2 To approve the Directors' Remuneration Report.
Resolution 3 To re-appoint Menzies LLP as auditors and to authorise
the directors to fix their remuneration.
Resolution 4 To authorise the allotment of shares.
Resolution 5 To authorise the Company to make market purchases
of its own shares (Special Resolution).
Resolution 6 To approve the repurchase of B Shares (Special Resolution).
Resolution 7 To approve the calling of general meetings on 14 clear days notice.
Please sign and insert date. A Corporation should execute under its common seal or under the hand of a duly authorised agent or officer.
Dated this day of 2009
Signed
Notes:
1. In the case of joint holdings the signature of any holder is sufficient but the vote of the senior holder who tenders a vote (whether in person or by proxy) shall be accepted to the exclusion of
the other joint holders; for this purpose seniority shall be determined by the order in which the names stand in the register of members.
2. If you wish to appoint one or more a proxies other than the Chairman you should delete the words "the Chairman of the Meeting or", insert your own choice in the space provided and initial
the amendment. A proxy need not be a member of the Company. To appoint more than one proxy you may photocopy this form. Please indicate the proxy holder's name and the number
of shares in relation to which they are authorised to act as your proxy (which, in aggregate, should not exceed the number of shares held by you). Please also indicate if the proxy instruction
is one of multiple instructions being given. All forms must be signed and should be returned together in the same envelope. On any other business which properly comes before the meeting
(including any motion to amend any resolution or to adjourn the meeting) the proxy will vote or abstain at his or her discretion.
3. Please indicate by marking "X" in the appropriate space how you wish your votes to be cast. Unless so instructed the proxy will vote or abstain as he/she thinks fit.
4. To be valid this proxy must be returned to Capita Registrars, The Proxy Department, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU not later than 48 hours before the time
fixed for the Meeting.
5. This is not a vote in law and will not be counted in the calculation of the proportion of the votes "For" or "Against" the Resolution.
6. If you appoint as your proxy a person who is himself a member of the Company or who is already appointed by more than one member of the Company, such person will be able to cast
your vote only on a poll, not on a show of hands.
7. Completion and return of this proxy will not prevent you attending and voting at the annual general meeting if you so wish.
For Company Use Only
Holding of shares
Number Capita Registrars
The Proxy Department
PO Box 25
Beckenham
Kent
BR3 4BR
BUSINESS REPLY SERVICE
Licence No. MB122
1 1 L’Armoire (from the Meta Collection)
Tord Boontje has reinterpreted the classic wood
veneered cabinet of the 18th century by creating
a beautiful, folding shape emphasised and
expressed with simply figured veneers to
highlight its rich landscape.
L’Armoire is a sensual re-discovery of the art 
of beautiful concealment The hand-veneered
wardrobe is a chamber of secrets housing a
central concealed panel which opens to reveal a
series of drawers and contains three additional
hidden compartments to conceal your most
valued possessions.
To create such a piece as this requires veneers
of exceptional precision and refinement which
were derived from the traditional technique of
vertical veneering to give them the rigidity and
shared strength of the tree. They were cut by
Patrick George, a fourth generation French
veneer specialist on a scie à bois montant built
in the early 1800s. 141 New Bond Street,
London W1S 2BS
Telephone + 44 (0)20 7499 7411
www.mallettantiques.com
929 Madison Avenue at 74th,
New York, NY 10021
Telephone +1 212 249 8783
MALLETT PLC