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Delta plc is an international industrial group structured around four businessareas: Electrical Protection, Industrial Services, Plumbing Products andCables & Materials. The management has identified four long-term growthbusinesses, which they believe offer superior growth opportunities. These are:Electrical Protection, Galvanizing, Electrolytic Manganese and PlumbingProducts. These businesses will increasingly define the future shape of theGroup. In each business area Delta companies have leading market positions.With a compact headquarters and tight financial controls, Delta isdecentralised with strong management accountability. We employ some12,200 people worldwide and over half our business is outside the UK withoperations in Continental Europe, USA, Australia, Africa and the Pacific Rim.
Corporate statement
Contents
1 Financial highlights 2 Operations overview 4 Chairman’s report to shareholders 6 Chief executive’s review of the year 8 – Electrical Protection
10 – Industrial Services12 – Plumbing Products14 – Cables and Materials16 – Business development17 People development18 Financial review21 Board of directors of Delta plc22 Directors’ report (including the report of the
Appointments and Remuneration Committee)29 Auditors’ reports30 Group profit and loss account31 Balance sheets32 Group cash flow statement33 Statement of total recognised gains and losses34 Accounting policies35 Notes on the accounts45 Principal Group and associated companies46 Shareholders’ information47 Notice of annual general meeting48 Group financial information
98_Delta_RA_IFC_p01 29/4/98 4:15 pm Page ii
1997 1996 (as restated)
Before After Before Afterexceptional exceptional exceptional exceptional
items and items and items and items anddiscontinued discontinued discontinued discontinued
operations operations operations operations
Profit (loss) before interest £65.8m £(15.3)m £64.2m £55.5m
Profit (loss) before taxation £59.2m £(22.5)m £54.7m £45.6m
Earnings per ordinary share 25.7p (29.3)p 21.7p 15.2p
Dividends per ordinary share:
Paid as a conventional dividend — 4.5p
Paid as an enhanced Foreign Income Dividend — 14.4p
Payable/paid as an unenhanced Foreign Income Dividend 16.0p —
Total dividend for year 16.0p 18.9p
Equivalent to a total conventional dividend 16.0p 16.0p
Shareholders’ funds £285.6m £330.6m
Net assets per ordinary share 189p 219p
1
Financial highlights
98_Delta_RA_IFC_p01 29/4/98 4:15 pm Page 1
2
Operations overview
ElectricalProtection
Circuit
Power
Fire
Automotive& Accessories
1997 1996Sales £240m £244mProfit £19m £19m
IndustrialServices
Galvanizing
ElectrolyticManganese
Distribution& Mining
1997 1996Sales £210m £207mProfit £22m £21m
98_Delta_RA_p02_05 29/4/98 4:14 pm Page 2
3
PlumbingProducts
Water
Gas
1997 1996Sales £227m £251mProfit £21m £24m
Cables &Materials
Building Wires
Extrusions
Components
1997 1996Sales £262m £290mProfit £5m £nil
98_Delta_RA_p02_05 29/4/98 4:14 pm Page 3
Chairman’s report to shareholders
Although trading conditions
in most of our markets remained difficult throughout the
year, profit before tax and exceptional items was £59.2
million (1996 £54.7 million) giving earnings per share of
25.7p (1996 21.7p).
In common with many other companies with significant
UK manufacturing bases, the strength of Sterling severely
impacted our exported sales and our competitive position in
domestic markets. It also reduced the Sterling value of our
overseas profits on translation. Such was the adverse impact
of currency movements in 1997 that, had these not occurred,
it is estimated that profits before tax and exceptional items
would have been some £12.5 million higher.
Group turnover, which was affected by the divestment of
several businesses during the year and the strength of Sterling,
decreased by 5% to £898.4 million (1996 £950.0 million).
Continued tight management of working capital resulted
in a reduced interest charge.
Despite modestly increased general economic activity in
the UK resulting in some improvement in volumes, the pricing
environment remained very competitive, particularly for our
commodity cables and materials businesses. Continental
European markets remained subdued but steady, and despite
uncertain economic backgrounds in South Africa and Asia-
Pacific, the management teams in Industrial Services achieved
good results.
While maintaining
current profitability, attention has been focused on
repositioning the Group for future growth. As part of this
process, we announced in February 1998 a sale and asset
exchange agreement with BICC. A £49 million provision has
been established to cover the loss on the disposals within this
transaction and a writedown of the carrying value of the
retained assets within the cables and materials businesses.
This, together with associated goodwill of £27.3 million, the
losses from discontinued businesses and other disposals
totalling £5.4 million, results in the Group recording a pre-
tax loss of £22.5 million (1996 £45.6 million profit).
On completion of this transaction with BICC, which is
subject to approval by the Secretary of State for Trade and
Industry, Delta will have withdrawn from the commodity
businesses of copper rod, enamelled winding wires, utility
cables and utility accessories and rubber cables. Delta’s
Repositioning the Group for future growth
Results of continuing business remaining commodity cable business of building wires will be
significantly strengthened by the acquisition of BICC’s
interests in that area. Regrettably, this will lead to a number
of redundancies, but given the excess manufacturing capacity
in the European cables market, such actions had become
inevitable.
We are proposing to pay a final dividend of 11.5p
as a Foreign Income Dividend (FID). Although it was
announced in the 1997 Budget that FIDs would be phased
out by 1999, paying the dividend in this way is in the best
interests of the company and the shareholders as a whole,
because it helps to avoid having to write off irrecoverable
Advance Corporation Tax (ACT). After an interim dividend
of 4.5p, the total dividends for the year amount to 16.0p.
This is equivalent to last year’s underlying dividend before the
enhancement of the final.
Since his appointment as Chief Executive at the end
of 1996, Jon Scott-Maxwell and his management team have
undertaken a rigorous evaluation of each business in the
Group and its future strategy. In September, we announced
that the Group’s strategic objectives are to focus on those
areas with higher growth potential, to reduce exposure to low
value-added commodity businesses and to achieve better
geographic cover and balance. Therefore the focus of the
Group’s management and cash resources will be on the four
long-term growth businesses of Electrical Protection,
Galvanizing, Electrolytic Manganese and Plumbing Products,
which will increasingly define the future shape of the Group.
In line with this strategy, we have recently announced the
completion of the acquisition of the electrolytic manganese
dioxide business, AMCL from BHP. At the same time, it was
announced that Delta had increased its holding in Delta
Electrical Industries Limited to a majority position of 50.1%.
The sale of commodity cables and materials businesses to
BICC is a further important strategic step.
Due to other commitments, Sir Brian Moffat has
decided not to offer himself for re-election at the forthcoming
Annual General Meeting. I would like to thank him for his
extremely valuable contribution to the Board over the years. He
leaves with our best wishes and his wise counsel will be missed.
The central corporate team was strengthened with the
appointment of Paul Smits as Corporate Development
Director and promotion to the Delta plc board. He has
People
Strategy
Dividend
4
98_Delta_RA_p02_05 29/4/98 4:14 pm Page 4
The board of directors
5
Seated from left to right: Sir Martin Jacomb Chairman Jon Scott-Maxwell Chief Executive Standing from left to right: John Robinson Non-executive DirectorPaul Smits Corporate Development Director Mike Gill Finance Director Sir Philip Beck Non-executive Director Sir Brian Moffat Non-executive Director
considerable experience in international mergers and
acquisitions and has held several senior management positions
in the Group’s international operations.
In the autumn we appointed Mike Amos, group director
of human resources. He joins us from Duracell Europe and
reports directly to the Chief Executive. His appointment
underlines the Group’s commitment to management
development which will be important in the delivery of our
strategic objectives.
During what has been a particularly challenging year, I
would like to thank all of our employees at every level for
their enthusiasm, hard work and dedication.
Volumes for building related products in the UK
have seen some improvement. However, the pricing
environment has remained very competitive with pressure
from imports and supply ahead of demand.
The evidence from Continental Europe is that stability is
returning and there are signs of a pick up in end demand in
the German and Spanish markets, although pricing still
remains an issue. It is still too early to ascertain the likely
effects of the recent turmoil in Far Eastern financial markets
Outlook
on our businesses. The outlook for the Australian and South
African economies is for little change in the near-term.
During the coming year the businesses will see the benefit
from the ongoing programme of operational improvements
and cost reductions which we have implemented. We now
have a clear strategic focus on our long-term growth
businesses which will provide a platform for sustainable
earnings growth.
Sir Martin Jacomb, Chairman
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98_Delta_RA_p02_05 29/4/98 4:14 pm Page 5
During the year we determined the future strategic direction
for Delta while implementing a programme of operational
improvements. The translation and transaction effects of
currency in the year estimated at £12.5 million more than
offset the underlying 17% growth in profits. In the first few
months of 1998 the acquisition of AMCL from BHP and the
agreement with BICC, which reduces our exposure to cables
and copper, were significant first steps in the reshaping of the
Group.
Trading conditions during the year remained challenging
throughout Europe, despite some improvement in certain
sectors of the UK economy and some evidence in the second
half of the year of increasing confidence in the Spanish and
German markets. The South African economy was subdued
and the Australian economy remained constrained by tight
fiscal policy. Whilst the financial crisis in South East Asia has
dominated the headlines in recent months and the outlook for
6
Chief executive’s review of the year
The long-term growth businesses will provide the futuregrowth for the Group
Below: Ernie Fontan at Innovative
Technology reviewing the design
of a transient voltage surge
suppressor with Don Wilfong
and Jon Scott-Maxwell.
98_Delta_RA_p06_07 29/4/98 4:20 pm Page 6
7
the region remains uncertain, growth rates in the year were
still significantly higher than the OECD average. The US
economy continued to perform well.
The tight control of cash and in particular working capital
was maintained throughout the year. In order that cash
resources can be more focused on the growth objectives, the
remaining capital expenditure submissions were examined
closely and where appropriate, outsourcing implemented.
Initiatives to drive improvements in operational performance
were introduced, focusing on cost reductions from increased
productivity, reduced complexity and procurement gains. The
full effect of these actions across the Group will be seen going
forwards. To ensure that the targets set are appropriate,
external benchmarking has been undertaken at several
operations.
In an economic environment of low growth and low
inflation, it is particularly important that management
attention is focused on sales growth through product and
market developments. We must listen to our customers’ needs
and requirements and ensure we thoroughly understand the
markets in which we operate. During the year a number of
steps were taken across the Group to achieve these aims.
Electrical Protection, for instance, continued to invest both in
new products and market development, backed by critical
customer analysis and market research. Plumbing Products is
widening its range of products to customers in order to
capitalise on its excellent sales and distribution networks. Our
Electrolytic Manganese Dioxide and Galvanizing businesses
already enjoy an excellent reputation for customer service and
product quality in their respective fields and they both saw
considerable investment in new capacity during the year.
In September, we announced the conclusions of a detailed
evaluation of the Group and its businesses and our intention
to focus on the four businesses of: Electrical Protection,
Galvanizing, Electrolytic Manganese and Plumbing Products.
They will provide the platform for future growth of the
Group. We have undertaken a detailed analysis of the
businesses, their products, customers and our competences in
those marketplaces. We believe that these businesses offer
attractive opportunities for growth and by concentrating our
management and financial resources in these areas, we will be
able to generate sustainable long-term growth and value for
our shareholders. Acquisitions and investments in new
facilities have been directed at accelerating the rate of organic
growth in those long-term growth businesses.
In addition to those long-term growth businesses we have
identified several performance businesses which achieve
excellent performances in their specific products and markets,
but whose future growth potential is limited by the size of the
markets in which they operate. Investment in these
performance businesses will continue but given their limited
growth potential, their use of cash resources should be
broadly neutral after contributing to Group tax and dividend
commitments.
The remaining operations in the Group have been
included in programmes of operational improvement and
divestment so we can generate more resources for investment
in the long-term growth businesses.
To be able to achieve both the strategic and operational
objectives we have reorganised the Group into four business
areas, Electrical Protection, Industrial Services, Plumbing
Products and Cables and Materials. There have also been
several changes to strengthen the management team. Most
notably at the senior level, the appointment of Paul Smits as
Corporate Development Director, Mike Amos as Group
Director of Human Resources and Michel Van der Kindere as
Managing Director, Materials.
The performance of each business together with
comments on the territories in which they operate is reported
separately on the following pages.
98_Delta_RA_p06_07 29/4/98 4:20 pm Page 7
The UK market for circuit protection products showed some
signs of volume improvement during the year, although
pricing remained difficult against the background of a highly
competitive marketplace. Delta’s circuit protection products
continued to benefit from recent investment in product and
market development. Export sales continued to build during
the period and there were signs of improvement in the Middle
East. Sales to Asia Pacific continued to grow, but it is too
early to assess the likely impact of the recent economic
turmoil in the region. Against a competitive marketplace and
a background of significant investment in product and market
development, margins were maintained giving a profit of
£18.5 million on slightly reduced turnover of £239.6 million
following the divestment of BERL in 1996.
Delta’s brands, MEM and BILL, retained
their predominant position in the UK market for low voltage
fusegear and circuit breakers which are designed to protect
500v circuits. During the year, the senior management at both
BILL and MEM 500v changed and the latter saw substantial
reorganisation with the extension of cell manufacturing.
Delta Electrical Systems (DES), MEM 500v and BILL
continued to see success from targeting major project work.
For example, BILL supplied products for the new stand at
Aston Villa’s ground, Villa Park and towards the end of the
year DES and MEM 500v won orders for refitting all the low
voltage systems at Harrods.
MEM 250v supplies consumer units, miniature circuit
breakers (MCB) and residual current devices (RCD) for
commercial and residential low voltage applications. This
business has seen substantial investment in recent years in
new product development and approximately 85% of MEM
250v’s sales are now generated by products which have been
developed in the last five years. Sales of recent products, such
as the 10kA MCB and combined RCD pod, continued to
grow during the year.
In August we acquired Elek GmbH in Germany, a
manufacturer of enclosures and systems for the low voltage
market. Although Elek has required reorganisation with its
associated costs, it provides Delta with a respected brand
Circuit Protection
name and an established distribution chain for circuit
protection products in Germany and is in line with Delta’s
stated ambition to increase its sales of circuit protection
products in Continental Europe. The existing MEM sales
force in Germany has been combined with the team at Elek.
In July we announced the acquisition of Innovative
Technology Inc (IT). IT is a leading manufacturer of transient
voltage surge suppression (TVSS) systems supplying the US
power protection market. Together with United Power
Corporation, in which Delta purchased a majority interest in
1995, the acquisition gives Delta a significant position in the
fast growing TVSS market in the US with potential to transfer
this technology to other markets. Both companies saw strong
performances during the year.
Delta Special Cables include fire resistant, safety critical
products designed to preserve circuit integrity in hazardous
situations. Delta’s quality products, such as the Firetuf range of
fire resistant cables, continued to see good demand in the UK
and overseas. The decision to target important Far Eastern
markets was rewarded with considerable success. Additionally
a number of new products, including the category 5 data cable,
were launched.
Delta Schoeller, a manufacturer of
automotive switches and power points, concentrated on
investment prior to the launch of a number of new products,
principally for General Motors and Volkswagen Group. The
benefits of this investment will be seen as volumes begin to
build in the current year.
The market for wiring accessories remained subdued
during the year, although import penetration at the lower end
of the market appears to have stabilised. MEM’s successful
Memstyle range of accessories continued to win market share
during the year and the business showed improvement on the
previous year.
Automotive and Accessories
Fire
Power
8
Electrical Protection
The businesses continued to benefit from recent investmentin product and market development
98_Delta_RA_p08_09 29/4/98 4:19 pm Page 8
9
Above: Clive Robertson, Managing
Director, Circuit Protection (left) with
Cees Buijs at Elek. Left: Elek’s products
are being used in the refurbishment of
the Reichstag building in Berlin.
98_Delta_RA_p08_09 29/4/98 4:19 pm Page 9
Despite the adverse effect of the strength of Sterling on the
translation of overseas profits and the subdued background of
the Australian and South African economies, profits increased
to £21.7 million on turnover of £210.4 million.
During the year, Delta continued to build on its
market-leading position in galvanizing in the Asia Pacific
region. Galvanizing provides a durable and cost effective
protection for steel products and the management team at
Industrial Galvanizers (IG) have brought a highly professional
approach to marketing, customer service and the operation of
their plants. IG has doubled its size over the last three years
and has been identified as a long-term growth business.
IG owns twelve plants in Australia and is the largest
operator of hot dip zinc plants in that territory. The
manufacture of associated steel products provides a good base
load for the galvanizing plants.
The year saw considerable further expansion of IG’s
operations in Asia Pacific. In addition to the existing plant, a
second plant in Malaysia was established at Nilai. Another new
plant commenced production in Indonesia as a joint venture
with a local steel producer and a similar joint venture in
Vietnam is due to open during 1998. These plants are
positioned to benefit from the demand for infrastructure
development taking place in the region.
In the US, Industrial Galvanizers Inc. opened a new facility
in Petersburg, Virginia. The plant has the largest galvanizing
bath on the Eastern Seaboard of the USA and features state of
the art material handling techniques as well as the latest
environmental controls and recycling methods. In addition to
the Southeastern Galvanizers plant in Florida which Delta
acquired in 1996, this new plant strengthens IG’s presence in
Galvanizing
the US galvanizing market leaving Delta well placed to benefit
from the infrastructure refurbishment programmes which are
being undertaken in the US.
Delta EMD and Manganese Metal
Company both performed well during the year. Both companies
trade internationally in US dollars and therefore are not
dependent on the South African economy. Delta is recognised
by its customers as a high quality supplier in the world of
Electrolytic Manganese Dioxide (EMD) which is used in the
manufacture of dry cell batteries.
During the year Delta EMD successfully filled the new
capacity at its Nelspruit facility which was commissioned in
December 1996. In January 1998, Delta announced the
completion of the acquisition of BHP’s Australian EMD
business, AMCL. This acquisition makes Delta the number one
global supplier of EMD and doubles the Group’s market share
of this product to 20%.
At the time of the AMCL announcement, it was also
announced that Delta had increased its holding in Delta
Electrical Industries Limited (DEI) and had moved into a
controlling position over those South African assets.
Against a tight economic background
in Australia and South Africa and depressed prices for natural
resources, the mining and distribution businesses produced
creditable results. In South Africa, Reid & Mitchell which was
acquired as part of the Genwest acquisition in July 1996, was
successfully integrated into Electrical Repair Engineering (ERE)
creating a market leading electrical repair business which
performed well during its first year of combined operation. In
Australia, Donhad, which supplies grinding media to the
mining industry, had another successful year.
Mining and Distribution
Electrolytic Manganese
10
Industrial Services
The long-term growth businesses of Galvanizing andElectrolytic Manganese are the key drivers for the growth inIndustrial Services
98_Delta_RA_p10_11 29/4/98 4:09 pm Page 10
11
Above: Graham Salter (right),
Managing Director, Australia talking
to Graham Choice at the Year 2000
Olympic Games site in Sydney where
IG are supplying galvanizing services.
Left: Evan van Zyl (left), Managing
Director, South Africa talking to
Doug Meyer at the expanded EMD
plant in Nelspruit.
98_Delta_RA_p10_11 29/4/98 4:09 pm Page 11
Trading conditions across Europe remained subdued. In the
UK there was some improvement in volumes, but pricing was
tight. Towards the end of the year, there was some evidence
of volume recovery in the important German market and also
in Spain, although the pricing environment remained very
competitive. Trading remained flat in France throughout the
year. Against this background, the profits in the second half
showed some improvement to give an annual result of £20.6
million on turnover of £227.4 million.
International Building Products (IBP) is a leading pan-
European supplier of branded products for the connection of
many types of pipe for the supply of water and heating, with
a particularly strong position in copper based products.
Investment in the distribution network in recent years has
resulted in IBP being able to market its products throughout
Europe. More recently, significant management effort has
been focused on the faster growing markets for plumbing
products in Central and Eastern Europe. Outside Europe, IBP
has continued to target key markets in the Far East, including
China.
IBP launched a number of new products during 1997.
Nautilus, an axial jointing system for plastic pipes, was
launched in Germany towards the end of the year. It is
intended that this product will be marketed progressively
throughout Europe. The demand for plastic pipes and fittings
is growing at an annual rate of more than 10%, particularly
in the fast developing markets of Eastern and Central Europe
where it is mainly replacing ferrous products.
In February 1998, IBP announced that it had entered into
a joint venture with TC of Germany to manufacture plastic
plumbing system piping at a new facility in Southern Poland.
This facility will have the advantages of low manufacturing
cost and proximity to the important growth markets. It was
also announced at this time that Delta had signed an
agreement with La Farga Lacambra SA (LFL) of Spain. The
two parties are establishing a joint venture to manufacture
copper tubing at LFL’s existing site situated near Barcelona.
Through this agreement, IBP secures a low cost supply of
engineering tube for use in the manufacture of copper fittings
throughout Europe. This venture will deliver considerable
Water
benefits to the reliability and cost of sourcing engineering
tube supply for the entire IBP business.
During 1997 IBP further expanded its existing factory at
Poznan in Poland to accommodate additional manufacturing
transferred to this low-cost operation. In the UK, the Conex
facility was further reorganised and cell based manufacturing
techniques were extended. Opella, with its active product
development programme and new plastic products, continued
to make further progress.
In October, we acquired National Vulcan Safety Products
(NVSP), a manufacturer and distributor of safety valve
products under the brand name NABIC. NVSP has a wide
customer base and a strong brand identity in its main UK
marketplace. Delta will build on these strengths by adding
and developing further products for both home and export
markets. The business has been re-located to Delta’s nearby
company, Donald Brown (Brownall) Limited in Manchester.
Sourdillon, with headquarters in France and with
additional manufacturing facilities in the US and Mexico, has
built a leading position in the manufacture and supply of
parts for gas cookers and other appliances. The company
continues to invest in new product development and enjoyed
another successful year in 1997. The US operation continued
to grow strongly and saw further gains in market share. A
new sales office was established in Brazil to target the fast-
growing South American markets. In January 1998, it was
announced that Delta had exercised its option to move to a
controlling position of 66% in Acrotec in Mexico. Acrotec
provides Sourdillon with a low-cost manufacturing base
within the North American Free Trade Area.
In October we announced the sale of KWB Kenmac,
based in the Isle of Man, for £6.3 million. Together with
goodwill of £4.2 million, which was previously written off,
the sale gave rise to an exceptional loss on disposal of £5.3
million.
Gas
12
Plumbing Products
Acquisitions and joint ventures are extending our product range
98_Delta_RA_p12_13 29/4/98 4:17 pm Page 12
13
Above: Eddie Garvey (left), Managing
Director, Plumbing Products talking to
Henryk Grzechowiak and Irek Grupa
at Poznan Poland. Left: IBP Conex
products were used in the restoration
of Windsor Castle.
98_Delta_RA_p12_13 29/4/98 4:18 pm Page 13
Against the background of difficult trading conditions, our
Cables and Materials businesses saw a decline in turnover to
£262.3 million, but a return to profits of £5.0 million driven
by a programme of further cost reductions.
The UK energy cables market witnessed a general
decline in trading conditions during the year. Throughout
Europe, cables manufacturers strove to improve volumes
through price reductions against a background of excess
manufacturing capacity for all categories of commodity cables
resulting in intense margin pressure. In the second half of the
year, the further deterioration of the European cables market,
notably in Italy and Germany, exacerbated the highly
competitive nature of the UK market. In our energy cables
businesses, cost reductions achieved through ongoing
rationalisation and continuous improvement programmes
partly offset the price falls.
Our utility cables operation increased its order intake and
sales of super tension cables during the year with deliveries to
the home market, Middle East and Asia Pacific. In the UK,
demand from the Regional Electricity Companies for medium
voltage cables was steady, but the pricing environment was
highly competitive. There was evidence of increased
competition and aggressive pricing in the second half of the
year. Contract duration for this category of cable is typically
two or three years and therefore, in the medium-term, the
outlook for margins in this area remains poor.
Sales volumes of building wires improved both in the UK
and export markets. However, trading conditions continued
to be competitive and import penetration remained at similar
levels.
During this difficult period of adverse trading conditions,
the motivation of the management team and the loyalty of the
employees have been maintained.
The Materials businesses were most affected in the
Group by the adverse transactional effect of the strength of
Sterling. Both pressure on export margins and increased
competition in the UK from imports resulted in reduced
profitability. In addition during the second half of the year the
Materials
Cables
14
Cables and MaterialsRichard Watts, Managing Director,
Cables (right) and Martin Dale reviewing
a supertension cable product.
98_Delta_RA_p14_15 29/4/98 4:17 pm Page 14
15
sharp fall in the copper price caused a transient margin
squeeze in the final quarter.
Delta Extruded Metal maintained volumes, but at much
reduced margins and has recently initiated a radical programme
to reduce complexity and fixed costs to restore profitability.
Delta Manganese Bronze was less affected because of the
specialist nature of the materials it supplies for demanding
applications where there is less scope for substitution.
Cables Materials which manufactures copper rod, wire
and aluminium conductor for supply both within the group
and externally, experienced difficult trading during the year
resulting from both currency and the competitive pressures in
the European cables market.
The Component operations managed to maintain
reasonable performances, despite the difficult conditions, by
further reduction of costs through productivity gains. More
recently there has been an additional drive to reduce
complexity costs and examine again the fixed cost structure
of these businesses.
In February 1998, we
announced the signing of an asset sale and exchange
agreement with BICC. As the first part of this transaction,
Delta received in the region of £18 million for its rod and
winding wire operations. These businesses, which are based at
Brimsdown, will be transferred to BICC’s existing rod mill
and the Brimsdown site will be closed. Under the terms of the
transaction, Delta will retain the major freehold site at
Brimsdown which will be sold for development, subject to
planning permission.
At the same time, Delta announced an asset exchange
agreement involving the transfer to BICC of Delta’s utility
cables business and accessories, based at Brimsdown and
Swansea, and Delta’s rubber cables business which is located
at Derby. In return, BICC will transfer its building wires
operation, based at Wrexham, to Delta. On completion of
this transaction, which has been submitted to the Office of
Fair Trading (OFT) for approval by the Secretary of State for
Trade and Industry, Delta will have ended its involvement in
Asset sale and exchange agreement
the commodity cable businesses of utility cables and
accessories and rubber cables. The Group will then have only
one remaining commodity cable product category, building
wires, based on two manufacturing sites. Concentrating its
cable ownership in this way will allow management to focus
on extracting cost savings and efficiencies as a result of the
increased scale. This will enable Delta to compete effectively
with foreign imports in the UK market.
This transaction will lead to approximately six hundred
redundancies in our Cables and Materials businesses. Whilst
this is regretted, the current state of the European cables
market meant that this course of action was inevitable.
Michel Van der Kindere, Managing
Director, Materials (left) and Ken Benson
discussing a product which Delta
Manganese Bronze supplies to British
Airways Engineering for use in Boeing
777 landing gear.
Concentration on building wires will allow management tofocus on cost savings and efficiencies
98_Delta_RA_p14_15 29/4/98 4:17 pm Page 15
The conclusions of the detailed evaluation of the Group and
its businesses were announced in September. The management
has identified four long-term growth businesses of Electrical
Protection, Galvanizing, Electrolytic Manganese and Plumbing
Products. We have undertaken detailed analysis of these
businesses, their products, customers and our competences in
those marketplaces.
Within the context of the identified long-term growth
businesses, management focus on business development will be
on three areas. First, investment in product and market
development to maintain and improve the rate of organic
growth in those businesses. Second, accelerating acquisitions
and investments in new facilities will be made which may not
be individually large, but by being focused on the long term
growth businesses will cumulatively increase the rate of
growth achieved by organic means. Finally, more significant
acquisitions will be sought to drive forward the long-term
growth businesses.
In addition to ensuring that acquisitions and investments
have a good fit with our growth objectives, they will also be
judged on achieving wider geographic cover and closer market
proximity.
The strong returns achieved by our performance businesses
make a significant contribution to the Group, particularly in
terms of cash flow, and will be protected by appropriate
investment.
The remaining operations in the Group have been included
in programmes of operational improvement and divestment so
we can generate more resources for investment in the long-
term growth businesses.
The recently announced purchase of AMCL doubles the
market share of EMD, one of our identified long-term growth
businesses. EMD’s world market share has been increased to
20% and the acquisition of AMCL has established Delta as
the leader in this important market for highly specified battery
materials. At the same time the agreement reached with BICC
allows us to exit several commodity cables: utilities and their
accessories, rubber, winding wires and rod. This has
significantly reduced our exposure to commodity cables and,
to a lesser extent, our exposure to copper price fluctuations.
There is much yet to be achieved, but the reshaping of
Delta has begun.
Jon Scott-Maxwell, Chief Executive
16
Business development
ElectricalProtection
Galvanizing ElectrolyticManganese
PlumbingProducts
Building Infrastructure Consumer Building
ProductTechnology
EngineeringService
GlobalSupplier
Marketing & Distribution
Market Market No. 1Worldwide
ProductRange
Focus
Competence
Growth
98_Delta_RA_p16_17 29/4/98 4:29 pm Page 16
People development
17
During the year Delta underlined its commitment to people
development with the appointment of a Group Director of
Human Resources and the introduction of a new People
Development Strategy to support the Group’s future business
goals and ambitions.
In order to achieve its business objectives, Delta needs to
be able to recruit and retain employees of the highest calibre
throughout its businesses. Delta has always encouraged the
development of internal talent and many Group companies
have in place successful initiatives to achieve this. These
include, for instance, Investors in People (IIP) and ISO 9000
accreditation, both of which require consistent and
professional approaches to many aspects of managing and
developing people. In addition, all divisions have been active
in moving key managers into new positions as organisations
have developed and changed to meet changing market
conditions. The new People Development Strategy builds on
this progress and brings together key aspects of people and
organisation development.
In approving the People Development Strategy, the
Management Board has undertaken to place greater emphasis
on our people development by focusing attention on three key
areas at Divisional and Group level:
– First, to establish an effective and balanced internal and
external resourcing process by which we fill key positions
in the Group. This means identifying internal talent and
where appropriate and practical, promoting from within.
– Second, to be more effective in developing our people
through the introduction of performance appraisal
systems and succession planning. This will ensure that we
understand the strengths of our people and how their
potential can be developed to meet the needs of the
changing organisation.
– Third, in the area of reward we will develop flexible
reward systems that both encourage performance and
focus managers and employees on achieving key business
targets.
Supporting these initiatives will be a greater emphasis on
improving internal communications throughout the Group.
Ensuring all employees share an understanding of Delta’s
business objectives will lead to improved motivation and
commitment at all levels.
In conclusion, we have taken important steps in
recognising the need to link the development of our people to
our business planning. This will ensure that our human
resource efforts going forward are relevant and add value to
the businesses which are facing significant and challenging
business opportunities.
Mike Amos (2nd from right),
Group Director of Human Resources
at a monthly HR meeting with:
(left to right) Peter Goodliffe,
Mike Redston, Noel Gallagher and
Jackie Patel.
98_Delta_RA_p16_17 29/4/98 4:29 pm Page 17
Trading conditions during the year were dominated by thestrength of sterling. This affected the Group in two ways. Therewas a transaction effect, as our UK exporting operations sawtheir competitive position damaged in home and world marketsand they had to choose between reduced volumes or reducedmargins. There was also a translation effect, as we saw thesterling value of the profits of overseas operations reduced. Weestimate that the combined impact on the Group’s reportedprofit was a reduction of about £121/2 million, of which about£7 million was attributable to the transaction effect, and £51/2 million due to translation. However, our policy of hedgingour share of assets in material subsidiaries meant that the effectof the strength of sterling on the balance sheet was limited to areduction in net assets of £1.8 million.
We have begun the reshaping of the Group, and have seenincreased acquisition and disposal activity, particularly sincethe year-end. During 1997 we acquired Innovative Technologyin the USA (power protection, cost £6.0 million), Elek inGermany (circuit protection, cost, including debt acquired,£4.1 million) and National Vulcan Safety Products in the UK(plumbing products, cost £4.6 million). We disposed of KWB Kenmac and Westray during the year. The net effect ofthese was sale proceeds of £5.7 million and a £5.3 millioncharge to profit and loss account, which included £4.2 millionof goodwill previously written off to reserves. We havedisposed of KWB Controls subsequent to the year-end.
In February 1998, we announced a two-part disposal andasset exchange agreement with BICC. In the first part we soldour copper rod and enamelled wires businesses for £17.8 million. The second part which is conditional onapproval by the Secretary of State for Trade & Industry, willbe an exchange of assets, under which we will dispose of ourutility cables, utility accessories and rubber cables businessesto BICC in exchange for BICC’s building wires operation andcash in the order of £5 million (representing the difference inthe value of stock in the two businesses). The cash effect ofthese transactions, including the subsequent sale of vacatedfreehold properties will be to generate anticipated gross cashproceeds of £35 million. After rationalisation spend, costsand working capital requirements this will be a net cashinflow of £26 million. With a reduction in commodity cablesassets of £38 million, this will give a loss on disposal of £12 million which, together with goodwill previously writtenoff to reserves, gives an overall charge of £21 million to theprofit and loss account.
At the same time we announced that we would writedown the carrying values of the assets in the remainingcommodity cables and materials businesses to theiranticipated realisable values. To cover the loss on disposalfrom the BICC transactions and this further write down, wehave charged the 1997 accounts with a provision of £49 million, plus previously written off goodwill of £27 million. That is comprised as follows:
Financial review
18
98_Delta_RA_p18_20 #01 29/4/98 4:16 pm Page 18
19
Loss on Previouslydisposal and written off Total profit
£ million write down goodwill and loss
Unspent provision (2) – (2)BICC transactions 12 9 21Provision for diminution in value 39 18 57Total 49 27 76
Also since the end of the year, we have announced twostrategic acquisitions. In the first we increased ourshareholding in Acrotec (now renamed Sourdillon de Mexico)from 25% to 66% at a cost of approximately £4.1 million tostrengthen our gas controls business. In the second we movedto a control position in Delta Electrical Industries (DEI) byincreasing our shareholding from 47.5% to 50.1% at a costof £5.8 million. Both companies will then be accounted for assubsidiaries rather than associates. We subsequently took upour share of a rights issue by DEI to fund the acquisition ofthe business of Australian Manganese Company Pty Limitedfrom BHP group at a cost of £2.7 million. This transactiondoubled Delta EMD’s market share to 20% in this worldwidemarket.
We have adopted a five column presentation for theGroup profit and loss account to distinguish between theGroup’s trading, including the currency effects outlinedabove, and the effect of the cables sales and the otherexceptional asset write downs.
DividendsThe directors have recommended a final dividend of 11.5p
per share, paid as a Foreign Income Dividend (FID). Thechanges to the treatment of ACT credits in the hands of non-taxpaying shareholders announced in the 1997 Finance Actmean that we have decided that it is no longer appropriate toenhance the FID as we have done for the final dividends for1995 and 1996. We also paid the 1997 interim dividend as anunenhanced FID. These measures have allowed us to write back £2.9 million of ACT written off in previous years.
The dividend is covered 1.6 times by profit beforeexceptional items.
We will once again be paying the dividend on 1 July.
Cash flows Operating profit was £66.3 million, which included
£15.4 million share of profits of associates and profits of £1.4 million from sales of fixed assets and was after chargingdepreciation of £29.3 million. Dividends received fromassociates amounted to £3.8 million. An increase in workingcapital absorbed £2.3 million and other items generated £7.4 million.
The net cash inflow from operating activities was £92.3 million.
Interest paid amounted to £13.2 million and interestreceived £5.5 million. Ordinary shareholders were paid £28.3 million in dividends and minority shareholders insubsidiaries £0.8 million. Total tax paid was £13.5 million, of
which £3.2 million was paid in the UK and £10.3 millionoverseas.
Capital expenditure amounted to £40.5 million,significantly higher than in 1996 (£27.8 million). Sales offixed assets generated £4.3 million of cash. Sales of businessesgenerated £7.3 million (after deduction of £1.8 million ofcash disposed of with the businesses). £10.2 million was usedfor the purchase of businesses (after deduction of £0.4 millioncash acquired with the new businesses). We also invested £0.5 million in associated companies, lent £1.7 million toassociated companies and used £1.5 million to purchase ourown shares for our ESOT.
This gave an increase in net debt resulting from cash flowsof £0.8 million. Together with acquired debt of £3.8 millionand a translation increase of £1.2 million this led to anincrease in net borrowings of £5.8 million.
Borrowings and borrowing facilitiesNet borrowings increased from £73.2 million to £79.0
million. This was the net of a £55.8 million decrease in grossborrowings (including overdrafts and acceptances) from£158.4 million to £102.6 million and a £61.6 milliondecrease in cash balances and short-term deposits, from £85.2 million to £23.6 million. Net gearing increased to 27%(1996 22%), due more to the fall in shareholders’ funds fromthe £49 million exceptional charge referred to above than tothe increase in net borrowings.
The Group’s net interest charge fell to £7.2 million (1996£9.9 million). It was covered nine times by the profit on pre-exceptional ordinary activities before interest (1996 six times).
Committed borrowing facilities at the end of the yearamounted to £170 million, of which £165 million matures inJuly 2000. We have subsequently cancelled the other £5 million. £100 million of FID preference shares, issued byDelta Group International Holdings Limited in June 1996,were redeemed in June 1997.
At the end of the year 68% of the Group’s year end grossborrowings are either due in two years or more or supportedby facilities with a maturity date at least two years hence(1996 92%). In addition we had surplus committed facilitiesof £140 million and cash of £23.6 million.
Further details of the borrowing structure are given innote 19 to the accounts. The analysis of the Group’s netborrowings and net interest by country is set out below:
1997 1996 1997 1996Closing net Closing net Net interest Net interest
(borrowings) (borrowings) (payable) (payable)cash cash receivable receivable
Country* £ million £ million £ million £ million
UK (107.8) (119.6) (8.9) (10.4)Other Europe 29.7 43.4 1.7 0.4North America 2.9 1.2 – 0.1Asia-Pacific (4.4) – (0.3) (0.2)Other 0.6 1.8 0.3 0.2Total (79.0) (73.2) (7.2) (9.9)
*Country of borrowing or depositing entity.
98_Delta_RA_p18_20 #01 29/4/98 4:16 pm Page 19
Treasury policiesThe underlying philosophy of the Group’s treasury
policies remains one of risk management and control, and nospeculative transactions are undertaken. Group Treasury doesnot operate as a profit centre.
Currency exposures arising from trading transactions aremostly covered as they arise (typically on the placing of a firmorder), with forecast exposures covered forward to only avery limited extent, and no material exposures left uncoveredonce they have been identified.
For most currencies, translation exposures are hedged intosterling on at least a monthly basis, thus fixing the sterlingvalue of the profits of overseas companies as they arise.However, we do not hedge profits in anticipation, and so seea reduction in the sterling value of overseas profits as sterlingstrengthens.
The balance between fixed and floating interest rates ineach currency where we have material net borrowings ismonitored regularly by the Board and adjusted in line withtheir recommendations.
It remains the Group’s policy to maintain and developstrong relationships with a range of banks reflecting itsworldwide operations and to maintain a range of committedand uncommitted borrowing facilities to meet its financingneeds.
Effect of interest and exchange ratesMost of the Group’s underlying net borrowings are in
sterling, with the principal exception being the US PrivatePlacement. Some of the hedging is achieved by means of localborrowings in overseas operating companies and forwardforeign exchange deals in overseas finance companies, but themajority of it is achieved by a mixture of forward foreignexchange deals and ISDA-documented cross-currency swapsexecuted by Group Treasury. At the year-end the gross value offorward foreign exchange deals used in translation hedging was£123.6 million, and the gross value of cross-currency swapswas £30.5 million. The analysis of the Group’s net assets bycurrency at the year-end is shown in the following table.
Netfinancial
liabilities NetNet Effect of after operating 1997
borrowings hedging hedging assets Net assetsCurrency £ million £ million £ million £ million £ million
Sterling (36.4) 82.3 45.9 206.1 252.0Euro-bloc 5.8 (48.8) (43.0) 40.7 (2.3)US dollars (43.2) 20.9 (22.3) 19.2 (3.1)Australia 5.5 (42.0) (36.5) 35.9 (0.6)Other Asia-Pacific (9.5) (10.8) (20.3) 22.4 2.1South Africa 0.5 (0.5) – 40.5 40.5Other (1.7) (1.1) (2.8) 8.3 5.5Total (79.0) – (79.0) 373.1 294.1Euro-bloc comprises the eleven currencies likely to enter EMU in the first phase.
The effect of the hedging is to give net interest-bearingliabilities in the hedged currencies. Combined with the overall low level of gearing this gives net interest-bearingassets in sterling.
The effect of the translation of unhedged net assets onreserves was a charge of £1.8 million (1996 £12.5 million),primarily related to unhedged assets in Africa. The effect ismuch lower in 1997 than in 1996 due to the comparativestability of the South African rand against sterling. Sincetaking control of DEI we have hedged our share of DEI’s netassets, which will reduce our future exposure to the SouthAfrican rand.
Group Treasury carries out the Group’s interest rate riskmanagement, using interest rate swaps and forward rateagreements. The gross principal value of interest rate swapsoutstanding at the year-end was £171.1 million. The analysisof the Group’s interest rate fixing profile at the year-end isshown in the table below:
Net financial liabilities Rate reset Rate reset
after within Rate reset Rate reset afterhedging 1 year 1-3 years 3-4 years 5 years
Currency £ million £ million £ million £ million £ million
Sterling 45.9 45.9 – – –Euro-bloc (43.0) (17.0) (2.5) (23.5) –US dollars (22.3) (7.1) – – (15.2)Australia (36.5) (10.8) (5.9) (19.8) –Other Asia-Pacific (20.3) (18.1) (2.2) – –South Africa – – – – –Other (2.8) (2.8) – – –Total (79.0) (9.9) (10.6) (43.3) (15.2)
The weighted average maturities and average interest ratesof fixed rate borrowings are shown in the table below:
Average WeightedNet financial interest average
liabilities rate of maturity ofafter Floating Fixed fixed rate fixed rate
hedging rate rate borrowings borrowingsCurrency £ million £ million £ million % Years
Sterling 45.9 45.9 – – –Euro-bloc (43.0) (11.6) (31.4) 6.8 1.7US dollars (22.3) (7.1) (15.2) 7.9 6.1Australia (36.5) (4.8) (31.7) 7.5 1.9Other Asia-Pacific (20.3) (18.1) (2.2) 7.3 1.3South Africa – – – – –Other (2.8) (2.8) – – –Total (79.0) 1.5 (80.5) 7.0 2.2
Fixed rate includes all borrowings whose rate was originally fixed for more than sixmonths or subject to an FRA.
M Gill, Finance director
20
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?@ ??????
98_Delta_RA_p18_20 #01 29/4/98 4:16 pm Page 20
The directors at the date of this report and their responsibilities and other directorships are:
Responsibilities Other directorships
Sir Martin Jacomb*† Chairman (non-executive) Prudential Corporation plc
Marks & Spencer plc
Rio Tinto plc
J P Scott-Maxwell Chief executive —
M Gill Finance director —
P M Smits Corporate development director —
Sir Philip Beck*† Non-executive Railtrack Group plc
Siebe plc
Yorkshire Electricity plc
Sir Brian Moffat O.B.E.*† Non-executive British Steel plc
Enterprise Oil plc
J H Robinson*† Non-executive Smith & Nephew plc
Low & Bonar PLC
RJB Mining plc
* Member of Appointments and Remuneration Committee [Chairman Sir Philip Beck] All directors are full-time executives, unless otherwise indicated.
† Member of Audit Committee [Chairman J H Robinson] Directorships of other Group and associated companies are excluded.
Board changes
P M Smits was appointed to the Board on 16 September 1997. Sir Brian Moffat retires from the Board at the conclusion of the AGM.
Election of directors
The director retiring by rotation is M Gill who, being eligible, offers himself for re-election. M Gill has been finance director of
the Company since 1991 and is aged 49. The unexpired period of the service contract of M Gill is 2 years.
P M Smits, having been appointed since the last annual general meeting, will also retire and being eligible, offer himself for election.
P M Smits has considerable experience in international mergers and acquisitions, has held several senior management positions in
the Group’s international operations and is aged 54.
P M Smits has been seconded to the Company from Delta America, Inc. The unexpired period of secondment under the
secondment agreement between the Company and Delta America, Inc. is between two and three years. The length of the contract
reflects the terms of reference of his appointment.
Further details of the contracts relating to P M Smits and J P Scott-Maxwell can be found on page 25.
Non-executive directors
Sir Martin Jacomb. Appointed non-executive deputy chairman of Delta in 1993 and became non-executive chairman in 1994. He
is chairman of the Prudential Corporation plc and the British Council and is aged 68.
Sir Philip Beck. Appointed a non-executive director in 1994. He is non-executive chairman of Siebe plc and a director of Railtrack
Group plc and Yorkshire Electricity plc and is aged 63.
Sir Brian Moffat O.B.E. Appointed a non-executive director in 1994. He is chairman and chief executive of British Steel plc and a
director of Enterprise Oil plc and is aged 59.
John Robinson. Appointed a non-executive director in 1993. He is non-executive chairman of Smith & Nephew plc, Low & Bonar
PLC and RJB Mining plc and is aged 57.
Management Board
During the year, as part of the strategic review of the operations of the Company undertaken by the Board, the Group Board was
reconstituted as a Management Board, being a management committee of the Board. This committee is made up of the executive
directors of the Board and certain other senior executives.
21
Board of directors of Delta plc
98_Delta_RA_p21 20/7/98 11:32 am Page 21
The directors of Delta plc submit their report together with the audited financial statements for the year ended 3 January 1998.
Business review and future developmentsThe Chairman’s report to shareholders on pages 4 and 5, the Chief Executive’s review of the year on pages 6 to 16, people
development on page 17, the financial review on pages 18 to 20 and the Board of directors of Delta plc on page 21, form part of
the directors’ report. Information about Group businesses, financial performance and likely future developments are to be found
in those sections.
Dividends and transfer to reservesThe directors declared a foreign income interim dividend of 4.5p (1996 conventional interim dividend 4.5p) per ordinary share which
was paid on 1 December 1997. They now recommend a final dividend in the form of a Foreign Income Dividend (FID) of 11.5p per
ordinary share (1996 enhanced FID 14.4p) making a total for the year of 16.0p (1996 18.9p). Dividends paid and proposed for the
year amount to £24.1 million (1996 £28.4 million). Requiring £68.0 millon to be transferred from reserves (1996 £5.6 million).
Acquisitions and disposalsDuring the year the Group acquired the businesses of National Vulcan Safety Products Ltd in the UK, Elek GmbH in Germany
and Innovative Technology in the USA. The total consideration for these businesses was £10.7 million. The Group disposed of the
businesses of KWB Kenmac Ltd (to members of KWB Kenmac’s management team) for £6.3 million and Westray Engineering Pty
Ltd for £0.5 million.
In February 1998 the Group signed a two part disposal and asset exchange deal with BICC plc. Under the first part of the
transaction the Group sold its rod and winding wire businesses to BICC at a small premium to net asset value. The results of these
operations have therefore been treated as discontinued activities in the financial statements. The second transaction will comprise
of an exchange of operations and assets whereby the Group will transfer its utility cables, utility accessories and rubber cables
businesses to BICC, who will transfer its building wires operations to Delta. Final completion of this phase depends upon approval
from the Secretary of State for Trade and Industry. A provision of £49.0 million has been made in the accounts to cover the loss
on disposal resulting from this transaction and the write down the carrying values of the assets in the remaining commodity cable
and materials businesses to their likely realisable values. In addition £27.3 million of goodwill previously written off to reserves in
respect of these businesses, has been charged to the profit and loss account.
Post balance sheet eventsIn January 1998 the Group increased its shareholdings in the following associates: Acrotec S.A. de C.V. from 25% to 66% and
Delta Electrical Industries Ltd (DEI) from 47.5% to 50.1%. From those dates these companies will be accounted for as subsidiaries
rather than associates. At the same time DEI acquired the business of Australian Manganese Company Pty Ltd from the Broken
Hill Proprietary Company Ltd. Details of these transactions are given in note 29 to the accounts.
Property values(i) As part of the continuing process of professional valuations, the freehold and leasehold properties of certain companies were
revalued during the year and the revised values included in the Group balance sheet.
(ii) In the opinion of the directors, there was no significant difference between the market value and the book value of property at
3 January 1998.
Charitable donationsDuring the year the Group donated £57,949 to charities of which £36,435 was in the United Kingdom.
Employment policies(i) Equal opportunity in employment
It is the Group’s policy to treat employees equally and fairly without unlawful or unfair discrimination on the grounds of colour,
race, nationality, ethnic or national origin, sex, marital status or disability. Wherever possible the employment and retention of
disabled people is supported, commensurate with their capabilities. To this end, equal opportunity in employment is promoted and
guidance given to companies in achieving this objective.
(ii) Training and development
In an international and diverse group of Delta’s standing there is a clear recognition that an effective Human Resources strategy
is essential for sustained business success.
In late 1997 the Management Board approved a People Development Strategy, the objective of which is to ensure that the
Group has the human resources necessary to meet its business goals. The key elements of this strategy relate to improving how
Delta develops and trains its employees at all levels, improving its internal and external resourcing methods and ensuring that
reward systems fairly reflect the responsibilities and performance of employees.
22
Directors’ reportIncluding the report of the Appointments and Remuneration Committee for the year ended 3 January 1998
98_Delta_RA_p22_28 20/7/98 11:31 am Page 22
(iii) Communication and involvement
In support of this, greater emphasis is being placed on two way communication with managers and employees throughout the
Group at all levels. It recognises that a better informed, knowledgeable workforce will be more productive and committed to
achieving Delta’s business goals.
(iv) Health and safety at work
The Group has a comprehensive policy statement in order to safeguard the health, safety and welfare of all employees whilst at
work and to provide, so far as is reasonably practicable, a working environment which is safe and with minimum risk to the health
of employees and others.
Environmental policyThe Group is committed to best environmental practice and has clear management responsibilities to ensure full compliance. The
Group’s overall policy forms the basis of further detailed policies that are appropriate to the individual operating businesses.
It is Group policy to manage its activities so as to give benefit to society; this entails ensuring they are acceptable to the
community and that any adverse effects on the environment are reduced to a practicable minimum.
It is also Group policy to:
– Encourage and promote the interchange of environmental information and technology among its companies.
– Provide information to enable Group processes, when used under licence, to be operated without unacceptable effects on
the environment.
– Encourage its companies to establish and implement for themselves environmental policies and environmental management
systems.
The managing director of each business area is responsible to the Chief Executive (who is in turn responsible to the Delta plc
Board) for ensuring adherence to the above Group policy and for an organisational structure within his business area to ensure
adherence. Overall policy is co-ordinated by the Company Secretary.
The Group requires the following objectives and targets at all operating companies. This, of course, is not an exhaustive list,
but they are corporate objectives and targets which have been given a high priority by the Group.
The implementation of these objectives must be at local level, but any change of policy or corporate implementation will be
from the Company Secretary.
The objectives are:
– To promote an environmental awareness in all employees and thereby develop a well motivated and environmentally
proactive workforce.
– To eliminate the use of ozone depleting substances (ODS).
– To set targets for reduction of electricity, gas, oil and water consumption.
– To encourage waste management programmes which encourage recycling and provide environmental incentives to
employees.
– The environmental probity of suppliers and sub-contractors will be investigated.
– To ensure compliance with all environmental legislation.
– To reduce and prevent emissions to air, discharges to water and deposits to land.
The targets for reaching each of the above objectives will be set by each operating company within the Group. Each of the
targets will be audited within the Group Environmental Audit.
The Group has appointed external consultants to initiate an environmental review covering its sites worldwide.
Remuneration policyThe remuneration arrangements for executive directors and senior executives are recommended by the Appointments and
Remuneration Committee to the Board. The key objectives of the remuneration policy are to attract and retain high calibre
executives and to ensure that executives are appropriately rewarded and motivated to enhance the performance of the Group in
the interests of shareholders.
The remuneration package for each executive director, which is determined by reference to the scope of responsibility and the
sustained level of individual performance, consists of basic salary and benefits, pension contributions and participation in the
Company’s Long Term Incentive Plan (‘LTIP’). Full details of the LTIP are given below in the report of the Appointments and
Remuneration Committee. In addition, certain executive directors and senior executives retain options granted under the terms of
the Company’s Inland Revenue approved Senior Executive Share Option Scheme, which they will be able to exercise in accordance
with the Rules of that Scheme. No options have been granted under the Scheme since 1994, when it was replaced by the LTIP.
23
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Full details of options held by directors under the LTIP and the Senior Executive Share Option Scheme and details of directors’
emoluments in respect of the year ended 3 January 1998 are shown on pages 25 and 26 and details of directors’ shareholdings are
shown in note 23 on the accounts.
Substantial shareholdersAs at 24 March 1998, the date of this report, the Company has been notified, pursuant to the Companies Act 1985, of thefollowing interests in its issued ordinary share capital:
Prudential Corporation group of companies 11.04%Hermes Investment Management Limited 6.53%Sprucegrove Investment Management Limited 4.79%Sun Life and Provincial Holdings PLC 3.88%Britannic Assurance PLC 3.14%B.A.T. Industries plc group of companies 3.09%Electricity Supply Pension Scheme 3.09%
Research and developmentExcluding significant development expenditure associated with production processes, product improvement and tooling, theGroup spent £1.9 million on R & D as defined by SSAP 13.
Payment of creditorsThe Group’s policy in respect of the majority of its trade creditors, is to negotiate terms and conditions with our suppliers andprovided that suppliers comply with these, payments are made in accordance with the agreed terms and conditions. Wherepayment terms are not specifically agreed, suppliers are paid in accordance with local commercial practice.
Trade creditor days of the Company for the year ended 3 January 1998 were 25 days, based upon the average daily amountinvoiced by suppliers during the year ended 3 January 1998.
Control of raw materialsSome of the Group’s units are substantial users of copper and zinc. Group policy is one of no speculation and relevant units arecontrolled by the use of centrally directed, obligatory long positions, to which they must adhere.
Insurance of directorsThe Company maintains insurance for its directors and officers against liabilities as permitted by the Companies Act 1985.
Power to purchase own sharesThe directors believe that it remains advantageous for the Company to be able to purchase its own ordinary shares in the market.Accordingly, resolution 5, which will be proposed as a special resolution at the annual general meeting, seeks renewal of the generalauthority conferred on the Company in 1990 to make such market purchases. The details of the minimum and maximum price atwhich such shares would be purchased are contained in the resolution.
The Company has not purchased any of its own shares since the power was first conferred. The directors have no presentintention of utilising this authority and will only make such purchases if they believe earnings per share would be improved.
Power to dispense with statutory pre-emption rightsResolution 6, which will be proposed at the annual general meeting as a special resolution, seeks renewal of the directors’ authorityto disregard statutory pre-emption rights when allotting shares in respect of any rights issue or under an employees’ share schemeand in respect of allotments of equity securities for cash, up to a nominal amount of £1,873,647.39 (which represents 5 per cent.of the Company’s issued ordinary share capital as at the date of this report). Under the resolution, this renewed authority wouldend either fifteen months after the resolution is passed or at the end of the annual general meeting in 1999, whichever is the earlier.In exercising this authority the directors will comply with the guidelines of the Investment Committees of the Association of BritishInsurers and the National Association of Pension Funds on pre-emption rights.
Report of the Appointments & Remuneration CommitteeThe Appointments & Remuneration Committee’s composition, responsibilities and operation comply with the provisions insection A of the Annex to the Listing Rules of the London Stock Exchange Limited. In implementing its policy, the Committee hasgiven full consideration to the provisions of section B of the Annex to the Listing Rules.
The Committee consists of the non-executive directors and is chaired by Sir Philip Beck. In making recommendations to theBoard on the remuneration arrangements for executive directors and senior executives the Committee uses information from
24
98_Delta_RA_p22_28 20/7/98 11:31 am Page 24
independent sources on the rates of salary for similar jobs in a selected group of comparable companies and specific surveys whichit commissions, whilst at all times exercising caution in its use of such information by having in particular due regard to theperformance and the nature of the trading activities of such companies.
(i) Service contracts
J P Scott-Maxwell’s service contract with the Company is for a three year period which commenced on 16 November 1996. Afterthis period and up to the date of the fifth anniversary of his appointment, the contract may be terminated by either the Companyor J P Scott-Maxwell giving to the other not less than 24 months’ written notice. After the fifth anniversary of his appointmentthis notice period will be reduced to not less than 12 months’ written notice on either side.
P M Smits has been seconded to the Delta plc board from Delta America, Inc. where he was managing director. Thesecondment agreement is for an initial period ending on 24 August 1999; after that date the secondment may be terminated byeither the Company or Delta America, Inc. giving to the other not less than 12 months’ written notice.
In recommending the contract periods of both J P Scott-Maxwell and P M Smits, the Committee’s overriding concern was toensure that continuity at the most senior executive level was assured. Accordingly, the Committee agreed that it would be desirableto maintain the contractual 24 months’ notice period contained in the service agreements of other executive directors and certainother senior executives in the Group at present.
The Committee will continue to review the appropriateness of contractual notice periods for executive directors and the mostsenior executives in the light of the Company’s future development.
(ii) Pensions and remuneration
Delta’s pension policy is to offer most of its senior executives membership of the Delta Pension Plan or the local equivalent if basedoutside the UK. Executive directors participate in the Plan within a special category for senior executives. The Plan is a funded,Inland Revenue approved, final salary, occupational pension scheme. It provides a pension of up to two thirds of final pensionablesalary, subject to the completion of 20 years’ pensionable service up to normal retirement age. The Plan also provides lump sumlife assurance cover of up to four times pensionable salary and makes provision for spouses’ and dependants’ pensions and earlyretirement provisions, including ill-health. The Company bears the cost of a separate policy to cover such benefits for P M Smits.
All Plan benefits are subject to Inland Revenue limits. Where a limit is imposed by the earnings ‘cap’, a funded unapprovedretirement benefit scheme may be used to increase pension and death benefits and this is applicable currently to one executivedirector. This is operated on a defined contribution basis with the contributions being based upon an agreed percentage rate of thedirector’s salary.
Full details of the directors’ remuneration and pension entitlements are as follows:Directors’ remuneration Pension entitlements
1997 1996Company Additional
Basic salary Value of approved pension Age at(inclusive of benefits pension earned in Accrued end of
directors fees) in kind Bonus contributions Total Total the year entitlement year£ £ £ £ £ £ £ £
Sir Martin Jacomb (chairman) 60,000 — — — 60,000 62,611 — — 68J P Scott-Maxwell Ø 253,750 63,224 8,333 9,653 334,960 25,715 1,442 1,556 46R A Easton # — — — — — 484,441 — — 49M Gill 148,000 11,414 7,400 17,242 184,056 199,378 6,684 53,818 49P M Smits † 55,061 28,995 2,753 — 86,809 — 506 103,488 54Sir Philip Beck 20,000 — — — 20,000 19,167 — — 63Sir Brian Moffat 20,000 — — — 20,000 19,167 — — 58J H Robinson ¥ 21,113 — — — 21,113 19,167 — — 57
Total 577,924 103,633 18,486 26,895 726,938 829,646 8,632 158,862
1997 1996Aggregate totals £ £
Salaries and benefits 726,938 829,646Gains made on exercise of share options 18,420 —
Amounts paid to or receivable under the LTIP 8,333 19,653
25
1 Retirement benefits on a defined benefit basis are accruing to three directors (1996three directors).
2 The accrued pension entitlement shown is the amount that would be paid in eachyear on retirement, based on pensionable service to the end of the financial year.
3 The normal retirement age for J P Scott-Maxwell and P M Smits is 60. For M Gillthe normal retirement age is 621/2 with an option to retire at 60. The pensionentitlement of M Gill, has been accrued on the basis that he will retire at 60.
4 Spouses pension is the greater of 50% of prospective pension or one third of finalpensionable salary. An orphan’s pension is applicable where there is no spouse andadditionally the Trustees have discretionary powers to consider other dependants.
5 Members of the Plan have the option of paying Additional Voluntary Contributionsalthough none were paid during the year.
6 It has been agreed to provide a pension to P M Smits equivalent to the pension thathe would have received had he been a member of the Plan. Pension contributionspayable by P M Smits from his date of appointment to the end of the year were£2,180.
7 Following retirement, pensions increase at an annual rate in line with RPI up to 5%.M Gill and P M Smits pensions increase at an annual rate fixed at 5%, subject toInland Revenue limits.
8 The contributions payable by the directors under the plan during the year were: M Gill £5,920; J P Scott-Maxwell £3,342.
Ø J P Scott-Maxwell became Chief Executive on 1 December 1996. Included in his total value of benefitsin kind is an amount of £50,205 which repesents additional amounts contributed during the yearunder a funded unapproved retirement benefit scheme. This represents the total Company pensioncontributions to money purchase schemes in the year.
# R A Easton retired as Chief Executive on 30 November 1996. He will be entitled to draw down hispension under the Plan from November 1998. During the year the Company paid a pension to R A Easton of £77,500.
† P M Smits emoluments include allowances paid in connection with his relocation from the USA to theUK and are intended to put him in a position, after taking into account taxation differentials, wherehe is no better or worse off as a result of his carrying out his duties in the UK. He was appointed tothe Board on 16 September 1997.
¥ Total sums paid to third parties for the services of directors were £21,113 paid in repect of J H Robinson and include the sum of £1,113 in respect of the National Insurance contributions to bepaid by such third party.
98_Delta_RA_p22_28 20/7/98 11:31 am Page 25
(iii)Directors’ share options
Details of the options held by executive directors are shown in the table below:
Number of shares reserved under options:
Subscription Market Realised Date on Date onAs at Granted Exercised As at price value profit which options which
Option 28 December during during 3 January payable at date of on become optionsName scheme 1996 year year 1998 (per share) exercise exercise exercisable lapse
J P Scott-Maxwell SAYE — 6,388 — 6,388 270p — — 01/01/03 30/06/03
Total — 6,388 — 6,388
M Gill Senior Executive 14,000 — — 14,000 388p or 330p* — — 16/11/95 16/11/02
or 16/11/97 16/11/02
2,800 — — 2,800 455p or 387p* — — 08/04/96 08/04/03
or 08/04/98 08/04/03
Long Term 5,410 — 5,410 — nominal 3401/2p £18,420 31/03/97 30/04/97
Incentive Plan 11,513 — — 11,513 nominal — — 04/04/98 04/05/98
— 6,172 — 6,172 0p — — 14/07/00 14/08/00
SAYE 6,703 — — 6,703 317p — — 01/02/00 31/07/00
— 7,222 — 7,222 270p — — 01/01/05 30/06/05
Total 40,426 13,394 5,410 48,410
P M Smits Overseas Senior 25,000 — — 25,000 393p — — 15/04/94 15/04/01
Executive 3,800 — — 3,800 388p or 330p* — — 16/11/95 16/11/02
or 16/11/97 16/11/02
10,000 — — 10,000 455p or 387p* — — 08/04/96 08/04/03
or 08/04/98 08/04/03
22,000 — — 22,000 523p — — 18/04/97 18/04/04
US Long Term 14,287 — (lapsed)14,287 — nominal — — 21/10/97 21/11/97
Incentive Plan + 19,720 — — 19,720 nominal — — 04/04/98 04/05/98
8,660 — — 8,660 0p — — 20/05/99 20/06/99
— 11,270 — 11,270 0p — — 14/07/00 14/08/00
Total 103,467 11,270 (lapsed)14,287 100,450
(i) J P Scott-Maxwell has participated in the LTIP with effect from 1 January 1997 and is likely to be granted rights to acquire shares in the Companypursuant to the rules of the LTIP in Spring 1998.
(ii) In the case of options exercisable at two different prices, marked *, which were granted pursuant to the rules of the Senior Executive Share OptionScheme 1991 and Overseas Senior Executive Share Option Scheme 1991, options may only be exercised at the lower price between the 5th and 10thanniversaries of their grant date and then only if growth in the Company’s earnings per share exceeds the retail price index by 2 per cent. per annumbetween the grant date and the proposed exercise date. When an option is exercised at whichever price, the opportunity to exercise it at the other priceautomatically lapses.
(iii) US LTIP options granted to P M Smits, marked +, have been granted as call options. During 1997, a call option became exercisable. As the share pricehad not increased between the grant date and the exercise date, P M Smits chose not to exercise his call option and the option was allowed to lapse.
(iv) The open market value of Delta plc 25p ordinary shares was 2631/2p per share (middle market closing value as quoted in the Daily Official List of theLondon Stock Exchange Limited) on 2 January 1998.
(v) Shares subject to rights granted in 1994, 1995 and 1996 under the LTIP were acquired by the Employee Share Ownership Trust (ESOT) at an averagecost of 533p, 491p and 350p per share respectively.
(iv)LTIP
The LTIP was introduced in 1993 and further developed in 1994 to replace the Company’s Senior Executive Share Option Scheme.
Only executive directors and the most senior executives in the Group participate in the LTIP. There have been no changes in the
rules of the LTIP over the last year and no changes to the Committee’s policy on the requirements for participation. No part of
any LTIP award is eligible for pension contributions.
The LTIP was designed to contribute to increasing shareholder returns and the motivation of senior management over the
longer term and it emphasises a strong link between reward and performance against agreed targets, specifically recognising the
return provided to shareholders and the long term performance of the Company.
Awards under the LTIP are calculated by reference to achievement against Group earnings per share or business area financial
performance against profit plan. The maximum annual award is 35% of salary in the year to which the award relates.
Awards are split into three equal parts; the first third is delivered to participants in cash; the second third is delivered in the
form of rights to acquire the Company’s ordinary shares (‘rights’) ; and the final third is delivered either in cash or in the form of
further rights, at the discretion of participants (‘the base LTIP award’). The number of shares covered by these rights is matched
26
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by the Company’s grant of rights to acquire further shares. In normal circumstances, these rights can be realised three years after
the base LTIP awards are approved. Once the base LTIP award has been made, the Committee has no discretion to increase or
decrease the number of shares comprised in each award.
The value of the Company’s matching grant will vary and will depend on the growth of the total return delivered by the Company
to its shareholders compared to the growth in the total return delivered to shareholders of FT-SE Mid-250 companies over the three
years. The maximum value of the Company match will be £3 for every £1 of LTIP base award delivered as rights, but this will only
accrue if the growth in total return delivered by the Company to shareholders exceeds the growth in the return to shareholders of FT-
SE Mid-250 companies by 3% per annum over the three year period. Smaller matching awards are made depending on performance,
if the return is less than this; the Company match will be £2 for every £1 of base LTIP award and £2.50 for every £1 of base LTIP
award delivered as rights if the total return exceeds the FT-SE Mid-250 average return by 1% and 2% respectively. The Company
match is £1.50 for every £1 of base LTIP award delivered as rights if the total return matches the FT-SE Mid-250 average return.
Corporate governanceThe Company has complied with the provisions of the Cadbury Committee’s ‘Code of Best Practice’ (‘the Code’) throughout the
year.
(i) Board of directors
The Board of directors comprises three executive and four non-executive directors. The Board meets regularly and is
responsible for the overall direction and strategy of the Group. It has a schedule of matters specifically reserved to it for decision
and has set up advisory committees on other specific matters. The roles of the chairman and chief executive are separate.
All directors have access to the advice and services of the company secretary and senior management, and the Board of directors
has established a procedure for all directors to take independent professional advice, if necessary, at the Company’s expense.
Through established procedures directors are at all times made fully aware of their responsibilities, duties and obligations.
The Board is made up of a majority of non-executive directors all of whom bring an independent judgement to the management
of the Group. They are free from any business or other relationships which could interfere with the exercise of their judgement.
The fees for non-executive directors’ duties are determined by the Board with regard, where appropriate, to market
comparisons, within the restrictions contained in the Company’s articles of association.
The non-executive directors have no service contracts and are not eligible for bonuses or to participate in the LTIP. In addition,
no pension contributions are made on their behalf.
(ii) Board committees
The Board has two principal committees:
• The Appointments and Remuneration Committee consists of all the non-executive directors and is chaired by Sir Philip Beck.
The objectives of the Committee are to advise and make recommendations to the Board on the terms of service and
remuneration of the members of the Board and all senior executives. The Committee normally meets three times a year.
Remuneration policy is determined by the Board.
• The Audit Committee consists of all the non-executive directors and is chaired by J H Robinson. It normally meets four times
a year to review the published financial information, the scope and nature of the external audit and the effectiveness of internal
financial controls. The meetings are also attended by the external auditors and for part of the meeting by the Group finance
director and other senior financial executives. The Audit Committee provides the external auditors with a direct line of
communication to the non-executive directors.
(iii)Internal financial control
The directors have overall responsibility for the Group’s system of internal financial control. Such system can provide only
reasonable and not absolute assurance against material financial misstatement or loss. The essential elements of the Group’s
internal financial control procedures involve:
• The control of cash and profit through three year business plans and annual budgets. All plans and budgets are approved by
the Board. The Group reports monthly on current year results and updated forecasts which are subject to a review by divisional
and Group management.
• Defined procedures for the appraisal, review and control of capital expenditure.
• Policies which are communicated via a series of corporate manuals.
• A formal mechanism, based on self-assessment, for the measurement of risks and assessment of the principal financial controls
across the Group. The evaluation of risk forms an integral part of this assessment.
27
98_Delta_RA_p22_28 20/7/98 11:31 am Page 27
The Audit Committee, on behalf of the Board, has reviewed the principal risks and effectiveness of the established control
procedures. In addition to the existing external audit procedures, it also receives a certification of compliance with the Group’s
manuals from the senior managers for areas for which they are responsible.
(iv) Identified risks
The potential impact of both European Monetary Union and the Year 2000 to the whole Group are being addressed by the Board.
In undertaking this course of action the directors will take all steps necessary to minimise and where possible eliminate the relevant
risks.
(v) Going concern
After making appropriate enquiries, the directors have a reasonable expectation that the Group 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
Group’s financial statements.
(vi)Report by the Auditors
The report by the Auditors on corporate governance matters is set out on page 29.
AuditorsA resolution to re-appoint Coopers & Lybrand as the Company’s auditors will be proposed at the annual general meeting.
By order of the Board
J P Narciso
Secretary
24 March 1998
Responsibility of the directors for the preparationof the financial statementsThe directors are required by UK company law to prepare financial statements for each financial year that give a true and fair view
of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or loss of the Group for
that period. The directors confirm that suitable accounting policies have been used and applied consistently and reasonable and
prudent judgements and estimates have been made in the preparation of the financial statements for the year ended 3 January 1998.
The directors also confirm that applicable accounting standards have been followed, subject to any material departures disclosed
and explained in the financial statements and that the financial statements have been prepared on the going concern basis.
The directors are responsible for keeping proper accounting records, for safeguarding the assets of the Company and the Group
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
By order of the Board
J P Narciso
Secretary
24 March 1998
28
98_Delta_RA_p22_28 20/7/98 11:31 am Page 28
To the Members of Delta plc
We have audited the financial statements on pages 30 to 45.
Respective responsibilities of directors and auditors
As described on page 28 the Company’s directors are responsible for the preparation of financial statements. It is our responsibility
to form an independent opinion, based on our audit, on those statements and to report our opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. 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 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 are free from material
misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state of the affairs of the Company and the Group at
3 January 1998 and of the loss, total recognised losses and cash flows of the Group for the year then ended and have
been properly prepared in accordance with the Companies Act 1985.
London Coopers & Lybrand
24 March 1998 Chartered Accountants and Registered Auditors
Report by the auditors to Delta plc on corporate governance mattersIn addition to our audit of the financial statements we have reviewed the directors’ statements on pages 27 and 28 concerning the
Company’s compliance with the paragraphs of the Cadbury Code of Best Practice specified for our review by the London Stock
Exchange and their adoption of the going concern basis in preparing the financial statements. The objective of our review is to
draw attention to non-compliance with Listing Rules 12.43(j) and 12.43(v).
Basis of opinion
We carried out our review in accordance with guidance issued by the Auditing Practices Board. That guidance does not require us
to perform the additional work necessary to, and we do not, express any opinion on the effectiveness of either the Group’s system
of internal financial control or its corporate governance procedures, nor on the ability of the Group or Company to continue in
operational existence.
Opinion
With respect to the directors’ statements on internal financial control and on going concern on pages 27 and 28, in our opinion
the directors have provided the disclosures required by the Listing Rules referred to above and such statements are not inconsistent
with the information of which we are aware from our audit work on the financial statements.
Based on enquiry of certain directors and officers of the Company and examination of relevant documents, in our opinion the
directors’ statement on page 27 appropriately reflects the Company’s compliance with the other aspects of the Code specified for
our review by Listing Rule 12.43(j).
London Coopers & Lybrand
24 March 1998 Chartered Accountants
29
Auditors’ report
98_Delta_RA_p29 20/7/98 11:46 am Page 29
1996 Notes 1997 (as restated)
Continuing
ExceptionalPre- items Sub Discontinued
execeptional (note 4) total operations Total Total£ million £ million £ million £ million £ million £ million
Turnover
Continuing operations 839.4 — 839.4 — 839.4 890.7
Discontinued operations — — — 59.0 59.0 59.3
Turnover 1 839.4 — 839.4 59.0 898.4 950.0
Cost of sales 2 (627.6) — (627.6) (55.2) (682.8) (733.7)
Gross profit
Continuing operations 211.8 — 211.8 — 211.8 210.3
Discontinued operations — — — 3.8 3.8 6.0
211.8 — 211.8 3.8 215.6 216.3
Distribution costs and administrative expenses 2 (161.4) — (161.4) (3.3) (164.7) (168.9)
Operating profit
Continuing operations 50.4 — 50.4 — 50.4 44.5
Discontinued operations — — — 0.5 0.5 2.9
Operating profit 50.4 — 50.4 0.5 50.9 47.4
Share of profits of associated companies 5 15.4 — 15.4 — 15.4 14.7
65.8 — 65.8 0.5 66.3 62.1
Sale of businesses 4 — — — (5.3) (5.3) (6.6)
Provision for diminution in value of businesses
to be disposed of 4 — (49.0) (49.0) — (49.0) —
Goodwill previously written off 4 — (27.3) (27.3) — (27.3) —
Total provision for diminution in value of
businesses to be disposed of — (76.3) (76.3) — (76.3) —
Profit (loss) on ordinary activities before interest 65.8 (76.3) (10.5) (4.8) (15.3) 55.5
Interest 6 (6.6) — (6.6) (0.6) (7.2) (9.9)
Profit (loss) on ordinary activities before taxation 1, 7 59.2 (76.3) (17.1) (5.4) (22.5) 45.6
Taxation 8 (19.0) (0.7) (19.7) — (19.7) (20.3)
Profit (loss) on ordinary activities after taxation 40.2 (77.0) (36.8) (5.4) (42.2) 25.3
Minority interests (1.7) — (1.7) — (1.7) (2.5)
Profit (loss) for the financial year 38.5 (77.0) (38.5) (5.4) (43.9) 22.8
Dividends 9 (24.1) — (24.1) — (24.1) (28.4)
Transfer from reserves 24 14.4 (77.0) (62.6) (5.4) (68.0) (5.6)
Earnings per 25p ordinary share:
Net 10 25.7p (25.7)p (29.3)p 15.2p
Nil distribution 10 23.7p (27.6)p (31.2)p 16.2p
30
Group profit and loss accountFor the year ended 3 January 1998
98_Delta_RA_p30_33 20/7/98 11:47 am Page 30
Group Holding company
Notes 1997 1996 1997 1996£ million £ million £ million £ million
Fixed assets
Tangible assets 11 195.7 214.0 0.1 —
Investments
Associated companies and other investments 12(a) 48.7 40.1 0.7 0.7
Group companies 12(b) — — 396.7 362.1
244.4 254.1 397.5 362.8
Current assets
Stocks 13 158.0 161.4 — —
Debtors – amounts falling due after one year 14 7.0 7.8 4.2 5.4
Debtors – amounts falling due within one year 14 173.9 184.1 25.7 21.5
Bank and other deposits 23.6 85.2 0.2 24.4
362.5 438.5 30.1 51.3
Creditors – amounts falling due within one year
Borrowings 19 (24.3) (12.8) (34.3) (0.4)
Other creditors 15 (171.0) (173.8) (32.2) (39.0)
Net current assets 167.2 251.9 (36.4) 11.9
Total assets less current liabilities 411.6 506.0 361.1 374.7
Creditors – amounts falling due after more than one year
Borrowings 19 (78.3) (145.6) (75.5) (44.1)
Provisions for liabilities and charges 20 (39.2) (21.1) — —
Net assets 294.1 339.3 285.6 330.6
Capital and reserves
Called up share capital 21 40.3 40.3 40.3 40.3
Share premium account 24 31.2 31.1 31.2 31.1
Revaluation reserve 24 46.1 45.7 144.2 154.4
Profit and loss account 24 168.0 213.5 69.9 104.8
Equity shareholders’ funds 282.8 327.8 282.8 327.8
Non-equity shareholders’ funds 2.8 2.8 2.8 2.8
Total shareholders’ funds 285.6 330.6 285.6 330.6
Equity minority interests 8.5 8.7 — —
294.1 339.3 285.6 330.6
The accounts on pages 30 to 45 were approved by the directors on 24 March 1998 and are signed on their behalf by:
Sir Martin Jacomb M Gill
Chairman Finance director
31
Balance sheetsAt 3 January 1998
98_Delta_RA_p30_33 20/7/98 11:47 am Page 31
Notes 1997 1996£ million £ million
Net cash inflow from operating activities 26 92.3 109.7
Returns on investments and servicing of finance
Interest received 5.5 1.1
Interest paid (13.2) (11.5)
Preference dividends paid (0.1) (0.1)
Dividends paid to minority shareholders (0.8) (1.7)
Net cash outflow from returns on investments and servicing of finance (8.6) (12.2)
Taxation (13.5) (19.2)
Capital expenditure and financial investment
Capital expenditure (40.5) (27.8)
Sale of tangible fixed assets 4.3 2.2
Sale of other investments — 0.1
Associated company loans (1.7) (1.0)
Purchase of own shares for ESOT (1.5) (1.0)
Net cash outflow from capital expenditure and financial investment (39.4) (27.5)
Acquisitions and disposals
Purchase of businesses 29 (10.6) (12.5)
Net cash acquired on purchase of businesses 29 0.4 —
Purchase of investment in associated companies (0.5) (0.5)
Sale of businesses 29 9.1 28.1
Net cash disposed of on sale of businesses 29 (1.8) (0.1)
Net cash (outflow) inflow from acquisitions and disposals (3.4) 15.0
Equity dividends paid (28.3) (28.3)
Cash (outflow) inflow before use of liquid resources (0.9) 37.5
Management of liquid resources
Decrease (increase) in short term cash deposits 27 32.2 (36.5)
Financing
Issue of ordinary share capital 0.1 0.9
Debt due within one year: increase in short term borrowings 72.1 37.9
repayment of short term borrowings (61.2) (57.8)
Debt due after one year: increase in loans 118.6 101.2
repayment of loans (186.7) (60.1)
Net cash (outflow) inflow from financing (57.1) 22.1
(Decrease) increase in cash in the period 27 (25.8) 23.1
32
Group cash flow statementFor the year ended 3 January 1998
98_Delta_RA_p30_33 20/7/98 11:47 am Page 32
1997 1996£ million £ million
(Loss) profit for the financial year (43.9) 22.8
Other recognised gains and losses for the year:
Unrealised surpluses on revaluation of properties 1.1 2.4
Currency translation differences on foreign currency net investments (1.8) (12.5)
Total recognised losses and gains for the year (44.6) 12.7
Note of historical cost profits and losses
Reported (loss) profit on ordinary activities before taxation (22.5) 45.6
Realisation of property revaluation surpluses of previous years 0.8 2.0
Difference between historical cost depreciation and actual depreciation
charge for the period calculated on the revalued amount 0.4 0.1
Historical cost (loss) profit on ordinary activities before taxation (21.3) 47.7
Historical cost loss for the period retained after taxation, minority
interests and dividends (66.8) (3.5)
Movement in total shareholders’ funds
(Loss) profit for the financial year (43.9) 22.8
Dividends (24.1) (28.4)
(68.0) (5.6)
Other recognised gains and losses for the year (0.7) (10.1)
Goodwill arising on acquisitions (7.9) (6.1)
Reinstatement of goodwill previously written off to the profit and loss account on disposals 4.2 7.8
Reinstatement of goodwill previously written off in respect of businesses where provision
for permanent diminution in value has been made 27.3 —
Shares issued 0.1 0.9
Net decrease in shareholders’ funds for the year (45.0) (13.1)
Total shareholders’ funds at the beginning of the period 330.6 343.7
Total shareholders’ funds at the end of the period 285.6 330.6
33
Statement of total recognised gains and losses For the year ended 3 January 1998
98_Delta_RA_p30_33 20/7/98 11:47 am Page 33
1 Accounting convention and StandardsThe financial statements are prepared in accordance with the historical cost accounting convention, modified to include the
revaluation of certain assets, and in accordance with applicable Accounting Standards in the United Kingdom.
2 Group consolidation(i) The Group’s financial statements comprise a consolidation of the holding company and all its subsidiaries.
(ii) The Group share of results of associated companies is included in the Group profit and loss account and its share of post-
acquisition reserves is included in the Group balance sheet. The figures for associated companies are based on their latest
audited accounts ending in the financial year, updated by reference to unaudited management accounts in certain cases to
coincide with the Group’s financial year.
(iii)The results of companies acquired or sold during the year are dealt with from the date of acquisition or to the date of sale.
Acquisitions are accounted for by the acquisition method of accounting, the net goodwill being written off directly to reserves
in the year of acquisition. On the disposal of a business, goodwill paid on its acquisition is written off through the profit and
loss account as part of the profit or loss on disposal.
3 Research and development, patents and trademarksAll expenses are written off as incurred.
4 Foreign currencyThe profit and loss accounts of overseas companies are translated into sterling at average exchange rates for the financial year.
Their balance sheets and also the foreign currency assets and liabilities of UK companies, including hedging instruments, are
translated into sterling at the rates ruling on the last day of the financial year. The exchange differences arising from the translation
of the opening net assets of overseas companies and the exchange differences on foreign currency liabilities hedging those net assets,
are taken directly to reserves. Similarly, the difference between the net profits of overseas companies translated at average rates
and year end rates is taken directly to reserves.
5 Pensions and post retirement benefitsThe costs of providing pensions and post retirement healthcare benefits are charged to the profit and loss account on a systematic
basis, with surpluses and deficits arising, amortised over the expected average remaining service lives of current employees.
6 StocksStocks are valued at the lower of cost (including an appropriate element of production overhead costs) and net realisable value of
the separate items of stocks or of groups of similar items.
7 Tangible assets(i) Freehold and leasehold property is mainly valued on an open-market value for the existing-use basis. Each property in the UK
is revalued regularly, once in every three years, while overseas the period between valuations varies according to local
conditions.
(ii) Depreciation is provided on the straight-line basis mainly at the following rates:
Freehold land Nil Plant and machinery 10%
Freehold buildings 2% Motor vehicles 25%
Leasehold property; over the term of lease, but not less than 2% Fixtures, fittings, tools and equipment 20%
(iii) Finance leased assets are capitalised as tangible fixed assets and depreciated accordingly. The capital element of future lease
payments is included in borrowings and the finance element is charged to the profit and loss account. Operating lease rentals
are charged in the profit and loss account as incurred.
8 TaxationThe profit and loss account charge is calculated at current rates of corporation tax and overseas tax on the profits for the year. It
includes deferred tax calculated, at the appropriate rates, by the liability method on any timing differences, to the extent that it is
probable that a liability or asset will crystallise.
9 TurnoverTurnover is the amount receivable for goods sold or supplied and services provided, excluding inter-group transactions and value
added tax.
34
Accounting policies
98_Delta_RA_p34 20/7/98 11:29 am Page 34
1997 1996 (as restated)
Profit Profitbefore Net before Net
Turnover taxation assets Turnover taxation assets£ million £ million £ million £ million £ million £ million
1 Principal activitiesBy activity (i) & (ii): Electrical protection (vi) 239.6 18.5 94.5 244.3 18.8 86.4
Industrial services 210.4 21.7 79.0 206.7 21.2 72.5Plumbing products 227.4 20.6 103.4 250.8 24.5 102.9Cables and Materials (v) 262.3 5.0 106.1 290.5 (0.3) 134.1Exceptional operating charges (iv) — — — — (5.0) (5.7)
Continuing operations 939.7 65.8 383.0 992.3 59.2 390.2Discontinued operations (cables and materials) 59.0 0.5 18.7 59.3 2.9 22.3Sale of businesses (note 4) — (5.3) — — (6.6) —Provision for diminution in value of businesses (note 4) — (49.0) (28.6) — — —Goodwill previously written off (note 4) — (27.3) — — — —Interest/net borrowings — (7.2) (79.0) — (9.9) (73.2)
998.7 (22.5) 294.1 1,051.6 45.6 339.3Less: Associated companies (100.3) — — (101.6) — —
898.4 (22.5) 294.1 950.0 45.6 339.3
By origin (iii): Europe (vi) 601.6 29.3 249.9 638.0 29.2 277.9Asia – Pacific 188.2 16.4 66.6 198.5 15.9 65.5North America (v) 56.1 5.4 21.0 64.5 4.2 14.0Africa 93.8 14.7 45.5 91.3 14.9 38.5Exceptional operating charges (iv) — — — — (5.0) (5.7)
Continuing operations 939.7 65.8 383.0 992.3 59.2 390.2Discontinued operations (Europe) 59.0 0.5 18.7 59.3 2.9 22.3Sale of businesses (note 4) — (5.3) — — (6.6) —Provision for diminution in value of businesses (note 4) — (49.0) (28.6) — — —Goodwill previously written off (note 4) — (27.3) — — — —Interest/net borrowings — (7.2) (79.0) — (9.9) (73.2)
998.7 (22.5) 294.1 1,051.6 45.6 339.3Less: Associated companies (100.3) — — (101.6) — —
898.4 (22.5) 294.1 950.0 45.6 339.3
By destination: Europe 513.8 571.5Asia – Pacific 202.2 192.3North America 74.9 77.7Near & Middle East 29.9 29.2Africa 18.6 20.0
Continuing operations 839.4 890.7Discontinued operations 59.0 59.3
898.4 950.0
(i) Analysis by activity (based on 1996 segmental disclosure)Cables (v) 223.5 4.0 90.1 254.8 (0.7) 106.4Circuit protection (vi) 154.5 13.9 61.4 151.3 13.0 56.4Engineering 320.4 22.9 136.8 346.1 27.8 147.3Industrial services 241.3 25.0 94.7 240.1 24.1 85.8Exceptional operating charges (iv) — — — — (5.0) (5.7)
Continuing operations 939.7 65.8 383.0 992.3 59.2 390.2
(ii) Includes associated companies by activity: Electrical protection 15.9 1.5 3.3 21.2 1.5 3.2Industrial services 65.7 10.3 29.3 62.1 10.4 25.1Plumbing products 18.7 3.6 15.4 18.3 2.8 11.1
(iii) Includes associated companies by origin: Europe 15.9 1.4 4.6 21.2 1.5 3.2Asia – Pacific 0.2 (0.1) 1.1 — — 0.8North America 1.5 0.2 1.7 1.3 0.1 1.4Africa 82.7 13.9 40.6 79.1 13.1 34.0
(iv) Exceptional operating charges Electrical protection — — — — (2.0) —(also see note 4): Plumbing products — — — — (3.0) (1.7)
Cables and Materials — — — — — (4.0)
Total exceptional operating charges Europe — — — — (5.0) (5.7)
35
Notes on the accounts
98_Delta_RA_p35_44 20/7/98 11:48 am Page 35
1997 1996
Profit Profitbefore Net before Net
Turnover taxation assets Turnover taxation assets£ million £ million £ million £ million £ million £ million
1 Principal activities (continued)(v) Includes Surprenant Cable Corporation sold 5 June 1996 — — — 13.2 (0.7) —
(vi) Includes British Electrical Repairs Ltd sold 27 September 1996 — — — 13.3 0.5 —
(vii) Both in 1996 and 1997 the impact of acquisitions and disposals on turnover and profit before taxation were not material to the Group or individual
business segments except as disclosed in discontinued activities and in notes (v) and (vi) above.
1997 1996
Continuing activities Continuing activities
Before Exceptional Before Exceptionalexceptional operating Discontinued exceptional operating Discontinued
charges charges activities Total charges charges activities Total£ million £ million £ million £ million £ million £ million £ million £ million
2 Analysis of expensesCost of sales 627.6 — 55.2 682.8 678.8 1.6 53.3 733.7
Distribution costs 92.7 — 1.7 94.4 93.7 0.2 1.7 95.6
Administrative expenses 68.7 — 1.6 70.3 68.7 3.2 1.4 73.3
161.4 — 3.3 164.7 162.4 3.4 3.1 168.9
1997 1996£ million £ million
3 Group employees(a) Employee costs Aggregate remuneration – United Kingdom 130.9 134.4
Aggregate remuneration - Overseas 70.6 73.1
201.5 207.5
Social security contributions 18.1 19.0
Pension contributions 9.4 10.4
Other employee costs 1.0 4.2
230.0 241.1
Average monthly number Actual number at the year end
1997 1996 1997 1996
(b) Number of employees United Kingdom 7,858 8,607 7,707 7,971
Overseas 4,413 4,500 4,534 4,161
12,271 13,107 12,241 12,132
(c) Pensions
The Group operates a number of pension schemes throughout the world. The major schemes, which cover 82% of scheme members, are of the defined benefit
type. The assets are held in separate trustee administered funds, unless determined otherwise by local best practice and regulations.
Of the total pension contributions, £3.1 million (1996 £3.3 million) relates to overseas schemes. Where appropriate the pension contributions are
assessed in accordance with the advice of a qualified independent actuary.
The main UK scheme, which covers 64% of all employees in Group pension schemes, was last assessed at 5 April 1997. Using the attained age method,
the assumptions which have the most significant effect on the results of the valuation are those detailed below. They are fixed relative to the expected rate
of inflation as follows: investment returns 31/2% higher, earnings growth 11/2% higher, pension increases in line with inflation.
At the date of the latest actuarial valuation, the market value of the assets of the main UK scheme was £593.4 million and the actuarial value of the
assets was sufficient to cover 115% of the benefits that had accrued to members after allowing for expected future increases in earnings. The contribution
rate has been adjusted to amortise the surplus over the expected future service lives of the members.
There is a provision of £7.2 million (1996 £7.8 million) for pensions, shown in note 20. The major part of this provision relates to the excess of the
accumulated pension liability over the amount funded in overseas schemes.
There is a provision of £1.3 million (1996 £1.6 million) for post retirement benefits of US employees who have retired, or retire in the five year period
to 31 December 2002. The continuing cost to the Group of £0.1 million (1996 £0.1 million) is charged to revenue. A weighted average discount rate of
71/2% has been assumed. Plan amendments during the year have resulted in a credit to revenue of £0.3 million (1996 £0.4 million).
(d) Directors’ emoluments
The disclosures required by the Companies Act 1985 are included within the Directors’ report – pages 25 to 27.
36
Notes on the accounts
98_Delta_RA_p35_44 20/7/98 11:48 am Page 36
1997 1996£ million £ million
4 Exceptional itemsOperating exceptional charges (continuing activities) –
Rationalisation and restructuring costs [see also note 1(iv)] — (5.0)
Non-operating exceptional items –Sale of businesses: Loss on disposals (i) (5.3) (8.6)
Profit on disposals — 2.0
(5.3) (6.6)
Provision for diminution in value of Cables & Materials businesses (49.0) —Goodwill previously written off in respect of these businesses (27.3) —
Total provision for diminution in value of businesses to be disposed of (76.3) —
(81.6) (11.6)
(i) In accordance with accounting policy 2(iii) goodwill of £4.2 million (1996 £7.8 million), previously written off to reserves on the acquisition of businesseswas written back through reserves and charged to the profit and loss as part of the loss on disposal of £(5.3) million (1996 £(6.6) million) above.
(ii) The tax charge attributable to non-operating exceptional items is £0.7 million (1996 £0.7 million).
5 Profits of associated companiesGroup share of profits less losses of associated companies, after interest 15.4 14.7Taxation (note 8) (4.5) (4.1)
Profit attributable to Delta shareholders 10.9 10.6
Dividends of £3.8 million (1996 £3.5 million) were received from associated companies.
6 Interest Interest payable: On bank loans and overdrafts (5.4) (6.6)
On other loans (6.2) (6.4)On finance leases (0.1) —
(11.7) (13.0)Interest receivable 4.5 3.1
(7.2) (9.9)
7 Profit on ordinary activities before taxationThe profit on ordinary activities before taxation is after charging: Auditors’ remuneration (i) 1.2 1.1
Depreciation of tangible assets (ii) 29.1 31.7Depreciation of leased assets 0.2 0.1Operating lease rentals – plant and equipment 2.4 2.4Operating lease rentals - other 4.2 4.9Research and development 1.9 2.0
(i) Coopers & Lybrand also received £0.9 million (1996 £0.5 million) in respect of non-audit services in the UK during the year.(ii) An additional £17.0 million, provided as part of the exceptional provision for the diminution in value of assets, has been utilised against tangible assets,
representing a further accelerated depreciation charge, not included in the above.(iii) The translation of overseas profits at the 1997 average rates of exchange, as compared with the 1996 average rates, decreased profits by £(5.5) million.
8 Taxation UK corporation tax 311⁄2% (1996 33%) 23.9 4.2Advance corporation tax (written back) written off (2.9) 1.6Double taxation relief (13.2) (0.4)Overseas taxation 9.1 11.2Prior year adjustments (1.7) (0.4)Taxation of Group share of profits less losses of associated companies (note 5) 4.5 4.1
19.7 20.3
The tax charge has been reduced by £1.0 million (1996 £0.8 million) due to the utilisation of tax losses brought forward.The deferred tax charge included above is £1.1 million (1996 credit £0.1 million).
9 DividendsPreference (non-equity): 4.2% cumulative first preference shares and 3.15% cumulative second preference shares 0.1 0.1
Ordinary (equity): Interim 4.5p paid as a foreign income dividend (1996 4.5p paid as a conventional dividend) 6.7 6.7Proposed final 11.5p (1996 14.4p) payable as a foreign income dividend 17.3 21.6
24.0 28.3
Total dividends 24.1 28.4
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1997 1996
Nil (i) Nil (i)Net distribution Net distribution
10 Earnings per 25p ordinary shareWeighted average number of shares in issue during the year 149.872m 149.872m 149.704m 149.704m(Loss) profit for the financial year attributable to ordinary shareholders £(44.0)m £(46.9)m £22.7m £24.3mEarnings per 25p ordinary share (29.3)p (31.2)p 15.2p 16.2p
(Loss) profit for the financial year attributable to ordinary shareholders £(44.0)m £(46.9)m £22.7m £24.3mAdjustment for exceptional items and discontinued activities after tax £82.4m £82.4m £9.8m £9.8m
Adjusted profit for the financial year attributable to ordinary shareholders £38.4m £35.5m £32.5m £34.1m
Adjusted earnings per 25p ordinary share 25.7p 23.7p 21.7p 22.8p
(i) Nil distribution basis is based on attributable profits as for the net basis adjusted for Advance Corporation Tax written off (written back) 1997 £(2.9)million (1996 £1.6 million)
Cost or valuation Accumulated depreciation
Fixtures, Fixtures,fittings, fittings,
Land and Plant and tools and Land and Plant and tools and Bookbuildings machinery equipment Total buildings machinery equipment Total value£ million £ million £ million £ million £ million £ million £ million £ million £ million
11 Tangible assetsAt 28 December 1996 106.6 298.1 76.2 480.9 6.4 202.8 57.7 266.9 214.0Currency translation (5.4) (9.7) (3.6) (18.7) (0.5) (6.8) (3.0) (10.3) (8.4)Property revaluation (0.8) — — (0.8) (1.1) — — (1.1) 0.3Disposal of businesses (2.4) (4.2) (0.6) (7.2) — (2.8) (0.5) (3.3) (3.9)Other disposals (2.1) (6.7) (5.1) (13.9) — (6.2) (4.9) (11.1) (2.8)Acquisition of businesses 4.7 2.2 1.6 8.5 1.7 2.0 1.1 4.8 3.7Expenditure 1997 6.6 24.5 8.0 39.1 — — — — 39.1Provision for diminution in value of assets — — — — — 17.0 — 17.0 (17.0)Depreciation 1997 — — — — 1.9 19.2 8.2 29.3 (29.3)
At 3 January 1998 107.2 304.2 76.5 487.9 8.4 225.2 58.6 292.2 195.7
Analysis of cost or valuation of land and buildings at professional valuation in: Analysis of net book value of land and buildings:1995 and earlier years 44.0 Freeholds 94.81996 9.4 Long leaseholds (iii) 0.81997 (iv) 32.0 Short leaseholds (iii) 3.2At cost 21.8
At 3 January 1998 107.2 At 3 January 1998 98.8
(i) The net book value includes plant, machinery and equipment held under finance leases amounting to £0.7 million (1996 £0.4 million).(ii) The net book value includes payments on account and assets in course of construction £11.6 million (1996 £6.2 million).(iii) A long leasehold is one with more than 50 years unexpired. A short leasehold is one with 50 years or less unexpired.(iv) The revaluations which were made in 1997 comprise: UK £30.2 million valued on an existing use basis, these valuations having been carried out by
Henry Butcher, International Asset Consultants, in accordance with the RICS Appraisal and Valuation Manual and £1.8 million overseas valued on anexisting use basis by independent surveyors.
(v) If the land and buildings were included at cost, the value before depreciation would be reduced by £31.0 million (1996 £28.3 million) and theaccumulated depreciation increased by £13.3 million (1996 £14.8 million).
(vi) The holding company tangible assets consist entirely of fixtures & fittings etc.: additions at cost in the year and at 3 January 1998 £0.1 million,depreciation in the year and at 3 January 1998 £ nil, net book value at 3 January 1998 £0.1 million (at 28 December 1996 £ nil).
(vii) Included in the net book value at 3 January 1998 is £7.3 million in respect of the assets of the rod and winding wire businesses disposed of in February 1998.
Group &Group Company
Associated companies EmployeeShare
Share of OwnershipCost reserves Loans Trust Total
£ million £ million £ million £ million £ million
12 Investments (iii)(a) Associated companies and other investments: cost and share of reservesAt 28 December 1996 11.8 26.8 0.8 0.7 40.1Currency translation (0.2) (0.6) — — (0.8)Acquisitions, disposals and other movements 0.8 (0.7) — 1.5 1.6Revaluation — 0.5 — — 0.5Movement in loans — — 1.7 — 1.7Charge for year — — — (1.5) (1.5)Amounts retained — 7.1 — — 7.1
Net book value at 3 January 1998 12.4 33.1 2.5 0.7 48.7
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12 Investments (continued)(a) Associated companies and other investments (continued)(i) The names of associated companies are given on page 45.(ii) The net book value of an associated company, listed overseas is £14.3 million (1996 £12.1 million), the market value being £50.3 million (1996 £36.2 million).(iii) At 3 January 1998, the 657,149 shares held by the ESOT (cost £2.5 million) had a market value of £1.7 million. At 3 January 1998, £1.8 million has
been amortised to the profit and loss account. Dividend income paid to the ESOT is used to defray the holding cost of the shares. A proportion of thefunds to purchase these shares are borrowed by the ESOT under a loan facility guaranteed by the Company which are shown as borrowings in theGroup balance sheet.
Book value (i) Amounts providedNet book Net book
At 28 Movements At 3 At 28 Movements At 3 value at 3 value at 28December during January December during January January December
1996 year 1998 1996 year 1998 1998 1996£ million £ million £ million £ million £ million £ million £ million £ million
(b) Holding company investments in Group companiesShares 675.2 (11.2) 664.0 (1.4) (37.0) (38.4) 625.6 673.8Loans (294.4) 82.6 (211.8) (17.3) 0.2 (17.1) (228.9) (311.7)
Total 380.8 71.4 452.2 (18.7) (36.8) (55.5) 396.7 362.1
(i) The book value of shares is equivalent to the issued share capital and reserves of the subsidiary companies.(ii) The cost of shares in subsidiary companies is £522.4 million (1996 £523.1 million).(iii) The names of the principal Group companies are given on page 45.
Group Holding company
1997 1996 1997 1996£ million £ million £ million £ million
13 StocksRaw materials 36.4 35.0 — —Work-in-progress 35.7 37.4 — —Finished goods 85.9 89.0 — —
158.0 161.4 — —
Replacement cost 162.6 163.5 — —
14 DebtorsAmounts falling due after one year: Other debtors 2.2 1.7 — —
Prepayments and accrued income — 0.1 — —Advance corporation tax recoverable 4.8 6.0 4.2 5.4
7.0 7.8 4.2 5.4
Amounts falling due within one year: Trade debtors 147.9 152.5 — —Amounts owed by Group companies — — 10.0 7.6Amounts owed by associated companies 0.5 1.1 — —Other debtors 10.0 8.9 7.7 2.2Prepayments and accrued income 8.7 10.6 2.0 2.8Advance corporation tax recoverable 6.5 8.9 6.0 8.9Corporation tax recoverable 0.3 1.2 — —Deferred tax — 0.9 — —
173.9 184.1 25.7 21.5
180.9 191.9 29.9 26.9
15 Other creditorsAmounts falling due within one year: Trade creditors 79.1 67.1 — —
Other creditors 9.7 10.1 0.6 0.4Accruals and deferred income 41.3 44.9 8.3 10.1Dividends 17.3 21.6 17.3 21.6Corporate taxation 17.3 21.9 6.0 6.9Other taxation and social security 6.3 8.2 — —
171.0 173.8 32.2 39.0
16 Capital commitments Future capital expenditure, contracted but not provided for 11.3 14.0 — —
17 Contingent liabilitiesFinancial guarantees 6.9 4.6 6.1 5.2
(i) It is not expected that any loss will arise in respect of these contingent liabilities.(ii) The holding company is registered under a group registration for value added tax and is jointly liable for the amount payable of £1.4 million at
3 January 1998 (1996 £3.2 million) in respect of certain UK group companies.
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1997 1996
Land and Plant and Land and Plant andbuildings equipment buildings equipment£ million £ million £ million £ million
18 Commitments under operating leasesAnnual commitments under operating
leases expiring: Within one year 0.7 0.6 0.5 0.6
Between one and five years 2.4 2.0 1.5 1.5
After five years 2.0 0.3 1.8 0.1
5.1 2.9 3.8 2.2
Group Holding company
Due within Due after Due within Due afterone year one year Total one year one year Total£ million £ million £ million £ million £ million £ million
19 BorrowingsAt the end of this year:
Bank loans, overdrafts and acceptances: Unsecured bank loans and overdrafts 22.5 31.1 53.6 34.0 30.0 64.0
Acceptances 1.3 0.5 1.8 — — —
23.8 31.6 55.4 34.0 30.0 64.0
ESOT loan [ see note 12a (iii) ] 0.2 — 0.2 0.2 — 0.2
Senior unsecured loan notes due 1999/2004 (i) — 45.4 45.4 — 45.4 45.4
Other unsecured loans — 0.9 0.9 — — —
Finance leases (iii) 0.3 0.4 0.7 0.1 0.1 0.2
At 3 January 1998 24.3 78.3 102.6 34.3 75.5 109.8
At the end of last year:
Bank loans, overdrafts and acceptances: Unsecured bank loans and overdrafts 9.8 0.1 9.9 — — —
Acceptances 2.3 — 2.3 — — —
12.1 0.1 12.2 — — —
ESOT loan [ see note 12a (iii) ] 0.4 0.1 0.5 0.4 0.1 0.5
Senior unsecured loan notes due 1999/2004 (i) — 44.0 44.0 — 44.0 44.0
Other unsecured loans 0.2 1.1 1.3 — — —
Preference shares issued by a subsidiary company (ii) — 100.0 100.0 — — —
Finance leases (iii) 0.1 0.3 0.4 — — —
At 28 December 1996 12.8 145.6 158.4 0.4 44.1 44.5
Group Holding company
1997 1996 1997 1996£ million £ million £ million £ million
The Group borrowings are repayable
as follows: Within one year 24.3 12.8 34.3 0.4
Between one and two years 8.5 0.5 7.6 0.1
Between two and five years 54.4 123.1 52.8 22.0
After five years 15.4 22.0 15.1 22.0
102.6 158.4 109.8 44.5
Group borrowings repayable wholly or partly in more than five years by instalments:
Senior unsecured loan notes due 1999/2004 (i) 45.4 44.0 45.4 44.0
Other 1.3 — — —
46.7 44.0 45.4 44.0
(i) The senior unsecured loan notes are denominated in US dollars, with a nominal value of $75 million. They were issued in July 1994, and are repayablein six equal annual instalments of $12.5 million, beginning in July 1999. $50.0 million (£30.3 million) is repayable between 1999 and 2002, $25.0 million (£15.1 million) is repayable between 2003 and 2004. The interest rate on the loan notes is fixed at 7.88% per annum.
(ii) In 1996 Delta Group International Holdings Ltd, a wholly owned subsidiary of Delta plc, issued £100 million of 4.3701% redeemable preference sharesat par to a UK financial institution. In accordance with FRS 4, these shares and their associated finance cost have been treated as debt and interestpayable in the Group financial statements. The shares were redeemed on 20 June 1997. As they were supported by committed facilities with a maturitydate of 19 July 2000, the liability in 1996 was disclosed within amounts due after more than one year.
(iii) The net finance lease obligations due after more than one year are repayable as follows: £0.4 million between two and five years.
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DiminutionPost in asset
retirement Acquisition value &Pension benefit & disposal restructuring Other Deferred
provisions provisions provisions provisions provisions taxation Total£ million £ million £ million £ million £ million £ million £ million
20 Provisions for liabilities and charges (i) (i) (ii) (iii)
At 28 December 1996 7.8 1.6 1.2 8.3 1.7 0.5 21.1
Currency translation (0.8) — (0.1) (0.1) — (0.1) (1.1)
Acquisition of subsidiaries 0.1 — — — — — 0.1
Profit and loss charge (credit) 0.3 (0.2) 0.8 24.2 — 1.1 26.2
Utilised (0.2) (0.1) (0.7) (3.8) (1.2) (1.1) (7.1)
At 3 January 1998 7.2 1.3 1.2 28.6 0.5 0.4 39.2
(i) See note 3 (c) pensions.
(ii) See note 4 exceptional items.1997 1996
Amount Amountnot Amount not Amount
provided provided provided provided£ million £ million £ million £ million
(iii) Deferred taxation
United Kingdom tax on timing differences: Excess of tax allowances over depreciation 2.2 — 9.9 2.4
Other items (2.2) — (0.3) (2.4)
— — 9.6 —
Overseas tax on timing differences: Excess of tax allowances over depreciation — 2.2 0.7 1.9
Other items — (1.8) — (1.4)
— 0.4 10.3 0.5
No provision has been made for deferred taxation in respect of any future disposals of revalued properties, as the directors do not envisage a significant
crystallisation of any such liability in the foreseeable future.
No deferred taxation has been provided on retained profits in overseas subsidiaries, as no material tax liability should arise in respect of them.
4.2% 3.15%Cumulative Cumulative
first secondpreference preference Ordinary Total
shares of shares of shares of share£1 each £1 each 25p each capital
£ million £ million £ million £ million
21 Share capital (i) (ii) (iii)
Authorised: At 28 December 1996 and 3 January 1998 1.0 2.0 47.0 50.0
Called up share capital – allotted and fully paid: At 28 December 1996 0.9 1.9 37.5 40.3
Issued during year under share option schemes — — — —
At 3 January 1998 0.9 1.9 37.5 40.3
(i) 1,000,000 shares authorised and 866,152 shares allotted and fully paid at 28 December 1996 and 3 January 1998.
(ii) 2,000,000 shares authorised and 1,940,000 shares allotted and fully paid at 28 December 1996 and 3 January 1998.
(iii) 188,000,000 shares authorised at 28 December 1996 and 3 January 1998, 149,891,791 shares allotted and fully paid at 3 January 1998 (1996
149,860,755).
(iv) The preference shares are not redeemable and are non-voting except in circumstances where the Company proposes to abrogate, modify or vary their
rights. They have preferential rights to return of capital on a winding up.
Save as International save Senioryou earn as you earn executive
22 Share optionsInvitation to subscribe 6th 3rd
Total number of participants at end of year 2,397 319 24
Options granted during year: Date 23 October 23 October —
Number of shares 1,327,666 162,812 —
Options exercised and shares allotted during year: Number of shares 31,036 — —
(i) At 3 January 1998, there were options outstanding, under the save as you earn scheme over 3,705,092 shares at prices between 270p and 459p, under
the international scheme over 332,019 shares at prices between 270p and 339p and options outstanding under the senior executive schemes over
1,212,000 shares at prices between 286p and 523p.
(ii) In normal circumstances the options can be exercised under the save as you earn share option scheme between three and seven years and for the senior
executive schemes between three and ten years after the date on which options were granted.
(iii) The consideration received in respect of shares issued during the year under share options was £90,332.
41
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Number of ordinary shares of 25p each owned
At 3 January 1998 At 28 December 1996
23 Directors’ share holdingsThe holdings of the directors and their families in ordinary shares were:
Directors at the end of the financial year: Sir Martin Jacomb 17,600 7,600
J P Scott-Maxwell 25,000 10,000
M Gill 26,568 21,158
P M Smits 16,000 8,000*
Sir Philip Beck 13,140 1,600
Sir Brian Moffat 2,000 600
J H Robinson 600 600
*As at date of appointment, 16 September 1997.
No changes in the share holdings shown above have taken place since 3 January 1998.
Other than the share holdings shown in the table above and the options disclosed on page 26, none of the directors had or has any interest, or any holding
without beneficial interest, in any class of any share capital of the Company or of any subsidiary. At no time during the year has any director had any material
interest in a contract with the Company, being a contract of significance in relation to the Company’s business.
Group Holding company
Share Profit Share Profitpremium Revaluation and loss premium Revaluation and lossaccount reserve account account reserve account
£ million £ million £ million £ million £ million £ million
24 ReservesReserves at 28 December 1996 31.1 45.7 213.5 31.1 154.4 104.8
Movements during the year:
Share premiums 0.1 — — 0.1 — —
Net surplus (deficit) arising on revaluation: Currency translation — 0.5 (2.3) — (0.1) —
Property (iii) — 1.1 — — — —
Group companies — — — — (10.0) —
Goodwill on acquisitions (vi) — — (7.9) — — —
Goodwill transferred to the profit and loss account on disposals — — 4.2 — — —
Goodwill previously written off in respect of businesses where provision for
permanent diminution in value has been made — — 27.3 — — —
Transfer of reserves — (1.2) 1.2 — (0.1) 0.1Transfers from profit and loss account: Group companies — — (75.1) — — (35.0)
Associated companies — — 7.1 — — —
0.1 0.4 (45.5) 0.1 (10.2) (34.9)
Reserves at 3 January 1998 31.2 46.1 168.0 31.2 144.2 69.9
(i) The profit and loss account of the Group includes profits retained in overseas Group companies totalling £43.2million (1996 £35.7 million) which could
be subject to local exchange control regulations if distributed as dividends.
(ii) The profit and loss account of the Group includes retained profits in associated companies of £29.4 million (1996 £23.4 million) of which £29.4 million
(1996 £22.1 million) is retained overseas and which could be subject to local exchange control regulations if distributed as dividends.
(iii) The surplus arising on the revaluation of properties comprises £0.7 million in respect of subsidiary companies and £0.4 million in respect of associated
companies.
(iv) The revaluation reserve of the Group includes £3.7 million (1996 £3.4 million) in respect of associated companies.
(v) The loss for the year dealt with in the accounts of the holding company is £(10.9)million (1996 profit £27.8 million). As permitted by Section 230 of
the Companies Act 1985, the holding company has not presented its own profit and loss account.
(vi) The cumulative goodwill written off attributable to continuing Group and associated companies held at the end of the year amounted to £75.5 million
(1996 £99.1 million). It has not proved possible to identify goodwill in respect of companies acquired prior to 1970, but the amounts are not considered
to be material.
(vii) In the Group reserves £8.5 million (1996 £5.3 million) of exchange gains on foreign currency loans have been offset against exchange losses on the netinvestments in certain overseas subsidiaries and associated undertakings.
25 Related party transactionsDuring the year ended 3 January 1998, sales on normal trading terms, of £2.7 million were made to associated companies.
As at 3 January 1998 debtors include £0.5 million owed by associated companies in respect of their purchases from the Group (see note 14) and loans to
associates were £2.5million (see note 12).
Details of the Group’s principal associated companies are set out on page 45.
42
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1997 1996£ million £ million
26 Reconciliation of operating profit to net cash inflow from operating activitiesOperating profit (including share of profits of associated companies) 66.3 62.1
Share of profits of associates (15.4) (14.7)
Dividends from associates 3.8 3.5
Profits of associates less dividends received (11.6) (11.2)
Depreciation 29.3 33.0
Profit on sale of fixed assets (1.4) (0.6)
(Increase) decrease in stocks (9.4) 19.2
(Increase) decrease in debtors (0.9) 4.6
Increase (decrease) in creditors 12.6 (2.9)
Restructuring provisions (5.2) (1.9)
Other items 12.6 7.4
Net cash inflow from operating activities 92.3 109.7
AcquisitionsAt 28 (excluding Other At 3
December cash & non-cash Exchange January1996 Cash flow overdrafts) changes movements 1998
£ million £ million £ million £ million £ million £ million
27 Analysis of net debtCash in hand, at bank 40.9 (27.3) — — (0.4) 13.2
Overdrafts (2.0) 1.5 — — 0.5 —
Net cash 38.9 (25.8) — — 0.1 13.2
Debt due after one year (145.3) 68.4 (0.1) — (0.9) (77.9)
Debt due within one year (10.7) (10.9) (3.7) — 1.3 (24.0)
Finance leases (0.4) (0.3) — — — (0.7)
Debt (156.4) 57.2 (3.8) — 0.4 (102.6)
Liquid resources (i) 44.3 (32.2) — — (1.7) 10.4
Net debt (73.2) (0.8) (3.8) — (1.2) (79.0)
(i) The Group includes as liquid resources, term deposits of less than one year.
1997 1996£ million £ million
28 Reconciliation of net cash flow to movement in net debt(Decrease) increase in cash in the period (25.8) 23.1
Cash outflow (inflow) from decrease (increase) in debt and lease financing 57.2 (21.2)
Cash (inflow) outflow from (decrease) increase in liquid resources (32.2) 36.5
Change in net debt resulting from cash flows (0.8) 38.4
Acquisitions (3.8) —
Translation difference (1.2) 3.2
Movement in net debt in the period (5.8) 41.6
Net debt at the beginning of the period (73.2) (114.8)
Net debt at the end of the period (79.0) (73.2)
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Disposals Acquisitions
1997 1996 1997 1996£ million £ million £ million £ million
29 Disposal and acquisition of businessesTangible fixed assets 3.9 14.9 3.7 4.3Stocks 1.8 11.7 2.6 3.0Debtors 1.9 5.0 2.6 0.5Creditors (including tax) (2.1) (3.6) (3.4) (0.7)Provisions — (0.8) — —Minority interests — — — —Borrowings — — (3.6) —Net cash 1.8 0.1 0.4 —
Net assets acquired and disposed of 7.3 27.3 2.3 7.1Goodwill (including minority interest’s share £0.5 million [1996 £nil]) 4.2 7.8 8.4 6.1Loss on disposal (5.3) (6.6) — —Utilisation of disposal provision (0.5) — — —
Consideration (including deferred element) less costs of acquisition and disposal 5.7 28.5 10.7 13.2
Net cash inflow (outflow) at average exchange rates:Cash received (paid) including costs of acquisition and disposal 9.1 28.1 (10.6) (12.5)Cash (sold) acquired with businesses (1.8) (0.1) 0.4 —
7.3 28.0 (10.2) (12.5)
(i) Disposals
During the year the Group disposed of KWB Kenmac Ltd (manufacturer of control valves and fittings) in the Isle of Man and Westray Engineering Pty Ltd
(manufacturer of industrial parts) in Australia. Neither of these disposals were material nor did they qualify as discontinued activities.
(ii) Acquisitions
During the year the Group acquired the businesses of National Vulcan Safety Products Ltd in the UK (which during the year changed its name to NABIC
Valve Safety Products Ltd), Elek GmbH in Germany and Innovative Technology in the USA. None of the acquisitions made in 1996 or 1997 were
individually material to the Group. There were no significant fair value adjustments to these acquisitions. The impact of acquisitions on the Group’s profit
and cash flows is not material.
(iii) Post balance sheet events● In January 1998 the Group increased its shareholding in Acrotec S.A. de C.V. (an associate company) from 25% to a majority shareholding of 66%. The
cost of this additional shareholding was approximately US$6.6 million. From that date Acrotec will be accounted for as a subsidiary company rather than
an associate. Delta retains the option to acquire the outstanding balance of 34%. Acrotec is a manufacturer of parts for gas ranges based in Celaya, Mexico.● On 30 January 1998 the Group increased its shareholding in Delta Electrical Industries Ltd (DEI) from 47.5% to a controlling position of 50.1%, via a
vendor placing at a cost in the region of £5.8 million to the Group. From that date DEI will be accounted for as a subsidiary company rather than an associate.
In 1996 and 1997 the summarised DEI financial statements (100%) in South African Rand were:
1997 1996Rand Rand
million million
Profit and lossTurnover 685.5 562.7Profit before interest 89.1 72.7Profit before tax 88.5 78.8Profit for the year attributable to shareholders 53.8 51.9
Balance sheetFixed assets 115.8 122.2Trademarks and investments 28.8 28.1Current assets 247.9 230.3Current liabilities (128.6) (159.6)Long term borrowings — (2.4)Deferred taxation (20.1) (14.8)
243.8 203.8
Shareholders’ funds 225.6 190.0Minority interests 18.2 13.8
243.8 203.8
● On 30 January 1998 DEI acquired Australian Manganese Company Pty Ltd, the Australian electrolytic manganese dioxide business of the Broken Hill
Proprietary Company Ltd. Purchase consideration was approximately A$57 million which represented net asset value. This acquisition was funded by
a mixture of debt and equity and the Group subscribed in full for its entitlement in this rights issue at a cost in the region of £2.7 million.
44
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98_Delta_RA_p35_44 20/7/98 11:48 am Page 44
ELECTRICAL PROTECTION UNITED KINGDOMMEM Limited
500v Circuit Protection & Control Circuit protection products250v Circuit Protection & Control Electrical accessories and
domestic circuit protectionBill Switchgear Ltd Circuit protection productsDelta Electrical Systems Ltd Power distribution equipmentHome Automation Ltd Electronic control equipmentJohnson & Phillips (Capacitors) Ltd Power factor correction equipmentDelta Schoeller Ltd Automotive and micro switchesMonmer Foundry Ltd Iron castingsDelta Special Cables Ltd Communication cablesASSOCIATEDTelephone Cables Ltd Telecommunication cable 25.5% of 2,250,000 ordinary shares of systems
£1 each
AUSTRALIABell-IRH Industries Pty Ltd Distribution of electrical &
electronic productsGERMANYSchoeller & Co Elektrotechnische
Fabrik GmbH & Co Automotive electrical equipmentElek GmbH Power distribution equipmentHONG KONGDelta Electrical & Engineering Distribution of electrical
Services Ltd products MALAYSIADelta Switchgear Sdn Bhd (91.8%) Circuit protection productsUSAUnited Power Corporation (84.25%) Power supply protection equipmentInnovative Technology, Inc (84.25%) Power supply protection equipment
INDUSTRIAL SERVICESAUSTRALIADelta Fasteners Pty Ltd Industrial distributorDonhad Pty Ltd (60.0%) Mining consumablesD M Hull & Co Pty Ltd Machined partsMachin & Ewen Pty Ltd FastenersIndustrial Galvanizers Corporation Pty Ltd Protective coating services
Cutting Edges Pty Ltd Distributor of renewal parts forconstruction equipment
INDONESIA-ASSOCIATEDPT Bukit Terang Paksi Galvanizing Protective coating services50.0% of 1,500,000 ordinary shares of
US$1 each
MALAYSIAIGC-Industrial Galvanizers Corporation (M) Sdn Bhd (63%) Protective coating services
VIETNAMVingal Industries Co Ltd (55%) Protective coating servicesSOUTH AFRICA-ASSOCIATEDDelta Electrical Industries Ltd Electrical repair, industrial 47.5% of 44,732,332 ordinary distribution & electrolytic
shares of 9c each manganese dioxideManganese Metal Co (Pty) Ltd Electrolytic manganese metal49.0% of 464,500 ordinary shares of
50c each
USAIndustrial Galvanizers-Southeastern, Inc Protective coating servicesIndustrial Galvanizers-Virginia, Inc Protective coating servicesZIMBABWEEnfield Holdings Ltd Distributor of electric cable,
electrical equipment andengineering products
PLUMBING PRODUCTSUNITED KINGDOMConex-Sanbra Ltd(trading as IBP-Conex) Plumbing fittings
Opella Ltd Engineered plastic productsDelta Fluid Products Ltd Gas controls and flow indicatorsFRANCEInternational BuildingProducts France SA Plumbing fittings
Sourdillon SA Gas controlsGERMANYBänninger GmbH Plumbing fittingsPOLANDIBP “Instalfittings” Sp z o.o. Plumbing fittingsSPAINAccesorios de Tuberia de Cobre SA Plumbing fittingsSOUTH AFRICA-ASSOCIATEDCobra Investments (Pty) Ltd Plumbing products37.6% of 1,000,000 ordinary shares of
R1 each
USAAccurate Forging Corporation Brass & aluminium forgingsNew England CenterlessGrinding Co Precision engineering
Opella Inc Engineered plastic products Sourdillon Inc Gas controls
CABLES AND MATERIALSCABLESUNITED KINGDOMDelta Crompton Cables Ltd Electric cablesDelta Energy Cables Ltd Power and wiring cablesCables and Plastics Ltd Electric cablesAluminium Wire & Cable Co. Ltd Electric cablesNETHERLANDSDelta Crompton Cables BV Electric cablesGERMANYDelta Kabel Vertriebs GmbH Electric cablesKENYAEast African Cables Ltd (75.6%) Electric cablesMATERIALSUNITED KINGDOMDelta Extruded Metals Company Ltd Extruded productsDelta (Manganese Bronze) Ltd Extruded productsSmiths Metal Centres Ltd Non-ferrous metal distributorDelta EMS Ltd Brass and aluminium forgingsDelta Precision Ltd Industrial componentsJ W Singer & Sons Ltd Non-ferrous diecastingDelta Enfield Wires Ltd Bare copper conductorDelta Enfield Metals Ltd Bare copper conductorDelta Welding Equipment Ltd Welding cablesEnfield Winding Wires Ltd Winding wires
PRINCIPAL HOLDING COMPANIESDelta Circuit Protection &Controls Ltd (iii) UK
Delta Engineering Holdings Ltd (iii) UKDelta Cables Holdings Ltd (iii) UKDelta America, Inc USADelta Group Australia Pty Ltd (95.3%) Australia
45
Principal Group and associated companiesAt 3 January 1998
Notes(i) The issued share capital of each of the companies, is in the form of fully paid ordinary shares. The percentage of the equity held by the Group is 100%, unless
otherwise stated. Certain of the smaller Group companies and non-trading companies have been omitted.(ii) Companies, without a designation are incorporated and operate in Great Britain. Those overseas are incorporated and operate in the country under which
they are listed.(iii) Shares held by Delta plc.
98_Delta_RA_p45 20/7/98 11:22 am Page 45
Calendar 1998
Dividends on ordinary shares Final 1997 Announcement 24 March 1998Payable 1 July 1998to members registered on 3 April 1998
Interim 1998 Announcement 15 September 1998Payable 1 December 1998to members registered on 25 September 1998
Distribution of documents to members Interim report 1998 posted 18 September 1998
Annual general meeting Proxies to reach registrars by 5.00 p.m. 8 May 1998Meeting to be held at 12 noon 12 May 1998
Accounting periods First half year 1998 ends 4 July 1998Second half year 1998 ends 2 January 1999
Ownership of ordinary sharesAt 3 January 1998
By type of shareholder
Shareholders Ordinary shares in issue
Number inNumber % Description millions %
6,638 82.9 Individual shareholders 8.3 5.632 0.4 Insurance companies, investment companies and pension funds 5.9 3.9
1,336 16.7 Other institutions 135.7 90.5
8,006 100.0 149.9 100.0
By size of shareholding
Shareholders Ordinary shares in issue
Number inNumber % Description millions %
4,413 55.1 held up to 999 shares 1.8 1.23,267 40.8 held between 1,000 and 24,999 shares 9.4 6.3
222 2.8 held between 25,000 and 249,999 shares 18.8 12.5104 1.3 held 250,000 shares and above 119.9 80.0
8,006 100.0 149.9 100.0
Personal equity plans (PEPs)The Company has both a General and a Single Company PEP with Bank of Scotland as Plan Manager. The PEPs provide UKresidents with a tax efficient method in which to hold ordinary shares in Delta plc. Dividends arising on such shares are free ofincome tax and any gains made on the shares’ stock market value whilst they are held in the PEP are free of capital gains tax.Further information is available from the Company Secretary or, alternatively, the Plan Managers at the following address:
Bank of Scotland (PEPs), PO Box 41, 101 George Street, Edinburgh EH2 3JH. The Government has announced its intention to adjust the tax benefits conferred on PEPs. The Company will monitor any changesmade by the Government and will consider the appropriateness of any alternative schemes introduced, once the Govenment hasfinalised its proposals.
RegistrarsDue to the sale of the share registration business of the Royal Bank of Scotland plc to Computershare Services PLC, the lattercompany became our registrars with effect from 12 March 1998. The Company will continue to review the effectiveness of theservice provided by the registrars.
Low cost share dealing serviceA low cost share dealing facility in the Company’s ordinary shares is available for all shareholders from the Company’sstockbroker, Cazenove & Co., 12 Tokenhouse Yard, London EC2R 7AN. Telephone: 0171 588 2828.
46 Delta 1997 Annual Report
Shareholders’ information
98_Delta_RA_p46 20/7/98 11:22 am Page 46
Notice is hereby given that the one hundred and tenth annual general meeting of Delta plc will be held at the Adelphi Suite, TheWaldorf, Aldwych, London WC2B 4DD on 12 May 1998 at 12 noon for the following purposes:
1 To receive and consider the accounts for the financial year ended 3 January 1998 and the report of the directors and auditorsthereon.
2 To declare a final dividend on the ordinary shares.
3 (a) To re-elect M Gill as a director of the Company;(b) To elect P M Smits as a director of the Company.
4 To re-appoint Coopers & Lybrand as auditors and to authorise the directors to determine their remuneration.
5 As special business, to consider and, if thought fit, pass the following resolution as a special resolution:
THAT, the authority conferred on the Company by a special resolution passed at the extraordinary general meeting of theCompany held on 25 April 1990 and subsequently renewed annually to make market purchases (as defined by Section 163 (3) ofthe Companies Act 1985) of ordinary shares of 25p each in its capital be renewed provided that:-
(a) the maximum aggregate number of ordinary shares hereby authorised to be purchased is 7,500,000;
(b) the minimum price which may be paid for each such ordinary share is the nominal value of such share and the maximum pricewhich may be paid for such ordinary shares is not more than 5 per cent. above the average of the middle market quotations forsuch shares taken from the Daily Official List of the London Stock Exchange Limited for the five business days in respect of whichsuch Daily Official List is published immediately preceding the date of purchase (in each case excluding expenses);
(c) unless previously revoked or varied the authority hereby conferred is to expire on 12 August 1999 or at the conclusion of theannual general meeting in 1999, whichever is the earlier;
(d) the Company may make a contract to purchase ordinary shares under the authority hereby conferred prior to the expiry ofsuch authority which may be or will be executed wholly or partly after the expiry of such authority, and may make a purchase ofordinary shares in pursuance of any such contract.
6 As special business, to consider and, if thought fit, pass the following resolution as a special resolution:
THAT, the power of the directors to allot equity securities (as defined in section 94 (2) of the Companies Act 1985) for cash,contained in Article 19 of the Company’s articles of association be renewed for a period ending on 12 August 1999 or at theconclusion of the annual general meeting in 1999, whichever is the earlier.
1 Kingsway, London WC2B 6XF By order of the Board8 April 1998 J P Narciso, Secretary
Notes:
(i) Preference shareholders have the right to attend but not to vote at this meeting.
(ii) Any member entitled to attend and vote at this meeting may appoint one or more proxies, whether a member of the Companyor not, to attend and vote on the member’s behalf. A form of proxy is enclosed for the use of members who may wish to votebut who are unable to attend the meeting. This must reach the registrars not later than 5.00 p.m. on 8 May 1998 in order tobe effective.
(iii) Copies of service contracts under which the directors of the Company are employed and the register of directors’ interests willbe available for inspection at the Company’s registered office, during normal office hours on any working day, from 8 April1998 to the date of the meeting and at the place of the meeting for fifteen minutes prior to and during the meeting.
Delta 1997 Annual Report 47
Notice of annual general meeting
98_Delta_RA_p47 20/7/98 11:21 am Page 47
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997£ million £ million £ million £ million £ million £ million £ million £ million £ million £ million
Profit and loss accountTurnover 655.7 840.2 793.6 774.0 785.9 832.7 898.6 1018.5 950.0 898.4
Profit before exceptional items, discontinued
activities and interest 74.6 93.6 92.4 70.7 62.7 60.0 71.3 74.4 64.2 65.8
Profit before interest 72.7 96.5 90.9 68.9 60.7 60.0 71.3 63.4 55.5 (15.3)
Profit on ordinary activities before exceptional
items, discontinued activities and taxation 74.1 89.2 87.2 65.8 57.0 53.4 65.1 64.1 54.7 59.2
Profit on ordinary activities before taxation 72.2 92.2 85.7 64.1 55.0 53.4 65.1 53.1 45.6 (22.5)
Profit for the year attributable to
ordinary shareholders 46.1 55.4 51.8 39.8 33.9 34.2 41.1 29.9 22.7 (43.9)
Transfers to (from) reserves 29.8 36.1 31.3 19.1 13.2 12.7 18.0 1.6 (5.6) (68.0)
Balance sheetOrdinary capital issued 36.4 36.6 36.7 36.8 36.9 37.1 37.2 37.4 37.5 37.5
Reserves 205.2 243.8 252.5 268.8 278.2 288.7 302.9 303.5 290.3 245.3
Equity shareholders’ funds 241.6 280.4 289.2 305.6 315.1 325.8 340.1 340.9 327.8 282.8
Capital employed 295.9 364.3 373.7 390.9 407.6 408.2 420.4 466.7 411.9 373.5
Earnings and dividendsEarnings per 25p ordinary share (pence) 31.7 38.0 35.4 27.0 23.0 23.1 27.7 20.0 15.2 (29.3)
Dividends per 25p ordinary share (pence) 11.2 13.2 14.0 14.0 14.0 14.5 15.5 18.9 18.9 16.0
Times covered 2.9 2.8 2.6 2.0 1.6 1.6 1.8 1.1 0.8 (1.8)
Underlying earnings per 25p ordinary share (pence) 32.7 36.6 35.7 28.0 24.3 23.1 27.7 26.1 21.7 25.7
Dividends per 25p ordinary share (pence)
excluding the FID enhancement 11.2 13.2 14.0 14.0 14.0 14.5 15.5 16.0 16.0 16.0
Times covered 2.9 2.8 2.6 2.0 1.6 1.6 1.8 1.6 1.4 1.6
StatisticsTaxation as a percentage of profit before taxation (%)
excluding exceptional items and discontinued activities 35.0 35.1 33.9 33.2 33.3 33.1 34.1 36.3 35.8 32.1
Taxation as a percentage of profit
before taxation (%) 35.3 34.9 33.4 33.5 34.5 33.1 34.1 40.1 44.5 (87.8)
Return on capital employed (%) before
exceptional items and discontinued activities 28.0 28.4 25.2 18.5 15.7 14.7 17.2 16.8 14.6 16.8
Return on capital employed (%) 27.3 29.2 24.8 18.0 15.2 14.7 17.2 14.3 12.6 (3.9)
Net assets per 25p ordinary share (pence) 166 192 197 208 213 220 229 228 219 189
Debt/equity ratio 0.1:1 0.2:1 0.2:1 0.1:1 0.3:1 0.2:1 0.2:1 0.3:1 0.2:1 0.3:1
Ratio of current assets to current liabilities 1.8:1 1.9:1 1.8:1 1.7:1 1.6:1 1.8:1 1.7:1 2.0:1 2.3:1 1.9:1
Stock Market price of ordinary sharesHighest (pence) 328 365 384 450 505 554 579 533 463 387.5
Lowest (pence) 246 264 272 277 335 416 431 374 323 242.5
UK Capital Gains TaxThe market value of Delta plc ordinary shares on 31 March 1982 was 42.5p per share.
Notes:(i) The profits of overseas companies in 1988 have been translated at year end exchange rates.
(ii) The figures for 1988 to 1992 have been restated to reflect the inclusion of acceptances in debt.
(iii) The figures for 1988 to 1991 have been restated in accordance with FRS 3 with the exception that no adjustment has been made for discontinued
activities.
(iv) In arriving at the underlying earnings per share, exceptional items and discontinued activities have been excluded, to reflect more closely the trend inunderlying earnings.
48 Delta 1997 Annual Report
Group financial information
98_Delta_RA_p48 20/7/98 11:20 am Page 48
