Table of Contents
TOC o “1-3” h z HYPERLINK l “_Toc355964220” 1.Introduction PAGEREF _Toc355964220 h 1
HYPERLINK l “_Toc355964221” 2.Firetech PLC strategy PAGEREF _Toc355964221 h 2
HYPERLINK l “_Toc355964222” 3.Economic outlook for UK manufacturing PAGEREF _Toc355964222 h 3
HYPERLINK l “_Toc355964223” 3.1.National and global economic conditions PAGEREF _Toc355964223 h 3
HYPERLINK l “_Toc355964224” 3.2.Key economic forecast data PAGEREF _Toc355964224 h 4
HYPERLINK l “_Toc355964225” 3.3.Raw material prices PAGEREF _Toc355964225 h 4
HYPERLINK l “_Toc355964226” 4.Firetech PLC’s Chief Executive’s review for 2012 PAGEREF _Toc355964226 h 5
HYPERLINK l “_Toc355964227” 4.1.Business strategy PAGEREF _Toc355964227 h 5
HYPERLINK l “_Toc355964228” 4.2.Aerospace and Specialist Equipment Division PAGEREF _Toc355964228 h 6
HYPERLINK l “_Toc355964229” 4.3.Residential and Commercial Division PAGEREF _Toc355964229 h 8
HYPERLINK l “_Toc355964230” 4.4.Industrial Fire Protection Division PAGEREF _Toc355964230 h 8
HYPERLINK l “_Toc355964231” 4.5.Group issues PAGEREF _Toc355964231 h 9
HYPERLINK l “_Toc355964232” 4.6.Investor performance measures PAGEREF _Toc355964232 h 10
HYPERLINK l “_Toc355964233” 4.7.Outlook and strategy for growth PAGEREF _Toc355964233 h 10
HYPERLINK l “_Toc355964234” 5.The Executive Committee PAGEREF _Toc355964234 h 10
HYPERLINK l “_Toc355964235” 6.Project to extend the UK headquarters & research facility PAGEREF _Toc355964235 h 11
HYPERLINK l “_Toc355964236” 6.1.Project team personnel PAGEREF _Toc355964236 h 11
HYPERLINK l “_Toc355964237” 6.2.Project plan PAGEREF _Toc355964237 h 12
HYPERLINK l “_Toc355964238” 6.3.Project progress PAGEREF _Toc355964238 h 12
HYPERLINK l “_Toc355964239” 7.New European Legislation PAGEREF _Toc355964239 h 13
HYPERLINK l “_Toc355964240” 8.Budgeting PAGEREF _Toc355964240 h 13
HYPERLINK l “_Toc355964241” 9.Product costing PAGEREF _Toc355964241 h 14
HYPERLINK l “_Toc355964242” 10.Disclaimer PAGEREF _Toc355964242 h 15
Introduction HYPERLINK “http://www.utcfireandsecurity.com/fireproducts/pages/ProductDetails.aspx?ProductId=2” INCLUDEPICTURE “http://www.utcfireandsecurity.com/FireProducts/Media%20Assets/000023-resized.jpg” * MERGEFORMATINET HYPERLINK “http://www.utcfireandsecurity.com/fireproducts/pages/ProductDetails.aspx?ProductId=1” INCLUDEPICTURE “http://www.utcfireandsecurity.com/FireProducts/Media%20Assets/Thumbnail%20-%20Watermist.jpg” * MERGEFORMATINET HYPERLINK “http://www.utcfireandsecurity.com/fireproducts/pages/SubCategoryLanding.aspx?subCategoryId=2” INCLUDEPICTURE “http://www.utcfireandsecurity.com/FireProducts/Media%20Assets/DA-thumbnail-05.05.2011.jpg” * MERGEFORMATINET HYPERLINK “http://www.utcfireandsecurity.com/fireproducts/pages/SubCategoryLanding.aspx?subCategoryId=3” INCLUDEPICTURE “http://www.utcfireandsecurity.com/FireProducts/Media%20Assets/UTC-Fire-Response-03.28.2011.jpg” * MERGEFORMATINET
Figure 1: Some of Firetech’s core products.
Firetech PLC is a global leader in fire and safety products. The firm serves aerospace, defence, industrial, commercial and consumer markets with the widest range of quality fire and safety products, systems and services, covering detection, protection, prevention and fire fighting. Firetech’s mission statement is:
“To make the world a safer place while delivering superior returns for our stakeholders. To do this, we will develop fire protection and safety products and systems, supported by first-class service. People everywhere trust our brands to help protect what is most valuable to them.”
The Firetech PLC group comprises three divisions: Aerospace & Specialist Equipment: Residential & Commercial Fire Protection and Industrial Fire Protection. It has its main research base and headquarters in Colnbrook in the UK, with development and product evaluation facilities associated with all of the Group’s major manufacturing locations in the UK, Europe and the US. It was established as a PLC in 2005 when it de-merged from a larger group of companies, Jones Ltd., along with Lock PLC. It was reported in the press at the time that Lock PLC got away with most of the shareholder funds (assets, capital) and it was Firetech PLC that ‘got lumbered with the debt’. In 2005 Firetech PLC started with a share price of £0.58 and long-term debt in the balance sheet of £303.4million. By 2012, despite the challenging conditions associated with the global economic slowdown, Firetech had managed to reduce this debt to £44.6m and the share price closed at £1.06 on 31st December 2012.
Firetech PLC strategyFiretech’s strategy includes the following four aspects:
Building brand awareness;
Our sponsorship of commercial television announcements, alerting consumers to the need for adequate fire and carbon monoxide protection, has increased demand for Firetech home safety products.
Innovation ahead of regulation;
We have developed the Open Path Eclipse, an infrared detector capable of ‘seeing’ a hydrocarbon gas, offering gas detection vital to safety in the petrochemical sector.
Extending capability through acquisition;
The acquisition of what is now Firetech PLC Fire Trainers enables Firetech to provide fire simulators, which offer realistic training facilities for a large range of fire scenarios, including airport emergencies.
Targeting growing markets;
As airlines develop hubs, the use of regional jets has grown dramatically, and Firetech is a market leader in the sophisticated fire protection systems they use.
As Firetech serves a wide spectrum of mainly regulated markets, developing products in anticipation of new legislation is a powerful driver of growth. The following Table 1 gives examples of legislative changes since the company’s inception that have led to growth in demand for Firetech’s products. It should be noted that in the UK there have been no significant updates since 2005, with the introduction of the extremely comprehensive “Regulatory Reform (Fire Safety) Order 2005”. Firetech are currently following with interest the prospect of European legislation being updated.
2000 Canadian Aviation Authority Class DMandate – adopting the FAA mandate
2001 French Civil Aviation authority mandates training of fire fighters at a certified training centre every 3 years
2002 ISO 14520 adopted as standard for halon alternatives worldwide
2003 States of Massachusetts, New Jersey, Pennsylvania, Rhode Island, Tennessee and City of New York require residential buildings to be fitted with carbon monoxide detectors
2003 EC Directive requires replacement of non-essential halon systems
2004 All motor vehicles to be fitted with a new standard of fire extinguisher in Brazil
2004 The Fire and Rescue Services Act 2004 (England and Wales) states that a fire and rescue authority must make provision for the purpose of promoting fire safety in its area by (for instance) offering free smoke detectors as part of the drive to reduce deaths in the home.
2004 Housing Act (England and Wales) allows Environmental Health Officers (EHOs) strong enforcement powers to require sufficient fire safety measures in existing dwellings.
2005 New ICAO regulations governing capacity of fire fighting vehicles on civil airports. All countries subscribing to ICAO regulations
2005 The Regulatory Reform (Fire Safety) Order 2005 – (England and Wales – later adopted by Scotland and NI) places the responsibility on individuals within an organisation to carry out risk assessments to identify, manage and reduce the risk of fire.
Table SEQ Table * ARABIC 1: Regulatory and legislative factors
Economic outlook for UK manufacturingThe following review was taken from ‘Manufacturing Outlook; EEF’s snapshot survey of business conditions in engineering and manufacturing companies’ (December 2012), published by EEF; The Manufacturer’s Organisation, and incorporates data from the Office for National Statistics (ONS) website and other business news websites.
National and global economic conditionsAfter three consecutive quarters of contraction, UK GDP rebounded back into positive territory with growth of 1% in the three months to September 2012. However, this still left total output slightly lower compared with the same period a year before; the data has been impacted by a series of one-off factors which means that the growth in the third quarter is most likely concealing a much weaker underlying economic performance. Latest surveys for manufacturing and other private sector indicators, including the Purchasing Managers’ Indices (PMIs), point to little momentum behind a recovery in the final months of the year. A potential bright spot heading into 2013 could be consumer spending. Employment has been edging higher through the year and inflation has been on a downward trend. While increases in energy prices and tuition fees pushed inflation higher in October, CPI came in at 2.7% compared to 5% a year ago. If maintained, both an improved labour market and lower inflation should start to lift households’ spending power through the course of 2013. The prospects for other components of growth continue to look much more uncertain and closely linked with developments outside the UK. Eurozone weakness is holding down export growth and the drop in investment intentions indicate that a sustained recovery in business investment spending still looks some way off.
The most recent assessment of the economic outlook from the Bank of England, set out in its Inflation report, judged that the UK is likely to see a sustained but slow recovery over the next few years. A key risk continued to be the situation in the Eurozone creating a challenging external environment over their forecast period. The government outlined another set of forecasts on the UK economy, from the Office for Budget Responsibility, at the Autumn Statement in which downgrades, both to the growth outlook and the public finances were announced. The Chancellor continues to consider shifting spending between current and capital budgets as a growth enhancing measure.
The success, or otherwise, of on-going efforts to resolve the crisis in the Eurozone will be a big determinant of the UK’s fortunes over the next twelve months. The Eurozone again slipped into recession in the third quarter and has not reported growth for a year. The composite PMI sunk to a forty-month low in October and European Commission indicators show that consumer confidence remains in the doldrums.
In contrast to the consumer slump in the Eurozone, confidence has been gradually picking up in the US. The recent run of data has been amongst the most positive across developed nations with most states adding jobs in October, optimism returning to the house-building sector; consumer spending has picked up a little and both the closely watched manufacturing and services PMI remain above the 50, no-change mark. While the recent election gave a decisive answer on one front, the automatically-imposed spending cuts and tax rises (the so-called ‘fiscal cliff’, narrowly avoided at the end of the year after tense negotiation in Congress) remain the key source of uncertainty for the US economy; there is little common ground on where the axe should fall or who should pay.
There was also some evidence of softening activity across emerging markets. Growth slowed in the first half of 2012 and forecasts downgraded growth projections (including for China and India) over the next couple of years. However, more recent indicators seem to have stabilised. In China the manufacturing PMI hit a 13 month high in November as domestic demand picked up and external demand held steady. China’s economy expanded by approximately 7.5% in 2012 and is expected to pick up some momentum to grow by over 8% next year.
Table 2 presents international economic forecast data, 2011-2013.
GDP Inflation 2011 2012 2013 2011 2012 2013
France 1.7 0.1 0.1 2.1 2.0 1.6
Germany 3.1 1.0 0.8 2.3 2.0 1.8
Japan -0.7 1.6 0.9 -0.3 0.0 -0.5
US 1.8 2.2 2.5 3.1 2.1 2.3
Eurozone 1.5 -0.5 -0.1 2.7 2.5 1.9
China 9.3 7.5 8.1 5.4 2.6 2.5
India 7.5 5.6 6.4 8.9 9.3 8.2
World 3.5 3.0 3.6 4.4 3.6 2.3
Table 2: International Economic Forecasts (% change except where stated) Source: Oxford Economics and EEF
Key economic forecast dataTable 3 contains a range of economic metrics for the period from 2011 and predictions for the forthcoming two years;
2011 2012 2013 2014
Exchange Rate (€/£) 1.15 1.23 1.25 1.27
Exchange Rate ($/£) 1.60 1.58 1.58 1.53
World Trade 6.4 2.5 4.2 6.4
Inflation – CPI 4.5 2.8 2.1 1.6
Inflation – RPI 5.2 3.1 2.7 2.5
Base Rate of Interest (%) 0.5 0.5 0.5 0.5
Exports 4.51 -0.17 3.03 5.55
Imports 0.47 2.08 2.79 3.98
Current Account (% GDP) -1.91 -3.85 -2.79 -2.45
Manufacturing Output 2.1 -1.2 0.7 2.6
GDP 0.9 -0.1 1.2 2.3
Average Earnings 2.5 1.8 2.4 2.6
Oil Price (Brent Oil $/barrel) 111.3 111.0 101.4 106.4
Manufacturing Employment (000s) 2531 2572 2545 2525
Rest of Economy Employment (000s) 28847 29298 29340 29577
Unemployment Rate (%) 8.1 8.1 8.4 8.3
Table 3: UK Economic Forecasts (% change except where stated) Source: Oxford Economics and EEF
Raw material pricesRaw material prices continue to put pressure on manufacturing businesses across all sectors. The rate of increase in prices stabilised somewhat in the latter half of 2012, however year-end prices remain high at ~70% higher than the 2005 benchmark figure for all manufacturing materials and fuels purchased, according to the Office for National Statistics (ONS). Recent (December 2012) surveys by both commercial insurer NIG and professional services firm PwC report that larger SMEs and manufacturers are being hit hardest, with 46% of firms with an annual turnover of more than £20 million actively looking to offset rising raw material costs by making reductions in other areas of the business, and over two-fifths (43%) of manufacturers having to consider cutting costs due to the resources crunch. But the effects are also being keenly felt by big business, with a Global Annual CEO survey revealing concerns about raw material costs being at a three-year high among bosses of the world’s biggest businesses. 53% of CEOs at global firms said the issue had now overtaken consumer spending and behaviour as one of the top threats to their firms’ growth prospects.
Firetech PLC’s Chief Executive’s review for 2012In 2012, we successfully followed our stated strategy and, as a consequence, have delivered what I believe to be satisfactory results in difficult market circumstances. We can be pleased with our performance against the main objective we set ourselves which was organic growth, furthermore achieving that growth in all three Group Divisions.
We also delivered an improvement in profit margin for the second year running after the significant impact of the global economic downturn. Reported growth in sales was 6.6% to £938.1m (£879.7m in 2011) and despite difficulties posed by such factors as the volatility in both raw material prices and exchange rates, the Group profit margin still grew to 2.3% (from 2% in 2011). Profits before tax were £21.6m (from £17.59m in 2011). During the year we reduced our legacy debt from £73.2m to £44.6m. The full year dividend for shareholders is 2.7p, which represents a 5.9% increase on last year.
We made further progress on acquisitions to improve our market coverage by being selective and investing in their integration, and these acquisitions have done well. During 2012, we also created a new structure of three divisions, by combining our European Fire Protection and North American Fire Protection businesses into one Industrial Fire Protection Division, which also includes our Emerging Markets business. The objective is to improve the profitability of our industrial fire protection business, focusing on reducing costs and improving margins. We will continue to focus on this throughout 2013, and expect to see benefits coming through from 2014. Figures 2 and 3 show recent company performance in both Turnover and Profit Margin.
Figure 2: Turnover (or sales revenue)Figure 3: Profit Margin
Business strategyThe resilience of our business is derived from the diversity of end-user markets we serve with a wide portfolio of strong product brands. Regulation and legislation drive demand, creating potential for growth, and we also support organic growth with investment in marketing and new product development. This is complemented with our strategy of ‘infill’ acquisitions designed to consolidate market structures, extend our distribution and service capabilities, and achieve cost and revenue synergies. Adhering to this growth strategy in attractive markets improves the strong cash generative qualities of the business; this has enabled us to focus since the demerger in 2005 on prioritising the repayment of the company’s sizeable legacy debts. We are on target to pay-down these debts by the end of 2013.
These results demonstrate that our business strategy is working, and I believe the continued application and execution of this approach represents an effective and healthy directive for future growth. The outlook for the year ahead is the most promising we have had since the start of the current economic downturn in global markets. The following Figures 4 and 5 provide an analysis of the business by division and geographic market.
Figure 4: Business analysis by division, 2012Figure 5: Business analysis by region, 2012
Figures 6 and 7 show the Return On Total Assets (ROTA) and stock turnover performance.
Figure 6: Return On Total AssetsFigure 7: Stock Turnover
Aerospace and Specialist Equipment Division
Figure 8 – Applications for some of our products
The division provides products and systems (industrial goods) for civil and military aircraft, military vehicles and bridging, plus combustion controls for power generation and industrial heating sectors. The divisional strategy focuses upon;
Targeting expanding markets plus an ongoing cycle of product development, in step with regulation.
Innovation through central R&D skills base and cross-transfer of technology into new markets.
Distribution capability through infill acquisitions, strategic partnerships and leveraging group network.
Investment in the core brand through a supportive brand architecture and awareness programmes.
Sales engineers work closely with specific customers, such as Airbus or Boeing, to determine the customers’ fire protection needs for their new products. Our products are then customised or designed from scratch to meet these needs. They also have the reassurance that they are dealing with a global firm with a longstanding reputation. They have personal relationships with Firetech’s sales engineers and we provide a comprehensive web-based marketing and service support information service. Awareness of Firetech’s brand is promoted via limited advertising in industry journals and trade magazines, whilst we offer a complete range to meet all fire and safety needs for the customer and provide a ‘one-stop shop’. This complete range and customised service commands a premium price in a competitive market, with products for new aircraft being delivered direct from our factories to the customer. However, these products also need to be supported once the aircraft, vehicle, power generation system etc. is in service and this requires a world-class distribution system to provide spare parts and maintenance. Our customers benefit from a global distribution network with regional warehouses in the major aviation hubs, such as Heathrow in the UK. We also provide training on how to use our products, for example we ran a series of training courses for British Airways cabin staff in 2012.
The net result of £206.4million turnover, representing 1.6% organic growth, for the Division demonstrates the strength in diversity. Our company continues to compete primarily with two other large groups, UTC (a US firm) and Tyco International (a UK firm) and between the three of us we hold 50% of the estimated £1,100m global market. The remaining 50% market share is divided between many local, specialist manufacturers worldwide, none of whom provide a complete product range. The Division also delivered an increase in operating profit of £1.3m in the year. This is after £1.1m of expense to rationalise the production facilities in North America, the benefit of which will be about £1.3m a year from 2014. A slight growth in our defence related business and a recovery in the demand for civil aerospace spares since the start of the global economic downturn contributed to the 1.6% organic growth in sales, despite the continued uncertainty in Original Equipment Manufacturers’ (OEMs) aerospace programmes.
Sales growth in regional jets and healthy business in civil aerospace and specialist combustion controls compensated for the decline in military sales. Wins on new programmes during the year provide a platform for future growth and the Division is positioned for an upturn in the market. The civil aerospace business benefitted from a tentative recovery in production at the major OEMs and included significant new contracts with both Airbus and Boeing. The Division also reinforced its market leadership on regional jet programmes by growing its sales and winning a large programme in China. The aftermarket in spare parts stabilised throughout the year but sales of upgrade equipment continue to suffer from uncertainty in the state of the global economy. By contrast, it was a good year for sales of equipment in support of military aircraft and bridges, boosted further by full production on the dry support bridge contract and further procurement on the F-35 Lightening II project.
The aerospace business is stable and I see continuing opportunities for growth by targeting expanding markets such as fire protection for regional jets and military applications. Although the power generation market in North America remains slow, there are good growth prospects for our specialist businesses in Asia, particularly China.
Residential and Commercial DivisionThe division provides extinguishers, smoke and carbon monoxide alarms, and other safety products to the retail (for sale to consumers) and commercial markets (for sale to businesses). We had a good year in difficult trading conditions with £142.4million turnover, representing growth of 1.7% on 2011. We established significantly stronger positions with major retailers such as Lowe’s, Home Depot and Wal-Mart and our broad range of products was a factor in this. The one-off costs associated with setting up the new arrangements for these major customers were absorbed in the year and contributed to a small drop in margins. The goal in the US is to become the sole supplier to North America’s largest home improvement and mass-market retailers. To do this it is vital to achieve low costs, via economies of scale. We promote our products to retailers at the major retail trade fairs and exhibitions around the world as well as delivering local promotions and seminars. These local events are organised in conjunction with the Group’s subsidiary companies overseas and are promoted with international advertising in appropriate trade journals. Our products are distributed from our factories to the major retailers via a series of regional warehouses worldwide.
62420522860
Figure 9: Examples of the division’s products
Our success also lies in developing the consumer demand for our brand. In 2011 we tested marketing programmes with consumers and continued in 2012 by launching a major awareness campaign, which runs into 2013. This programme could reach 30% of US households, with one in six already protected by Firetech products. Central to this is our television sponsorship of announcements by former New York mayor Rudolf Giuliani. The series, called Operation Save A Life, brought about a positive impact on consumer awareness and in the future we expect consumers to specifically request Firetech products at the point of sale. Firetech aims to provide a complete product range by continuing to acquire firms to fill existing gaps – so-called ‘infill acquisitions’. The firm again competes against two other large groups (UTC and Tyco International) and the three of us together hold 80% of the estimated £500m global market for these products. The division is in an excellent position to make positive progress this year.
Industrial Fire Protection DivisionThe division provides fire and gas detection, suppression and fire fighting products to industrial markets and fire brigades globally, plus distribution and services-related activities. £591m sales included growth of 1.1%. Again we are competing fully against UTC and Tyco International and with a host of smaller local firms, resulting in a similar global market share to that held by the Aerospace and Specialist Equipment division. The promotional strategy is also very similar to that adopted by the Aerospace and Specialist Equipment division.
Figure 10: Training fire fighters
We were successful in our desire to improve margins in North America, increasing them by 0.5%. However, in Europe slower markets, plus project delays in the petrochemicals sector, put pressure on margins. Rationalisation projects previously announced have progressed according to our plans. The loss of some employees through compulsory redundancy as a result of this rationalisation, whilst regrettable, is essential for our continued long-term success. The reorganisation into a single Industrial Fire Protection Division allows better co-ordination of marketing and new product development activity. The aim is also to grow the service element of our business, to complement our comprehensive product offering and to co-ordinate the approach to global customers more effectively. The resulting direct contact with end-users of our product also enables improved customer service. The infill acquisition strategy continues to build value, while adding service activity improves performance.
The division made good progress in challenging economic conditions and we will continue to work on this by developing the service element of sales, together with the benefits derived from reorganisation activity.
I anticipate the Industrial Fire Protection Division will benefit from improved demand in Europe and continued growth in North America and the emerging markets. Infill acquisitions that we have already integrated will support continued sales and profit growth, alongside partner programmes such as that with Rolls Royce. Further growth will come from acquisitions such as Croda’s fire fighting chemicals business (now renamed Firetech Fire Fighting Chemicals) and the launch of new products for gas detection, fixed fire suppression and fire fighting.
Group issuesThe initial phase of our £16 million investment in software (an Enterprise Resource Planning or ERP system) is progressing satisfactorily. This will help all aspects of the business, integrating internal and external management of information across our entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management etc. and providing a common software platform across the Group. The infrastructure is now established and working and the first operating unit began live use of the system in December 2012. Others will now follow at regular intervals over a 5-6 year period, and we expect to see a positive return in cost savings, operational efficiency and reduced working capital.
We announced the sale of our investment in Warmlux (a company providing domestic gas central heating boilers) in January 2013 and expect to complete the transaction in March 2014. In the 2005 de-merger Lock PLC refused to take Warmlux, despite its relatively high profit margins and return on total assets. It has considerable long-term debts and long-term liabilities with respect to the warranties offered to consumers on its products and we have found it difficult to estimate the likely future commitments required to support these warrantees. The research and development required to improve Warmlux’s product range is expensive and unique, with no synergies with other parts of the group. Being a very mature business it has a large number of retired employees and there are concerns about the current size of the pension fund and the potential size of its future payments. Nonetheless it represents a good acquisition for a company based in the provision of such products and the cash proceeds from the sale of Warmlux will further reduce borrowings, thereby enhancing the Group’s potential for making acquisitions in the year ahead.
With the prospect of the end of this year seeing the final repayment of the legacy debts resulting from the 2005 demerger, coupled with the funds generated by the sale of Warmlux, the Executive Committee have been discussing the company’s strategy towards market position. Specifically, they are interested in whether they may now fully dedicate the company to assuming a role as a technology leader or continue with the safer option of following technological developments as a ‘fast-follower’.
Investor performance measuresThere are various incentive schemes offered to the company Directors and general employees. These schemes are all linked to growth in Earnings Per Share; EPS is a relative measure of the company’s profit performance with respect to the number of shares in issue. It is a very useful ratio for any stakeholder and in particular is one that is watched closely by financial institutions and ordinary shareholders. The higher the earnings the more likely the firm is to issue dividends. All stakeholders will want to interact with a company that is profitable and therefore less likely to run into financial problems.
Figure 11: Earnings per shareFigure 12: Research & Development spend
Outlook and strategy for growthOur business strategy is proving its worth. In 2013, we expect to see further growth, both organically in what I expect to be more favourable markets, and from infill acquisitions, for which we will have more resource as a result of the sale of Warmlux. We have entered 2013 with a good order book and improving market conditions evident in all three Divisions. The influence of factors such as currency exchange fluctuations and rising prices of raw materials may be expected to continue to affect reported sales and profits, although we hope that the impact may be mitigated by our initiatives with, for instance hedging contracts that we have in place for 2013. (Hedging contracts are used to help firms manage the risk of exchange rate fluctuations, which can have a detrimental effect on the value of overseas sales, profits and assets.)
We have been suc