Annual Report 2012

Thorntons PLC Annual Report and Accounts 2012
Rebalance Revitalise Restore
About Thorntons
Providing quality chocolate gifts for over 100 years

Our delicious treats have been delighting customers for 100 years. Today Thorntons is a 217m+ turnover company and our products can befound across a multi-channel network comprising shops, franchisees, online and through a wide choice of retail partners.
Our vision To be Britains best-loved chocolate brand, making every customer smile
Read how we aim to achieve this in our strategy on page 4
Thorntons plc Annual Report and Accounts 2012
Highlights
Revenues of 217.1 million (2011: 218.3 million) Profit before tax and exceptional items of 0.9 million (2011:4.3 million) Exceptional items total 3.1 million (2011: 5.4 million) consisting ofimpairment and onerous lease provisions Net debt at period end was 29.1 million (2011:24.5million) Dividend waived (2011: 2.20p) Market share increased from 7.7% to 7.8% in a weak market
In this report
IFC About Thorntons 1 Highlights 2 4 6 Chairmans statement Our business and strategy Chief Executives report Review of the year
10 Finance Directors report 13 Corporate social responsibility
16 Board of Directors 17 Corporate information andfinancialcalendar
retail
revenue OPERATING PROFIT
18 Report of the Directors 22 Corporate governance 27 Report on the Directors remuneration 35 Independent auditors report Corporate
132.1m 3.4m
sales & operations
revenue OPERATING PROFIT
37 Consolidated income statement 38 Statements of comprehensive income 39 Statements of changes in equity 41 Balance sheets 42 Cash flow statements 43 Statement of accounting policies 49 Notes to the financial statements 79 Five year summary 80 Shareholder analysis Financial statements and notes
85.0m 16.6m
Chairmans statement
During the past year Thorntons has continued to operate in a difficult trading environment as the UK economy moved into a double-dip recession. We maintained production volumes and grew our market share in an overall weak marketplace. This was, however, achieved atthe expense of margin and as a result profitability was affected in particular during the first half of the financial year. We have taken actions to improve margins and the second half of the financial year saw encouraging year on year improvements, reviewed in the Finance Directors report on page 10. Sales declined by 0.5% to 217.1 million (2011: 218.3 million) and profit before tax and exceptional items was 0.9 million (2011:4.3 million). This performance was affected by weak consumer demand caused by a decline in discretionary income, combined with structural problems in many of the UKs High Streets, which continued to suffer from high vacancy rates and weak footfall. Promotional activity remained high as shoppers sought value. This was most evident around our key Christmas season which negatively impacted gross margins and consequently profitability asstated in our trading statement in December. These events reaffirmed our three-year strategic plan to rebalance the business, create a smaller Retail estate, revitalise our brand and, most importantly, restore profitability. Our strategy to rebalance the business is progressing well and has started to bear fruit: in the second half we delivered a strong Easter across all our channels and ended the year with good growth in our Commercial channel and a small like for like growth in our Own Stores. Reducing exposure to underperforming stores in weaker locations whilst growing our sales through other channels, specifically through our Commercial channel with our grocery partners, is proving the right way forward for our business. The UK High Street Following our strategy review last year we announced that we would reshape our Own Store portfolio having concluded that we could trade profitably from an estate of approximately 180 to 200 stores. These stores will be located in vibrant High Streets and malls with sustainable footfall and rents that support our business model. Our exit from the remaining stores isprogressing well and this will continue throughout the next two financial years. The majority of these stores will close upon their lease expiry. During the period, 36 stores were closed at a cost of 1.0 million (2011: 0.6 million). In May this year our largest franchisee wentinto administration. This contributed toasignificant decline in Franchise store numbers and sales in the final quarter of theyear. Our remaining franchisees, whilst similarly challenged by the overall environment did, however, respond positively to the new ranges and initiatives for spring 2012. Commercial customers Despite the challenging economic environment our business with third party retailers, particularly the major grocers, continued to grow both in terms of sales and market share where our leadership of the inlaid boxed chocolate market was maintained. As we rebalance we anticipate that this growth will continue, offsetting the reduction in sales due to the decline in our Own Store numbers. Pension scheme Following the regular triennial review the pension scheme actuarial deficit as at 31 May 2011 increased to 29.4 million. Despite regular contributions to the scheme the deficit has grown due in particular to the impact of the Bank of Englands fiscal policy on the discount rates being applied to future liabilities. Since the year end an agreement with the Pension Trustees has been concluded which secures anincrease in regular funding and a cash payment of 1.0 million into the scheme. Dividends The Board is not recommending a final dividend. Employees and Directors I would like to take this opportunity to acknowledge the commitment, passion andhard work of the people at Thorntons.
Summary
During the past year Thorntons has continued to operate in a difficult trading environment affected byweak consumer demand caused by a decline in discretionary income, combined with structural problems in many of the UKsHigh Streets Our strategy to rebalance thebusiness is progressing well and has started to bear fruit: in the second half we delivered a strong Easter across all our channels and ended the year with good growth in our Commercial channel and a small like forlike growth in our OwnStores Despite the challenging economic environment our business with third party retailers, particularly the major grocers, continued togrow both in terms of salesand market share
We do not expect the external economic environment to improve. However, weenter the financial year with a strong order book from ourCommercial customers for the Christmas period, trading plans for our Own Stores and Franchises supported by new year-round and seasonal ranges as well as having secured some new international business.
Alongwith our franchisees and commercial and business partners, I would like to thank them all for their continued support. I would especially like to express my sincere thanks and best wishes to those in our Own Store teams that have had to leave us during the past year as we proceeded with store closures. I am delighted that we have been able to retain so many but I have been overwhelmed by the positive approach shown by those to whom wehave regrettably had to say good-bye. In February Mike Killick joined Thorntons asFinance Director succeeding Mark Robson, whom I would like to thank for his positive contribution to the business. In February Keith Edelman joined the BoardasNon-Executive Director, bringing considerable and valuable experience in retailand general management. Since the year end we have further strengthened the Board with the appointment of Martin George as Non-Executive Director with effect from 1November 2012. Martin has extensive experience in the marketing and commercial development of consumer brands and we lookforward to his future contribution. With regard to the role of Chairman, Iannounced my intention to retire from theBoard this time last year. The Board hasnow asked me to remain in role until February 2013 after which Paul Wilkinson, currently the Senior Non-Executive Director, will succeed me as Chairman. Paul has significant knowledge and understanding ofThorntons, gained not least through his sixyears as Non-Executive Director, and considerable FMCG and Board experience. Iam confident that he will do an outstanding job as we continue to implement our strategy. From February 2013 Keith Edelman will become the Senior Non-Executive Director. Outlook Following a difficult first half and many quarters of continuing tough trading conditions I have been heartened by the level of sales in the final quarter of the year. Albeit a nine-week period that accounts for less than 12% of our
sales, our Own Store like for like sales werepositive and our sales to Commercial customers particularly strong. We do not expect the external economic environment to improve. However, we enter thefinancial year with a strong order book from our Commercial customers for the Christmas period, trading plans for our Own Stores and Franchises supported by new year-round and seasonal ranges as well as having secured some new international business. Additionally we will continue to seek margin improvements and cost savings. Whilst we have confidence in our plans we are mindful of the challenges in these difficult and uncertain economic times.
Review of the year
John von Spreckelsen Chairman 11 September 2012
Corporate Financial statements and notes
Our business and strategy
Whats our plan?

Our strategic aim is to rebalance the organisation andcapitalise on Thorntons brand strength through a more focused retail estate with a differentiated customer proposition, a renewed customer focus and a compelling and growing commercial, franchise and online offering.
Our business
Who are we and what makes us different?

Were a famous British chocolate maker, providing quality gifts forover 100 years. Our customers have somany things to say to those they care about; wehelp them say it with chocolate. Together we make every day special.
Whats our business What are comprised of? ourvalues?

Our two divisions:
rETAIL 3 30 Own Stores and Cafs across theUKand Ireland A franchise estate of 177 stores T horntons Direct online consumer andcorporate sales Sales and operations Commercial sales Purchasing Manufacturing and Distribution Brand support
Creativity Excellence Bringing people together

Our values underpin our strategy, helping toinform our people, their actions and our communication with our customers.
What are our objectives?
To rebalance...
our sales & resources tomeet our customers current and future needs, delivering a reduced and sustainable retail estate and growing sales through all other channels
To revitalise...
our brand through clear and consistent brand positioning across all customer touch-points, encouraging customers tobuy from us once more per year
To restore...
our profitability to industry competitive returns over the medium to long term
Review of the year
How will we achieve our objectives in the coming year? S tore closure programme on track andtocontinue Continued commercial sales and sharegrowth Franchise refocus on mini format Develop Retailer Brand business International strategy launched Launch of brand positioning and visualidentity Extensive range and packaging refresh Further improvements in store experience Introduce new products to encourage brandreappraisal Deliver and protect margin improvements
Corporate
Leverage category management Continuing to improve business efficiency
Financial statements and notes
Our strategy goes into more detail in the ChiefExecutives report on pages 6 to 9
Delivering this transformation will have a positive impact on our multi-channel strategy and our long-term corporate health.
Chief Executives report

The past year has seen some of the mostchallenging economic conditions inThorntonshistory. Sales in the year fell by 0.5% to 217.1 million, partly due to the impact of our store closure programme. Our reported pre-tax profit before exceptional items was 0.9 million (2011: 4.3 million). Net debt at 30 June 2012 was 29.1 million (2011: 24.5 million), partially affected by the timing ofbalancing quarterly VAT payments. Although a multi-channel strategy helps tode-risk our business, the impact of the weakness in the economy was felt across the Company. Consumer spending continued to be squeezed and this was most evident during our key Christmas selling season when customers purchased selectively which resulted in a higher proportion of sales coming from lower priced items and promotional lines. This had an adverse effect on both revenues and margins as our sales mix shifted into promoted lines and we lost sales of higher priced items. Our overall production volumes were, however, maintained as a result of the changing mix between Retail and Commercial sales as we progress our strategy. In recent years increasing business costs, inparticular raw material costs, have put pressure on our margins. Since we produce most of our own products, we are afforded the opportunity to influence product costs. During the course of the year we took a number of actions to mitigate such pressures including product and packaging engineering, ingredient optimisation and procurement initiatives. Although the benefits of such actions take some time to feed through into the business wedid begin to see year on year improvements in margin during the second half of the year. We expect these benefits to continue into the current financial year. Despite these strong headwinds, we have made progress with the implementation of our strategy and delivered an encouraging second half performance. Our share of the UK chocolate market grew further to circa 7.8% (2011: circa 7.7%), reflecting the continued strength of the Thorntons brand with our customers. Strategy The 2012 financial year saw us begin the implementation of our new strategy, announced in June last year, which set out our plan for the future of Thorntons. Underpinning this plan are three main objectives: Rebalance our sales and resources to ensure we are where our customers want to buy from us, be that on the High Street, in supermarkets or online. We want to meet our customers current and future needs, trading from a reduced but sustainable and profitable Own Stores estate whilst growing sales across our other channels, specifically our Commercial channel, which will become our largest channel over the next two years. Revitalise the Thorntons brand, developing the year-round chocolate gifting market, whilst retaining our special reputation for the key seasons. Through the creation of clear and consistent brand positioning supported by outstanding new products, we want to encourage our customers to buy from us once more per year. Restore our profitability to industry competitive returns over the medium to long term. We have made good progress in implementing this three-year plan. The past year has presented many challenges but we have been encouraged by the way in which the business has demonstrated itsability to cope with these difficulties. I am confident that the core direction of our strategy is right. The year in review Retail Total Retail sales including Own Stores, Franchise and Thorntons Direct declined by 5.2% to 132.1 million (2011: 139.5 million). Own Stores Good progress was made with the store closureprogramme. During the period, 36stores were closed at a cost of 1.0 million (2011: 0.6 million) and three stores were refurbished, two of which were successful resites, resulting in a total of 330 stores at theyear end (2011: 364). We remain on trackto reach our target of 120 closures over thethree-year period.
Summary
The past year has seen someof the most challenging economic conditions in Thorntonshistory. Despite this, we have made progress withthe implementation ofour strategy and delivered anencouraging second halfperformance Our share of the UK chocolate market grew further to circa 7.8% (2011: circa 7.7%), reflecting the continued strength of the Thorntons brand with our customers We routinely review our long-term objective and remain confident that we canretain a sustainable and profitable Own Store estate of between 180 to 200 stores Our ambition for the Commercial business is that itshould be able to generate over half of our overall sales over the next two years, making it the largest channel
We have made goodprogress in implementing this three-year plan. The past year has presented many challenges but wehave been encouraged by theway in which thebusiness has demonstrated its ability to cope with these difficulties. I am confident that the core direction of ourstrategy is right.
Overall Own Store sales were down 5.8% to111.4 million (2011: 118.3 million), reflecting the reduced estate and declines in like for like performance. Sales in Own Stores declined on a like for like basis by 3.8% as a result of the further weakening of consumer expenditure and footfall. As mentioned earlier, this was particularly apparent during the key Christmas period. Improvements were made in merchandising, trading and new products. We launched a number of initiatives to improve the customer experience including Smiles sampling, newFinishing Touches including improved gift-wrapping service and gift creation and our customer experience measurement programme. We believe our strong Easter performance and improved like for like sales in the final quarter ofthe year reflect the impact of these initiatives. During the year we opened three stores tradingin a new format focusing on year-round gifting supported by an outstanding customer experience. Whilst it is still early days, we havebeen encouraged by their performance. We have taken learnings from these stores to improve the wider estate as well as informing future refurbishments. Recognising the challenging conditions in many of the more distressed locations where we trade and may have plans to close, we adopted a tactical trading approach which presents a simpler offer through a reduced range supplemented by residual, short-dated and end-of-line products. Consumers in these locations have responded positively to these Outlet stores which will decrease in number as our closure programme continues. Franchise Franchise sales for the period declined 7.8%to10.7 million (2011: 11.6 million). Our franchisees were similarly affected by the difficult trading conditions resulting in a dampening of prospective franchisees appetitefor investment. During the year we were affected by the challenges facing our major franchise partner which culminated in their administration in May 2012. We are encouraged that this
business has subsequently been purchased by new owners. We opened 19 new Franchise locations duringthe year and closed 69 (of which 46 were with our major franchise partner) resulting in 177 stores at the year end (2011: 227). A combination of the above factors meant that we have been unable to deliver on our plan to open a franchise in the majority of locations where we closed an Own Store. In light of this, we have adapted our Franchise offer to include a new mini-franchise format, which requires less space and lower investment. This new format has been well received and the first opened in August 2012. Thorntons Direct Thorntons Direct sales over the period rose by 4.2% to 10.0 million (2011: 9.6 million). Our online consumer business grew strongly by9.8% with good performances at Christmas and Easter. Visitors to our website grew by 13% and orders by 15% reflecting a further improvement in conversion levels. During the year, we put considerable effort behind the development of a new website, which will launch later this month. The new website willoffer greater flexibility for both us and ourcustomers, along with opportunities to further enhance personalisation. Our corporate sales declined slightly as customers continued to be cautious about theirlevel of spending in this area. Sales & Operations Commercial sales Commercial sales grew by 7.9% to 85.0 million (2011: 78.8 million). Both sales and margins came under pressure during the year which saw the total boxed chocolate market decline by 4%. Nevertheless, our overall market share grew by 0.2% to 11.7%*. Whilst we maintained our position as the leading brand in inlaid boxed chocolate with 33.1%* we placed a great amount of effort in growing our share in the key seasons. Our share in Christmas and Easter specialities grew considerably to 2.7% (2011: 0.9%) and3.9% (2011: 3.0%) respectively as a result of strong new products and promotions*.
* Source: AC Nielsen July 2012.
Review of the year Corporate Financial statements and notes
Chief Executives report continued

The year in review continued Sales & Operations continued Commercial sales continued Whilst sales of Christmas seasonal products were positive, the overall Christmas period failedto deliver to our expectations and we subsequently made a number of changes to both channel management and trading plans. The effect of this was encouraging and resulted in a strong period of trade through Easter and the year end. Export sales Within this Commercial Sales performance Export sales grew by 8.3% to 3.9 million (2011: 3.6 million). Our tax- and duty-free sales continued to grow strongly and we saw good growth in a number of territories including South Africa and Australia. Sales to the Republic of Ireland weakened reflecting the poor local economic conditions. We have now completed our strategic review ofinternational opportunities, the conclusions of which are presented later in this report. Manufacturing operations Maintaining or growing our production volumes is a key element of our rebalancing strategy. We are pleased that despite the challenges of the past year we have been able to maintain our production volumes and kept production overheads broadly flat. This is due to the continued benefits of investment and good manufacturing disciplines. We were able to respond quickly to changing demand levels during the year, evidence of the inherent flexibility of our production capability and also the skill andexperience of our outstanding Derbyshire manufacturing team. Whilst raw material prices have fluctuated we continue to ensure that we buy in a timely and effective way. The outsourcing of our Warehousing and Distribution to our new partner, DHL, was completed during the financial year and had apositive impact on service levels, where we saw further improvement from 97.8% in 2011 to 98.1% this year. Brand and product innovation Following the presentation of our strategy and the restructuring of our Marketing and New Product Development teams under our newly appointed Director of Brand & Customer Marketing, we have undertaken a thorough review of our brand in the context of our strategy and vision to be Britains best-loved chocolate brand making every customer smile. We now have clarity about who we are and what makes us different. Our customers have so many things to say to those they care about and we want to help them say it with chocolate. Underpinning this are our values of Creativity, Excellence and Bringing People Together which will help inform our people, their actions and our communication with our customers. In this context, we have also simplified ourcategories, ranges and approach to our customers which will support our activity for next year. A full review of our brand identity has been completed and will start to become visible over the year ahead. New products are always of critical importance to Thorntons and never more so than now as we seek to gain reappraisal from our customers, encouraging them to see us as relevant all year round, as well as for the key gifting occasions. In addition to the significant levels of product innovation at these key seasons, the past year saw the successful introduction of our Little Gifts range of affordable chocolate gifts ideal for those just because moments. We introduced Hampers and Alphabet Truffles into our Own Stores and Franchise channels, both of which continued to be successful online along with further growth in sales of Photo Boxes. Our Perfect Hearts along with our Perfect Eggs allowed our customers to create personalised, bespoke gifts which were very well received and our Best of British range, introduced for the summer of celebration, has also been particularly successful. In the meantime our brand remains strong. Thorntons was ranked eleventh on the list of the most highly rated brands by UK consumers (YouGov BrandIndex 2011). We retain the highest brand advocacy of any premium chocolate manufacturer and our spontaneous brand awareness reached 50% at Christmas 2011, consistently the highest in our category (HPI Brand Tracker). Over 95% of our customers rate their overall store experience as four or fiveout of five and 89% rate their likelihood to
Restoring profitability is our top priority. Wehave taken a number of actions torebalance our business and revitalise our brand which we believe will deliver improved profits.
recommend similarly (ORC Customer Experience Survey). Our brand and chocolate-making skills continue to win awards. Led by our Master Chocolatier, Keith Hurdman, who continues as the Academy of Chocolates Chocolatier of the Year, three of our chocolatiers won gold and silver medals at Hotelympia in the Petit Fours class. We were also proud that our Centenary marketing campaign was recognised by the Marketing Society and won an Award for Excellence. The year ahead the second year of our plan Rebalancing We will continue with our Own Store closure programme and expect to close around 40 stores over the course of the current financial year. When store leases expire we will take advantage of opportunities to extend our period of trading on significantly reduced rent. Most ofthe stores identified for closure continue to make a positive cash contribution, albeit an unsatisfactory one, so we are in control of thisprogramme and will take advantage of short-term opportunities should they arise. Weroutinely review our long-term objective and remain confident that we can retain a sustainable and profitable Own Store estate ofbetween 180 to 200 stores. Our plans for our Franchise channel are notbased on improvement in the underlying economy and prospective franchisee sentiment. We now anticipate a low percentage of franchise openings in Own Store closure locations but are more confident of the wider opportunity that our new mini-franchise format presents. Whilst we have not budgeted to recover any business with our major franchise partner, we are currently working with the new owners and have recommenced modest levels of trading. Thorntons Direct will be boosted by the newwebsite launching in September 2012, with improved functionality and improved personalisation. Weare also working further onimproving our operations and delivery services ahead of our peak trading period. Our ambition for the Commercial business is that it should be able to generate over half of our overall sales over the next two years, making it
the largest channel. With a strengthened team we are focusing on building on our positive relationships with the major grocers, achieving broader and deeper year-round listings supported by further strong growth in share during the key Christmas and Easter seasons. During the year ahead we expect to rebuild ourRetailer Brand business, an area which we have previously moved away from due to low margins. As a result of the quality, flexibility and efficiency of our New Product Development and Manufacturing we have secured profitable business from retailers at home and overseas. We do not, however, currently supply private label to existing commercial customers who sell the Thorntons brand. We have now completed our review of the opportunities for developing our business internationally. The coming year will see us embark upon the first stage of a long-term development programme that has the prospect of adding significantly to the overall profitability of the business over a three- to five-year time frame. We have a targeted approach to a few markets where we can learn and develop our international capabilities. Alongside the further development of our tax- and duty-free business, we will start with a focus on English-speaking markets where the Thorntons brand has an existing level of awareness as well as some modest sales. We will not export our retail format nor pursue Franchise at this time but will invest resources solely on developing commercial relationships. We will not incur heavy investment or start-up losses. We expect that rebalancing during the year ahead will benefit growth in production volumes with manufacturing overheads remaining broadly flat. Revitalising We will continue to focus our energies on improving our Own Stores, making them the place where the Thorntons brand is brought to life. Ahead of Christmas we will refurbish three further stores with a refined version of our new store format. Taking learnings from our new store format and building on last years activity, we will embark on further improvements to merchandising in our core estate in the coming
year. This will be supported by enhancements to our customer engagement focus including additional support to our new Finishing Touches programme. In the autumn we launch our new boxed chocolate brand, created to appeal to the less formal, female customer, a range that will signal our intent to encourage new year-round purchase occasions, expanding the market and inviting reappraisal of our brand. This supports a strong programme of new product development that includes a re-launch of our models range, further new Little Gifts, a trio of limited edition Wow boxes in addition to a Christmas seasonal line-up that includes two new iconic Continental items: our first Continental advent calendar and a magnificent Christmas table centrepiece. With the work on the Thorntons brand now complete we are embarking on an extensive programme to review almost all of our products over the course of the next year. This will deliver a step change in our ranging, packaging and merchandising by the autumn of 2013. Restoring profitability Restoring profitability is our top priority. We have taken a number of actions to rebalance our business and revitalise our brand which we believe will deliver improved profits. We have also invested significant effort in product and packaging engineering, ingredient optimisation and procurement. Combined with the restructuring and outsourcing completed during the past financial year, these actions should positively impact margins and profitability. In the meantime we have created and adopted new approaches to manage costs and cash aggressively and will continue to do so.
Financial statements and notes Corporate Review of the year
Jonathan Hart Chief Executive 11 September 2012
Finance Directors report

Key performance indicators The Board uses five key performance indicators to measure progress in building shareholder value. These are shown below for the last two financial years:
2012 2011
Net sales movement Own Stores like for like sales growth Profit before tax and exceptional items Gross margin return on sales Cash generated from operations
(0.5)% (3.8)% 0.9m 44.0% 1.5m
1.7% (7.9)% 4.3m 46.2% 14.8m
Revenue Thorntons sales are made through a number of channels, whose performance is summarised below:
2012 m 2011 m % increase/ decrease
Profit before taxation Reported profit before taxation and exceptionals fell to 0.9 million (2011: 4.3 million). Group sales fell by 0.5% to 217.1 million (2011: 218.3 million) primarily due to the very challenging economic environment in the financial year under review, which led to weak consumer demand caused by a decline in discretionary income. Group gross margins came under pressure, falling to 44.0% (2011: 46.2%) as customers continued to seek value and focused their purchases on promotional lines. Exceptional items As a result of the performance of Retail OwnStores during the last two financial years, significant impairment and onerous lease charges have been incurred. Assets are reviewed for impairment on a regular basis anda provision made where necessary. A discounted cash flow is calculated for each Retail store, including attributable overheads, using the Groups weighted average cost of capital. The net book value of assets attributable to the Retail store is impaired to the extent that the net present value of the cash flows is lower than the net book value. The provision for onerous leases is held in respect of leasehold properties for which the Group is liable to fulfil rent and other property commitments for stores from which either the Group no longer trades or for which future trading cash flows are projected to be insufficient tocover these costs. Amounts have been provided for the shortfall between projected cash flows and the property costs up to the lease expiry dateon a discounted basis. The onerous lease provision was increased during the financial year by 1.9 million (2011: 2.5 million) and the impairment charge by 1.2 million (2011: 1.8 million). The lowering of the annual charge since last year reflects both the disposal of some of themost affected outlets in 2011 and the improvement in Own Stores LFL sales performance to (3.8%) (2011: (7.9%)).
Own Stores Franchise Thorntons Direct Total Retail sales Sales & Operations Total sales
111.4 10.7 10.0 132.1 85.0 217.1
118.3 11.6 9.6 139.5 78.8 218.3
(5.8)% (7.8)% 4.2% (5.2)% 7.9% (0.5)%
Sales for FY12 are for a 53-week financial year compared with a 52-week financial year in FY11. The53rd week contributed 3.5 million of sales equivalent to a 1.6% increase versus the previous year. A detailed review of the sales performance by channel is set out in the Chief Executives report. Exceptional items The exceptional charge for FY12 is made up of the following items:
2012 m 2011 m
Onerous lease provisions Asset impairment charge One-off charge incurred with the outsourcing of the warehousing and distribution facilities Bank re-financing fees Total
1.9 1.2 3.1
2.5 1.8 0.7 0.4 5.4
10
Underlying profits
2012 m 2011 m
Profit before taxation and exceptional items Redundancy and restructure charges Store closure costs Total underlying profit Underlying profits for the year under review fellfrom 5.5 million to 2.5 million. One-off costs increased year on year primarily as a result of there being 36 store closures in the year under review (2011: 16). Gross margin return on sales Gross profit margin percentage reduced by 2.2percentage points for the year to 44.0% (2011: 46.2%), reflecting contrasting half year performances, the first half declining 4.2% and the second half improving year on year by 1.0%. Overall in the year the following factors contributed to this 2.2% reduction: further success in growing the Commercial channel which now represents 39.1% of total Company sales (2011: 36.1%). These sales, being at wholesale prices, reduce Group gross profit percentages but enhance Group profitability as we continue to rebalance the business; continued weakness in the economy which has seenconsumer spending squeezed and the appeal of lower priced or promoted items grow; and raw material inflationary pressures which, while less acute than 2011, have continued, particularly in the first half. The second half of the financial year saw thebenefits of a number of management initiatives, identified earlier in the year, start toflow through into margin, including: manufacturing efficiencies and improved overhead cost control; product and packaging engineering and ingredient optimisation;
0.9 0.6 1.0 2.5 procurement initiatives; and refinement of New Product Development processes.
4.3 0.6 0.6 5.5
As part of the continued rebalancing strategy explained in the Chief Executives report we will continue to focus on growing sales to our commercial partners, reducing our Own Store estate and retail sales volumes to levels that will produce sustainable long-term profits. Whilst this will have a negative impact on reported gross margins, the net operating margins in our Commercial channel are materially higher than those through our OwnStores channel, primarily because of the inherently higher structural costs of operating aretail network. We believe that our strategy to improve overall gross margins will address the fall in gross margin percentages seen in the last two financial years and will benefit all of our distribution channels. We saw some modest early improvement in thesecond half of the year under review and anticipate that this upward trend will continue in the coming financial year. Half-on-half improvements As outlined in both the Chairmans and the Chief Executives reports, the second half of the year under review saw a significant reduction in the loss before exceptional items and taxation, and an improvement in all statutory profit measures, compared to the same period in theprevious financial year.
The second half of theyear under review saw a significant reduction inthe loss before exceptional items andtaxation, andan improvement in all statutory profit measures, compared to the same period inthe previous financialyear.
11
Finance Directors report continued

Half-on-half improvements continued
H1 2012 m H2 2012 m 2012 m H1 2011 m H2 2011 m 2011 m
Gross profit Operating profit Profit before taxation and exceptional items At the end of the first half of the year the Company reported a pre-exceptional profit before taxation of 3.1 million (2011: 8.4 million) in a challenging economic environment which affected our key Christmas trading period. However, a better Easter 2012 saw second halfpre-exceptional losses improve to a loss of2.2 million (2011: 4.1 million loss). This was the strongest second half performance recorded by the business for three years. Operating expenses Operating expenses before exceptional itemsreduced by 2.1% to 94.3 million (2011: 96.4 million). As a percentage of sales, operating expenses reduced from 44.2% in2011 to 43.4% in 2012. The reduction in operating expenses has come primarily from the closure of 36 (2011: 16) Own Stores in the financial year under review and the full year benefits of the outsourcing of the Warehouse and Distribution function to our strategic partner, DHL, and the restructure of our central functions. In addition we continue to exert very tight control over all areas of discretionary costs. During the period 1.0 million (2011: 0.6million) of costs were incurred in respect ofthe closure of 36 stores (2011: 16). Other operating income Other operating income decreased to 1.5 million (2011: 1.7 million), due mainly to the fall in licensing income from 1.3 million in 2011 to 1.1 million in 2012. The levels of franchise income and rent receivable remained relatively flat year on year.
55.3 4.1 3.1
40.3 (1.3) (2.2)
95.6 2.8 0.9
62.3 9.3 8.4
38.4 (3.3) (4.1)
100.7 6.0 4.3
Taxation The 1.3 million (2011: 0.8 million) tax credit for the year represents 59.4% of the loss before taxation (2011: 76.4%). The credit is higher than the effective statutory rate of 25.5% and is due to the tax effect of permanently disallowable items and the effect of the change in the corporation tax rate applicable during theperiod. Shareholders returns anddividends As a consequence of the continued challenging trading conditions and the exceptional charges, the basic loss per share equates to 1.4p (2011: loss of 0.4p). The Board is not recommending the payment of a final dividend (2011: 0.25p). The Board similarly proposed not to pay an interim dividend (2011: 1.95p), resulting in no dividend payments being recommended for the full financial year under review (2011: 2.2p). Cash and debt Cash generated from operations was 1.5 million (2011: 14.8 million). The main reason for this reduction was an outflow of working capital of 7.9 million (2011: inflow of 1.7 million) combined with lower profitability. Details of the Companys ongoing borrowing facilities of 57.5 million, committed from June 2011 to October 2015, are set out in note 17 of these accounts on page 59 of this report. Peak borrowings in the year under review were 49.3 million (2011: 41.4 million) leaving comfortable headroom against the current facilities. At 30 June 2012 all of the lending covenants have been satisfied.
Capital expenditure Investment in fixed assets totalled 4.6 million (2011: 5.9 million), none of which (2011:1.9million) was funded through newfinanceleases. During the year under review 0.4 million was spent on three new format store refits, two of which were successful re-sites. The balance of4.2 million was spent on supply chain, ITprojects and brand developments. Pensions The IAS 19 pension scheme deficit increased from 25.3 million in 2011 to 29.1 million at the 2012 year end. The deficit was reduced by 1.8 million due to the investment return on plan assets and a further 5.5 million of employer contributions. However, these were more than offset by service costs of 0.8 million, interest costs of 4.2 million and changes in actuarial assumptions totalling 6.1 million. The schemes deficit continues to be adversely affected by low Gilt yields resulting directly from the Bank of Englands recent fiscal policy of Quantitative Easing. Lower Gilt yields lead tolower discount rates applied to the schemes projected future liabilities which result in higher present valuesfor these costs. As outlined in the Chairmans report we have agreed the latest triennial funding agreement with the schemes Trustees. The schedule ofannual contributions has increased from 2.2million to 2.75 million, effective from June 2012. We have also agreed a one-off payment of 1.0 million to be made in December 2012.
Mike Killick Finance Director 11 September 2012
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Corporate social responsibility

Thorntons PLC recognises it has social, ethical and environmental responsibilities arising from its operations and it is committed to the welfare of its colleagues, customers, suppliers and the communities in which it operates. Marketplace Manufacturing our products Food safety is of paramount importance toourmanufacturing processes and our single-site production facilities at Thornton Park are regularly independently audited against theexacting requirements of the British Retail Consortiums Global Standard forFood Safety and were reaccredited inMay 2012 with its highest Grade A status. Additionally our Commercial and Retail brand customers regularly audit and monitor our performance against their own high standards. Sourcing our materials Our products use over 300 different raw materials, which are sourced by suppliers from all around the world. The majority ofour product range is made with natural colouring and flavours and our entire childrens range contains no artificial colours or added preservatives. We ensure ethical, social and environmental standards are maintained through the supply chain by auditing and visiting over 95% of oursuppliers, including those overseas, on a regular basis. Our main concern isfood safety but our audits also review ethics, health and safety, employee pay, employment conditions, use of child labour and environmental policies and practices. Thorntons is a registered member of GreenPalm, a certificated trading programme exclusively endorsed by the Roundtable on Sustainable Palm Oil whereby manufacturers offset their use of palm products by paying a producer for an equivalent amount produced sustainably. This gives producers an incentive to work sustainably and allows people whose livelihoods depend on palm oil production to continue making a living. Thorntons buys all of its cocoa from suppliers that actively support the International Cocoa Initiative and World Cocoa Foundation (WCF) programmes toimprove the livelihoods of cocoa farm families and promote responsible labour practices. This ensures the ethical sourcing of our cocoa and, in particular, minimises the risk of purchasing cocoa from sources which illegally use abusive or enforced child labour. Thorntons is also itself a member of the WCF which encourages responsible sustainable cocoa farming amongst small family-run farms. Our customers We believe in offering customers choices about what they purchase and our product ranges include organic, Fairtrade, no added sugar and dairy-free products. As our products are luxury gift items, they are notviewed as part of a balanced diet butwe do provide advice on consumption andfeature detailed nutritional advice on pack labelling, where size permits, sothat customers can make an informed choice. Thorntons also provides information onspecific ingredients on request, for example whether products are gluten free or contain alcohol. We undertake regular consumer surveys, which include questions about ethics, and respond to the results of these surveys when developing our products. In addition we obtain feedback from staff serving customers in our stores of their perception of issues that affect customer satisfaction and build them into our plans. Customer complaints and compliments are handled centrally and we are proud of the process we have established. All complaint investigations are started within 24 hours of receipt and we attempt to resolve each one to the satisfaction of our customers. Our policy is to communicate with our customers in plain English. All complaints are recorded so that we can undertake detailed analysis, monitor trends and identify key issues to further improve ourperformance.
Thorntons PLC recognises it has social, ethical and environmental responsibilities arising from its operations and it is committed tothe welfare of itscolleagues, customers, suppliers and the communities in which it operates.
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Corporate social responsibility continued

Workplace Our employees In addition to providing core remuneration benefits including annual incentive schemes, holidays, sick pay, life assurance and pension provision, Thorntons offers a flexible benefits programme, training and development programmes, discounts and participation in Company share scheme offers. Employees and their immediate families also have access to a confidential counselling and legal assistance helpline that operates 24 hours a day, 365 days ayear and the Company has a published procedure for employees to report any concerns confidentially (whistle blowingpolicy). We regularly survey our employees covering awide range of issues including Company benefits, working conditions and working relationships with the results of the survey fedback to employees and used to identify andimplement improvements. The Company has a formal process for succession planning to ensure we develop thecapability to grow the business in line with our long-term goals. Management performance and development reviews areconducted at least annually. We also regularly monitor our staff turnover rates and use exit interviews to understand reasons why staff leave and ensure improvements are made where appropriate. Training is available to all staff and we aim todevelop both individuals and teams in line with our business needs such that we grow our organisational capability. Health and safety In order to ensure continual improvement in health and safety, Thorntons has a three-year safety improvement programme and central to this programme are regular health and safety risk assessments. Incidents and accidents are monitored and reviewed in the workplace so that we can take appropriate action to improve working conditions whilst remaining focused onreducing both the absolute number of accidents and reportable accidents. Thelost time accident frequency rating of Thornton Park (ameasure of the number of accidents per 100,000 hours worked) increased marginally over the financial year to 2.2 (2011: 2.1) butremains significantly lower than previous financial years (2010: 2.4; 2009: 2.6). A Production Health and Safety Committee meets regularly to discuss unresolved health and safety matters and reviews statistics on accidents and lost time accidents. Independent external health and safety audits are conducted at least once every two years inboth manufacturing and OwnStores and improvements are made in line with any recommendations. Occupational health Whilst always aiming to minimise accidents occurring in the workplace, we also work withour insurers and have improved our occupational health service to employees byproviding post-accident access to private medical services, which can assist with therehabilitation process. We also use an external occupational health company and a doctor to provide us with health management services. Free eye tests and spectacles, where required, are provided for all VDU operatives. We also have a wellbeing policy to help deal with stress at work. Environment Energy and waste Recognising its major impacts on the environment, Thorntons is committed to improving energy efficiency, reducing utility usage and reducing ongoing costs throughout every stage of the chocolate-making process at its manufacturing operations in the heart of the UK. Energy consumption per tonne of product produced has reduced by a total of circa 7% since 2007 (4,486 kWh/tonne of product down to 4,171 kWh/tonne of product). We have also consistently beaten the reduction targets set bythe Food and Drink Federation (FDF) since being a member. Various initiatives have helped us continue to reduce energy consumption during the last year including a comprehensive programme to reduce compressed air and steam leaks across site. As a business Thorntons is also firmly committed to reducing its water consumption and to demonstrate this in 2011 signed up to the Federation House Commitment (FHC), working to reduce overall water usage across the Food and Drink sector by 20% by the year 2020. Working alongside the FHC during the last year we closely monitored our water usage via an extensive utilities sub-metering system, identifying and making good two significant water leaks, equating to an overall reduction inwater consumption of over 35,000 m3 per year. We are also investigating opportunities toreduce our effluent levels. Regarding waste management, we believe thata partnership approach is the key to driving zero waste to landfill. Following successful Refuse Derived Fuel (or energy from waste) trials, Thorntons manufacturing site has become a Zero to Landfill business. This means since January 2012 less than 1%of its waste has been sent to landfill. Theoverall recycling rate for the financial yearto June 2012 was a record 84%. This sustainable approach to waste management has been achieved with the support of a successful drive to further segregate waste by staff from all around the business, using dedicated teams, and working closely with an integrated waste management company. We also successfully introduced dry mixed recycling in order to further increase our recycling rates, and increased the amount of cardboard baled on site by over 250 tonnes per year. Thorntons is fully committed to becoming amore sustainable, low carbon business forthe future. All our Own Stores are fitted withenergy efficient fittings and lamps and wewill be extending our energy efficient lighting programme in the current financial yearbyreplacing a further 1,568 lights in our production and packing factories with energy saving T5 fluorescent lighting, which will save in excess of 500 tonnes of CO2 a year.
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Recognising its majorimpacts on theenvironment, Thorntons is committed to improving energy efficiency, reducing utility usage and reducing on-going costs throughout every stage of the chocolatemaking process.
We have plans to upgrade our Building Management System in order to run our high energy using plant equipment more efficiently and save approximately 625,000 kWh a year. We are also finalising an order for a Combined Heat and Power plant which, once operational from around June 2013, will not only generate almost all of our manufacturing site electricity needs, but will also provide heat to generate steam, hot water and cooling for the production facilities making every part of the chocolatemaking process more sustainable and saving 4,000 tonnes of carbon dioxide every year in the process. Packaging We continue to monitor the overall environmental impact of using more recycled materials in all components. Packaging is also a key issue for the Company and we have developed environmental policies for the procurement of packaging andcontinue to progress towards sourcing ForestStewardship Council approved materials forour cartons. We continue to find ways to reduce packaging (as measured by the percentage of cardboard packaging to product) across our products range. Transport The distribution and warehousing functions of the business are outsourced to DHL, a leading expert in the distribution field. DHL is committed to improving its CO2 efficiency and minimising its environmental impact in line with its GoGreen approach towards environmental protection. Where practicable vehicles returning to our production site back-haul raw materials and packaging from suppliers, as well as cardboard for recycling from our Own Stores. Community The seasonal nature of our business means thatwe employ a large number of temporary staff from the local community at both our production site and nationally in our Own Stores; we have apolicy to recruit staff locally in order to provide abenefit to the local community. We have subsequently been able to offer a number oftemporary staff permanent positions.
Many of our ingredients are sourced from local, UK-based suppliers and this factor is considered in our purchasing decisions for both ingredients and packaging of goods. Thorntons seeks to build new relationships through local school activities and work placement schemes. A staff Charity Committee is actively involvedinraising money for childrens charities. Last year staff raised in the regionof48,000 for the NSPCC with theCharity Committee co-ordinating a range ofinitiatives. These included sponsorship fromsuppliers andstaff for runners in the London Marathon, arranging collection points in storesand running a Charity Football Day forthe Companys suppliers at Derby Countys football ground, together with a number of Centenary celebration events. Our Own Stores are also actively encouraged to support local charitable activities. It is the policy of the Board not to make any political donations.
Corporate Review of the year
Further information on Thorntons approach to corporate social responsibility can be found on the Companys web site: www.thorntons.co.uk.
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Board of Directors
Chairman John von Spreckelsen Chairman N. Joined Thorntons in June 2006. He was previously Chief Executive Officerof Budgens plc and Chairman ofSomerfield plc. Currently his other appointments include those of an Operating Partner of Opcapita LLP inthe UK and Chairman ofBut SAS in France and Rex Opco SA in Luxembourg and he is a NonExecutive Director of Roseholdco Limited (IMO Carwash Group). He is Chairman of the Nomination Committee. Executive Directors Jonathan Hart Chief Executive Joined Thorntons in January 2011. He was previously Managing Director of Caff Nero for five years prior to which he held senior positions at Abbey, Woolworths and ITM Communications and spent more than a decade with Dixons Group plc where, latterly, he was responsible for the Groups high street brands (including Dixons, The Link and Dixons Tax-Free) as Group Managing Director and as Group Managing Director of PC World International. Key: A. Audit Committee N. Nomination Committee R. Remuneration Committee
Barry Bloomer Managing Director, Sales & Operations Joined Thorntons in July 2005 and was appointed to the Board in July 2006. Hepreviously spent ten years at Black &Decker, latterly as European Operations Director and prior to that eight years in various positions including Manufacturing and Quality Director for Philips Components Limited.
Mike Killick Finance Director Joined Thorntons in January 2012 and appointed to the Board in February 2012. Aqualified accountant with extensive experience in the retail sector. Most recently Interim Finance Director to a private equity healthcare business and prior to that previous appointments included eleven years at Peacocks, latterly asChief Financial Officer until January 2011, Bennetts GB (insurance), Going Places Retail Leisure and Burton Group plc. Non-Executive Director of Wales Finance Limited, a Welsh Government-owned venture capital investmentvehicle.
Non-Executive Directors Keith Edelman Non-Executive Director R. N. Joined Thorntons in February 2012. He holds a portfolio of non-executive directorships in public and private companies. Previous positions in his executive career include Managing Director at Arsenal Holdings and Group Chief Executive at Storehouse Group (BHS/Mothercare). Current appointments include Non-Executive Chairman at the retailing group Beale plc, Senior Independent Director at the UK branded fashion retailer Supergroup plc and Non-Executive Director of Safestore Holdings plc (self-storage) and the London Legacy Development Corporation.
Diana Houghton Non-Executive Director A. R. N. Joined Thorntons in December 2008. Acorporate development and strategy specialist with broad experience of the consumer goods, retail and leisure retail sectors and also possesses extensive corporate finance expertise. She spent six years as the Corporate Development Director of Allied Domecq before working as a consultant to a number of companies, investment banks andprivate equity houses. Other appointments include a senior advisory role with the National Audit Office. SheisChair of the Audit Committee.
Paul Wilkinson Non-Executive Director A. R. N. Joined Thorntons in August 2006. Heholds aportfolio of executive, non-executive and advisory roles in thefood, consumer and retail sectors aswell as the public sector. Previous appointments include Chairman of RankHovis McDougall and prior to that heheld management roles at Unilever and Grand Metropolitan. He was previously an independent Director of Aryzta AG, a major international food group based in Zurich. Other appointments include Chairman of Fengrain and Non-Executive Director of Fuerst Day Lawson. He also chairs the National Skills Academy. Heis Chairman of the Remuneration Committee and the SeniorIndependent Director.
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Corporate information
Company Secretary and registered office Mark R. Henson FCIS Thornton Park Somercotes Alfreton Derbyshire DE55 4XJ Tel: 0845 075 7565 www.thorntons.co.uk Registered in the United Kingdom No. 174706 Independent auditors PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Benson House 33 Wellington Street Leeds LS1 4JP Registrars Capita Registrars Northern House Woodsome Park Fenay Bridge Huddersfield HD8 0GA Tel: 0871 664 0300 Fax: 01484 600911 www.capitaregistrars.com Principal bankers Barclays Bank plc HSBC plc Lloyds TSB Bank plc Financial advisers and corporate brokers Investec Investment Banking Financial PR advisers Cardew Group Limited Risk and insurance advisers Marsh Limited
Review of the year Corporate
Financial calendar
For 53 weeks ended 30 June 2012 12 September 2012 Preliminary results announced September 2012 Annual Report circulated 25 October 2012 AGM For 52 weeks ending 29 June 2013 12 January 2013 Interim accounting period end (28 weeks) February 2013 Interim results and dividend announced 29 June 2013 Accounting period end (52 weeks) September 2013 Preliminary results announced September 2013 Annual Report circulated October 2013 AGM
Share dealing service If you want to buy or sell shares, Capita ShareDealing Service offers an easy-to-use, competitive, execution-only service. This meansthat they will only buy and sell shares and will not offer any other service (for example, financial advice). If you want to use this service,phone 0871 664 0364 or visit www.capitadeal.com. Capita Share Dealing Services is a trading name of Capita IRG Trustees Limited, which is authorised and regulated by the Financial Services Authority (www.fsa.gov.uk/register184113) and is also authorised to conduct business in Ireland under the provisions of the EU Markets in Financial Instruments Directive and is part of the Capita Group plc. Terms and conditions apply.
17
Report of the Directors

The Directors of Thorntons PLC together with its subsidiaries (the Group) have pleasure in presenting their Annual Report and the audited financialstatements of the Company and Group for the 53 weeks ended 30 June 2012. Principal activities and Business review The principal activities of the Company and Group during the financial year were the manufacturing, retailing and distribution of high quality confectionery and other sweet foods. A review of the Groups performance during the financial year, with commentary on the financial results, future development andprincipal risks and uncertainties facing the Company, is contained in the Chairmans statement (pages 2 and 3), the Chief Executives report (pages6to9), the Finance Directors report (pages 10 to 12), the Corporate Responsibility report (pages 13 to 15) and the Corporate governance statement (pages 22 to 26), which are incorporated into this report by reference. Results and dividends The profit for the financial year before tax and exceptional items was 0.9 million (2011: 4.3 million), and the loss for the financial year after tax and exceptional items was 0.9 million (2011: 0.3 million). No final dividend will be paid in respect of the financial year ended 30 June 2012 (2011: 0.25p), representing a total dividend for the financial year of nil pence (2011: 2.20p). Financial risk management Details of the Groups financial risk management policies are set out in note 18 on pages 61 to 64. Directors The current Directors of the Company, together with their biographical details, are shown on page 16. The Directors during the financial year who served forthe whole of the financial year and up to the date of signing these financial statements, except where stated, were: Chairman J A von Spreckelsen Non-Executive Directors K G Edelman (appointed 21 February 2012) D J Houghton P N Wilkinson Executive Directors J D Hart B Bloomer M D Killick (appointed 17 February 2012) W H M Robson (resigned 17 February 2012) P D J Wright (resigned 1 July 2011) The Directors retiring by rotation at the Annual General Meeting (AGM) are D J Houghton and P N Wilkinson who, being eligible, offer themselves for reappointment. K G Edelman and M D Killick, having been appointed by the Board since the last AGM, also offer themselves for reappointment inaccordance with the Companys articles of association. The interests of the Directors and their immediate families in the shares of the Company and in options over such shares granted under the Companys share option schemes are shown in the Report on the Directors remuneration on pages 27 to 34. NoDirector held a material interest, either during or at the end of the financial year, in any contract of significance in relation to the business of the Company or its subsidiaries.
18
Share capital Details of the Companys voting and share capital structure and any changes during the financial year under review are shown in note 23 to the accounts onpages 71 and 72. No person has any special rights of control over the Companys share capital and all issued shares are fully paid. The Directors were granted a general authority at the 2011 AGM to allot relevant securities up to a nominal amount of 1,663,448 and the authority applies until the conclusion of this financial years AGM when shareholders will be asked to grant a similar authority in line with current investor guidelines. Separate authorities will also be proposed to renew the Directors limited authority to disapply shareholders pre-emption rights and topurchase a proportion of the Companys share capital in the market, again in line with investor guidelines. Change of control: significant agreements There are no agreements that the Company considers significant and to which the Company is a party that would take effect, alter or terminate upon change of control of the Company following a takeover bid, with the exception of a number of banking and leasing agreements which upon a change of control of the Company are terminable at the banks and lessors discretion. There are no agreements between any Group company and any of its employees or any Director of the Company which provide for compensation tobe paid to the employee or Director for termination of employment or for loss of office as a consequence of a takeover of the Company, other thanprovisions that would normally apply on any termination of employment. Interests in voting rights The Company has been notified of the following significant interests in voting rights of the Companys issued share capital as at 11 September 2012:
Ordinary shares %
Review of the year
Henderson Global Investors Joseph Rowntree Charitable Trust Investmentaktiengesellschaft fuer Langfristige Investoren TGV Mrs J S Harcus*
* These include joint holdings as trustees and, consequently, certain shares are allocated against more than one name.
7,557,349 4,000,000 2,753,962 2,806,186
11.1 5.8 4.0 4.2
Corporate
Employee share schemes The Company operates a number of share option schemes for the benefit of employees. Information regarding the schemes and the number of options outstanding is given in note 23 on pages 71 and 72. Employee involvement It is the Groups policy to keep employees fully informed of matters affecting them as employees and to make them aware of the financial andeconomic factors influencing Group performance. The views of employees are taken into account in making decisions affecting their interests andinformation of relevance to all employees is communicated through a council system of employee representation and regular business updates. Encouragement is given to colleagues to contribute towards the Groups financial performance by annual bonus schemes and participation in the Companys share schemes.
19
Report of the Directors continued

Equal opportunities and employment of disabled persons Employment policies are designed to provide equal opportunity, irrespective of age, gender, sexual orientation, disability, religion, race or marital status. Applications for employment by disabled persons are given full and fair consideration and, whenever practicable, provision is made for their specialneeds. The Group applies the same criteria to disabled employees for training, career development and promotion as to any other employee. Ifexisting employees become disabled, every effort is made to ensure their continued employment. Research and development The Group continues an active programme of research and development in all areas of its activities, with the constant review of existing products anddevelopment of new products being an integral part of this programme. Charitable and political contributions During the financial year, the Group made local and national charitable contributions of 9,000 (2011: 50,500 including a 45,000 donation toSave The Children in relation to our Haiti chocolate block, sold to raise funds for the earthquake disaster). It is the policy of the Board not to makepolitical donations and accordingly none were made in the financial year (2011: nil). Payment of suppliers The Group does not follow any specific external code or standard on payment practice. Its policy is to: agree the terms of payment with suppliers when agreeing the terms of each transaction; ensure that those suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and pay in accordance with its contractual and other legal obligations. The payment policy applies to all creditors for revenue and capital supplies of goods and services without exception. The Group and Companys average creditor payment period at 30 June 2012 was 43 days (2011: 46 days). Independent auditors Following a recommendation of the Audit Committee to the Board, a resolution to reappoint PricewaterhouseCoopers LLP as auditors to the Company will be proposed at the AGM. Disclosure of information to auditors In the case of each of the persons who were Directors at the date this report was approved: so far as each of the Directors is aware, there is no relevant audit information (as defined in the Companies Act 2006) of which the Companys auditors are unaware; and each of the Directors has taken all the steps that he or she ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and to establish that the Companys auditors are aware of that information.
20
Statement of Directors responsibilities The Directors are responsible for preparing the Annual Report, the Report on the Directors remuneration and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group andParent Company financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that financial year. In preparing these financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; state whether applicable IFRS as adopted by the EU have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Companys transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Report on the Directors remuneration comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible 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. The Directors are responsible for the maintenance and integrity of the Companys web site. Legislation in the United Kingdom (UK) governing thepreparation and dissemination of financial statements may differ from legislation in other jurisdictions. Each of the Directors, whose names and functions are listed on page 16, confirm that to the best of their knowledge and belief: the financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company; and the Report of the Directors on pages 18 to 21 includes a fair review of the development and performance of the business and the position oftheGroup, together with a description of the principal risks and uncertainties that it faces. Articles of association The Companys articles of association may only be amended by a special resolution at a general meeting of shareholders. Annual General Meeting The notice convening the Companys AGM on 25 October 2012 can be found in the separate Notice of AGM accompanying this Annual Report andincludes full details of the business to be transacted. Approved by the Board on 11 September 2012 and signed by order of the Board by:
Financial statements and notes Corporate
Review of the year
Mark R. Henson Company Secretary
21
Corporate governance
Statement on compliance The Company recognises the importance of, and is committed to, high standards of corporate governance. The Board is accountable to the shareholders for good corporate governance. This report describes how the Board applies the principles of good governance and best practice assetout in the UK Corporate Governance Code issued by the Financial Reporting Council (the Code), available on its website www.frc.org. Throughout the financial year under review, the Board considers that the Company has complied fully with all applicable provisions recommended intheCode. The information required under Rule 7.2.6 of the Disclosure and Transparency Rules of the Financial Services Authority is included in the Report ofthe Directors on pages 18 to 21. The Board The Company is headed by a Board of Directors collectively responsible for the success of the Company. The Board provides leadership within a framework of prudent and effective controls designed to enable risk to be assessed and managed. It sets the Companys strategy and is responsible for reviewing management performance and for ensuring that the necessary financial and human resources are in place in order to meet the Companys objectives. The Board also sets the Companys values and standards mindful of its obligations to shareholders and other stakeholders. The Board currently comprises the Chairman, three Executive Directors and three Non-Executive Directors. The Board regards K G Edelman, DJHoughton and P N Wilkinson as being independent. The Chairman and ChiefExecutive both have clearly defined roles and responsibilities which are set out in writing and approved by the Board. The Chairman has responsibility for the leadership and the running of the Board, including but not limited to ensuring that afixed schedule of matters covering key areas of the Groups affairs, including strategy, annual budgets, significant capital expenditure and major litigation, isexclusively retained for the Boards review and approval and that a framework exists to allow the clear dissemination of relevant and timely information toall Directors for such discussion to occur. He is also responsible for communications with shareholders and for ensuring effective contributions from theNon-Executive Directors. The Chairman has commitments outside of the Company as detailed in his biography on page 16. All Directors are subject toreappointment by shareholders at the first AGM following their appointment and thereafter at intervals of no more than three years. The Board meets regularly (normally nine times per financial year) and during the financial year under review there was full attendance by all Directors eligible to attend at the twelve Board meetings that took place. The Board regularly reviews the operational performance and plans of the Company and, as necessary, determines the Companys strategy. The Executive Directors also meet under the chairmanship of the Chief Executive on a weekly basis todiscuss operational matters and ensure that Board decisions are implemented. All Board members receive agendas and comprehensive papers prior toeach Board meeting. All Directors have access to the services of the Company Secretary who is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are adhered to. The Board maintains a register of potential conflicts of interest with itsDirectors and confirms no such conflicts exist. The register is reviewed and updated as necessary throughout the financial year. Directors may also obtain further information from any manager or employee of the Company and there is a procedure for Directors to obtain independent advice from external advisers, consultants or any such further professional individual or entity at the Companys expense. The Company maintains appropriate liability insurance for the benefit of its Directors. The Chairman meets at least annually with the Non-Executive Directors without Executive Directors present and the Non-Executive Directors, led by the Senior Independent Director, P N Wilkinson, meet annually to consider the Chairmans performance, taking into account the Executive Directors views. The Senior Independent Director is also available to shareholders if they have any concerns that contact through the normal channels of the Chairman, Chief Executive or Finance Director has failed to resolve or for which such contact is inappropriate. The terms and conditions of appointment of the Non-Executive Directors are available during normal business hours at the Companys Registered Office and will be available for inspection at the AGM. New appointments to the Board receive an appropriate induction to gain an understanding of the Companys business, which includes meetings withsenior management. Given the skills and experience of the Non-Executive Directors, their general training requirements are left to their own discretion. The Company makes the necessary resources available to meet any identified requirements. The Chairman conducts a formal appraisal process for the Board, its Committees and individual Directors, including those Directors due to offer themselves for reappointment at the AGM, through use ofaquestionnaire and one-to-one meetings which facilitates a Board discussion and, where appropriate, agreed actions for improvements. TheExecutive Directors are also included in the Companys annual performance appraisal arrangements, which include development and trainingrequirements.
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The Board delegates its authority for certain matters to its Audit, Remuneration and Nomination Committees. The Board approves the terms of reference of each of the Committees, which were recently reviewed and amended, and they are available on the Companys web site, www.thorntons.co.uk, andupon request from the Company Secretary. During the financial year under review there were three meetings of the Audit Committee, two formal meetings of the Remuneration Committee and one formal meeting of the Nomination Committee with full attendance of all eligible Directors. In addition to formal Committee meetings, ad hoc decisions of the Committees are taken after discussion throughout the financial year as necessary through theform of written resolutions. Nomination Committee The Nomination Committee is composed of the three independent Directors and the Chairman of the Board, J A von Spreckelsen. The Committee is chaired (except if dealing with his own successor) by J A von Spreckelsen and is responsible for reviewing the credentials of each and every potential Director before such nominee isproposed to the Board. In considering potential appointments to the Board, the Committee evaluates the balance of skills, knowledge and experience on the Board when considering the role and capabilities required for a particular appointment. When appointments arebeing considered, the Committee uses professional external recruitment specialists as and when appropriate, as it did in relation to the appointments ofM D Killick as Finance Director and K G Edelman and M George, who joins the Board on 1 November 2012, as Non-Executive Directors, as well ascontacts of its Directors and the Companys advisers. The Committee also reviews the contribution ofthose Directors offering themselves for reappointment by shareholders at the AGM. Remuneration Committee The Remuneration Committee is composed of the three independent Directors and is chaired by P N Wilkinson. The Board has delegated authority tothe Committee for setting the Chairmans, the Executive Directors and the Company Secretarys remuneration and performance-related awards. Further details of the Committee and Directors remuneration are set out in the Report on the Directors remuneration on pages 27 to 34. Audit Committee The Audit Committee throughout the financial year comprised of two independent Directors, D J Houghton (Chair) and P N Wilkinson. It meets threetimes a financial year with the external auditors and considers any issues which are identified during the course of their audit work. The Board is satisfied that both Committee members have recent and relevant financial experience. Meetings are also attended, by invitation, by the Chairman, Chief Executive, Finance Director and Financial Controller. The Committee meets at least annually with the external auditors without any Executive Directors present. The Audit Committee is responsible for: monitoring the integrity of the Companys financial statements; reviewing the Companys internal financial controls and internal control and risk management systems; monitoring and reviewing the effectiveness of the internal audit function; making recommendations tothe Board regarding the appointment, reappointment or removal of the external auditors and approving their remuneration andterms of engagement; reviewing and monitoring the external auditors independence and objectivity and the effectiveness of the audit process; and developing and implementing apolicy on the engagement of the external auditors to supply non-audit services. In respect of safeguarding the objectivity and independence of the external auditors, the Committee has a formal policy regarding the provision ofnon-audit services by the external auditors including certain services which they cannot provide so as not to compromise their independence (forexample, bookkeeping or other internal accounting services, internal audit, management roles or legal services). The policy also provides for tendering for services where appropriate and has specific pre-approved categories of work subject to the level of fees involved. A formal rotation policy of the audit partner also exists which limits tenure to a maximum of five years. The Committee also specifically reviews the levels of all fees paid to the auditors for audit and non-audit services annually, which are set out in note 6 on page 52. The external auditors report to the Audit Committee each financial year on the actions they have taken to comply with professional and regulatory requirements and best practice designed to ensure their independence. The Committee reviews whether the auditors believe there areany relationships that may affect their independence and additionally the auditors formally confirm their independence in writing to the Board inrespect of the period covered by these financial statements. The Committee also receives regular detailed reports from the internal audit function and, to ensure its activities are appropriate, reviews its proposed work plan for future periods.
23
Corporate governance continued

Internal control The Companys control environment is the responsibility of the Companys Directors and managers at all levels. The Board is therefore responsible forestablishing and maintaining the Companys system of internal control and for reviewing its effectiveness. No control system can provide absolute protection against material misstatement or loss but it is designed to manage rather than eliminate the risk of failure to achieve business objectives and to provide the Directors with reasonable assurance that problems should be identified on a timely basis and dealt with appropriately. The Board has delegated responsibility for reviewing the Companys system of internal control and its effectiveness to the Audit Committee. Due tothe size of the Company, the Executive Directors are able to monitor performance and evaluate and manage on a continual basis the risks faced bythe Company. The key procedures that have been established to provide effective internal control, including over the financial reporting process and the preparation of consolidated financial statements, and to comply with the Financial Reporting Councils guidance on Internal Control: RevisedGuidance for Directors on the Combined Code include: a formalised reporting structure which includes the setting of detailed annual budgets and key performance indicators which are updated onaregular basis to form forecasts which are reviewed at both management and Board meetings; regular Board meetings are held at which all key aspects of the business are discussed including comparison of actual performance against budgets and forecasts; monthly reports are made to the Board by the Chief Executive, Finance Director and other Executive Directors; there is a weekly review of operational performance and operational matters by the Executive Directors; meetings are held by each Executive Director on a weekly and monthly basis to review the progress of specific financial and non-financial responsibilities within their functions; the control, review and monitoring of key business projects by specific steering committees, each headed by an Executive Director who sponsors the project; defined authorisation levels for capital expenditure; defined authorisation levels for the placing of orders and contracts; clear authorisation levels and segregation of accounting duties to control major financial risks; daily cash movements are reconciled and monitored by the Finance Department and the Companys cash flow is monitored monthly in comparison to budget and forecast; the Companys reporting systems provide weekly updates on key statistics including sales, production and gross margin analysis; an internal audit function which monitors, maintains and controls a retail audit risk report, regularly conducting store audits in line with risk strategy, and also evaluates the effectiveness of systems of internal control and operational processes business-wide; the Executive Directors and senior management identify and review key operational and compliance risks and then implement appropriate procedures to address those risks. A corporate risk register is maintained and reviewed; major commercial, technological and financial risks are assessed by the Board throughout each financial year. The conclusions are then incorporated in the Companys business strategy and adopted by the Board; and a formal arrangement for staff to raise any concerns over financial reporting or other matters in confidence. The Board and Audit Committee review management reports prepared by the external and internal auditors and consider the suitability ofsuggested improvements to the system of internal controls. The Board and Audit Committee have reviewed the effectiveness of the internal control system, including financial, operational and compliance controls and risk management, in accordance with the Code on an ongoing basis for the period from 26 June 2011 to the date of this report andhave determined that they were not aware of any significant failings or weaknesses in the system of internal control.
24
Principal risks and uncertainties As described above in the internal control procedures, key risks are reviewed by the Executive Directors and senior management. The assessment ofrisks on the basis of likelihood and potential impact, together with the controls and actions to manage or mitigate them, are reviewed by the AuditCommittee and Board. The key risks and uncertainties facing the business are considered to be as follows: Economic and industry risks A competitive marketplace The UK confectionery market has many strong players and maintaining a competitive position depends on Thorntons continued ability to offer products that have a strong appeal to consumers and which are readily available in the places that they wish to purchase them. Any significant shift in consumer trends coupled with a failure to anticipate and react to such changes or a failure to invest adequately in our business could reduce demand for products resulting in loss of market share, reduced sales, reduced attractiveness to potential franchisees or harm to the image of the brand. Product innovation iscritical to maintaining consumer relevance and the Company has a rigorous process for identifying, researching and developing new product ideas, which is regularly reviewed. The Companys multi-channel strategy is also a means by which it can satisfy consumers needs better than some of itscompetitors, whilst also mitigating the overall risk to the business from a downturn in any specific channel. Economic downturn or recession During times of economic uncertainty or hardship consumer demand for products may fall or consumers may choose to purchase lower value consumer goods as opposed to higher value consumer goods resulting in a fall in demand for products. Thorntons consequently offers a range of products across various price points and has flexible trading and promotional plans that enable it to respond to consumer and market trends rapidly. The economic climate may also result in the failure of Commercial or Franchise businesses and consequently customers and/or franchisees defaulting on supply payments. Reduced sales as a result of an economic downturn or recession in the UK may have an adverse effect on the profitability and cash flow of the business. Key input prices are driven by commodity markets Material adverse changes in certain commodity prices could affect the Companys profitability. The Company buys key inputs forward and works with suppliers to choose the optimal time and quantity for purchases. Whilst this policy may sometimes preclude the Company from taking advantage of short-term dips in prices, it provides a stable cost base for the Company to make its trading decisions. Operational risks A substantial decrease in our ability to supply our customers with our products A major interruption or substantial decrease in the ability to supply customers could damage sales and brand reputation as well as relationships with customers and consumers. The majority of the Companys products for sale are produced at Thornton Park in Alfreton, Derbyshire. Thornton Park has significant fire protection across the site, contingency and emergency recovery plans for IT, utilities and major incidents which are regularly reviewed and appropriate insurance cover is also in place. Food products must have the highest integrity Product contamination, accidental or malicious, is a risk faced by all food producers. Thorntons has extremely rigorous policies and security systems for guarding against accidental or malicious contamination of ingredients or finished products. In the unlikely event that these policies andsystems fail, a robust process for product recall and consumer communication, in addition to comprehensive insurance cover, is in place. People risks The business is dependent upon the skills, enthusiasm and wellbeing of its people Management evaluates the balance of skills, knowledge and experience within the team when considering the role and capabilities required for a particular senior appointment. The Company uses professional external recruitment specialists as and when appropriate, as well as contacts of its Directors and the Companys advisers. Management aspires to keep colleagues informed of internal and external developments and regularly reviews how staff are feeling through surveys and communication sessions. A channel outside the normal line structures for communication and resolution ofissues exists through the Joint Industrial Council for Thornton Park and the Retail Council for store-based colleagues. Strong recruitment processes, formalised succession planning together with ongoing individual training and development plans help mitigate the risk of the loss of key staff.
25
Corporate governance continued

Relations with shareholders Communications with shareholders are given high priority. Following the announcement of the Companys interim and final results, the Directors, normally represented by at least the Chairman, Chief Executive and Finance Director, make detailed business presentations to institutional shareholders and investment analysts. The Senior Independent Director is also available to all shareholders. Feedback directly from shareholders andvia the Companys brokers after these regular analyst and shareholder meetings ensures that the Board understands shareholder views. Finally, the Companys web site, www.thorntons.co.uk/investor, allows shareholders to view Company results and announcements and other relevant information. The Board uses the AGM to communicate with private and institutional investors and welcomes their participation. Each financial year the Board reviews anygovernance and voting guidelines issued by representative bodies of its shareholders. At each AGM the Directors present abusiness review to all attending shareholders who may ask any questions they wish. It is not a requirement that these be previously submitted tothe Company in writing. Furthermore, at each AGM the Chairman aims to ensure that the chair persons of the Board Committees are available. All Code provisions regarding constructive use of the AGM are complied with. Going concern The Directors are satisfied, on the basis of current financial projections and facilities available, that the Company and the Group have adequate financial resources to continue to operate for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis inpreparing the financial statements. Approved by the Board on 11 September 2012 and signed on its behalf by:
Mark R. Henson Company Secretary
26
Report on the Directors remuneration

Information not subject to audit Remuneration Committee The Remuneration Committee is composed of the Companys independent Non-Executive Directors, P N Wilkinson (Chairman), K G Edelman (appointed 23 March 2012) and D J Houghton. The Committee is responsible for setting the Chairmans, Executive Directors and Company Secretarys remuneration and performance-related awards. It also monitors the remuneration of the Companys Senior Managers. During the financial year, the Chief Executive attended Committee meetings by invitation and provided advice on issues other than those relating to his remuneration. The Company Secretary attends the meetings assecretary to the Committee. During the financial year, the Committee received independent general remuneration and share scheme advice from Deloitte LLP who were appointed by the Committee and also advised the Company on tax and pension matters. The Committee also had access toprofessional market surveys on boardroom pay. No Director is involved in any decision relating to his own remuneration. The Terms of Reference of the Committee are available on the Companys web site, www.thorntons.co.uk, and upon request from the Company Secretary. Remuneration policy The policy for the current and future financial years for the remuneration and incentivisation of the Executive Directors is as follows: to ensure that individual rewards and incentives are aligned with the performance of the Company and the interests of shareholders; to ensure that performance-related elements of remuneration constitute a significant proportion of an executives remuneration package; and to maintain a competitive remuneration package which enables the Company to attract, retain and motivate high calibre executives. The Committee reviews the Companys executive remuneration arrangements and implements incentive arrangements to support the objective of rewarding those individuals who deliver real and genuine shareholder value. In developing the arrangements the Committee and its advisers carefully consider the best practice provisions in the UK Corporate Governance Code and current market practice. Salaries Salaries for the Executive Directors are targeted at remaining competitive for the market size of the business and, unless they fall below what the Committee considers to be competitive, will not normally be changed beyond a cost of living increase outside of this target. The level of salary of theExecutive Directors is reviewed each financial year by the Remuneration Committee and takes into account a range of issues including primarily underlying Group performance, comparative salary levels, market forces and having regard to pay and conditions elsewhere in the Company. Given the continuing uncertainty over the economic outlook and taking into account the awards under discussion with the general workforce, no increase inannual salary is being awarded to the Executive Directors for the new financial year. Taxable benefits comprise principally healthcare insurance policies, a fully expensed company car or car allowance, a fuel allowance and relocation expenses. Annual incentive plan The Remuneration Committee reviews and approves the annual bonus scheme targets each financial year. For the 2013 financial year, the bonus potential for Executive Directors remains at up to 100% of base salary dependent on profit performance. There are clear financial targets based on the achievement of Group profit and the Committee is satisfied that these are challenging and, in order for the maximum bonus to be earned, will demonstrate significant improvement in the profit performance of the business. Any element of bonus above 25% salary will be payable in shares that must be retained by the Executives for three years from when any bonus becomes payable. No bonus was payable to the Executive Directors in respect of the 2012 financial year.
Financial statements and notes Review of the year Corporate
27
Report on the Directors remuneration continued

Information not subject to audit continued Long term incentive plan (LTIP) The Committee introduced long-term incentive arrangements, approved by shareholders in October 2007, designed to deliver genuine performancerelated pay, with a clear line of sight for executives and a direct alignment with shareholders interests. Under the LTIP, annual awards of share options may be granted with an exercise price equal to the market value of the shares at the date of grant. Executive Directors may receive an award under the LTIP in any financial year over shares worth up to 150% of their basic annual salary (excluding bonuses, commissions and benefits in kind) provided that, to the extent that an award exceeds 100% of their basic annual salary, the vesting of such excess will be dependent on the achievement of a significantly more stretching performance target. The participants will not be entitled to exercise their options for a period determined by the Committee, which is generally no earlier than three years from the date of award. The vesting of awards at the end of the performance period will be subject to the relevant participant remaining in employment and the achievement of specified stretching performance conditions. There are currently three grants of awards in respect of the periods 2009 to 2012, 2011 to 2014 and 2012 to 2015 under the LTIP. The 2009 to 2012 award has a performance target based on the Companys Total Shareholder Return (TSR). TSR will normally be averaged across a period of three months before the start of the performance period and three months before the date on which the performance period ends. This is in keeping with normal market practice and is a practical adjustment to smooth the impact of short-term market influences and to provide a more robust measure of the Companys performance. Awards vest on a sliding scale between each step as follows:
Compound equivalent over three-year vesting period
Total award vesting (% of salary)
Annual TSR growth required
150% 100% 25%
20% 15% 8%
73% 52% 26%
In order to reassure shareholders that Executives will not benefit simply from an upward turn in the market, underlying real EPS performance is required to increase by at least Retail Prices Index (RPI) +10% per annum before any awards vest, even if the TSR targets are achieved. In addition, for any award above 100% to vest, the underlying annual growth in real EPS must be at least RPI +12%. Absolute TSR was chosen as the measure for this award because it requires Executives to increase shareholder value against the Companys prevailing business position. Based on the Companys TSR performance to date no options awarded in 2009 would vest. The actual percentage of the award vesting will be determined by the Remuneration Committee at the end of the three-year performance period. The Remuneration Committee monitors the performance of existing awards against the above targets on an annual basis and reviews the performance conditions for future awards to ensure that the conditions continue to be appropriate for the Company and the prevailing market. As reported last financial year, the Committee reviewed the performance conditions and level of award to apply to options granted under the LTIP in 2011 and discussed the proposed targets with major shareholders prior to the grant of the awards. The Committee scaled back the awards granted in 2011 to a maximum of 75% of salary rather than the 150% permitted under the scheme rules. The performance targets for the 2011 awards are based on a stretching share price improvement over a three-year period with a cumulative EPS underpin to ensure there is no benefit arising simply from an upward turn in the market at the point of measurement. Awards vest dependent on the Companys share price on the third anniversary of the date of grant (with 2% of the award vesting for each whole pence improvement in the share price between 101p and 150p).
Absolute share price required to vest
Total award vesting as a % of salary
75% (i.e. 100% of the award) 15% (i.e. 20% of the award) 1.5% (i.e. 2% of the award) 0%
150p 110p 101p 100p
28
The EPS underpin is such that the awards will not vest at all, regardless of share price performance, unless the Companys cumulative adjusted EPSfor 2012, 2013 and 2014 is at least 31.6p. Absolute measures were considered appropriate to focus management on restoring the Companys profitability, for simplicity and clarity of line of sight and to align shareholder and executive interests by driving shareholder value through share price growth. The Committee considers that the stretching share price and EPS targets reflect the application of a pay for performance philosophy in the best interests of the Company and shareholders. The March 2012 award to M D Killick was based on a reduced percentage of salary to reflect the reduction in the Company share price in the intervening period from the October 2011 awards but has the same performance criteria as described above to align him with his executive colleagues. Share option schemes The Thorntons PLC 2001 Executive Share Option Scheme (the Scheme) Prior to the introduction of the LTIP in October 2007, some of the Directors had previously been granted share options under the Thorntons PLC 2001 Executive Share Option Scheme. Subject to the achievement of performance targets, these options may be exercised between three and tenyears after the date of grant. Following the introduction of the LTIP in 2007, no further awards under this scheme to Directors are anticipated. Options granted under the Scheme can be exercised at any time between three and ten years after the grant date, subject to the fulfilment of certain performance criteria. Options granted in 2006 were split into three equal tranches with a requirement that a share price of 160p be achieved within a minimum of three and a maximum of six years from the date of grant before the first tranche could be exercised. With regard to the second and third tranches, the share price is required to reach 185p and 210p. In addition, before any tranche may be exercised, growth in EPS must exceed the RPI by at least 3% per annum cumulatively over at least a three-year and a maximum six-year period. The share price must have reached the relevant targets on the day prior to the exercise and the Remuneration Committee must be satisfied that there has been an improvement in the underlying performance of the Company. In line with these requirements, the first two tranches of options granted on 5 June and 11 July 2006 are now exercisable subject to the Companys share price reaching the required target prices on the day prior to any exercise. Under the Scheme rules, in the event of a change of control of the Company, options may be exercised within one month or such longer period as theRemuneration Committee determines and provided that such options have met their attaching performance criteria. The Remuneration Committee also has discretion but always acting fairly, reasonably and objectively, to determine whether and, if so, to what extent beyond that indicated by the performance condition, options shall be exercisable, having regard to all the circumstances. All employees Sharesave Scheme Executive Directors with twelve months service, along with all eligible employees, are also entitled to participate in the Companys All Employee Sharesave Scheme. Options granted under the HM Revenue and Customs approved Sharesave Scheme can be exercised at any time during the six-month period commencing three or five years from the start of the savings contract. Options may be granted under the Sharesave Scheme at a discount of up to20% of the market value of a share in the Company on the date immediately preceding the date on which employees are invited to participate inthe Scheme. There are no performance criteria under the Sharesave Scheme. Share price The mid-market price of the ordinary shares at 24 June 2011 (the last dealing day prior to 25 June 2011) was 60.25p and at 29 June 2012 (thelast dealing day prior to 30 June 2012) was 19.63p and the range for the financial year was from 9.5p to 62.5p. The Companys register of Directors interests, which is open to inspection, contains full details of Directors shareholdings and options to subscribe. During the period from 1 July 2012 to 11 September 2012, the interests of the Directors named in the table on page 16 in the shares of the Company were unchanged.
29

Information not subject to audit continued Performance graph The graph below shows the TSR performance for the Companys shares in comparison to the FTSE Small Cap Index for the five years to 30 June 2012. For the purposes of the graph, TSR has been calculated as the percentage change during the five-year period in the market price of the shares, assuming that dividends are reinvested.
This graph shows the value, by the end of the 2012 financial year, of 100 invested in the Group over the last five financial years compared with100 invested in the FTSE Small Cap Index which the Directors believe is the most appropriate comparative index. Pensions The Executive Directors, with the exception of J D Hart who does not participate in any Company pension arrangement, have private pensions towhich the Company contributes a fixed percentage (14%) of basic salary. A table identifying the contributions made on behalf of Directors todefined contribution arrangements are identified in the Directors pension benefits table on page 32. Pensionable salary is based on basic salary only and excludes any other form of remuneration including bonus payments or benefits in kind. Contracts of service and early termination All of the Executive Directors have service contracts with the Company. Contracts entered into before 2012 may be terminated by the Company or Directorby giving one years notice. The notice period of all Executive Directors service contracts is kept under review by the Remuneration Committee andduring the financial year the Committee reduced the standard notice period for Executive Directors to six months for future appointments, which appliesto M D Killicks service contract. It is the practice of the Committee that if the employment of an Executive Director is terminated, any compensation payment is calculated in accordance with normal legal principles, including the application of mitigation to the extent appropriate to the circumstances ofthetermination. There are no specific contractual obligations in the event of a change of control of the Company. All Non-Executive Directors have initial fixed-term agreements with the Company of no more than three years. There is no entitlement to any compensation in the event of such agreement not being renewed or the agreement terminating earlier.
30
Details of the Directors service contracts, notice periods and, where applicable, expiry dates are set out below:
Name Commencement Expiry
Notice period
J D Hart B Bloomer W H M Robson (resigned 17 February 2012) M D Killick (appointed 17 February 2012) J A von Spreckelsen K G Edelman (appointed 21 February 2012) D J Houghton P N Wilkinson*
4 January 2011 18 July 2006 2 November 2009 17 February 2012 5 June 2006 21 February 2012 5 December 2008 15 August 2006
21 February 2015 5 December 2012 15 August 2012
one year one year one year six months one year three months three months n/a
Review of the year
* P N Wilkinsons contract was renewed for a further three-year term subject to reappointment at the AGM in October 2012.
Non-Executive Directors fees The fees paid to Non-Executive Directors for their services are approved by the Board. These fees are paid on a pro rata basis if they hold office for part of the financial year. In recognition of legislative and corporate governance responsibilities, a supplement of 5,000 per annum is paid to the Senior Independent Director and Non-Executives who chair one or more Board Committees. Executive Directors are permitted to hold one Non-Executive directorship outside of the Company and to retain any earnings relating to such appointment. M D Killick is a non-executive director of Wales Finance Limited for which he receives director fees of 20,000 per annum. No other Executive Director holds any non-executive positions. Information subject to audit The following table shows an analysis of the various elements of remuneration receivable by those Directors who served during the 53 weeks ended 30 June 2012:
Salary and fees 2012 000 Taxable benefits 2012 000 Compensation for loss of office 2012 000 Performancerelated payments 2012 000 Basic annual salary/fees July 2012 000
Corporate
Total 2012 000
Total 2011 000
Chairman J A von Spreckelsen Executive Directors J D Hart B Bloomer M D Killick (appointed 17 February 2012) M R Davies (resigned 30 September 2010) W H M Robson (resigned 17 February 2012) P D J Wright (resigned 1 July 2011) Non-Executive Directors K G Edelman (appointed 21 February 2012) D J Houghton P N Wilkinson
150 345 180 73 127 8 11 38 43 975
27 21 11 13 1 73
188 188
150 372 201 84 140 197 11 38 43 1,236
150 178 200 327 212 189 38 43 1,337
150 345 180 190 n/a n/a n/a 33 38 43 979
12,000 (2011: 40,000) of the fees in respect of the services provided by P N Wilkinson were paid to Parkside Capital Limited.
31

Information subject to audit continued Directors pension benefits
Pension contributions 2012 000 Pension contributions 2011 000
Executive Directors J D Hart (appointed 4 January 2011) B Bloomer M D Killick (appointed 17 February 2012) W H M Robson* (resigned 17 February 2012) P D J Wright (resigned 1 July 2011)
25 12 19
23 62 24
* W H M Robson additionally received a salary supplement in 2011 of 41,240 in recognition of his period as Acting Chief Executive from September 2010 until the appointment of J D Hart as Chief Executive on 4 January 2011 which, at the Companys discretion, was paid as a lump sum employer contribution into his personal pension and is reflected in the Directors pension benefits table above.
Directors interests The interests of the Directors and their immediate families in the Companys ordinary shares as at 25 June 2011 (or date of appointment if later), at30 June 2012 and up to the date of signing of these financial statements were as follows: Ordinary shares The Directors holdings in ordinary shares were:
30 June 2012 (or date of resignation if earlier) Number 25 June 2011 (or date of appointment if later) Number
Chairman J A von Spreckelsen Executive Directors J D Hart B Bloomer M D Killick (appointed 17 February 2012) W H M Robson (resigned 17 February 2012) P D J Wright (resigned 1 July 2011) Non-Executive Directors K G Edelman D J Houghton P N Wilkinson All the above are beneficial interests.
1,892,301 95,431 20,598 251,438 34,744 30,000 100,000 25,000
1,090,000 20,000 5,512 10,000 30,000 100,000 25,000
32
Share options and awards The interests of the Executive Directors in share options held under the Executive Share Option Schemes and the Sharesave Scheme were as follows:
Awards and options held at 26 June 2011 or date of appointment Awards and options granted in period Awards and options held at 30 June 2012 Last date awards and options can be exercised
Director
Scheme
Date of grant
Subscription price (pence)
Options exercised/ shares sold
Options lapsed/ forfeited
Review of the year
J A von Spreckelsen J D Hart
2001 Executive 2011 Share Option Plan* LTIP 2007 2001 Executive LTIP 2007 LTIP 2007 LTIP 2007 Sharesave Sharesave LTIP 2007
5 Jun 2006 16 Feb 2011 5 Oct 2011 11 Jul 2006 16 Oct 2008 20 Oct 2009 5 Oct 2011 10 Oct 2007 18 Nov 2010 23 Mar 2012
116 1,200,000 99 46 128.5 113 132.25 46 148 84 24.37 696,969 500,000 218,038 186,301 4,358 11,165
562,500 293,478 257,284
(218,038)
1,200,000 696,969 562,500
5 Jun 2016 16 Feb 2021 5 Oct 2021
B Bloomer
500,000 11 Jul 2016 186,301 20 Oct 2019 293,478 5 Oct 2021 4,358 31 May 2013 11,165 30 June 2016 257,284 23 Mar 2022
Corporate
M D Killick (appointed 17February 2012) W H M Robson (resigned 17February 2012) M R Davies P D J Wright (resigned 1July 2011)
LTIP 2007 Restricted Share Award** LTIP 2007 2001 Executive 2001 Executive LTIP 2007 LTIP 2007
9 Nov 2009 9 Nov 2009 5 Oct 2011 2 Oct 2006 13 Sep 2007 16 Oct 2008 20 Oct 2009
117.25 117.25 46
243,070 44,150
309,783
(243,070) (44,150) (309,783)
153 1,200,000 170 113 132.25 500,000 226,692 193,696
(1,200,000) (500,000) (226,692) (193,696)
* To facilitate the recruitment of J D Hart as Chief Executive, on 16 February 2011 he was granted an option over 696,969 ordinary shares in the Company with an exercise price of 99p per share. This award was made pursuant to Listing Rule 9.4.2 (2). The option will become exercisable subject to the satisfaction of a performance condition to be measured over the period from 4 January 2011 to 4 January 2014 based on the annual increase in absolute TSR for the Company over that period asoverleaf:
33

Information subject to audit continued Ordinary shares continued Share options and awards continued
Annual increase in absolute TSR Percentage of the option that will vest
15% 11% 8% Less than 8%
100% 75% 50% 0%
For TSR performance between these points, vesting will be calculated on a straight-line interpolation rounded to the nearest whole share. The Companys TSR willbeaveraged across a period of three months before the start of the performance period and three months before the date on which the performance period ends. In addition, forthe option to vest, the Remuneration Committee must be satisfied that the underlying financial performance of the Company is satisfactory. If J D Hart ceases employment asa good leaver before his option has become exercisable, the Committee shall determine the extent to which the option shall become exercisable taking into account the period of time that has elapsed between grant and cessation and the extent to which the performance condition is satisfied at the relevant date. In the event of a change of control or other relevant transaction before the option has become exercisable, the option will become exercisable at the time of the relevant event to the extent determined by the Committee taking into account the period of time that has elapsed between grant and the relevant event and the extent to which the performance condition is satisfied. The option shall not be taken into account for pension purposes. ** To facilitate the recruitment of W H M Robson as Finance Director, he was granted a one-off restricted share award over 76,759 ordinary shares in the Company in lieu of entitlements foregone from his previous employer. This award was made pursuant to Listing Rule 9.4.2 (2). 32,609 shares were sold immediately on receiving the award solely to meet the income tax and national insurance liability arising when the award was made. The award, which included the right to receive the equivalent ofany dividends paid during the intervening period, vests on 9 November 2012 subject to W H M Robson continuing to be employed by the Company at that time. The award will be satisfied by the transfer of existing shares held by the Companys Employee Benefit Trust. The award lapsed and the shares held by W H M Robson were forfeited following his resignation in February 2012.
There is no requirement for the Directors to pay any contributions on the granting of any options under any of the Companys share schemes. The earliest dates of exercise for the options set out in the table above are shown in note 23 on page 72. Approved by the Board on 11 September 2012 and signed on its behalf by:
Paul Wilkinson Chairman of the Remuneration Committee
34
Independent auditors report

to the members of Thorntons PLC
We have audited the financial statements of Thorntons PLC for the 53 weeks ended 30 June 2012 which comprise the Consolidated income statement, the Statements of comprehensive income, the Statements of changes in equity, the Balance sheets, the Cash flow statements, the Statement of accounting policies and the related notes. The financial reporting framework that has been applied in their preparation is applicable lawand International Financial Reporting Standards (IFRS) as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
Review of the year
Respective responsibilities of Directors and auditors As explained more fully in the Directors Responsibilities Statement set out on page 21, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Boards Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Companys members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Groups and the Parent Companys circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion: the financial statements give a true and fair view of the state of the Groups and of the Parent Companys affairs as at 30 June 2012 and of the Groups loss and Groups and Parent Companys cash flows for the 53 weeks then ended; the Group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union; the Parent Company financial statements have been properly prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the lAS Regulation. Opinion on other matters prescribed by the Companies Act 2006 In our opinion: the part of the Report on the Directors remuneration to be audited has been properly prepared in accordance with the Companies Act 2006; the information given in the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and the information given in the Corporate Governance statement set out on pages 22 to 26 of the Annual Report and Accounts with respect to internal control and risk management systems and about share capital structures is consistent with the financial statements.
35
Independent auditors report

to the members of Thorntons PLC continued
Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the Parent Company financial statements and the part of the Report on the Directors remuneration to be audited are not in agreement with the accounting records and returns; or certain disclosures of Directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit; or a corporate governance statement has not been prepared by the Parent Company. Under the Listing Rules we are required to review: the Statement of Directors responsibilities, set out on page 21, in relation to going concern; the parts of the Corporate Governance statement relating to the Companys compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and certain elements of the report to shareholders by the Board on Directors remuneration.
Randal Casson (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Leeds 11 September 2012
36
Consolidated income statement

53 weeks ended 30 June 2012
53 weeks ended 30 June 2012 Before exceptionals 000 Exceptional items (note 2) 000 52 weeks ended 25 June 2011 Before exceptionals 000 Exceptional items (note 2) 000
Note
Total 000
Total 000
Review of the year
Revenue Cost of sales Gross profit Operating expenses Other operating income Operating profit/(loss) Finance income Finance costs Profit/(loss) before taxation Taxation credit/(charge) Profit/(loss) attributable to owners of the parent Loss per share Basic Diluted
217,144 (121,507) 95,637 (94,349) 1,474 2,762 2 (1,913) 851 846 1,697
(3,065) (3,065) (3,065) 470 (2,595)
217,144 (121,507) 95,637 (97,414) 1,474 (303) 2 (1,913) (2,214) 1,316 (898) (1.4)p (1.4)p
218,255 (117,516) 100,739 (96,403) 1,674 6,010 11 (1,685) 4,336 (174) 4,162
(5,158) (5,158) (249) (5,407) 992 (4,415)
218,255 (117,516) 100,739 (101,561) 1,674 852 11 (1,934) (1,071) 818 (253) (0.4)p (0.4)p
2 3 4 5 6 7
Corporate
The accounting policies and notes on pages 49 to 78 are an integral part of these consolidated financial statements.
37
Statements of comprehensive income

Group 53 weeks ended 30 June 2012 000 52 weeks ended 25 June 2011 000 Company 53 weeks ended 30 June 2012 000 52 weeks ended 25 June 2011 000
Note
(Loss)/profit for the period Other comprehensive (expense)/income: actuarial loss recognised in the defined benefit pension scheme movement of deferred tax on pension liability Total other comprehensive expense Total comprehensive (expense)/income for the financial period attributable to owners of the parent 21 20
(898) (7,197) 1,359 (5,838) (6,736)
(253) (2,375) 133 (2,242) (2,495)
(1,263) (7,197) 1,359 (5,838) (7,101)
4,559 (2,375) 133 (2,242) 2,317
38
Statements of changes in equity

Share capital 000 Share premium 000 Retained earnings 000
Group
Note
Total 000
At 26 June 2010 Loss for the period Other comprehensive (expense)/income: actuarial loss recognised in the defined benefit pension scheme movement of deferred tax on pension liability Total comprehensive expense for the period ended 25 June 2011 Transactions with owners: share-based payment credit dividends At 25 June 2011 Loss for the period Other comprehensive (expense)/income: actuarial loss recognised in the defined benefit pension scheme movement of deferred tax on pension liability Total comprehensive expense for the period ended 30 June 2012 Transactions with owners: share-based payment credit dividends At 30 June 2012 24 10 24 10
6,837 6,837 6,837
13,768 13,768 13,768
5,363 (253) (2,375) 133 (2,495) (110) (4,054) (1,296) (898) (7,197) 1,359 (6,736) (459) (167) (8,658)
25,968 (253) (2,375) 133 (2,495) (110) (4,054) 19,309 (898) (7,197) 1,359 (6,736) (459) (167) (11,947)
Corporate Review of the year
39
Statements of changes in equity continued

Share capital 000 Share premium 000 Retained earnings 000
Company
Note
Total 000
At 26 June 2010 Profit for the period Other comprehensive (expense)/income: actuarial loss recognised in the defined benefit pension scheme movement of deferred tax on pension liability Total comprehensive income for the period ended 25 June 2011 Transactions with owners: share-based payment credit dividends At 25 June 2011 Loss for the period Other comprehensive (expense)/income: actuarial loss recognised in the defined benefit pension scheme movement of deferred tax on pension liability Total comprehensive expense for the period ended 30 June 2012 Transactions with owners: share-based payment credit dividends At 30 June 2012 24 10 24 10
6,837 6,837 6,837
13,768 13,768 13,768
7,575 4,559 (2,375) 133 2,317 (110) (4,054) 5,728 (1,263) (7,197) 1,359 (7,101) (459) (167) (1,999)
28,180 4,559 (2,375) 133 2,317 (110) (4,054) 26,333 (1,263) (7,197) 1,359 (7,101) (459) (167) 18,606
Retained earnings are net of investments in own shares of 2,163,000 (2011: 2,163,000) being held by trusts operating the following plans: 2007 LTIP with 504,610 shares (2011: 504,610) at an original cost of 1,035,000 (2011: 1,035,000); and 2001 Executive Share Option Scheme with 905,070 shares (2011: 905,070) at an original cost of 1,128,000 (2011: 1,128,000). The accounting policies and notes on pages 49 to 78 are an integral part of these consolidated financial statements.
40
Balance sheets
as at 30 June 2012
Group Note 2012 000 2011 000 Company 2012 000 2011 000
Assets Non-current assets Intangible assets Property, plant and equipment Investment in subsidiaries Deferred tax assets Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets Equity and liabilities Shareholders equity attributable to owners of the parent Ordinary shares Share premium (Deficit)/retained earnings Total equity Liabilities Current liabilities Trade and other payables Borrowings Current tax liabilities Provisions for liabilities Non-current liabilities Borrowings Deferred tax liabilities Retirement benefit obligations Other non-current liabilities Provisions for liabilities Total liabilities Total equity and liabilities
Review of the year
11 12 13 20
2,140 47,221 2,346 51,707
2,792 52,667 55,459 37,018 16,017 1,752 54,787 110,246
2,140 22,174 27,368 7,264 58,946 38,056 17,024 2,407 57,487 116,433
2,792 26,760 27,368 4,826 61,746 37,010 16,720 1,452 55,182 116,928
14 15 25b
38,070 15,467 2,918 56,455 108,162
23
6,837 13,768 (8,658) 11,947
6,837 13,768 (1,296) 19,309
6,837 13,768 (1,999) 18,606
6,837 13,768 5,728 26,333

Corporate
16 17 19
27,559 30,354 370 1,410 59,693
32,457 22,886 967 56,310 3,355 599 25,264 2,699 2,710 34,627 90,937 110,246
29,541 30,354 1,410 61,305 1,653 29,080 2,490 3,299 36,522 97,827 116,433
32,714 22,886 967 56,567 3,355 25,264 2,699 2,710 34,028 90,595 116,928
17 20 21 22 19
1,653 29,080 2,490 3,299 36,522 96,215 108,162
The accounting policies and notes on pages 49 to 78 are an integral part of these consolidated financial statements. The financial statements on pages 37 to 78 were approved by the Board of Directors on 11 September 2012 and were signed on its behalf by:
Michael Killick Finance Director Company number 174706
41
Cash flow statements

Group 53 weeks ended 30 June 2012 000 52 weeks ended 25 June 2011 000 Company 53 weeks ended 30 June 2012 000 52 weeks ended 25 June 2011 000
Note
Cash flows from operating activities Cash generated from operations Corporate taxation paid Interest received Net cash flows generated from operating activities Cash flows from investing activities Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Interest paid Capital element of finance lease rental payments Borrowings advanced/(repaid) Dividends paid Net cash received from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents and bank overdrafts Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period
25a
1,497 628 2,125 539 (4,875) (4,336) (2,222) (2,234) 8,000 (167) 3,377
14,823 (1,392) 12 13,443 46 (4,208) (4,162) (1,802) (2,499) (800) (4,054) (9,155) 126 1,626 1,752
867 629 1,496 539 (4,870) (4,331) (1,813) (2,230) 8,000 (167) 3,790 955 1,452 2,407
14,588 (1,392) 12 13,208 46 (4,199) (4,153) (1,803) (2,499) (800) (4,054) (9,156) (101) 1,553 1,452
10
25b 25b
1,166 1,752 2,918
42
Statement of accounting policies

Basis of preparation Thorntons PLC (the Company) is a company incorporated and domiciled in the UK and is listed on the London Stock Exchange. The address oftheCompanys registered office is Thornton Park, Somercotes, Derbyshire DE55 4XJ. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the EU and with those parts of the Companies Act 2006 applicable tocompanies reporting under IFRS. These consolidated financial statements have been prepared under the historical cost convention. A summary of the more important Group accounting policies adopted in the preparation of the consolidated financial statements is set out below, together with an explanation of where changes have been made to previous policies on the adoption of new accounting standards in the financial year. These policies have been consistently applied to all the financial years presented, unless otherwise stated. The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts ofassets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on managements best knowledge, actual results may ultimately differ. A summary of critical accounting estimates used in the preparation of the financial statements is set out on page 48. Interpretations effective in the period ended 30 June 2012 but which had no significant impact The following interpretations to existing standards are mandatory for the accounting period ended 30 June 2012, but they have not had a significant impact on the Group or Company: Amendment to IAS 24 (Revised) Related party disclosures; Amendment to IFRS 7 Financial instruments: Disclosures; Amendment to IFRS 1 First time adoption; Annual improvements to IFRSs 2010; Amendment to IFRIC 14 Prepayments of a minimum funding requirement; and
Corporate
Review of the year
Amendment to IFRS 7 Financial instruments: Disclosures. Amendments and interpretations that are not yet effective and have not been early adopted, which are not expected to have asignificant impact The following standards and interpretations have been published and are mandatory for accounting periods beginning on or after 30 June 2012 orlater periods, but which the Group and the Company have not early adopted and are not expected to have a significant impact on the Group orCompany: Amendment to IAS 12 Income taxes on deferred tax; Amendment to IAS 19 Employee benefits; Amendment to IAS 1 Financial statement presentation regarding other comprehensive income; IFRS 9 Financial instruments: Classification and measurement; IFRS 10 Consolidated financial statements; IFRS 11 Joint arrangements;
IFRS 12 Disclosures of interests in other entities; IFRS 13 Fair value measurement; IAS 27 (revised 2011) Separate financial statements; IAS 28 (revised 2011) Associates and joint ventures; Amendment to IFRS 7 Financial instruments: Disclosures on offsetting financial assets and financial liabilities; Amendment to IAS 32 Financial instruments: Presentation on offsetting financial assets and financial liabilities; Amendment to IFRS 1 First time adoption on government loans; Annual improvements 2011; and IFRIC 20 Stripping costs in the production phase of a surface mine.
43
Statement of accounting policies continued

Basis of consolidation The consolidated financial statements incorporate the results of the Company and each of its subsidiaries for the financial year ended 30 June 2012. Subsidiaries are entities controlled by the Group where control is deemed to exist when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries are included in the consolidated financial statements from the date the control commences until the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured asthe fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective ofthe extent of any minority interest. The excess of the cost of acquisition over the fair value of the Groups share of the identifiable net assets acquired isrecorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the Income statement. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are alsoeliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation. Cost comprises the purchase price of property, plant and equipment together with any incidental costs of acquisition. Subsequent costs are included in the assets carrying value or recognised as a separate asset, as appropriate, only when it is probable that futureeconomic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs andmaintenance expenditure is charged to the Income statement as incurred. All property, plant and equipment, other than land and assets in the course of construction, are depreciated to write their cost down to residual value over their remaining useful lives by equal annual instalments as follows: Long leasehold and freehold premises Short leasehold land and buildings Other plant, vehicles and equipment Retail fittings and equipment 50 years Period of the lease Up to 15 years Up to 10 years
The assets residual values and useful lives are reviewed and adjusted, if appropriate, at each Balance sheet date. The need for an impairment write-down is assessed by comparison of the carrying value of the asset against the higher of its net realisable value or value in use. Gains and losses on disposals are determined by comparing the proceeds (net of disposal costs) with the carrying amount and are recognised within operating expenses in the Income statement. Intangible assets Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. Thesecosts are amortised over their estimated useful lives (three to five years). Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Computer software development costs that are directly attributable to identifiable and unique software products controlled by the Group are recognised as assets and are amortised over their estimated useful lives (not exceeding five years). Employee share option schemes Where share options are granted to employees as part of their remuneration, the fair value of options granted is recognised as an employee expense inthe Income statement with a corresponding increase in equity. The fair value is measured at the grant date and expensed through theIncome statement over the period during which the employees become unconditionally entitled to the options. The amount recognised in theIncome statement is adjusted at each Balance sheet date for the expected and actual number of options vesting with a corresponding entryinequity. The fair value of the options is measured using a Black-Scholes option valuation model for options with non-market performance conditions andaMonte Carlo model for options with market performance conditions.
44
The proceeds received net of any directly attributable transaction costs are credited to share capital and share premium when the options areexercised. Exercised options are equity settled. Own shares held by the Employee Share Ownership Plan (ESOP) Trusts are carried at cost and disclosed within note 9. Investments in subsidiaries Investments in subsidiaries are stated at cost, provision being made where appropriate for impairment, assessed by comparing the carrying value tothe higher of net realisable value or value in use. Inventories Inventories are stated at the lower of cost and net realisable value. Cost includes materials, direct labour and an attributable proportion of manufacturing overheads, based on normal operating capacity, according to the stage of production reached and valued on a First In First Out basis. Netrealisable value is the estimated value which would be realised after deducting all costs of completion, marketing and selling. Provision ismade to reduce the cost to net realisable value having regard to the age and condition of inventory, as well as its anticipated saleability. Trade receivables Trade receivables are recognised initially at fair value and subsequently carried net of provisions for impairment. A provision for impairment isestablished where there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the receivable, probability that the receivable will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable is impaired. The amount of theprovision isthe difference between the assets carrying amount and the present value of estimated future cash flows. The carrying amount of theasset is reduced through the use of an allowance account and the amount of the loss is recognised in the Income statement within Operating expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against Operating expenses in the Income statement. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits on call with banks, other short-term liquid investments with maturities of three months orless and bank overdrafts. Bank overdrafts are shown within borrowings in Current liabilities on the Balance sheet. Trade and other payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Borrowings Borrowings are recognised initially at fair value, net of transaction costs. Subsequent measurement is based on amortised cost and any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Income statement over the period of the borrowings using the effective interest rate method. If borrowings are renegotiated before the end of their term, remaining non-amortised transaction costs are written off to the Income statement. Borrowing facilities are provided by a number of different banks and are subject to continued covenant compliance, these covenants being measured half-yearly in line with the annual and interim reporting cycles. Use of these facilities is generally short term in nature, with loan maturity dates ranging from less than one week to several months. Borrowings are actively monitored in order to manage their cost and level ofexposure to each individual bank which, in the normal course of business, results in the settlement of these liabilities and the separate drawdown of new loans within twelve months of the Balance sheet date. In light of this, these borrowings are classified as current. Current taxation The charge for current tax is based on the results for the period after making allowance for non-assessable or disallowable items. It is calculated using rates of tax that have been enacted at the Balance sheet date. Deferred taxation Deferred taxation is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
Corporate Financial statements and notes Review of the year
45

Deferred taxation continued Deferred tax liabilities are recognised in full for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. However, if the deferred tax arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit, it is not accounted for. Deferred taxation is measured based on tax rates and laws enacted or substantively enacted at the Balance sheet date and are expected to apply when the related deferred income tax asset is realised or deferred income tax liability is settled. Deferred tax assets and liabilities are offset when there is a legal, enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a netbasis. Provisions Provisions for onerous leases and dilapidations are recognised in the Balance sheet when the Group has a legal or constructive obligation whereby, as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds, when applicable. Revenue Revenue comprises the amounts receivable for goods and services provided outside the Group in the normal course of business, net of trade discounts and value added tax. Retail sales and allowances are recognised at the date of the transaction with consumers. In addition, provisions are made for expected returns as necessary. For sales promotion purposes, Thorntons PLC operates a variety of schemes that give rise to goods being sold at a discount to the standard retail price. These include staff discounts and the redemption of promotional vouchers. Revenue is adjusted to show sales net of all related discounts. Wholesale sales, including sales to Franchise outlets, are recognised either when goods are dispatched to customers or the customer has accepted the products, depending on the sales channel. Provision is made for expected returns and allowances as necessary, including discounts and rebates. Revenue from the provision of the sale of goods on the internet is recognised at the point that the risks and rewards of the inventory have passed tothe customer, which is the point of despatch. Segmental reporting Following the adoption of IFRS 8 Operating segments, segments are reported in a manner consistent with the internal reporting provided to the ChiefOperating Decision Maker (CODM), which has been identified as the Executive Committee (Executive). The CODM is responsible for allocating resources and assessing performance of the operating segments. Other operating income Other operating income comprises amounts receivable in respect of licensing income, franchise fees and rental income, net of value added tax where applicable. Licence income and rental income are recognised on an accruals basis in accordance with the risks and rewards of the relevant agreements. Franchise fees are non-refundable and are charged in return for the initial grant of a five-year franchise and the income is therefore held as deferred income on the Balance sheet and released to the Income statement on a straight-line basis over this five-year period. Fees in respect of subsequent renewals are likewise amortised over the renewal period. Post-retirement benefits Defined benefit pension scheme The retirement benefit obligation recognised in the Balance sheet represents the present value of the defined benefit obligation and unfunded liabilities as reduced by the fair value of defined benefit scheme assets. This scheme was closed to new entrants with effect from August 2002. The defined benefit obligation is calculated annually by independent actuaries using the projected unit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pensionliability. With effect from 6 April 2009, benefits under the scheme for active members were amended for service from that date from the previous basis offinal salary accrual to a Career Average Revalued Earnings (CARE) basis.
46
Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised directly in equity and are presented in theStatement of comprehensive income. Other income and administrative expenses associated with the defined benefit scheme are recognised intheIncome statement. The contributions made by the employees and the Group are held in a trust fund separate from the Groups finances. Defined contribution pension scheme The Group also operates a defined contribution pension scheme which requires contributions to be made to a separately administered fund. Contributions to the fund are determined as a percentage of employees earnings and are charged to the Income statement as incurred. Foreign currencies Transactions in foreign currencies are translated in Sterling at the exchange rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated to Sterling at the exchange rates ruling at the Balance sheet date and any exchange differences arising are taken to the Income statement. Finance leases Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards of ownership to the Group. Allother leases are classified as operating leases. Property, plant and equipment held under finance leases are capitalised in the Balance sheet at fair value of leased assets, or if lower, the present valueof the minimum lease payments. Assets are depreciated over the shorter of their lease term and their expected useful lives. The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the Income statement over theperiod of the lease. Operating leases The costs of all operating leases are charged against operating profit on a straight-line basis at existing rental levels. Incentives to sign leases, including reverse premiums and rent-free periods, are treated as deferred income and are credited to the Income statement in equal instalments overthe term of the lease. Rental income from operating leases is recognised on a straight-line basis over the period of the lease at current rental levels. New store expenditure Pre-trading expenditure on new stores is charged to the Income statement as incurred. Derivatives and other financial instruments Derivatives are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured at fair value. Where appropriate, the Group enters into derivatives in order to minimise relevant currency and interest rate exposure. These are designated as hedges ofthe cost of a highly probable forecast transaction or commitment (cash flow hedging instrument). To qualify for hedge accounting the Group is required, at inception, to document in advance the relationship between the item being hedged and the hedging instrument and to document and reassess at each reporting date whether the hedge will be highly effective in offsetting changes in cash flows ofthe hedged item on an ongoing basis. The effective portion of changes in the fair value of cash flow hedging derivatives is recognised in Other comprehensive income within the hedging reserve. The change infair value relating to the ineffective portion of the hedge is recognised in the Income statement immediately within Finance costs. Amounts accumulated within equity are recycled to the Income statement in the periods when the hedged item will affect profit. When a hedging instrument expires or is sold, or no longer meets the criteria for hedge accounting, any cumulative gain or loss on the hedging instrument previously recognised in equity is retained in equity and is recognised when the forecast transaction is ultimately recognised in the Income statement. If the hedged transaction is no longer expected to occur, the cumulative gain or loss that was recognised in equity is immediately transferred to the Income statement. The Group seeks to limit its exposure to volatility in raw material and energy costs by buying these forward, where possible, for a period of up to a year. Under IAS 39 the Group takes advantage of the own use exemption and does not fair value these contracts.
47

Grants Grants and other contributions towards the cost of property, plant and equipment are included in payables as deferred income and credited to the Income statement over the life of the asset and recognised at fair value where there is a reasonable assurance the grant will be received and that theGroup will comply with conditions of the grant. Exceptional items Exceptional items are material items that derive from events or transactions which individually or, if of a similar type, in aggregate need to be disclosed by virtue of their size or incidence if the financial statements are to give a true and fair view. Dividends Final dividends are recognised as a liability in the period in which they are approved by the Companys shareholders. Interim dividends are recognised when they are paid. Net debt Net debt is cash and cash equivalents, bank and other loans and finance leases. Research and development Expenditure in respect of research and development is written off against profits in the period in which it is incurred, unless the development costs meet the criteria for capitalisation under IAS 38 Intangible assets. Critical accounting estimates and judgements Provisions The Group makes judgements to determine whether there is objective evidence which indicates that inventory should be held at net realisable value. The store dilapidation provision is estimated based on past experience of cash outflows. The Group provides against onerous leases based on future estimated trading cash flows and a discount rate is used in this calculation. A 1% change in this discount rate would result in a 140,000 change inthe provision at year end. Retirement benefit obligation The valuation of the retirement benefit obligation is dependent upon a series of assumptions, the key ones being discount rates, mortality rates, investment returns and inflation on the rate of salary and pension increases. These judgements and estimates are determined after taking into account the requirements of IAS 19 Retirement benefit obligations and after taking expert advice from the Group actuaries. These are set out in note 21 tothe financial statements.
48
Notes to the financial statements

1 Segmental reporting The Executive reviews the Groups internal reporting in order to assess performance and allocate resources. The operating segments of the Group have been determined on this basis. All revenue arises from UK operations to external customers and therefore the Executive does not consider the business from a geographic perspective, only an operational one. Two reportable segments, Retail which incorporates Own Stores, Franchise and Thorntons Direct, and Sales & Operations (S&O), encompassing the Commercial trading channel and manufacturing operations, have been identified. One Commercial customer now represents greater than 10% of Group revenue, with revenue in the period of 28.7 million (2011: 27.3 million). The Executive assesses the performance of the operating segments based on a measure of operating profit. Costs specific to Head Office and finance costs are not included in the result for each operating segment as these costs are not managed on a segmented basis. Total segment assets exclude IT assets, non-trade receivables and cash and cash equivalents as these are managed centrally. Assets are substantially located in the UK.
53 weeks ended 30 June 2012 Retail 000 S&O 000 Central 000 Total 000 Retail 000 52 weeks ended 25 June 2011 S&O 000 Central 000 Total 000
Review of the year
Total revenue Depreciation and amortisation Segment operating profit Head Office costs Exceptional items Operating (loss)/profit Net finance costs Loss before taxation Additions to non-current assets (other than deferred taxassets) Total assets
132,150 3,747 3,432 (3,060)
84,994 5,012 16,625
1,260 (5)
217,144 10,019 20,057 (17,295) (3,065) (303) (1,911) (2,214)
139,448 5,481 7,811 (4,334)
78,807 5,206 15,362
1,531 (824)
218,255 12,218 23,173 (17,163) (5,158) 852 (1,923) (1,071)

Corporate
1,300 10,351
2,493 83,628
827 14,183
4,620 108,162
2,226 12,721
2,232 83,717
1,429 13,808
5,887 110,246
49
Notes to the financial statements continued

2 Exceptional items Exceptional items comprise:
53 weeks ended 30 June 2012 000 52 weeks ended 25 June 2011 000
Impairment and onerous lease charges Outsourcing costs Refinancing costs Total exceptional items Tax credit attributable to exceptional items Total exceptional items after tax
3,060 5 3,065 (470) 2,595
4,334 687 386 5,407 (992) 4,415
Impairment and onerous lease charges As a result of the performance of Retail Own Stores during the financial year, significant impairment and onerous lease charges have been required. Further detail of the impairment charge can be found in note 12 and the onerous lease charge in note 19. Outsourcing costs On 27 June 2011 the Group announced the outsourcing of its distribution and warehousing functions. As the decision to sign the contract in an agreed form had been made and approved by the Board prior to the year end date, exceptional transition costs relating to this contract were included in the accounts for the financial year ended 25 June 2011. Refinancing costs On 24 June 2011 the Group agreed and signed new committed bilateral revolving credit facilities totalling 57.5 million with a maturity date of October 2015 to replace the existing bank facilities of 52.5 million. At 25 June 2011 loans against the existing facilities were in place, expiring by28 June 2011, at which point the new facility commenced. These facilities continue to be unsecured. The associated exceptional costs relate to professional fees for the arrangement of the new bank facility agreements and the write-off of remaining unamortised arrangement fees of the previous facilities which were due to expire in August 2012. Tax charge attributable to exceptional items This is the tax charge arising in relation to the exceptional items which are an allowable deduction for tax and it has been calculated at the UKstandard corporation tax rate of 25.5%.
50
3 Other operating income

Franchise fee income Licensing income Rent receivable
122 1,080 272 1,474
139 1,297 238 1,674
Review of the year
4 Finance income
Other finance income
2 2
11 11
5 Finance costs
Interest payable on bank borrowings Arrangement fee amortisation on bank borrowings Net exchange differences on foreign currency payments Interest payable on finance leases Provisions: unwinding of discount rate Other finance costs
825 213 37 314 252 272 1,913
653 527 9 356 42 347 1,934
Corporate
Arrangement fee amortisation on bank borrowings includes exceptional costs of nil (2011: 249,000), as shown in note 2.
51

6 Loss before taxation
Note
The following items have been included in arriving at loss before taxation: Employee benefits expense One-off restructuring costs: redundancies Store closure costs Cost of inventories recognised as an expense Onerous lease charges: unwinding of existing provisions new provisions during the financial year Depreciation of property, plant and equipment: impairment charges depreciation excluding impairment charges Amortisation of intangible assets Loss on disposal of property, plant and equipment Operating lease rentals payable: land and buildings other Repairs and maintenance expenditure on property, plant and equipment Trade receivables impairment charge Government grant income Product research and development Services provided by the Companys auditors During the period the Group obtained the following services from the Companys auditors, as detailed below:
27
59,874 578 1,042 81,268 (968) 1,837
64,930 625 574 72,229 (343) 2,537 1,797 8,779 1,642 148 20,928 1,074 5,539 164 (21) 369
12 254 8,366 1,399 160 20,674 1,173 5,077 100 (21) 322
11 28
18
53 weeks ended 30 June 2012 000
Fees payable to the Companys auditors for the audit of the Company and consolidated financial statements Fees payable to the Companys auditors and its associates for other services: audit of Thorntons PLC subsidiaries pursuant to legislation other services supplied pursuant to legislation review of working capital
93 5 32 53 183
88 5 32 125
52
7 Taxation Analysis of charge in period

Review of the year
Current tax: current period adjustment in respect of prior period Deferred tax (note 20): current period adjustment in respect of prior period effect of change in tax rate Taxation credit Tax on items charged to equity
270 270 (466) (766) (354) (1,316)
339 (89) 250 (436) (20) (612) (818)
Deferred tax credit on actuarial loss Effect of changes in the rate of taxation
1,727 (368) 1,359
617 (484) 133

Corporate
Tax reconciliation The tax for the period is higher (2011: higher) than the standard rate of corporation tax in the UK of 25.5% (2011: 27.5%). The differences areexplained below:
Loss on ordinary activities before tax Loss on ordinary activities multiplied by the rate of corporation tax in the UK of 25.5% (2011: 27.5%) Effects of: adjustments to tax provision in respect of prior periods expenses not deductible for tax purposes effect of other timing differences effect of reduction in tax rate Total taxation
(2,214) (565) (496) 71 1 (327) (1,316)
(1,071) (295) (109) 173 1 (588) (818)
The Finance Act (No.4) 2012 reduced the main rate of corporation tax from 26% to 24% from 1 April 2012. Accordingly, the Companys profits forthis accounting period are taxed at an effective rate of 25.5% and will be taxed at 24% in the future. The Act also included legislation to further reduce the main rate to 23% from 1 April 2013; this further reduction had not been substantively enacted at the Balance sheet date and therefore isnot included in these financial statements.
53

8 Profit/loss for the financial period The Parent Company has not prepared its own Income statement as permitted by Section 408 of the Companies Act 2006. Of the Group profit attributable to shareholders, a loss after tax of 1,263,000 (2011: profit of 4,559,000) has been dealt with in the accounts of the Company. 9 Loss per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period, excluding those held in the ESOP Trusts, which are treated as cancelled. For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. Dilutive potential ordinary shares are those share options granted to employees where the exercise price is less than the average market price of the Companys ordinary shares during the period. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:
53 weeks ended 30 June 2012 Earnings 000 Basic earnings per share Diluted earnings per share 52 weeks ended 25 June 2011 Earnings 000 Basic earnings per share Diluted earnings per share
Profit before exceptional items Effect of exceptional items Loss attributable to owners of the parent
1,697 (2,595) (898)
2.5p (3.9)p (1.4)p
2.5p (3.9)p (1.4)p
4,162 (4,415) (253)
6.2p (6.6)p (0.4)p

2012
6.2p (6.6)p (0.4)p

2011
Weighted average number of ordinary shares Dilutive effect of shares from share options Fully diluted weighted average number of ordinary shares 10 Ordinary dividends
Group and Company
66,955,838 1,233,787 68,189,625
66,955,838 536,726 67,492,564
2012 000
2011 000
Final dividend paid for the 52 weeks ended 25 June 2011 of 0.25p (52 weeks ended 26 June 2010: 4.10p) Interim dividend paid in respect of the 53 weeks ended 30 June 2012 of nil (52 weeks ended 25 June 2011: 1.95p) Amounts recognised as distributions to owners of the parent No final dividend will be paid in respect of the period ended 30 June 2012.
167 167
2,748 1,306 4,054
The trusts operating the long term incentive plan scheme (LTIP 2007) have fully waived dividends on the 504,610 (2011: 504,610) shares held at 30 June 2012 and all but 0.01p per share on the 905,070 (2011: 905,070) shares held in respect of the 2001 Executive Share OptionScheme.
54
11 Intangible assets
Group and Company Computer software 000
Cost At 26 June 2011 Additions externally acquired Disposals At 30 June 2012 Accumulated amortisation At 26 June 2011 Charge for the financial year Disposals At 30 June 2012 Net book amount at 30 June 2012 Net book amount at 25 June 2011
27,311 761 (50) 28,022 24,519 1,399 (36) 25,882 2,140 2,792
Computer software 000
Review of the year
Group and Company
Cost At 27 June 2010 Additions externally acquired Disposals At 25 June 2011 Accumulated amortisation At 27 June 2010 Charge for the financial year Disposals At 25 June 2011 Net book amount at 25 June 2011 Net book amount at 26 June 2010 Intangible assets held under finance leases were valued at 202,804 (2011: 459,000). Amortisation costs for intangible assets directly involved in production are recognised in cost of sales within the Income statement totalling 505,000 (2011: 617,000). All other amortisation costs are recognised within Operating expenses.
26,328 983 27,311 22,877 1,642 24,519 2,792 3,451
Included above are 392,000 (2011: 142,000) of assets in the course of construction which are not being amortised at the balance sheet date.
55

12 Property, plant and equipment
Land and buildings Long leasehold and freehold 000 Short leasehold 000 Other plant, vehicles and equipment 000 Retail fittings and equipment 000
Group
Totals 000
Cost At 26 June 2011 Additions at cost Disposals At 30 June 2012 Accumulated depreciation At 26 June 2011 Charge for the financial year Disposals At 30 June 2012 Net book amount at 30 June 2012
38,912 153 39,065 12,345 903 13,248 25,817
8,236 445 (983) 7,698 6,584 864 (826) 6,622 1,076
86,490 2,416 (2,799) 86,107 67,107 4,558 (2,334) 69,331 16,776
53,556 845 (4,501) 49,900 48,491 2,295 (4,438) 46,348 3,552
187,194 3,859 (8,283) 182,770 134,527 8,620 (7,598) 135,549 47,221
Group
Totals 000
Cost At 27 June 2010 Additions at cost Disposals At 25 June 2011 Accumulated depreciation At 27 June 2010 Charge for the financial year Disposals At 25 June 2011 Net book amount at 25 June 2011 Net book amount at 26 June 2010
38,906 6 38,912 11,459 886 12,345 26,567 27,447
8,200 216 (180) 8,236 5,777 957 (150) 6,584 1,652 2,423
84,221 2,678 (409) 86,490 62,631 4,873 (397) 67,107 19,383 21,590
53,307 2,004 (1,755) 53,556 46,234 3,860 (1,603) 48,491 5,065 7,073
184,634 4,904 (2,344) 187,194 126,101 10,576 (2,150) 134,527 52,667 58,533
Assets are reviewed for impairment on a regular basis and a provision made where necessary. A discounted cash flow is calculated for each Retail store, including attributable overheads, using the Groups weighted average cost of capital. The net book value of assets attributable to the Retail store are impaired to the extent that the net present value of the cash flows is lower than the net book value. The impairment charge for the financial year of 1,223,000 (2011: 1,797,000) has been recognised within the depreciation charge for the financial year and has been classified as an exceptional item (see note 2). Included above are 396,000 (2011: 154,000) of assets in the course of construction which are not being depreciated at the balance sheet date.
56
Company
Totals 000
Cost At 26 June 2011 Additions at cost Disposals At 30 June 2012 Accumulated depreciation At 26 June 2011 Charge for the financial year Disposals At 30 June 2012 Net book amount at 30 June 2012
Review of the year
890 153 1,043 215 42 257 786
8,197 445 (983) 7,659 6,551 862 (826) 6,587 1,072
86,490 2,416 (2,799) 86,107 67,107 4,557 (2,334) 69,330 16,777
53,402 839 (4,501) 49,740 48,346 2,293 (4,438) 46,201 3,539
148,979 3,853 (8,283) 144,549 122,219 7,755 (7,599) 122,375 22,174
Company
Totals 000
Corporate
Cost At 27 June 2010 Additions at cost Disposals At 25 June 2011 Accumulated depreciation At 27 June 2010 Charge for the financial year Disposals At 25 June 2011 Net book amount at 25 June 2011 Net book amount at 26 June 2010
884 6 890 192 23 215 675 692
8,161 216 (180) 8,197 5,746 955 (150) 6,551 1,646 2,415
84,221 2,678 (409) 86,490 62,631 4,873 (397) 67,107 19,383 21,590
53,162 1,995 (1,755) 53,402 46,090 3,859 (1,603) 48,346 5,056 7,072
146,428 4,895 (2,344) 148,979 114,659 9,710 (2,150) 122,219 26,760 31,769
Depreciation costs for property, plant and equipment directly involved in production are recognised within cost of sales within the Income statement totalling 4,696,000 (2011: 4,623,000). All other depreciation costs are recognised within Operating expenses. Property, plant and equipment held under finance leases have the following net book amount:
Land and buildings long leasehold and freehold 2012 000 Other plant, vehicles and equipment 2012 000 Land and buildings long leasehold and freehold 2011 000 Other plant, vehicles and equipment 2011 000
Group and Company
Retail fittings and equipment 2012 000
Retail fittings and equipment 2011 000
Cost Aggregate depreciation Net book amount
784 (342) 442
10,384 (7,008) 3,376
12,434 (11,521) 913
784 (290) 494
12,512 (8,337) 4,175
13,300 (11,750) 1,550
57

13 Investment in subsidiaries
Company 2012 000 2011 000
Cost At 30 June 2012 and 25 June 2011 Provisions for impairment At 30 June 2012 and 25 June 2011 Net book value at beginning and end of period
27,369 (1) 27,368
27,369 (1) 27,368
The Company owns the whole of the issued ordinary share capital of the following principal operating subsidiaries. To avoid a statement of excessive length, details of investments in dormant companies included in the consolidated accounts have been omitted. A full list of subsidiaries can be obtained upon request from the Companys registered office.
Subsidiary Country of incorporation Principal activity Country of operation
Strand Court Properties Limited Thorntons (Jersey) Limited
England Jersey
Property investment Retail trading company
United Kingdom Jersey
The Directors believe that the carrying value of the investments is supported by their underlying net assets. 14 Inventories
Group 2012 000 2011 000 Company 2012 000 2010 000
Raw materials Work in progress Finished goods and goods for resale
4,213 3,224 30,633 38,070
3,834 3,666 29,518 37,018
4,213 3,224 30,619 38,056
3,834 3,666 29,510 37,010
During the financial year 132,500 relating to the write-down of inventory to net realisable value was recognised as an expense and included within cost of sales (2011: release of expense previously recognised of 253,000). 15 Trade and other receivables
Group 2012 000 2011 000 Company 2012 000 2011 000
Trade receivables Less: provision for impairment Net trade receivables Other receivables Prepayments and accrued income Corporation tax
9,632 (749) 8,883 571 6,013 15,467
7,273 (446) 6,827 535 8,127 528 16,017
9,632 (749) 8,883 571 5,998 1,572 17,024
7,273 (446) 6,827 534 8,113 1,246 16,720
The Groups exposure to credit risk and impairment losses related to trade receivables is disclosed in note 18. Trade receivables are denominated in Sterling. Prepayments and accrued income include 4,214,000 (2011: 5,746,000) of property related rent, rates, insurances and surcharge prepayments.
58
16 Trade and other payables

Group 2012 000 2011 000 Company 2012 000 2011 000
Trade payables Other taxation and social security payable Amounts owed to other Group companies Other payables Accruals and deferred income
15,846 2,505 231 8,977 27,559
15,072 6,585 176 10,624 32,457
15,846 2,484 2,007 231 8,973 29,541
15,072 6,575 283 176 10,608 32,714
Review of the year
Amounts owed to other Group companies are unsecured, interest free and have no fixed repayment terms. Within accruals and deferred income is a balance in respect of Government grants within the Group and Company of 21,035 (2011: 21,035), primarily relating to a grant received in the financial year ended June 2004 for the relocation of toffee manufacturing operations from the original Belper site to Thornton Park. This Government grant totalling 400,000 is being released to the Income statement on a straight-line basis over 20years. 17 Borrowings
Group Current 2012 000 2011 000 Company 2012 000 2011 000
Bank loans and overdrafts due within one year or on demand: unsecured bank loans and overdrafts finance lease obligations
28,900 1,454 30,354
20,900 1,986 22,886
28,900 1,454 30,354
20,900 1,986 22,886
Corporate
Group Non-current 2012 000 2011 000
Company 2012 000 2011 000
Finance lease obligations
1,653
3,355
1,653
3,355
Bank loans and overdrafts are denominated in Sterling and incur interest based on LIBOR or UK base rates. The effective interest rates at the Balance sheet dates were as follows:
Group and Company 2012 % 2011 %
Bank borrowings Finance leases The Groups borrowings are all denominated in Sterling.
2.64 1.36
2.55 2.01
59

17 Borrowings continued Maturity of financial liabilities The table below analyses the Groups financial liabilities (excluding Trade and other payables which are all less than one year and shown in note 16) into relevant maturity groupings based on the remaining period at the Balance sheet date to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows:
2012 Debt 000 Finance leases 000 2011 Finance leases 000
Total
000
Group and Company
Debt 000
Total
000
Less than one year Between one and two years Between two and five years
28,900 28,900
1,552 901 823 3,276
30,452 901 823 32,176
20,907 20,907
2,186 1,647 1,906 5,739
23,093 1,647 1,906 26,646
The Group entered into new committed bank facilities on 24 June 2011 totalling 57.5 million and expiring in October 2015. Debt due in less than one year reflects the ongoing utilisation, on a short-term basis, of four-year revolving facilities described in the following borrowing facilities note. Allloans in place at 30 June 2012 are classified as current on the basis that they will be settled within twelve months. Borrowing facilities The Group must comply with the principal lending covenants tested semi-annually in respect of interest cover, net debt to earnings and Earnings Before Interest, Tax, Depreciation, Amortisation and Rent (EBITDAR) to fixed costs ratio. For both interest cover and net debt to earnings, earnings is defined as Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). The Group has the following undrawn committed floating rate borrowing facilities available at 30 June 2012:
Group and Company 2012 000 2011 000
Expiring within one year Expiring between two and five years
5,000 28,600 33,600
5,000 36,600 41,600
The facility in place at 30 June 2012 that expires within one year is an overdraft facility which is renewable annually. Those expiring between two and five years are part of revolving facilities, their utilisation being managed via regular review during their term. All these facilities incur commitment fees at market rates. The minimum lease payments under finance leases fall due as follows:
2012 Minimum lease payments 000 Future finance charges 000 Present value of finance lease liabilities 000 Minimum lease payments 000 2011 Future finance charges 000 Present value of finance lease liabilities 000
Group and Company
Less than one year Between one and two years Between two and five years
1,552 901 823 3,276
(98) (47) (24) (169)
1,454 854 799 3,107
2,186 1,647 1,906 5,739
(200) (117) (81) (398)
1,986 1,530 1,825 5,341
The fair value of obligations under finance leases equates to their carrying value as the interest rates being paid on these are substantially those prevailing in the open market. The fair values of other financial instruments are not materially different to their carrying value due to their relatively short maturity or small size. TheGroup does not have any financial instruments that are measured in the Balance sheet at fair value.
60
18 Financial instruments The Groups financial instruments comprise cash and cash equivalents, bank loans, finance leases and other items such as trade payables and trade receivables that arise from its operations. The principal function of these financial instruments is to raise finance for the Groups operations. The Groups activities expose it to a variety of financial risks which relate to interest rates, liquidity, capital, price, foreign currency and credit. The Groups overall risk management programme focuses on the potential movements in interest rates, pricing (in particular raw material costs) and credit and on minimising the potential adverse effects on the Groups financial performance. Risk management is carried out by both the Finance and Procurement teams under policies approved by the Board. The Group uses either forward purchasing or derivative financial instruments to hedge certain risk exposures. Interest rate risk Funding received from banks is at floating rates fixed in the short term for the duration of each loan. Floating rate borrowings are exposed to therisk of rising interest rates. Given the seasonality of the Groups trading, the level of bank borrowings fluctuate during each financial year particularly in the lead up to the Christmas and Easter trading periods where borrowings increase on a short-term basis. This leaves a level of core bank borrowings which is monitored and assessed for potential movements in interest rates and the cost of using hedging instruments to manage the interest rate risk. Management estimates that a 1% movement in interest rates would result in post-tax increase/decrease of around 0.3 million. Borrowings of a longer-term nature, such as those required to fund fixed asset acquisitions, are funded through financeleases such that the total finance lease exposure remains broadly constant from year to year and to this extent provides an element of fixed interest borrowing. Liquidity risk The Group uses banking facilities and finance leases as its primary sources of funding and is therefore exposed to liquidity risk. The Group has historically been very cash generative. Thebank position and headroom of the Group is monitored daily and capital expenditure has to be approved in accordance with its policy which defines the level of authorisation required. At the end of the financial period the Group has a short-term committed overdraft facility of 5 million. Capital risk The Groups objectives when managing capital are to safeguard the Groups ability to continue as a going concern in order to provide returns forshareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Further details on the Groups borrowings and the dividends proposed by the Group are outlined intheFinance Directors report on page 10 and the Chairmans statement on pages 2 and 3. Consistent with others in the industry, the Group monitors capital on the basis of gearing ratio. This ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the Balance sheet) less cash and cash equivalents. Total equity is taken from shareholders equity attributable to owners of the parent as shown in the Balance sheet. The Groups aim is to seek to maintain or reduce the level of net debt and improve operating cash flow. The gearing ratios at 30 June 2012 and 25 June 2011 were as follows:
2012 000 2011 000
Total borrowings Less: cash and cash equivalents Net debt Equity Gearing ratio
32,007 (2,918) 29,089 11,947 243.5%
26,241 (1,752)
24,489 19,309 126.8%
Price risk The Group seeks to limit its exposure to volatility in raw material and energy costs by buying these forward, where possible, for a period of up toayear. Under IAS 39 the Group takes advantage of the own use exemption and does not fair value these contracts. Foreign currency risk The Groups exposure to foreign currency risk on trading transactions is not significant; however, hedging arrangements are made in respect of the largest purchase contracts when placed. It is the Groups policy to hedge significant fixed asset or capital transactions where appropriate.
61

18 Financial instruments continued Credit risk Retail sales represent a large proportion of the Groups sales and present no credit risk as they are made for cash. Where credit sales are concerned the Group operates effective credit control procedures in order to minimise exposure to overdue debts and where possible also carriesinsurance against the cost of bad debts. The insurance counterparties involved in transactions are limited to high quality financial institutions. At 30 June 2012 there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset included in the Balance sheet. The carrying amount of financial assets representing the maximum credit exposure at the reporting date was:
2012 000 2011 000
Trade receivables Cash and cash equivalents The carrying amounts of the Groups trade and other receivables are denominated in Sterling. The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
8,883 2,918
6,827 1,752
2012 000
2011 000
UK Europe Rest of world
8,563 47 273 8,883
6,649 79 99 6,827
The maximum exposure to credit risk for trade receivables at the reporting date by sales channel was:
2012 000 2011 000
Franchise Commercial Thorntons Direct International Central
899 7,188 168 335 293 8,883
1,024 4,866 187 374 376 6,827
The ageing of gross trade receivables at the reporting date was:

2012 Gross 000 Impaired 000 2011 Gross 000 Impaired 000
Current 30 days past due 60 days past due More than 60 days past due
7,821 647 304 860 9,632
749 749
6,543 217 4 509 7,273
446 446
A significant proportion of the receivables less than 60 days past due relates to large corporate customers for which there is no objective evidence that the Group will not be able to recover amounts owing and therefore no impairment has been made. Past due not impaired receivables total 1,062,000 (2011: 284,000).
62
The movement in impairment in respect of trade receivables during the financial year was as follows:
000
At 26 June 2011 Charged to Income statement Utilised in period Released in period At 30 June 2012 The impairment charge recognised in Operating expenses in the Income statement, net of amounts recovered previously written off, amounted to 100,000 (2011: 164,000). The other classes within trade and other receivables do not contain impaired assets. Currency exposure Net monetary assets and liabilities of the Group that are not denominated in Sterling were as follows:
Euro 2012 000 2011 000 US Dollar 2012 000
446 100 (6) 209 749
Review of the year
2011 000
Net foreign currency monetary assets/(liabilities) Cash and cash overdraft Trade and other payables
452 (510) (58)
134 (744) (610)
133 10 143
116 (43) 73
Corporate
The following significant exchange rates applied during the financial year:
Average rate 2012 2011 Reporting date spot rate 2012 2011
Euro US Dollar
1.1834 1.5845
1.1686 1.5893
1.2408 1.5709
1.1265 1.5985
Currency sensitivity analysis The Group has used a sensitivity analysis technique that calculates the estimated change to the Income statement and equity had a 10% weakening in Sterling occurred against all other currencies from the rates applicable at 30 June 2012. This analysis assumes that all other variables, in particular interest rates, remain constant and represents managements estimate of the volatility that could be material to the Groups results. The amounts generated from the sensitivity analysis are estimates of the impact of market risk assuming that specified changes occur. A 10% weakening of Sterling against the following currencies at 30 June 2012 would have decreased profit and loss and equity by the following amounts:
Profit and loss 2012 000 2011 000 Equity 2012 000 2011 000
Euro US Dollar
624
612 19
465
444 14
A 10% strengthening of Sterling against the above currency would have had an equal and opposite effect to the amounts shown.
63

18 Financial instruments continued Interest rate risk The financial assets of the Group that were exposed to interest rate risk at 30 June 2012 consisted of cash and short-term deposits and financial liabilities consisted of short-term bank borrowings and finance leases. These are detailed, along with their effective interest rates, in note 17. Sensitivity analysis The interest rates applicable to finance leases are fixed and therefore not subject to movements in interest rates. A 1% adverse movement in the effective interest rates applicable to short-term bank borrowings at 30 June 2012, representing managements estimate of the volatility that could bematerial to the Groups results, would have decreased profit and loss and equity by the amounts shown below:
Profit and loss 2012 000 2011 000 Equity 2012 000 2011 000
Bank borrowings 19 Provisions for liabilities

Group and Company
310
247
231
179
Onerous leases provision 000
Dilapidations provision 000
Total 000
At 26 June 2011 Charged to Income statement Released in period Utilised in period Unwinding of discount rate At 30 June 2012 Provisions are analysed between current and non-current as follows:
3,070 1,837 (968) 252 4,191
607 35 (63) (61) 518
3,677 1,872 (63) (1,029) 252 4,709
Current Non-current
1,410 3,299 4,709
967 2,710 3,677
The provision for onerous leases is held in respect of leasehold properties for which the Group is liable to fulfil rent and other property commitments for stores from which either the Group no longer trades or for which future trading cash flows are projected to be insufficient tocover these costs. Amounts have been provided for the shortfall between projected cash flows and the property costs up to the lease expiry dateon a discounted basis. The charge in the current financial year is deemed to be exceptional given its nature and size and it is therefore shown in note 2. Obligations are payable within a range of less than one to 19 years (2011: one to 20 years), the weighted average being seven years (2011: eight years). The Group provides for property dilapidations, where appropriate, based on estimated undiscounted costs of the dilapidation repairs spread over theperiod of the tenancy.
64
20 Deferred tax Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 24% (2011: 26%). The movement on the deferred tax account is shown below: Deferred tax liabilities/(assets)
Group 2012 000 2011 000 Company 2012 000 2011 000
Review of the year
At beginning of period Income statement charge Actuarial loss Effect of changes in the rate of taxation (IAS 19) Effect of changes in the rate of taxation (Income statement) At end of period
599 (1,232) (1,727) 368 (354) (2,346)
1,800 (456) (617) 484 (612) 599
(4,826) (1,141) (1,727) 368 62 (7,264)
(4,085) (417) (617) 484 (191) (4,826)
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12) during the period are as follows: Deferred tax liabilities
Accelerated capital allowances 000 Other 000 Total 000
Group
At 26 June 2011 Charged to Income statement At 30 June 2012 Deferred tax assets
Provisions 000
7,125 (2,059) 5,066
44 (3) 41
7,169 (2,062) 5,107
Corporate
Group
Retirement benefit obligations 000
Other 000
Total 000
At 26 June 2011 Charged to Income statement Deferred tax on actuarial loss credited to equity At 30 June 2012 Deferred tax liabilities
6,570 (476) 1,359 7,453
6,570 (476) 1,359 7,453

Company
Accelerated capital allowances 000
Other 000
Total 000
At 26 June 2011 Credited to Income statement At 30 June 2012
1,744 (1,555) 189
1,744 (1,555) 189
65

20 Deferred tax continued Deferred tax assets
Provisions 000 Retirement benefit obligations 000 Other 000 Total 000
Company
6,570 (476) 1,359 7,453
6,570 (476) 1,359 7,453
Group
Other 000
Total 000
At 27 June 2010 Charged to Income statement At 25 June 2011 Deferred tax assets
Provisions 000
8,534 (1,409) 7,125
48 (4) 44
8,582 (1,413) 7,169
Group
Other 000
Total 000
6,782 (345) 133 6,570
6,782 (345) 133 6,570
Company
Other 000
Total 000
At 27 June 2010 Credited to Income statement Effect of other timing differences At 25 June 2011 Deferred tax assets
Provisions 000
2,696 (953) 1 1,744
2,696 (953) 1 1,744
Company
Other 000
Total 000
At 27 June 2010 Charged to Income statement Deferred tax on actuarial loss credited to equity At 25 June 2011
6,781 (344) 133 6,570
6,781 (344) 133 6,570
Deferred income tax assets are recognised for tax loss carry forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable.
66
21 Retirement benefit obligations Pension arrangements are operated through a defined contribution scheme and a defined benefit scheme for both the Group and the Company. Defined contribution scheme Pension costs for the defined contribution scheme are as follows:
2012 000 2011 000
Review of the year
Defined contribution scheme included within Employee benefit expense (note 27)
270
299
Defined benefit scheme The Company operates a defined benefit pension scheme. With effect from 6 April 2009, the benefit structure changed from a final salary basis toaCARE basis. Pension benefits are built up each year, linked to the members pensionable salaries in that year. The benefits are then increased each year in line with inflation. The scheme has been closed to new entrants since 31 July 2002. The Company has opted to recognise all actuarial gains and losses immediately via the Statement of comprehensive income. A formal actuarial valuation was carried out with an effective date of 31 May 2008. The results of this valuation have been updated to 30 June 2012 bya qualified independent actuary. The Thorntons Pension Scheme was actuarially valued by an independent professionally qualified actuary as at 30 June 2012 under IAS 19. Theprincipal actuarial assumptions at the Balance sheet date were:
2012 % 2011 % 2010 %
Rate of increase in pensionable salaries Rate of increase to CARE benefits before retirement Rate of increase in pensions: in deferment post-April 1997 Discount rate Inflation assumption Expected return on plan assets
n/a 2.90 2.90 2.80 4.60 2.90 5.70
n/a 3.50 3.50 3.40 5.50 3.50 5.70
n/a 3.30
Corporate
3.30 3.15 5.50 3.30 5.70
The assumption as to how many members will take up the maximum tax-free commutation on retirement is based on the Schemes own experience of commutation levels. The sensitivities regarding the principal assumptions used to measure the Scheme liabilities are set out below:
Change in assumption Impact on Scheme liabilities
Rate of increase in pensions post-April 1997 Discount rate Inflation assumption
Increase by 0.1% Increase by 0.1% Increase by 0.1%
Increase by 0.6m Decrease by 1.6m Increase by 1.5m
67

21 Retirement benefit obligations continued Defined benefit scheme continued The mortality rates used are as follows:
Life expectancy at age 65 (years) 2012 Mortality table Male Female
Current pensioners Future pensioners
S1NXA CMI_2010_M/F [1%] S1NXA CMI_2010_M/F [1%]
22.0 23.4
24.3 25.9
Life expectancy at age 65 (years) 2011 Mortality table Male Female
Current pensioners Future pensioners
PA92mc (yob = 1935) +1 PA92mc (yob = 1965) +1
20.6 23.0
23.7 26.2
The expected return on plan assets is a blended average of projected long-term returns for the various asset classes. Equity returns are based on aselection of an equity risk premium above the risk-free rate which is measured in accordance with the yields on Government bonds. Bond returns are selected by reference to yields on Government and corporate debt as appropriate to the Schemes holdings of these instruments. Returns are projected over the entire life of the benefit obligation. The assets of the Scheme were invested as follows:
30 June 2012 000 % 25 June 2011 000 % 26 June 2010 000 % 27 June 2009 000 % 28 June 2008 000 %
Equities Bonds Gilts Other Actual return on plan assets
31,770 13,711 7,466 2,695 55,642 1,797
57 25 13 5 100
30,945 12,295 6,601 206 50,047 5,105
62 25 13 100
25,274 11,106 5,645 1,060 43,085 6,723
59 26 13 2 100
20,977 8,481 5,211 81 34,750 (4,466)
60 25 15 100
24,338 6,845 6,845 38,028 (2,975)
64 18 18 100
History of assets, liabilities, experienced gains and losses:

30 June 2012 000 25 June 2011 000 26 June 2010 000 27 June 2009 000 28 June 2008 000
(Losses)/gains arising on Scheme liabilities: Due to experience Percentage of defined benefit obligation Due to change of basis Percentage of defined benefit obligation Experience adjustments: (Losses)/gains arising on Scheme assets Percentage of assets
415 0% (6,567) (8)% (1,045) (2)%
0% (5,177) (7)% 2,802 6%
0% (8,751) (13)% 4,711 11%
(4,695) (8)% 3,067 5% (7,001) (20)%
0% 3,489 6% (5,637) (15)%
68
Pensions and other post-retirement obligations The amounts recognised in the Balance sheet are determined as follows:
2012 000 2011 000 2010 000 2009 000 2008 000
Present value of funded obligations Fair value of plan assets Net deficit The amounts recognised in the Income statement are as follows:
(84,722) 55,642 (29,080)
(75,311) 50,047 (25,264)
(67,304) 43,085 (24,219)
(56,063) 34,750 (21,313)
(53,993) 38,028 (15,965)
Review of the year
2012 000
2011 000
Current service cost Interest cost Expected return on plan assets Total included within Employee benefit expense (note 27)
756 4,198 (2,842) 2,112
656 3,679 (2,303) 2,032
Of the total charge, 0.6 million (2011: 0.7 million) and 1.5 million (2011: 1.3 million) were included in cost of sales and administrative expenses respectively. Changes in the present value of the defined benefit obligations are as follows:
2012 000 2011 000
Present value of obligation at beginning of period Current service cost Interest cost Employee contributions Benefit payments Actuarial losses Present value of obligation at end of period
75,311 756 4,198 642 (2,337) 6,152 84,722
67,304 656 3,679 741 (2,246) 5,177 75,311
Corporate
In October 2009 and as part of the schedule of contributions agreed with the Trustees to Thorntons Pension Scheme, it was agreed that in addition to an annual contribution of 2,200,000, the Company would make an additional contribution over each of the next three financial years equivalent to the higher of either: a third of any reduction in the net debt reported in the statutory accounts for the financial years ending June 2010, 2011 and 2012; or the ongoing annual contribution of 2,200,000 multiplied by the percentage increase in the annual dividend above a minimum of 4,000,000. As part of the Companys arrangements with the Trustees of the pension scheme, a 3.0 million bank guarantee (2011: 5.0 million) is in place that will be paid into the Scheme in the event of either the Companys insolvency, the failure to replace the guarantee on annual renewal, or a winding-up of the Scheme by the Company.
69

21 Retirement benefit obligations continued Pensions and other post-retirement obligations continued Changes in the fair value of plan assets are as follows:
2012 000 2011 000
Fair value of plan assets at beginning of period Employer contributions Employee contributions Benefits paid Expected return on Scheme assets Actuarial gain Closing fair value of plan assets at end of period Analysis of the movement in the Balance sheet deficit
50,047 5,493 642 (2,337) 2,842 (1,045) 55,642
43,085 3,362 741 (2,246) 2,303 2,802 50,047
2012 000
2011 000
At beginning of period Employer pension cost Employer contributions Actuarial losses recognised in the period At end of period Cumulative actuarial gains and losses recognised in equity
(25,264) (2,112) 5,493 (7,197) (29,080)
(24,219) (2,032) 3,362 (2,375) (25,264)
2012 000
2011 000
At beginning of period Net actuarial losses recognised in the period Cumulative loss
(18,416) (7,197) (25,613)
(16,041) (2,375) (18,416)
The pension contributions to be paid by the Group during the financial period ending 29 June 2013 are expected to be in the region of 4,530,000. 22 Other non-current liabilities
Accruals and deferred income Included in the above are amounts totalling 209,000 (2011: 230,000) held in respect of Government grants.
2,490
2,699
70
23 Ordinary shares
Authorised Ordinary shares of 10p each: 85,000,000 (2011: 85,000,000) Issued and fully paid Ordinary shares of 10p each: 68,365,518 (2011: 68,365,518)
8,500 6,837
8,500
Review of the year
6,837
Allotments during the financial year During the financial year no shares (2011: nil) were issued under the provision of the Companys Executive Share Option Schemes and no shares (2011: nil) were issued under the Sharesave Scheme, representing a total nominal value of nil (2011: nil). The average price of shares issued under the Sharesave Scheme in the financial year was nil (2011: nil) and the aggregate consideration received under this Scheme was nil (2011: nil). Since the end of the financial year no shares have been issued under the provisions of the Executive Share Option Schemes (2011: nil) and no shares (2011: nil) have been issued under the Sharesave Scheme. Rights and restrictions attaching to shares Holders of the Companys ordinary shares of 10p each are entitled to participate in the payments of dividends pro rata to their holdings. TheDirectors may propose and pay interim dividends and recommend a final dividend for shareholders approval for any accounting period out oftheprofits available for distribution under English law. The rights attached to the Companys ordinary shares, in addition to those conferred on their holders by law, are set out in the Companys articles ofassociation (the articles), a copy of which can be obtained on request from the Company Secretary. The articles contain certain restrictions on the transfer of ordinary shares and on the exercise of voting rights attached to them, including where the Company has exercised its right to prohibit transfer following the omission of their holder or any person interested in them to provide the Company with information requested by it in accordance with Part 22 of the Companies Act 2006. Rules about the appointment and replacement of Directors are set out in the articles. Changes to the articles must be approved by shareholders passing a special resolution. The Directors powers are conferred on them by UK legislation and by the articles. At any general meeting a resolution put to the vote of the meeting is decided on a show of hands unless, before or on the declaration of the resultofa show of hands, a poll is properly demanded. On a show of hands every member who is present in person at a general meeting of theCompany has one vote. Proxies may not vote on a show of hands. On a poll every member who is present in person or by proxy has one vote forevery share of which he/she is the holder.
71

23 Ordinary shares continued Share options Options outstanding (including those held by Directors) are listed below: Executive Schemes
Number of options during the 53 weeks ended 30 June 2012 Date of grants At 25 June 2011 Granted or reinstated Forfeited Exercised Lapsed At 30 June 2012 Exercise price Exercisable From To
12 Mar 2002 16,516 2 Oct 2002 16,516 3 Apr 2006 44,000 5 Jun 2006 1,200,000 11 Jul 2006 500,000 2 Oct 2006 1,200,000 13 Sep 2007 500,000 16 Oct 2008 444,730 20 Oct 2009 399,865 9 Nov 2009 243,070 16 Feb 2011 696,969 5 Oct 2011 23 Mar 2012 28 May 2012 5,261,666 Sharesave Scheme
1,760,681 257,284 66,762 2,084,727
(1,200,000) (500,000) (226,692) (193,696) (243,070) (429,348) (2,792,806)
(16,516) (44,000) (218,038) (278,554)
16,516 1,200,000 500,000 206,169 696,969 1,331,333 257,284 66,762 4,275,033
111p 111p 119p 116p 129p 153p 170p 113p 132p 117p 99p 46p 24p 21p
12 Mar 2005 2 Oct 2005 3 Apr 2009 5 Jun 2009 11 Jul 2009 2 Oct 2009 13 Sep 2010 16 Oct 2011 20 Oct 2012 9 Nov 2012 16 Feb 2014 5 Oct 2014 23 Mar 2015 28 May 2015
12 Mar 2012 2 Oct 2012 3 Apr 2016 5 Jun 2016 11 Jul 2016 2 Oct 2016 13 Sep 2017 16 Oct 2018 20 Oct 2019 9 Nov 2019 16 Feb 2021 5 Oct 2021 23 Mar 2022 28 May 2022
Number of options during the 53 weeks ended 30 June 2012 Date of grant At 25 June 2011 Granted or reinstated Forfeited Exercised Lapsed At 30 June 2012 Exercise price
Exercisable From To
9 Oct 2006 10 Oct 2007 10 Oct 2007 18 Nov 2009 18 Nov 2009 18 Nov 2010 18 Nov 2010 23 Nov 2011 23 Nov 2011
130,846 11,025 158,308 285,428 316,412 365,845 419,042 1,686,906
459,638 458,514 918,152
(130,846) (11,025) (62,878) (170,008) (176,668) (226,551) (219,600) (13,635) (5,272)
95,430 115,420 139,744 139,294 199,442 446,003 453,242
113p 148p 148p 108p 108p 84p 84p 33p 33p
1 Jan 2012 1 Jan 2011 1 Jan 2013 1 Jan 2013 1 Jan 2015 1 Jan 2014 1 Jan 2016 1 Jan 2015 1 Jan 2017
30 Jun 2012 30 Jun 2011 30 Jun 2013 30 Jun 2013 30 Jun 2015 30 Jun 2014 30 Jun 2016 30 Jun 2015 30 Jun 2017
(1,016,483) 1,588,575
72
24 Share-based payments Under the Companys Executive Share Option Schemes, the Remuneration Committee can grant options over shares in the Company to Directors and employees of the Company. Options are granted with a fixed exercise price equal to the market price of the shares under option at the date ofgrant. The contractual life of an option is ten years. Awards of options under the Scheme are generally reserved for employees at senior management level and above. Details of the performance conditions attaching to awards of options are described in the Report on the Directors remuneration on pages 27 to 34. Fair value is measured by the use of the Black-Scholes model for options with internal performance criteria and the Monte Carlo model for options with external performance conditions. The Thorntons Sharesave Scheme enables eligible employees to acquire options over ordinary shares of the Company at a discount of up to 20% to the market price in conjunction with a Save As You Earn contract. The options are exercisable within a period of six months commencing three or five years from the date of the savings contract. The fair values per option granted during the financial year and the assumptions used in their calculation are as follows:
2012 Executive 1 Executive 2 Executive 3 Three-year Sharesave Five-year Sharesave Executive 1 2011 Three-year Sharesave Five-year Sharesave
Review of the year
Grant date 5 Oct 11 Share price at grant date 44.25p Exercise price 46p Number of employees 9 Shares under option 1,760,681 Vesting period (years) 3 Expected volatility 50.41% Option life (years) 10 Expected life (years) 3 Risk-free rate 0.86% Expected dividends expressed as a dividend yield 8.47% Possibility of ceasing employment before vesting n/a Fair value per option 4p
23 Mar 12 25.75p 24.37p 1 257,284 3 62.62% 10 3 0.51% 14.56% n/a 1p
28 May 12 20.25p 20.87p 1 66,762 3 61.97% 10 3 0.34% 18.52% n/a 3p
23 Nov 11 36.5p 33.0p 150 459,638 3 50.01% 3 3 0.79% 9.59% 61.1% 8p
23 Nov 11 36.5p 33.0p 79 458,514 5 50.01% 5 5 1.37% 9.59% 67.56% 2p
16 Feb 11 92p 99p 1 696,969 3 50.04% 10 3 1.96% 6.58% n/a 20p
18 Nov 10 101.5p 84p 161 401,928 3 58.36% 3 3 1.43% 7.40% 49.97% 32p
18 Nov 10 101.5p 84p 124 490,164 5 58.36% 5 5 2.22% 7.40% 47.23% 33p
Corporate
The expected volatility is based on historical volatility over the last three years. The expected life is the average expected period to exercise. Theriskfree rate of return is the yield on zero-coupon UK Government bonds of a term consistent with the assumed option life.
73

24 Share-based payments continued A reconciliation of Executive Share Option movements over the period to 30 June 2012 is shown below:
2012 Weighted average exercise price 2011
Executive Share Options
Number
Number
Weighted average exercise price
Outstanding at start of period Granted Forfeited Exercised Lapsed Outstanding at end of period Exercisable at end of period
5,261,666 2,084,727 (2,792,806) (278,554) 4,275,033 16,516
123p 43p 97p 115p 102p 111p
6,312,827 696,969 (1,624,226) (123,904) 5,261,666 33,032
135p 99p 135p 192p 123p 111p
For share options outstanding at the end of the period, the range of exercise prices and weighted average contractual life is disclosed below:
2012 Weighted average exercise price Contracted weighted average remaining years 2011 Weighted average exercise price Contracted weighted average remaining years
Range of exercise prices
Number
Number
90p111p 116p153p 170p192p
2,368,864 1,406,169 500,000
59p 150p 170p
9.1 4.4 4.0
2,374,731 2,386,935 500,000
97p 140p 170p
6.9 6.1 5.0
The weighted average share price during the period for options exercised over the period was nil (2011: nil). The total credit for the period relating to employee share-based payment plans was 555,000 (2011: 200,000). This net credit comprised a charge of 100,000 (2011: 145,000) and a credit of 655,000 (2011: 345,000) relating to the reversal of charges for schemes forfeited on resignation. After deferred tax, the total credit was 414,000 (2011: 145,000). A reconciliation of Sharesave Scheme Option movements over the period to 30 June 2012 is shown below:
2012 Weighted average exercise price 2011 Weighted average exercise price
Sharesave Scheme Options
Number
Number
Outstanding at start of period Granted Forfeited Exercised Lapsed Outstanding at end of period Exercisable at end of period
1,686,906 918,152 (1,016,483) 1,588,575
101p 33p 100p 63p
1,538,384 892,092 (743,570) 1,686,906 11,025
122p 84p 123p 101p 148p
74
For share options outstanding at the end of the period, the range of exercise prices and weighted average contractual life is disclosed below:
2012 Weighted average exercise price Contractual weighted average remaining life Years 2011 Weighted average exercise price Contractual weighted average remaining life Years
Review of the year
Sharesave Scheme
Number
Number
Oct 2006 Oct 2007 Oct 2007 Oct 2009 Oct 2009 Nov 2010 Nov 2010 Nov 2011 Nov 2011
95,430 115,420 139,744 139,294 199,442 446,003 453,242
148p 108p 108p 84p 84p 33p 33p
1.0 1.0 3.0 2.0 4.0 3.0 5.0
130,846 11,025 158,308 285,428 316,412 365,845 419,042
113p 148p 148p 108p 108p 84p 84p
1.0 0.0 2.0 2.0 4.0 3.0 5.0
The weighted average share price during the period for options exercised over the period was nil (2011: nil). The total charge for the period relating toemployee share-based payment plans was 96,000 (2011: 90,000). After deferred tax, the total charge was 70,000 (2011: 65,000). 25 Cash flow from operating activities a) Cash generated from operations
Group 2012 000 2011 000 Company 2012 000 2011 000
Corporate
Continuing operations Operating (loss)/profit Adjustments for: Depreciation and amortisation Amortisation of Government grants received Profit on disposal of property, plant and equipment Share-based payment credit Operating cash flow before working capital movements Changes in working capital Increase in inventories Decrease in trade and other receivables (Decrease)/increase in payables Increase in provisions Defined benefit pension contributions in excess of service costs Cash generated from operations
(303) 10,019 (21) 160 (459) 9,396 (1,052) 22 (4,520) 1,032 (3,381) 1,497
852 12,218 (21) 148 (110) 13,087 (6,625) 264 7,265 2,162 (1,330) 14,823
(1,725) 9,153 (21) 160 (459) 7,108 (1,046) 22 (2,868) 1,032 (3,381) 867
5,405 11,352 (21) 148 (110) 16,774 (6,628) 661 2,949 2,162 (1,330) 14,588
75

25 Cash flow from operating activities continued b) Cash and cash equivalents for the Cash flow statement
Group 2012 000 2011 000 Company 2012 000 2011 000
Cash and cash equivalents Bank overdraft Net position 26 Reconciliation of movement in net debt
2,918 2,918
1,752 1,752
2,407 2,407
1,452 1,452
Group Note 2012 000 2011 000
Company 2012 000 2011 000
Increase in cash and cash equivalents Cash flows from (decrease)/increase in debt Change in net debt resulting from cash flow Inception of new finance leases Movement in net debt in the period Net debt at beginning of period Net debt at end of period Net debt comprises: 18 30
1,166 (5,766) (4,600) (4,600) (24,489) (29,089)
126 3,300 3,426 (1,894) 1,532 (26,021) (24,489)
955 (5,766) (4,811) (4,811) (24,789) (29,600)
(101) 3,300 3,199 (1,894) 1,305 (26,094) (24,789)
Group 2012 000 2011 000
Company 2012 000 2011 000
Cash Overdraft Unsecured bank loans Finance leases
2,918 (28,900) (3,107) (29,089)
1,752 (20,900) (5,341) (24,489)
2,407 (28,900) (3,107) (29,600)
1,452 (20,900) (5,341) (24,789)
27 Employees and Directors

Group Employee benefit expense during the period Note 2012 000 2011 000 Company 2012 000 2011 000
Wages and salaries Social security costs Health cover, medical and life assurance Staff incentives and relocation costs Share-based payments Pension costs
21
53,293 4,337 271 50 (459) 2,382 59,874
57,591 4,727 283 108 (110) 2,331 64,930
53,242 4,334 271 50 (459) 2,382 59,820
57,533 4,724 283 108 (110) 2,331 64,869
76
Group Average monthly number of people (including Executive Directors) employed 2012 Number 2011 Number
Company 2012 Number 2011 Number
Management and administration Selling and distribution Manufacturing
247 2,342 1,189 3,778
253 2,495 1,462 4,210
246 2,336 1,189 3,771
252 2,491 1,462 4,205
Review of the year
Group and Company

Key management compensation 2012 000 2011 000
Salaries, social security costs and short-term employee benefits Post-employment benefits Termination benefits Share-based payments The key management figures given above include Directors and all other members of the Executive Committee.
Directors
1,802 71 188 (558) 1,503
1,734 109 100 (201) 1,742
2012 000
2011 000
Aggregate emoluments Aggregate gains made on the exercise of share options Company contributions to money purchase pension schemes
1,179 56 1,235
1,496 109 1,605
Corporate
Pension scheme contributions above represent the total contributions made by the Company on behalf of all Directors in respect of approved pensionarrangements. Further detail in respect of Directors remuneration can be found in the Report on the Directors remuneration on pages 27 to 34. 28 Operating lease commitments minimum lease payments
2012 Land and buildings 000 Other 000 2011 Land and buildings 000 Other 000
Group
Commitments under non-cancellable operating leases: Within one year Later than one year and less than five years After five years
17,700 40,903 44,629 103,232
877 1,592 2,469
19,881 46,511 25,576 91,968
860 1,563 2,423
77

28 Operating lease commitments minimum lease payments continued
2012 Land and buildings 000 Other 000 2011 Land and buildings 000 Other 000
Company
Commitments under non-cancellable operating leases: Within one year Later than one year and less than five years After five years
17,649 40,699 44,599 102,947
877 1,592 2,469
19,821 46,271 25,478 91,570
860 1,563 2,423
The Group has entered into operating leases in respect of Retail stores, vehicles, fork lift trucks and equipment. Retail store leases have remaining terms of between one month and 18 years, with renewal by mutual agreement at the expiry of the lease term and commonly with five-year upwards only rent review periods. Contingent rentals, not included in the commitments above, are payable on approximately 16% of Retail stores where leases contain a store revenue-based component. Standard institutional restrictions common to those in place with other High Street retailers are applicable to the Groups Retail leases. Non-store leases have remaining lease terms of between five days and five years. 29 Contingent liabilities As at 30 June 2012 the Group had provided guarantees in respect of Customs and Excise duty deferment of 100,000 (2011: 100,000). The Company has a contingent liability in respect of the Thorntons Pension Scheme, further details of which are shown in note 21. 30 Capital and other financial commitments
Group 2012 000 2011 000 Company 2012 000 2011 000
Bulk supplies of raw ingredients
16,617
15,162
16,617
15,162
The majority of bulk raw material supply contracts are denominated in Sterling and therefore carry no foreign currency exposure. The volatility of pricing within key raw material ingredients continues to prompt the use of forward contracts where practical. In addition to the bulk contracts detailed above, at 25 June 2011 further contracts had been agreed to set market ratios of cocoa liquor and butter up to December 2012. Although the price was not fixed, the Company had a commitment to purchase fixed volumes at the contracted ratios, which at the latest agreed contract prices valued this commitment at 16,480,000. These contracts have subsequently been converted to raw material supply contracts and no ratio contracts were in place at 30 June 2012. Major non-cash transactions During the period the Group and Company entered into no major non-cash transactions. During the previous period the Group and Company entered into finance lease agreements in respect of plant and equipment with capital values at the inception of the leases of 1,894,000. 31 Related party transactions Group There are no related party transactions requiring disclosure in the financial statements (2011: nil). Key management compensation is shown innote 27 to the financial statements. Company Funds are transferred within the Group, dependent on the operational needs of individual companies. The Directors do not consider it meaningful toset out the gross amounts of transfers between individual companies. Rent payable to Strand Court Properties Limited of 2,221,000 (2011: 2,221,000) is included within the Companys loss after tax (2011: profit after tax) for the financial year. Revenue generated by the Companys subsidiary Thorntons Jersey Limited is paid over to the Company on a periodic basis to cover the costs settled by the Company on behalf of its subsidiary. During the financial year a 9,000 creditor belonging to Gartner Pralines Limited, a dormant subsidiary of the Company, was written off to Operating expenses by the Company. Balances owed to other Group undertakings are shown in note 16 to the financial statements.
78
Five year summary

The figures below are extracted from this Annual Report and are prepared under IFRS:
2012* 000 2011 000 2010 000 2009 000 2008 000
Consolidated income statement Revenue Operating profit Net finance costs Profit before taxation Taxation Profit attributable to equity shareholders Balance sheet Net assets Net borrowings Net debt Gearing ratio Additions to intangible assets and property, plant and equipment Other financial data Basic earnings per share Dividends per share Number of outlets continuing operations Own stores Franchises Stock market ratios Year-end share price Shares in issue Market capitalisation Dividend yield
* 53 week period.
217,144 (303) (1,911) (2,214) 1,316 (898) 11,947 (25,982) (29,089) 243.5% 4,620 (1.4)p 330 177 20p 68.4m 13.4m
218,255 852 (1,923) (1,071) 818 (253) 19,309 (19,148) (24,489) 126.8% 5,887 (0.4)p 2.2p 364 227 60p 68.4m 41.2m 3.7%
214,553 7,582 (1,445) 6,137 (1,783) 4,354 25,968 (20,074) (26,021) 100.2% 5,700 6.5p 6.1p 377 222 82p 68.4m 55.7m 7.4%
214,805 9,740 (1,652) 8,088 (4,483) 3,605 28,738 (18,612) (26,674) 92.8% 10,345 5.4p 6.1p 379 197 74p 68.3m 50.5m 8.2%
208,122 10,326 (1,856) 8,470 (2,402) 6,068 35,035 (19,912) (28,264) 80.7% 7,905 9.1p 6.8p
379 250 114p 68.3m 77.9m 6.0%
79
Shareholder analysis
at 30 June 2012
Shareholders Number Shareholders % Shares Number Shares %
Shareholding range
Up to 500 5011,000 1,00110,000 10,001100,000 100,000+
5,294 1,481 2,054 234 79 9,142
57.9 16.2 22.5 2.5 0.9 100.0
1,370,503 1,230,184 6,408,451 6,684,812 52,671,468 68,365,518
2.0 1.8 9.4 9.8 77.0 100.0
Category of shareholding
Shareholders Number
Shareholders %
Shares Number
Shares %
Corporate bodies and nominees Private shareholders
467 8,675 9,142
5.1 94.9 100.0
50,796,708 17,568,810 68,365,518
74.3 25.7 100.0
80
Thorntons commitment to environmental issues is reflected in this Annual Report which has been printed on Olin Smooth Absolute White, an FSC certified paper. This document was printed by Group using their environmental print technology, which minimises the impact of printing on the environment. Vegetable based inks have been used and 99% of all dry waste associated with this production isdiverted from landfill. Group is a CarbonNeutral printer.
Thorntons PLC Thornton Park Somercotes Alfreton Derbyshire DE55 4XJ Tel: 0845 075 7565 www.thorntons.co.uk Thorntons Direct Tel: 0845 121 1911 www.thorntons.co.uk For information on Investor Relations visit:
www.thorntons.co.uk

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Thorntons PLC Annual Report and Accounts 2012

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Thorntons plc Annual Report and Accounts 2012

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Thorntons plc Annual Report and Accounts 2012

Thorntons plc Annual Report and Accounts 2012

Review of the year

John von Spreckelsen Chairman 11 September 2012

Corporate Financial statements and notes

Thorntons plc Annual Report and Accounts 2012

Our business and strategy

Whats our plan?

Who are we and what makes us different?

Whats our business What are comprised of? ourvalues?

Creativity Excellence Bringing people together

Thorntons plc Annual Report and Accounts 2012

What are our objectives?

Review of the year

Leverage category management  Continuing to improve business efficiency

Financial statements and notes

Chief Executives report

Thorntons plc Annual Report and Accounts 2012

Review of the year Corporate Financial statements and notes

Thorntons plc Annual Report and Accounts 2012

Chief Executives report continued

Thorntons plc Annual Report and Accounts 2012

Jonathan Hart Chief Executive 11 September 2012

Thorntons plc Annual Report and Accounts 2012

Finance Directors report

(0.5)% (3.8)% 0.9m 44.0% 1.5m

1.7% (7.9)% 4.3m 46.2% 14.8m

111.4 10.7 10.0 132.1 85.0 217.1

118.3 11.6 9.6 139.5 78.8 218.3

(5.8)% (7.8)% 4.2% (5.2)% 7.9% (0.5)%

1.9 1.2 3.1

2.5 1.8 0.7 0.4 5.4

Thorntons plc Annual Report and Accounts 2012

4.3 0.6 0.6 5.5

Review of the year Corporate Financial statements and notes

Thorntons plc Annual Report and Accounts 2012

Finance Directors report continued

55.3 4.1 3.1

40.3 (1.3) (2.2)

95.6 2.8 0.9

62.3 9.3 8.4

38.4 (3.3) (4.1)

100.7 6.0 4.3

Mike Killick Finance Director 11 September 2012

Thorntons plc Annual Report and Accounts 2012

Corporate social responsibility

Review of the year Corporate Financial statements and notes

Thorntons plc Annual Report and Accounts 2012

Corporate social responsibility continued

Thorntons plc Annual Report and Accounts 2012

Financial statements and notes

Thorntons plc Annual Report and Accounts 2012

Thorntons plc Annual Report and Accounts 2012

Financial statements and notes

Thorntons plc Annual Report and Accounts 2012

Report of the Directors

Thorntons plc Annual Report and Accounts 2012

Review of the year

16 Board of Directors 17 Corporate information andfinancialcalendar

Leverage category management Continuing to improve business efficiency