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annual report
and accounts 2003
i
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NORFLEX House Allington Way Darlington DL1 4DY
Telephone: 01325 467 558 Fax: 01325 363204
www.northgateplc.com
Commercial vehicles for business
Highlights
Turnover
Group operating profit
Profit before tax
Earnings per share
Dividend per share
Net assets per share
2003
2002
£337.9m
£48.3m
£36.6m
41.4p4
16.0p
252p
£277.8m
£45.1m
£31.7m
35.8p
15.0p
225p
Contents
3
Chairman’s Statement
4
Operational Review
6
Financial Review
8
Directors
9
Directors’ Responsibilities
10
Report of the Directors
12
Report on Remuneration
18
Corporate Governance
22
Report of the Auditors
23
Financial Statements
28
Accounting Policies
29
Notes on the Accounts
Five Year Financial Summary
42
43 Notice of Annual General Meeting
44
Information for Shareholders
45 Our Products
Northgate plc rents vehicles and sells a range of fleet products to
businesses via a network of companies.
www.northgateplc.com
Fleet growth
Profit before tax
0
0
1
,
6
3
0
0
5
,
2
3
0
0
6
,
6
2
0
0
0
,
5
4
0
0
5
,
0
4
3
0
6
,
6
3
4
7
6
,
1
3
0
1
1
,
7
2
5
2
3
,
4
2
0
1
6
,
6
1
EBITDA* *Earnings before interest,
taxation, depreciation and amortisation
4
5
3
,
8
4
1
1
7
9
,
1
3
1
2
6
7
,
8
1
1
3
1
6
,
4
0
1
0
0
7
.
8
7
1999
2000
2001
2002
2003
1999
2000
2001
2002
2003
1999
2000
2001
2002
2003
Earnings per share have
more than doubled since
the commencement of
our five year Strategy for
Growth increasing from
19.1p to 41.4p
CHAIRMAN’S STATEMENT
Dear Shareholder,
The current financial year has seen your Company make significant
progress with its five year Strategy for Growth for the UK announced in
1999, its plans to expand into the continental European market with an
initial 40% investment in Furgonetas de Alquiler SA (‘Fualsa’) in Spain and
the strengthening of the management structure for the Group as a whole.
Earnings per share have more than doubled since the
We place a great deal of emphasis in creating the right
commencement of our five year Strategy for Growth,
management structure in each of our divisions. Furthermore
increasing from 19.1p to 41.4p. This represents a 21% per
we seek to provide proper training and incentives for the
annum compound growth rate over the four year period.
management with adequate reward should they achieve
Furthermore the 69% growth in fleet during this same period
the goals set by the Board. During the financial year the
has been achieved with an increase in gearing of only 9% to
Remuneration Committee has undertaken a review of
a current level of 175%. This gearing level is after an initial
salaries in respect of senior executives and is also proposing
payment of £10.2m for Fualsa, being our first European
a new incentive scheme for management as detailed in the
investment. Interest cover remains at a healthy 3.4 times.
Remuneration Report. These proposals are in keeping with
The UK remains the core of our business now and will continue
to be so in the future. In order to ensure our ongoing success
in this business, in January 2003 we appointed Phil Moorhouse,
previously Group Finance Director, to the newly created position
the requirement to retain and motivate senior management,
but they are also an incentive that requires a continuation
of management’s total commitment to the progress of your
Company.
of Managing Director UK Rental. This appointment underpins
In January we appointed Gerard Murray, a senior executive
our intention to remain the UK’s largest vehicle rental company,
with significant experience in the automotive industry, as
providing first class service to our customers.
Group Finance Director. We have already felt the benefit of
Our plan to expand into continental Europe has been well
his ability and experience.
flagged over recent years. It is our policy to proceed cautiously
Your Board has determined the Strategy for Growth for the
with this expansion with the aim of delivering steady,
Company through to 2006. More details of this can be found
sustainable growth from this area of our business. To this
in the Operational Review by the Chief Executive, which
end, in respect of our initial investment in Spain and with the
follows my statement. In pursuing this Strategy for Growth
support of the vendors, we have transferred a number of
shareholders can be assured that the underlying philosophy of
senior managers from Northgate to Fualsa on a permanent
the Board, which is to manage the Company’s assets prudently
basis and have made senior appointments locally. Our
with the aim of delivering long term sustainable growth, will
objective is to ensure a smooth assimilation of the business
remain core to all our decisions.
prior to 31 May 2004, when we are required to make the final
decision on the exercise of the next option on shares in Fualsa,
which would raise our stake to 80% and which would oblige
us to purchase the remaining 20% by May 2006.
The Directors are recommending a final dividend of 11.1p
which, if approved by shareholders at the Annual General
Meeting, would make a total for the year of 16p, an increase of
6.7%. This is in line with the Board’s progressive dividend policy.
As always I thank my fellow Directors and all members of staff
for their efforts on behalf of shareholders, and I thank you, the
owners, for your support.
Michael Waring
Chairman
2 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 3
OPERATIONAL REVIEW
Five Year Strategy for Growth
This report covers the fourth year of our five year Strategy for
Growth announced in 1999, the overall aim of which was to
double the size of the business.
As the table below demonstrates, in terms of the key measure
of profitability, namely earnings per share, this has been
achieved one year ahead of plan.
30 April Fleet size
Hire locations
Basic e.p.s.
1999
2003
26,600
45,000
30
70
19.1p
41.4p
where appropriate, we will take the necessary steps to improve
efficiencies in both areas. For example, we have merged three
hire companies in Newcastle to form one large hire company
and a branch, resulting in one less location in that city.
As a result of the above, we closed the year operating from a
network of 70 locations.
Vehicle fleet
Although fleet growth, at 11.1%, was in line with our
expectations for the year as a whole, this was all achieved
in the period to 31 October 2002, an imbalance we did not
anticipate. This was due to the economic uncertainty in the
We informed shareholders in our interim report to 31 October
early part of 2003, to which we referred in our pre-close
2002 that we had achieved more vehicles per location than
trading statement issued on 2 May 2003. The quieter trading
originally envisaged and that, as a consequence, we could
we experienced in January and February, combined with our
operate a 50,000 vehicle fleet from a smaller number of outlets
relentless focus on utilisation, necessitated a reduction in the
than the 100 estimated. This improved operational gearing has
fleet of 1,500 vehicles in those months. Modest growth in the
produced a larger profit per vehicle than forecast in 1999 and
business resumed from mid March allowing the fleet to reach
has made a significant contribution to the 117% increase in
its year end level of 45,000.
earnings per share in the four years to 30 April 2003.
The five year Strategy for Growth was focused solely on the
Utilisation
As referred to above, our focus on this area remains
development of our business in the UK. On 16 July 2002, we
undiminished and, once again, we can report an average
purchased 40% of the equity of Fualsa, the second largest van
utilisation for the year of 90%. Utilisation analysed between
rental company in Spain and, as a consequence, now have our
mature locations, being those open for longer than 24 months
first operational involvement in continental Europe.
and those not yet mature, is 90.3% and 85.1% respectively.
Having doubled the Group’s earnings per share since 1999
and made our first step into Europe, we have concluded that
Hire rates
Our marketplace remains competitive but, as a result of
it is important to set out to shareholders our new Strategy for
our excellent customer service levels, we have not needed
Growth covering the three year period to April 2006. Over the
past four years we have had positive feedback from shareholders
on our policy of communicating the broad parameters of our
forward strategy and, within our financial results, reporting the
progress that we have made. We therefore intend to follow a
to reduce hire rates. When combined with no increase in
the purchase cost of new vehicles and a low interest rate
environment, this has ensured the core operating margin of
the business has also remained stable. The factors causing the
reduction in the reported operating margin are set out in the
similar policy for our strategic plan to April 2006, broad details
Financial Review.
of which are set out towards the end of this Operational Review.
Review of Current Period
Depot network
During the year we opened new branches in Andover, Grimsby,
Northampton and Telford. The acquisition of Target Vehicle
Rental Limited on 1 October 2002 added 1,100 vehicles and six
new locations in the area along the M40 corridor. We continue
Used vehicle sales
As predicted in last year’s operational review, the residual
market remained stable during the year and we were able
to achieve a profit on used vehicle sales in each month of the
year. Our outlook for this area of our business remains positive.
Complementary non-rental products
We announced last year the development of a number of
to examine our hire company structure both in terms of
vehicle related, non-rental products through our Norfleet
improving customer service and reducing the cost base and,
division; in particular, that we had commenced offering a
telematics product, the provision of discounted vehicle parts
In terms of development, the plan is based on us achieving the
and mobile servicing for customers who have their own fleets
following targets by April 2006:
as well as renting from us. Although still in their infancy each
• Fleet size of 60,000 in the UK and 18,000 in Spain
of these products has been well received by our customers and
• Network of 100 locations in the UK and 20 in Spain
they are making a valuable, albeit modest, contribution to the
• 100% ownership of Fualsa
Group’s performance.
• An established portfolio of non-rental products
In preparation for our next period of growth, we have now
The last four years’ results to 30 April 2003 represent a 21%
merged these Norfleet activities with our “Central Reservations”
annual compound growth in earnings per share. We are
unit and our “Wannavan.com” business to form Northgate
seeking to achieve double-digit annual growth in earnings per
Vehicle Solutions. This division will now be responsible for the
share through the successful implementation of the new plan.
development of both our existing and future non-rental business.
Fualsa (Spain)
Our first step into Europe has, to date, been better than our
expectations and we are satisfied with Fualsa’s trading
performance in the ten months since our investment.
Since acquiring our 40% investment, the fleet has increased by
20% to 12,000; the network has been extended to eight hire
sites, with an additional location in Barcelona, and a new site
in Malaga; utilisation for the ten months averaged 88.7%.
Fualsa contributed positively to earnings during the ten
months of our investment, with Northgate’s share of profit
before tax and goodwill amortisation being £1.97m.
Future Strategy for Growth
In March 2003, the Board approved a new three year Strategy
for Growth for the Company based around three key areas of
the business – UK Rental, Spain and non-rental products. This
period takes us to April 2006, close to the point of time when
our option to acquire full control of Fualsa, our Spanish rental
business, lapses.
As indicated in the Chairman’s Statement in our interim report
for the six months ended 31 October 2002, we remain firmly
of the view that the UK market is far from mature and that
there remains significant potential for us to continue to grow
our UK business.
In addition, our strategic investment in Fualsa has provided
a platform for significant expansion in what is a relatively
immature market in Spain.
Finally, the creation of Northgate Vehicle Solutions offers a
means for the development of non-rental but vehicle-related
products to be sold to our diverse customer base.
We look forward to continuing to take your Company forward
and to updating you on our progress against the targets set
during the reporting periods of the plan.
Steve Smith
Chief Executive Officer
Earnings per share (p)
4
.
1
4
8
.
5
3
4
.
1
3
1
.
8
2
1
.
9
1
1999
2000
2001
2002
2003
4 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 5
FINANCIAL REVIEW
Financial Reporting
Sales, Margins and Return on Capital
Turnover increased by 21.6% to £337.9m (2002 - £277.8m)
divided by average capital employed (being shareholders’
funds plus net debt) is 12.9% (2002 - 12.7%).
Return on equity, calculated as profit after tax divided by
excluding turnover from the Fualsa joint venture. Hire company
average shareholders’ funds is 17.3% (2002 - 16.6%).
turnover increased by 16% and turnover from sales of used
vehicles by 38%. Operating profits excluding any contribution
from the Fualsa joint venture increased by 7.2% to £48.3m
(2002 - £45.1m) representing an operating margin of 14.3%
(2002 - 16.2%).
Taxation
The Group’s UK operations have a total tax charge of 31.4%
which is slightly higher than the standard rate of 30%. This is
due to disallowable expenditure incurred within the business,
comprising non-qualifying depreciation, goodwill amortisation
The factors that caused the reduction in operating margin
and business entertaining. The joint venture tax rate at 25% is
during the year were broadly the turnover mix between hire
below the standard Spanish tax rate of 35% because of tax
revenue and used vehicles sales, a number of non recurring
concessions that are available to the Fualsa business.
costs and the continued investment in the Group’s network.
As highlighted above the Group’s turnover from the sale of
Dividend
The Directors recommend a final dividend of 11.1p per
used vehicles has increased more than the corresponding
share (2002 - 10.35p), making a total for the year of 16p
increase in hire revenues. Used vehicle sales generates the
(2002 - 15p) - an increase of 6.7%. The dividend is 2.6 times
lowest operating margin for the Group since our ongoing
covered (2002 - 2.4 times).
objective is to remain around break even in this activity. The
larger increase in used vehicle turnover has had the effect of
reducing the Group’s overall operating margin by 0.5%.
During the year the Group incurred increased operating costs
in the form of goodwill amortisation (£0.38m), reorganisation
expenses (£0.3m) as the Central Reservations Operation was
relocated to Darlington and increased insurance premiums
(£0.4m). The aggregate effect of these costs was to reduce the
Group’s operating margin by 0.3%. The goodwill amortisation
charged to operating profits will reduce to £0.07m in future
years and the CRO relocation costs will not be incurred again.
Finally the operating margin has also been reduced as a result
of the continuing investment in the Group’s depot network.
The Directors believe that fleet growth in immature locations
during the next couple of years will reverse this short term
margin dilution.
Earnings per share
Earnings per share increased by 15.6% to 41.4p (2002 - 35.8p).
Earnings per share have been calculated in accordance with
FRS14. The weighted average number of shares in issue during
the year has been amended to reflect that the Ordinary shares
held by Kleinwort Benson (Guernsey) Trustees Limited for the
Northgate All Employee Share Scheme and the Long Term
Incentive Plan do not count towards the weighted average
number of shares until they rank for dividend.
Investments
On 16 July 2002 the Company acquired 40% of Fualsa, a
leading commercial vehicle rental company in Spain, for a
consideration of £10.2m. This investment has been treated as
a joint venture within the Group’s accounts to reflect the fact
that the Company has joint management control of Fualsa and
is disclosed in the consolidated balance sheet as ‘Investment in
The operating margin reported by Fualsa is slightly ahead of
joint venture’. The Company has an option to acquire the
the Group’s UK operations. This result is attributable to the 20%
remaining 60% of Fualsa: 40% being exercisable no later than
fleet growth, mainly from existing sites, during the ten months
May 2004 and the remaining 20% no later than May 2006.
since the joint venture investment was made. The medium term
The maximum total consideration for the additional share
view is that overall operating margins in the Spanish market
capital of Fualsa is € 37m.
will be broadly similar to those achieved in the UK.
During the year the Group acquired 100% of two UK vehicle
Profit before tax has increased by 15.5% to £36.6m (2002 -
hire operations for a total cash consideration (net of cash
£31.7m) and includes an exceptional property profit of £0.7m
acquired) of £4.5m.
and goodwill amortisation of £0.6m.
Ordinary shares of the Company have been acquired in the
Return on capital employed, calculated as operating profit
open market by Kleinwort Benson (Guernsey) Trustees Limited
in order to satisfy the Company’s obligations under the
underlying increase of 6% in interest costs in the UK business.
Northgate All Employee Share Scheme and under the Long
This underlying increase in interest costs is lower than the
Term Incentive Plan. These shares are included within the
growth in net debt reflecting the fact that UK interest rates
Group’s balance sheet as investments.
continued to fall during the financial year and the Group has
Goodwill
The Group amortises goodwill acquired over its useful life to a
maximum of 20 years. The goodwill that has been paid for the
Fualsa joint venture and for Target Vehicle Rental Limited, one
been a beneficiary of this fall. The Group’s interest cover
remains healthy at 3.4 times (2002 - 3.4 times).
Strategy
The Group’s financing strategy has been approved by the
of the UK rental businesses acquired, is being amortised over
Board. This strategy is to use medium and long-term debt to
20 years. This gives rise to a goodwill amortisation charge to
finance the Group’s vehicle fleet, other capital expenditure and
30 April 2003 of £0.24m and an ongoing annual charge
acquisitions. Working capital is funded by internally generated
relating to these acquisitions of £0.3m in future years of which
funds and an overdraft facility. The Group’s interest rate
£0.07m will be charged to operating profits and £0.23m
exposure is managed by a series of treasury contracts as
against the share of joint venture profits. The ongoing charge
described below.
excludes any goodwill that may arise should the Company
exercise its option to acquire additional share capital in Fualsa.
Further goodwill of £0.34m paid for UK businesses acquired
and then immediately absorbed into existing hire companies
has been amortised in full.
Capital structure
The Group’s total gearing is 175% (2002 - 170%) of
shareholders’ funds which the Board views as modest
considering the business activity of the Group. This gearing
ratio is calculated after taking into account net cash balances
of £31.5m (2002 - £26.1m). The Group’s borrowings are in the
form of hire purchase obligations (£242.4m), vehicle related
loans (£46.8m) and a bank overdraft (£10.7m). The hire
purchase and the vehicle related loans are used to finance the
Group’s vehicle fleet (£367m). As at 30 April 2003 the Fualsa
joint venture had £18.9m of shareholders’ funds and £65.3m
of net debt.
Treasury
Cash flows
The Group’s net debt increased by 15% to £268.4m (2002 -
£232.9m) reflecting the continued fleet growth in the UK of
11.1% to 45,000 units (2002 - 40,500), net cash consideration
of UK acquisitions totalling £4.5m, existing debt of £11.5m
acquired within UK acquisitions and the £10.2m investment in
the Fualsa joint venture. Gross cash generation remains strong
with EBITDA increasing by 12% to £148m (2002 - £132m).
Interest costs
The Group’s net interest costs have increased by 12% to
Treasury management
Each of the Group’s operations is responsible for its own
day-to-day cash management. The funding arrangements
with asset finance companies are negotiated and monitored
centrally on behalf of the operations. All funds generated by
the Group’s operations, with the exception of Fualsa, are
controlled by a central treasury function.
Interest rate management
The Group has historically managed its interest rate risk by
having in place a number of financial instruments covering
30-40% of its total borrowings. As interest rates have continued
to fall some of the earlier financial instruments are at levels
2-4% above the prevailing rates. Subsequent to the financial
year end the Group has entered into additional interest rate
swaps for five year terms to cover £45m of debt at an average
rate of 3.97 %. Furthermore five year interest rate collars
covering £55m of debt with a spread of 3.15% to 5.5%,
have also been taken out.
Liquidity risk
The finance facilities that are available to the Group are in
excess of £454m compared to net debt of £268m. These
facilities comprise hire purchase funding, revolving loans and
overdraft secured primarily against the value of the vehicle
hire fleet. The revolving loans comprising 16% of the total
facilities are arranged on a rolling three year basis. These
loans are the only element of the Group’s facilities that are
subject to covenants. The main covenant of interest rate cover
is comfortably achieved with the Group’s existing cover.
£15.0m (2002 - £13.4m). This increase includes the Group’s
Gerard Murray
share of interest costs in the joint venture of £0.8m leaving an
Finance Director
6 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 7
DIRECTORS’ RESPONSIBILITIES
in relation to the preparation of the accounts
The following statement, which should be read in conjunction
accounting standards which they consider to be applicable
with the statement of auditors’ responsibilities set out on page
have been followed.
22, is made with a view to distinguishing for shareholders the
respective responsibilities of the Directors and auditors in
relation to the accounts.
The Directors are responsible for ensuring that the Company
keeps adequate accounting records and for safeguarding the
assets of the Group and hence for taking reasonable steps for
The Directors are required by the Companies Act 1985 to
the prevention and detection of fraud and other irregularities.
prepare financial statements for each financial year which give
a true and fair view of the state of affairs of the Company and
the Group as at the end of the financial year and of the profit
or loss for that period. The Directors consider that in preparing
the financial statements, the Company has used appropriate
accounting policies, consistently applied and supported by
reasonable and prudent judgements and estimates and that all
Going concern
The accounts have been prepared on a going concern basis as
the Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence
for the foreseeable future.
DIRECTORS
Michael Waring (56)
Became Non-Executive Chairman in October 1999, having
been Executive Chairman since February 1996. Previously
Chief Executive of the Group since 1985.
Jan Astrand MBA* (56)
Appointed to the Board as a non-executive Director in
February 2001. A Swedish national based in London, he is
Chairman of Car Park Group AB in Stockholm and also a non-
executive director of PHS Group plc. From 1994 to 1999 he
was President and Chief Executive of Axus (International) Inc.
(previously known as Hertz Leasing International). From 1989
to 1994 he was Vice President, Finance and Administration
and Chief Financial Officer of Hertz (Europe) Ltd.
Phil Moorhouse FCCA (50)
Appointed Managing Director, UK Rental operations in
January 2003, having been Finance Director since February
1998 and a member of the Board since August 1997.
Joined the vehicle hire division in 1991 as Finance Director.
He previously held a number of senior financial positions
within the Norcros group of companies and Meyer
International.
Gerard Murray ACA (40)
Appointed Group Finance Director in January 2003. Qualified
as a Chartered Accountant with Arthur Andersen & Co before
joining Reg Vardy plc in 1988, where he served as Finance
Director from 1991 to 2001 and latterly as Chief Executive.
Alan Noble (52)
Appointed Executive Deputy Chairman in October 1999
having been Managing Director since March 1996 and a
member of the Board since 1990. In 1981 he founded the
commercial vehicle hire business, which was acquired by
Northgate in 1987.
Stephen Smith ACA (46)
Appointed Chief Executive Officer in October 1999, having
been a member of the Board since August 1997. Managing
Director of the vehicle hire operations since 1990. He
qualified as a Chartered Accountant with Coopers & Lybrand
and held a number of senior financial positions in industry
prior to joining Northgate.
Ronald Williams FCA* (69)
A non-executive Director and Deputy Chairman since March
1996. Prior to his appointment he was for eight years an
executive director of Smiths Group plc.
* Member of the Remuneration and Audit Committees
8 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 9
REPORT OF THE DIRECTORS
The Directors present their report and the audited financial
The termination provisions in respect of executive Directors’
statements for the year ended 30 April 2003.
contracts are set out in the Remuneration Report on page 12.
Results
Profit for the year after taxation was £25,106,000 (2002 -
£21,721,000). An interim dividend of 4.9p per share was
paid on the Ordinary shares on 7 February 2003.
The Directors recommend a final ordinary dividend of
11.1p per share making a total for the year of 16p
per share.
The final dividend, if approved, will be paid on 11 September
2003 to shareholders on the register at close of business on
8 August 2003. Ordinary and preference dividends paid
and recommended for payment in respect of the year
total £9,736,000 (2002 - £9,119,000).
Principal activities
Northgate plc is an investment holding company. The Group’s
activities are reported on pages 4 to 7.
Close company status
So far as the Directors are aware the close company provisions
of the Income and Corporation Taxes Act 1988 do not apply to
the Company.
The following are the interests of the Directors in the share
capital of the Company as shown in the register required to be
maintained under Section 325 of the Companies Act 1985. All
interests are beneficial unless otherwise stated.
J Astrand
P J Moorhouse
G T Murray
A T Noble
S J Smith
F M Waring
R Williams
Ordinary shares
1.5.02
–
41,616
–
817,624
70,616
30.4.03
–
43,674
4,000
821,015
73,007
1,673,100*
1,663,767*
5,000
5,000
*5,767 (2002 - 15,100) shares are held beneficially.
The interest of Mr Waring in the remainder is as a
discretionary beneficiary of various family trusts.
No Director has an interest in the preference shares of
the Company.
No changes in the above interests have occurred between
30 April 2003 and the date of this report.
Interests in shares
The following interests of 3% or more in the issued Ordinary
Details of options held by the Directors under the Company’s
various share schemes are given in the Remuneration Report
share capital of the Company appear in the register required
on pages 12 to 17.
to be maintained under the provisions of Section 211 of the
Companies Act 1985:
Donations
The Group made charitable donations of £17,000
Number of shares
(2002 - £20,000).
HBOS Group
Legal & General
Lazard Asset Management
Barclays plc
2,337,062 (3.8%)
1,921,541 (3.2%)
1,836,007 (3.0%)
1,828,999 (3.0%)
Directors
The names of the present Directors are listed on page 8.
All have served throughout the year except Gerard Murray
who was appointed on 8 January 2003. Phil Moorhouse
and Steve Smith are retiring by rotation in accordance with
No political donations were made.
Payment of suppliers
The Group’s policy is to pay suppliers within normal trading
terms agreed with that supplier. The policy is made known to
the staff who handle payments to suppliers. At 30 April 2003
the Group’s creditor days were 39.
Remuneration report
As required by the Directors’ Remuneration Report Regulations
2002, the Remuneration Report, set out on pages 12 to 17 of
the Articles of Association and with the requirements of the
these Report and Accounts, will be put to shareholders for
Combined Code and, being eligible, are seeking re-election.
approval at the Annual General Meeting.
Power to allot shares
A special resolution, pursuant to Section 95 of the Companies
Auditors
On 1 August 2003, Deloitte & Touche will transfer their
Act 1985, will be proposed to renew the authority of the
Directors to allot Ordinary shares for cash other than to
existing shareholders on a proportionate basis. This authority
will be limited to an aggregate nominal amount of £152,000
representing approximately 5% of the current issued Ordinary
share capital and will expire not later than 15 months after the
date on which the resolution is passed.
Authority for the Company to
purchase its own shares
The Directors propose to renew the general authority of
the Company to make market purchases of its own shares
up to a total of 6,000,000 Ordinary shares (representing
approximately 10% of the issued Ordinary share capital) and
within the price constraints set out in the special resolution to
be proposed at the Annual General Meeting.
There is no present intention to make any purchase of
own shares and, if granted, the authority would only be
exercised if to do so would result in an improvement in
earnings per share for remaining shareholders.
business to Deloitte & Touche LLP, a limited liability partnership
incorporated under the Limited Liability Partnerships Act 2000.
However, at present they remain the Company's auditors and
have signed the accounts in that capacity. The Company has
given its consent to treating the appointment of Deloitte &
Touche as extending to Deloitte & Touche LLP with effect from
1 August 2003. Accordingly, although the accounts have been
signed in the name of Deloitte & Touche, a resolution for the
re-appointment of Deloitte & Touche LLP will be proposed at
the forthcoming Annual General Meeting.
By order of the Board
D Henderson
Secretary
1 July 2003
10 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 11
REPORT ON REMUNERATION
Remuneration Committee
The Remuneration Committee is responsible for making
recommendations to the Board on the remuneration packages
and terms and conditions of employment of the executive
Directors of the Company and of other senior executives in
the Group. The Committee also reviews remuneration policy
generally throughout the Group. The members of the Committee
are Ron Williams (Chairman) and Jan Astrand, both of whom
are independent and both served throughout the year. The
discretionary bonuses and the motivation to achieve the
maximum benefit for shareholders in the future is provided by
the allocation of share options. Only basic salary is pensionable.
Basic salaries are normally reviewed annually taking into
account the performance of the individual, changes in
responsibilities and market trends.
Flexible benefits scheme
A flexible benefits scheme was introduced on 1 May 2002
Committee consults with the Chairman of the Board and with
which is designed to help in the recruitment and retention
the Chief Executive who may be invited to attend meetings.
of employees by allowing them to tailor their remuneration
The Company Secretary is secretary to the Committee.
package to best suit their individual needs.
The Remuneration Committee has met on eight occasions
In particular, it enables company car users to mitigate the
during the year, all meetings being attended by both members
effects of the new benefit in kind taxation system for company
of the Committee. In addition, the Chief Executive and/or the
Chairman of the Board were invited to attend five meetings.
cars, introduced on 6 April 2002, which is based on CO2
emission levels.
Both members of the Committee also attended a meeting with
New Bridge Street Consultants and the executive Directors to
discuss the new Deferred Annual Bonus Plan (“DABP”)
referred to below.
The Committee has access to external independent advice
on matters relating to remuneration. During the year the
Committee took advice, directly or indirectly, from the
following organisations:
– New Bridge Street Consultants, in relation to the
remuneration packages of the executive Directors and
senior management, including the DABP;
– Dickinson Dees, in relation to the service contracts for
executive Directors; and
– Watson Wyatt, in relation to pension benefits for senior
executives.
Remuneration policy
The Committee aims to ensure that executive Directors
Service contracts
The executive Directors have rolling service contracts which
may be terminated by 12 months notice on either side.
The dates of the contracts are:
P J Moorhouse
G T Murray
A T Noble
S J Smith
8 January 2003
8 January 2003
6 January 1998
8 January 2003
In the event of early termination of an executive Director’s
service contract, compensation of up to the equivalent of
one year’s base salary and benefits may be payable: there
is no contractual entitlement to compensation beyond this.
Directors have a duty to make reasonable efforts to mitigate
any loss arising from such termination and the Committee will
have regard to that duty on a case by case basis when assessing
the appropriate level of compensation which may be payable.
It is also the Board’s policy that where compensation on early
are fairly and competitively rewarded for their individual
termination is due, in appropriate circumstances it should be
contributions by means of basic salary, benefits in kind and
paid on a phased basis.
pension benefits. High levels of performance are recognised by
Basic salaries
The current basic salaries paid to the executive Directors and
the date last reviewed are as follows:
The current fees paid to the non-executive Directors are as
follows:
F M Waring
(Chairman)
£85,000
P J Moorhouse
£200,000 8 January 2003
R Williams
G T Murray
A T Noble
S J Smith
£160,000 8 January 2003
£158,500 1 May 2002 *
£240,000 8 January 2003
J Astrand
(Deputy Chairman and
Chairman of Audit and
Remuneration Committees)
£36,000
£29,000
*Alan Noble’s salary will be reviewed when he returns to full
All were last reviewed on 1 May 2003.
time working following a lengthy period of illness. The salaries
of the other Directors are next due for review on 1 May 2004.
External appointments
The Board recognises that executive Directors may be invited
to become non-executive Directors of other companies and
that such appointments can broaden their knowledge and
experience, to the benefit of the Group. Provided that it does
not impact on their executive duties, Directors are generally
allowed to accept one such appointment. As the purpose of
seeking such positions is self-education rather than financial
reward, any resulting fees would normally be expected to be
paid to Northgate plc as compensation for the time
commitment involved.
Non-executive Directors
The remuneration of the non-executive Directors is determined
by the Board as a whole, within the overall limit set by the
Articles of Association. Non-executive Directors are not eligible
for performance related payments nor may they participate in
the Company’s share option or pension schemes.
Non-executive Directors do not have contracts of service with
the Company and their appointments are terminable without
notice.
Pension schemes
Throughout the year all pension arrangements operating
throughout the Group were defined contribution schemes.
Performance graph
As required by The Directors’ Remuneration Report Regulations
2002, this graph illustrates the performance of Northgate plc
measured by Total Shareholder Return (share price growth plus
dividends paid) against a ‘broad equity market index’ over the
last five years. As Northgate plc is a constituent of the FTSE
250 index, that index (excluding investment companies) is
considered to be the most appropriate benchmark.
Total Shareholder Return Source: Datastream
140
120
100
80
60
40
20
0
Northgate plc
FTSE Mid 250
(Excl. inv. companies) Index
1998
1999
2000
2001
2002
2003
30 April
This graph shows the value, by the 30 April 2003, of £100 invested in Northgate plc
on 30 April 1998 compared with that of £100 invested in the FTSE Mid 250 (Excl.
inv. companies) Index. The other points plotted are the values at intervening financial
year ends.
12 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 13
REPORT ON REMUNERATION
The following elements of this report have been audited.
Emoluments
Salary/
fees
£000
Bonus
£000
Cost of
benefits*
£000
Chargeable
expenses
£000
26
–
165
51
158
193
–
75
33
701
–
–
54
–
–
65
–
–
–
119
–
–
19
2
23
22
–
–
–
66
–
–
3
–
1
2
–
–
–
6
2003
total
£000
26
–
241
53
182
282
–
75
33
892
2003
Pension
2002
2002
Pension
total contributions† contributions†
£000
£000
£000
25
12
206
–
221
222
12
75
32
805
–
–
20
4
22
21
–
–
–
–
–
16
–
22
14
–
–
–
J Astrand
M C Baughan
P J Moorhouse
G T Murray
A T Noble
S J Smith
C J Spence
F M Waring
R Williams
Total emoluments excluding
pension contributions
Total pension contributions
A condition of the grant of an option is that any shares
be vested in the employees on exercise will depend on the
acquired on exercise will be held on behalf of the employee
Company’s TSR performance relative to the Index and, provided
by the trustees for a further period of two years, during which
the Company’s performance is above the median, can range
time the employee will be entitled to all the benefits of share
from a fraction of one third to a multiple of two. If performance
ownership but may not dispose of the shares (other than
is below the median, options cannot be exercised.
sufficient to meet any income tax liability arising on exercise).
The maximum value of an award on any one occasion to any
The performance criteria considered by the Board to be the
individual may not exceed 25% of basic annual salary at that
most appropriate at the time the awards were made was
time and the aggregate value (in each case taking the value at
a comparison of the growth in the Company’s Total Shareholder
the time of grant) of all awards subsisting under the Plan at
Return (“TSR”) with that of other companies included in the
any one time may not exceed basic annual salary.
HSBC Trixie Index (“the Index”) over the period of three years
following the date of grant.
The Company will fund the Trust to enable it to acquire shares
in the Company to be applied on the exercise of options under
When granted, an option is expressed in terms of a standard
the Plan. At 30 April 2003 options over 1,304 Ordinary shares
number of shares. The number of shares which ultimately will
capable of exercise remained outstanding.
67
52
The Directors held the following options granted under The Plan:
*These benefits include: company car, private medical insurance, permanent health insurance, life assurance and spouses death in
service pension.
† All contributions are to a defined contribution type scheme.
Share option scheme
The Goode Durrant Share Option Scheme (“the GD Scheme”), which has been approved by the Board of the Inland Revenue, was
established in 1986. At 30 April 2003 options over 102,000 Ordinary shares were outstanding exercisable at various dates between
1998 and 2006 (See Note 19 on page 40). The last options were granted in January 1996 and no further options may be granted
under this scheme. There are no performance conditions attached to this scheme.
The Directors held the following options granted under the GD Scheme:
F M Waring
At 1.5.02
Exercised
At 30.4.03
100,000
52,500
152,500
–
52,500*
100,000
–
52,500
100,000
Exercise
price (p)
218.5
280.5
Normally exercisable
between
Jan 1998
Jan 1999
Jan 2005
Jan 2006
*These options were exercised on 17 March 2003 when the market price was 375p. The total gross gain on exercise was
therefore £49,612. No Directors’ options under the GD scheme lapsed during the year. The mid-market price of the Ordinary
shares at 30 April 2003 was 416p (30 April 2002 – 503p) and the range during the year was 370.5p to 548.5p.
Long term incentive plan
In 1996 a Long Term Incentive Plan (“the Plan”), which is
administered by the trustees of an employee trust (“the
Trust”), was introduced for executive Directors and senior
management within the Group.
The Plan was intended to provide incentives, in the form
of Ordinary shares of the Company, to Directors and senior
management.
The Board believes that the Plan failed to achieve its
motivational objectives, largely due to its complexity, and it
was therefore effectively replaced by a new share option
scheme, (“the NSOS”) (see below) which was approved by
shareholders at the Annual General Meeting in 2000. It is the
Board’s intention that no further options under the Plan be
awarded. The last options were awarded in July 1999.
An award under the Plan consists of a right to acquire shares
for a nominal price which, in normal circumstances, can be
exercised, subject to performance criteria being satisfied,
between three and six years following the date of grant.
At 1.5.02
Exercised*
Date of
Exercise
Share price
on date of
purchase (p)
Gross gain
on exercise
£
Lapsed†
At 30.4.03
Normally exercisable
between
P J Moorhouse
A T Noble
S J Smith
F M Waring
4,000
4,200
8,200
8,000
6,800
14,800
5,000
4,400
9,400
9,000
7,700
8,000
24,700
1,334
4.9.02
438
5,842
1,334
2,667
2,667
1,667
1,667
4.9.02
438
11,680
4.9.02
438
7,300
3,000
24.10.02
388.5
11,654
30.7.02
460
12,267
2,667
5,667
–
4,200
4,200
–
6,800
6,800
–
4,400
4,400
–
7,700
–
7,700
Total
57,100
11,335
23,100
July 2000
Jan 2001
July 2003
Jan 2004
July 2000
Jan 2001
July 2003
Jan 2004
July 2000
Jan 2001
July 2003
Jan 2004
July 2000
Jan 2001
July 2001
July 2003
Jan 2004
July 2004
–
–
–
–
–
–
–
–
–
–
–
–
–
–
*The Company’s TSR Performance over the period of three years following the date of grant placed it in the top 50% of the Index resulting in a multiple of
one third being applied to the original number of options granted with any balance being forfeited. In all cases, the exercise price was £1 per award.
† Those options granted in January 1998 did not meet the above performance criteria over the three, four or five year periods following the date of their grant
and therefore have lapsed.
Executive incentive scheme
The EIS, introduced in 1999, was designed to motivate
those key executives in Northgate most able to influence
the successful implementation of our five year Strategy for
Growth, with a target to double the size of the business over
the period 1999-2004. As is referred to in the Operational
Review on pages 4 and 5, as measured by earnings per share,
we have achieved that target this year, one year ahead of
expectations. As the EIS was specifically aligned to this strategy
plan, it has been decided that no further options will be awarded
under the EIS, the last options being granted in July 2001.
14 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 15
REPORT ON REMUNERATION
An award under the EIS consists of a right to acquire Ordinary
shares of the Company at a pre-determined price which, in
normal circumstances, can be exercised, subject to a specified
performance condition being satisfied, between four and ten
years following the date of grant. Options may relate to new
and/or existing shares when exercised.
The performance condition attached to the options granted
during the year is that, for all the options to become
exercisable, the Company’s normalised earnings per share
growth over the five year period following their grant should
exceed 15% p.a. These options will normally only first become
exercisable in full on the seventh anniversary of their grant
and will lapse if they do not meet the prescribed level of
New share option scheme
The NSOS was introduced in 2000 to replace the Plan (see
page 14) and operates on broadly similar lines to the EIS (see
above). The NSOS is designed to provide incentives, in the form
of Ordinary shares in the Company, to selected employees at
managerial level. Although Directors, with the exception of
Gerard Murray who does not participate in the EIS, and certain
other management at a senior level do not currently participate
in the scheme (as their share incentives in recent years have
been provided under the EIS), it is intended that, from July
2004, longer term incentives for Directors and senior executives
(currently numbering approximately 12 in total) be provided
by a modest level (up to 50% of salary per annum) of option
growth over the five years. However, they will become capable
grants under the NSOS: this would be in addition to participating
of earlier exercise in tranches of 20%, 25% and 25% on the
fourth, fifth and sixth anniversaries of their grant if earnings
per share growth has been at least 15% p.a. over the two,
three and four years following their grant respectively. Partial
exercise of these options over a sliding scale will be permitted
for growth in earnings per share of between 8% and 15% p.a.
over these periods.
The aggregate value (in each case being the exercise price
multiplied by the number of options) of options granted to an
individual in the preceding ten years under the EIS and under
any other executive share option scheme adopted by the Company
may not exceed eight times their annual earnings. Waived and
exercised options continue to count towards this limit.
The Directors hold the following options granted under the EIS:
No. of options Exercise price (p)
P J Moorhouse
A T Noble
S J Smith
180,000
174,050
5,950
180,000
180,000
492.5
492.5
503.5
492.5
All the above options are normally exercisable between
September 2003 and September 2009.
No Directors were granted options under the EIS during the
year, none lapsed and none were exercised.
In addition to the above, options over 907,500 shares granted
to 40 employees at exercise prices ranging from 367.5p to
523p were outstanding at 30 April 2003.
in the new DABP (see below). From July 2004, middle
management would no longer participate in the NSOS, instead
being incentivised under the DABP.
The principal differences between the NSOS and
the EIS are:
i)
the maximum individual allocation over a ten year
period is limited to four times annual earnings
(EIS – eight times);
ii) subject to the performance criteria being satisfied,
options may be exercised between three and five and a
half years from the date of grant (EIS – four to ten years);
and
iii) the performance criteria is that earnings per share
should increase by at least 3% per annum above
inflation over a period of at least three years (EIS –
earnings per share growth of 15% per annum over five
years but with partial exercise over a sliding scale for
growth between 8% and 15%).
Gerard Murray was awarded 50,000 options under the NSOS
at an exercise price of 380p following his appointment to the
Board. These options are normally exercisable between January
2006 and July 2008.
In addition, options over 260,500 shares granted to 62
employees at exercise prices ranging from 403.5p to 478p
were outstanding at 30 April 2003.
Deferred annual bonus plan
A new DABP is being introduced for our 2003/04 financial year
for Directors and senior and middle management. Part of the
bonus will be delivered in cash and will be payable
immediately after the year end and part (not normally
exceeding 50% of the total) in the form of shares with the first
share award being made following the announcement of our
results in July 2004.
The shares will be retained in an employee benefit trust for
three years and be subject to forfeiture if the employee leaves
during that time. This will provide a stronger retention
mechanism than share options and has the motivational
benefits of certainty and clarity for the employee. During
the retention period, executives continue to have an incentive
to influence the share price so as to maximise the value on
release.
For the financial year 2003/04, the bonuses for executive
Directors upon which these awards will be made will be based
upon business and individual performance, including elements
based on cash flow and a target of growth in earnings per
share of between 3% and 10% above inflation. The share
element of the bonus will have stretched targets relative to the
cash element. The maximum amount of bonus which may be
earned, expressed as a percentage of basic salary is as follows:
S J Smith
P J Moorhouse
A T Noble
G T Murray
Cash
50%
40%
30%
30%
Shares
50%
40%
30%
30%
at all levels with the opportunity to acquire shares in the
Company on preferential terms. The Board believes that
encouraging wider share ownership by all staff will have
longer term benefits for the Company and for shareholders.
The AESS operates under a trust deed, the Trustees being
Capita IRG Trustees Limited.
To participate in the AESS, which operates on a yearly cycle,
employees are required to make regular monthly savings (on
which tax relief is obtained), by deduction from pay, for a year
at the end of which these payments are used to buy shares in
the Company (“Partnership shares”). For each Partnership
share acquired, the employee will receive one additional free
share (“Matching shares”). Matching shares will normally be
forfeited if, within three years of acquiring the Partnership
shares, the employee either sells the Partnership shares or
leaves the Group. After this three year period Partnership and
Matching shares may be sold, although there are significant
tax incentives to continue holding the shares in the scheme for
a further two years. Those employees who are most committed
to the Company will therefore receive the most benefit.
The second annual cycle ended in January 2003 and
resulted in 393 employees acquiring 79,372 Partnership shares
at 415p each and being allocated the same number
of Matching shares.
As at 30 April 2003 the Trust held 260,624 Ordinary shares
that have vested to employees from the first two cycles.
The third annual cycle started in January 2003 and currently
some 450 employees are making contributions to the scheme
at an annualised rate of £375,000.
For other levels of management bonus levels will be based on
As at 30 April 2003, the Trust held 25,960 Ordinary shares of
a combination of the performance of the relevant business unit
the Company against the shares that are anticipated to be
and individual Key Performance Indicators and the maximum
required at the end of the third annual cycle of the AESS in
amounts, again expressed as a percentage of basic salary and
January 2004.
split equally between cash and shares, range from 20% to
60% in total.
Shares to satisfy awards made under the DABP will be
purchased in the market.
All employee share scheme
The All Employee Share Scheme (“the AESS”), which is
approved by the Inland Revenue under Schedule 8 Finance Act
2000, was introduced in 2000 to provide employees
On behalf of the Board
D Henderson
Secretary
1 July 2003
16 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 17
CORPORATE GOVERNANCE
The Financial Services Authority has incorporated into the
In addition, the non-executive Directors, including the
are invited to briefings given by the Chief Executive Officer
management information are identified and can be monitored.
Listing Rules the Combined Code (“the Code”), published
Chairman, but without executive Directors present, met
and Finance Director.
Where appropriate, the business is required to comply with the
in June 1998, which sets out Principles of Good Corporate
informally on six occasions during the year.
Governance and contains a Code of Best Practice.
All shareholders are given the opportunity to raise matters for
procedures set out in written manuals.
The provisions of the Code applicable to listed companies are
assure the Board that they can give the time commitment
the recommended minimum 20 working days notice is given.
highest business and ethical standards and to promote a
divided into four parts, as set out below:
necessary to properly fulfil their duties, both in terms of
In recent years the Company has adopted the practice of
culture of honesty and integrity amongst all staff, the Board
Before appointment, non-executive Directors are required to
discussion at the Annual General Meeting, of which more than
To demonstrate the Board’s commitment to maintaining the
availability to attend meetings and discuss matters on the
issuing a brief statement at the Annual General Meeting,
has established a confidential telephone service, operated by
telephone and meeting preparation time.
which is simultaneously released to the London Stock
an independent external organisation, which may be used by
1 Directors
The business of the Company is managed by the Board of
Directors, currently comprising four executive and three non-
executive Directors, details of whom are set out on page 8.
The non-executive Directors, apart from the Chairman, who
was formerly an executive Director of the Company, are
considered to be independent both in the sense outlined in
the Code and in terms of the criteria laid down by the National
Association of Pension Funds for judging the independence of
non-executive Directors. Ron Williams, as Deputy Chairman,
is considered to be the senior such independent Director.
The offices and responsibilities of the Chairman and
Chief Executive Officer are separate.
The Board meets regularly, normally monthly, to review trading
results and has responsibility for, inter alia, overall Group
strategy, financial reporting to and relationships with
shareholders, dividend policy, acquisitions and disposals,
major capital expenditure and financing and treasury policy.
The Company’s Articles of Association provide that at each
Annual General Meeting of the Company, one third (or the
number nearest to but not exceeding one third) of the
Directors shall retire from office. Those to retire in each
year are those who have been longest in office since their
appointment or re-appointment. (Any Director appointed by
the Board during the year is obliged to seek re-election at the
next following Annual General Meeting and is not included
when determining the one third to retire by rotation). It is
therefore possible for a Director to serve four years before
seeking re-appointment by shareholders. The Company intends
to amend its Articles to comply with the Code requirement
that all Directors be subject to re-election at intervals of no
more than three years the next time it makes other changes to
its Articles of Association. No current Director has served more
than three years without being re-elected by shareholders.
Until the Articles are amended, the Company will in any event
comply with the Code by ensuring that no Director serves
The Chairman ensures that all Directors are properly briefed
more than three years without seeking re-election.
to enable them to discharge their duties. In particular, detailed
management accounts are prepared and copies sent to all
Board members every month and, in advance of each Board
meeting, appropriate documentation on all items to be
discussed is circulated.
During the year under review the full Board met on
11 occasions.
Attendance was as follows:
F M Waring
J Astrand
P J Moorhouse
G T Murray
A T Noble
S J Smith
R Williams
9
11
11
3*
5†
11
11
*Mr Murray has attended all meetings held since his appointment on
8 January 2003.
†Mr Noble’s absences have been due to a prolonged period of illness.
18 Northgate plc Annual Report & Accounts 2003
In terms of the Code requirement to establish a nominations
committee, the Board considers that it is a small board and
therefore does not need to establish such a committee. The
appointment of new Directors is regarded as a matter for the
Board as a whole.
2 Directors’ remuneration
The Company’s policy on remuneration and details of the
remuneration of each Director are given in the Remuneration
Report on pages 12 to 17.
3 Relations with shareholders
Throughout the year the Company maintains a regular
dialogue with institutional investors and brokers’ analysts,
providing them with such information on the Company’s
progress and future plans as is permitted within the guidelines
of the Listing Rules. In particular, twice a year, at the time of
announcing the Company’s interim and full year results, they
Exchange, on current trading conditions. In addition, this year
all staff to report any issues of concern relating to dishonesty
for the first time the Company issued brief ‘pre-close’ trading
or malpractice within the Group. All issues reported are
statements two months prior to the announcement of both our
investigated by senior management.
interim and full year results and would intend to continue this
practice in the future.
Identification of risks
The Board and the Group’s management have a clearly
In compliance with the requirement in the Code, the Company
defined responsibility for identifying the major business
has adopted the practice at general meetings of the Company
risks facing the Group and for developing systems to mitigate
of advising shareholders of the numbers of proxy votes lodged
and manage those risks. The control of key risks is reviewed
on each resolution, after the resolution has been dealt with on
by the Board and the Group’s management at their monthly
a show of hands.
meetings.
4 Accountability and audit
An assessment of the Company’s position and prospects is
included in the Chairman’s Statement on page 3.
Internal control
Provision D2.1 of the Code requires the Directors to conduct
an annual review of the effectiveness of the Group’s system of
internal controls. The Turnbull Report, published by the ICAEW
in September 1999, provides relevant guidance for directors on
compliance with the internal control provisions of the Code.
The Directors are responsible for the Group’s system of internal
controls which aims to safeguard Group assets, ensure proper
accounting records are maintained and that the financial
information used within the business and for publication is
reliable. Although no system of internal controls can provide
absolute assurance against material misstatement or loss,
the Group’s system is designed to provide the Directors with
reasonable assurance that, should any problems occur, these
are identified on a timely basis and dealt with appropriately.
The key features of the Group’s system of internal controls,
which was in place throughout the period covered by the
financial statements, are described below:
Control environment
The Group has a clearly defined organisational structure
within which individual responsibilities of line and financial
management for the maintenance of strong internal controls
and the production of accurate and timely financial
The Board is therefore able to confirm that there is an
ongoing process for identifying, evaluating and managing the
significant risks faced by the Group, that it has been in place
for the year under review and up to the date of approval of
these accounts and accords with the Turnbull guidance.
Information and communication
The Group has a comprehensive system for reporting financial
results to the Board. Each operating unit prepares monthly
accounts with a comparison against their business plan and
against the previous year, with regular review by management
of variances from targeted performance levels. A business
plan is received and approved by the Board annually. Each
operating unit prepares a three year business plan with
performance reported against key performance indicators on
a monthly basis together with comparisons to plan and prior
year. These are reviewed regularly by management. Forecasts
are updated regularly throughout the year.
Control procedures
The Board and the Group’s management have adopted a
schedule of matters which are required to be brought to it
for decisions, thus ensuring that it maintains full and effective
control over appropriate strategic, financial, organisational
and compliance issues. Measures taken include clearly
defined procedures for capital expenditure appraisal and
authorisation, physical controls, segregation of duties and
routine and ad hoc checks.
Northgate plc Annual Report & Accounts 2003 19
CORPORATE GOVERNANCE
HEALTH AND SAFETY
The Board regards the monitoring and control of health and
– all hazardous waste (principally engine oils, batteries, tyres
safety and environmental issues as a key part of its risk
and other vehicle consumables) is collected and disposed
management programme.
of by licensed contractors;
The Board has designated the Chief Executive as the person
ultimately responsible to the Board for all health, safety and
environmental matters throughout the Group. Responsibility
for implementing the Group’s policy is devolved to regional
and depot management.
To provide technical advice and support a Group health and
safety committee has been established and a qualified health
and safety officer appointed, part of whose responsibility is to
visit every Group location at least once a year to carry out a
health and safety audit. Where appropriate, outside
professional advice and services are used:
– in compliance with the Electricity at Work Regulations, a
rolling programme of electrical inspections and surveys,
covering all Group locations, is carried out by qualified
– prior to acquiring new sites, environmental risk
assessments, to ISO 9000 standard, are carried out by
external consultants;
– we have arranged with the Institute of Advanced Motorists
a rolling programme of driver assessment and training for
all employees who have a company vehicle or who are
otherwise required to drive as part of their duties.
A comprehensive health and safety procedures manual and
a vehicle user handbook provide guidance and advice in
implementing the Group’s health and safety policy. Relevant
training is provided to all employees.
During the year under review no major incidents (classed as
those resulting in death, serious injury or significant pollution)
occurred.
electrical contractors;
No health and safety enforcement notices were served on
– a programme of surveys has been put in place to meet
any company in the Group and there were no convictions
the requirements of the new Asbestos Regulations, due to
for health and safety offences during the year. There were
come into force in 2004, using licensed contractors;
no pending prosecutions outstanding at the year end.
Monitoring
The Board has delegated to executive management
implementation of the system of internal control. The Board,
including the Audit Committee, receives reports on the system
of control from the external auditors and from management.
An independent internal audit function reports bi-annually to
the Audit Committee primarily on the key areas of risk within
the business.
The Directors confirm that they have reviewed the
effectiveness of the system of internal controls covering
financial, operational and compliance matters and risk
management, for the period covered by these financial
statements in accordance with the guidance contained in
the Turnbull Report.
Audit
The Audit Committee is currently comprised of the two
independent non-executive Directors and chaired by Ron
work on behalf of shareholders and providing other fee-paying
services to the Company. The Board’s policy on non-audit
work is:
Tax advisory and other audit-related work (including in
particular Corporation Tax).
This is work that, in their capacity as auditors, they are best
placed to carry out and will generally be asked to do so.
Nevertheless, where appropriate, they will be asked for a
fee quote.
Non-audit related and general consultancy work.
This type of work will either be placed on the basis of the
lowest fee quote or to the consultants who are felt to be best
able to provide the expertise and working relationship
required. In certain instances, such as the appointment of
consultants to provide external advice and support to the
internal audit department, the auditors will not be invited to
compete for the work.
Williams, who is Deputy Chairman of the Board. The
Fees paid to Deloitte & Touche in respect of the year under
Committee has written terms of reference setting out its
review were as follows:
duties. These include matters relating to the appointment and
fees of the external auditors and review of the annual and
interim statements, of the Group’s internal controls and of the
Statutory audit
nature, scope and results of the internal audit programme.
Tax advice (principally Corporation Tax)
The Committee has access to the resources and facilities it
Due diligence
requires to enable it to carry out its duties. These include
external professional advice and direct access to the Company
Secretary and other relevant staff. Both the external auditors
Other
£000
173
72
102
65
412
and the internal audit manager have direct access to members
In light of the recently published report on audit committees
of the Committee and can meet with the Committee without
by the group appointed by the Financial Reporting Council and
the Company’s management being present.
chaired by Sir Robert Smith, the Board is currently undertaking
The Audit Committee has met formally on four occasions
during the year.
– As well as being attended by both members of the
Committee, all other Board members were invited
attendees at the above meetings.
– The external auditors attended three meetings.
– The internal audit manager attended two meetings.
– In addition to the four meetings referred to above,
the two members of the Committee, together with the
Chairman of the Board, had informal meetings with the
external auditors and, separately, with the internal audit
manager, both with no other Directors present.
a review of the terms of reference of the Audit Committee.
Subject to any further changes to the Combined Code resulting
from the publication in January 2003 of Derek Higgs’ ‘Review
of the role and effectiveness of non-executive directors’, the
Board would expect the new terms of reference to be in place
by the end of the current financial year.
Compliance
The Board considers that the Company was in compliance
with the provisions of the Code applicable to listed companies
throughout the financial year, with the exception of the
requirement to appoint three non-executive Directors to the
Audit Committee (see under Audit above). The composition
The Committee also monitors the independence and objectivity
of the Audit Committee will remain unchanged until the
of the external auditors in carrying out their statutory audit
appointment of a further independent non-executive Director.
20 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 21
REPORT OF THE AUDITORS
Independent auditors’ report to the members of Northgate plc
FINANCIAL STATEMENTS
We have audited the financial statements of Northgate plc for
the year ended 30 April 2003 which comprise the consolidated
profit and loss account, the balance sheets, the consolidated
cash flow statement, the statement of total recognised gains
and losses, the accounting policies and the related Notes 1
to 25 together with the reconciliation of net cash flow to
movement in net debt and the notes to the consolidated
cash flow statement. These financial statements have been
prepared under the accounting policies set out therein. We
have also audited the information in the part of the Directors’
remuneration report that is described as having been audited.
This report is made solely to the Company’s members, as a
body, in accordance with section 235 of the Companies Act
1985. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an auditors’ report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and
the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Respective responsibilities of
Directors and auditors
As described in the Statement of Directors’ responsibilities,
the Company’s Directors are responsible for the preparation
of the financial statements in accordance with applicable
United Kingdom law and accounting standards. They are
also responsible for the preparation of the other information
contained in the annual report including the Directors’
remuneration report. Our responsibility is to audit the financial
statements and the part of the Directors’ remuneration report
described as having been audited in accordance with relevant
United Kingdom legal and regulatory requirements and
auditing standards.
We report to you our opinion as to whether the financial
statements give a true and fair view and whether the financial
statements and the part of the Directors’ remuneration report
described as having been audited have been properly prepared
in accordance with the Companies Act 1985. We also report to
you if, in our opinion, the Directors’ Report is not consistent
with the financial statements, if the Company has not kept
proper accounting records, if we have not received all the
information and explanations we require for our audit, or if
information specified by law regarding directors’ remuneration
and transactions with the Company and other members of the
Group is not disclosed.
We review whether the corporate governance statement
reflects the Company's compliance with the seven provisions
of the Combined Code specified for our review by the Listing
Rules of the Financial Services Authority, and we report if it
does not. We are not required to consider whether the Board's
statements on internal control cover all risks and controls, or
form an opinion on the effectiveness of the Group's corporate
governance procedures or its risk and control procedures.
We read the Directors’ Report and the other information
contained in the annual report for the above year as
described in the contents section including the unaudited
part of the Directors’ remuneration report and consider the
implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the
financial statements.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom
auditing standards issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial
statements and the part of the Directors’ remuneration report
described as having been audited. It also includes an assessment
of the significant estimates and judgements made by the
Directors in the preparation of the financial statements and
of whether the accounting policies are appropriate to the
circumstances of the Company and the Group, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements and the part of the
Directors’ remuneration report described as having been audited
are free from material misstatement, whether caused by fraud
or other irregularity or error. In forming our opinion, we
also evaluated the overall adequacy of the presentation of
information in the financial statements and the part of the
Directors’ remuneration report described as having been audited.
Opinion
In our opinion:
• the financial statements give a true and fair view of the state
of affairs of the Company and the Group as at 30 April 2003
and of the profit of the Group for the year then ended; and
• the financial statements and that part of the Directors’
remuneration report described as having been audited have
been properly prepared in accordance with the Companies Act
1985.
Deloitte & Touche
Chartered Accountants and Registered Auditors
Leeds
1 July 2003
22 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 23
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30 April 2003
BALANCE SHEETS
30 April 2003
Notes
1
Turnover
Continuing operations
Acquired joint venture
Turnover: Group and share of joint venture
Less: share of joint venture's turnover
Group turnover
Cost of sales
Gross profit
Administrative expenses
– general administrative expenses
– goodwill amortisation
Total administrative expenses
Group operating profit – continuing operations
1, 2
Share of joint venture's operating profit
Profit on disposal of property
Interest payable, net
Profit on ordinary activities
before taxation
Tax on profit on ordinary activities
Profit for the financial year
Dividends
Profit transferred to reserves
Earnings per Ordinary share – basic
Diluted earnings per Ordinary share
Dividends per Ordinary share
4
5
6
7
21
8
8
7
Before goodwill
amortisation
and exceptional
items
2003
£000
Goodwill
amortisation
and exceptional
items
2003
£000
337,875
14,514
352,389
(14,514)
337,875
(250,213)
87,662
(38,999)
–
(38,999)
48,663
2,817
51,480
–
(15,032)
36,448
–
–
–
–
–
–
–
–
(384)
(384)
(384)
(197)
(581)
736
–
155
Total
2003
£000
337,875
14,514
352,389
(14,514)
Total
2002
£000
277,829
–
277,829
–
337,875
277,829
(250,213)
(202,315)
87,662
75,514
(38,999)
(384)
(39,383)
48,279
2,620
50,899
736
(30,455)
(4)
(30,459)
45,055
–
45,055
–
(15,032)
(13,381)
36,603
(11,497)
25,106
(9,736)
15,370
41.4p
41.2p
16.0p
31,674
(9,953)
21,721
(9,119)
12,602
35.8p
35.6p
15.0p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 30 April 2003
Profit for the financial year
Foreign exchange differences
2003
£000
25,106
626
25,732
2002
£000
21,721
–
21,721
Fixed assets
Intangible assets
Tangible assets
Vehicles for hire
Other fixed assets
Investments
Investment in joint venture
Share of gross assets
Share of gross liabilities
Goodwill on investment less amortisation
Total fixed assets
Current assets
Stocks
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current (liabilities) assets
Total assets less current liabilities
Creditors: amounts falling due after more than
one year
Provisions for liabilities and charges
Capital and reserves
Called up share capital
Share premium account
Revaluation reserve
Merger reserve
Profit and loss account
Shareholders’ funds
Attributable to equity shareholders
Attributable to non-equity shareholders
Notes
9
10
11
12
17
13
14
15
16
18
19
20
21
21
21
Group
Company
2003
£000
1,382
366,976
21,574
409
390,341
38,450
(30,898)
4,529
2002
£000
142
325,116
19,076
590
344,924
–
–
–
12,081
402,225–
2003
£000
–
–
2,188
79,050
81,238
–
–
–
–
2002
£000
–
–
1,932
70,161
72,093
–
–
–
–
402,422
344,924
81,238
72,093
10,328
57,270
31,545
99,143
8,028
54,925
26,125
89,078
185,758
149,754
(86,615)
315,807
155,592
7,005
153,210
3,545
45,635
23
4,721
99,286
153,210
152,710
500
153,210
(60,676)
284,248
142,031
5,170
137,047
3,542
45,471
23
4,721
83,290
137,047
136,547
500
137,047
–
19,455
29,792
49,247
12,909
36,338
–
26,465
24,537
51,002
12,844
38,158
117,576
110,251
–
(6)
–
(65)
117,582
110,316
3,545
45,635
–
417
67,985
117,582
117,082
500
117,582
3,542
45,471
–
417
60,886
110,316
109,816
500
110,316
The accounts were approved by the Board of Directors on 1 July 2003.
F M Waring
Director
G T Murray
Director
24 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 25
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 April 2003
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
Cash inflow from operating activities
Returns on investments and servicing of finance
Taxation
Capital expenditure and financial investment
Purchase of vehicles for hire
Sale of vehicles for hire
Other items, net
Net cash outflow from capital expenditure
and financial investment
Acquisitions
Equity dividends paid
Cash outflow before use of liquid resources
and financing
Management of liquid resources
Cash (placed on) withdrawn from deposit
Financing
Issue of Ordinary shares (net of expenses)
Decrease in borrowings
Capital element of vehicle related hire purchase payments
Cash inflow from new vehicle related hire purchase agreements
Net cash inflow from financing
(Decrease) increase in cash for the year
RECONCILIATION OF NET CASH FLOW
TO MOVEMENT IN NET DEBT
(Decrease) increase in cash for the year
Financing
Decrease in borrowings
Capital element of vehicle related hire purchase payments
Cash inflow from new vehicle related hire purchase agreements
Cash placed on (withdrawn from) deposit
Change in net debt resulting from cash flows
Hire purchase agreements acquired with subsidiary undertakings
Foreign exchange movements
Movement in net debt for the year
Net debt at 1 May
Net debt at 30 April
Notes
(i)
(ii)
(iii)
(iv)
17(b)
2003
£000
2002
£000
150,896
127,057
(13,847)
(11,869)
(216,858)
95,341
(3,457)
(13,265)
(7,250)
(172,603)
68,866
(6,173)
(124,974)
(109,910)
(14,672)
(9,240)
(6,150)
(8,631)
(23,706)
(18,149)
(191)
39
167
(7,226)
(170,458)
199,254
21,737
(2,160)
153
(1,735)
(133,091)
166,258
31,585
13,475
2003
£000
(2,160)
7,226
170,458
(199,254)
191
(23,539)
(11,547)
(393)
(35,479)
(232,899)
(268,378)
2002
£000
13,475
1,735
133,091
(166,258)
(39)
(17,996)
(228)
–
(18,224)
(214,675)
(232,899)
(i) Reconciliation of operating profit to net cash inflow from operating activities
Notes
Group operating profit
Depreciation
Amortisation of goodwill
Loss on sale of equipment and other fixed assets
Increase in stocks
Increase in debtors
Increase in creditors
Net cash inflow from operating activities
Analysis of items stated on a net basis in the cash flow statement
(ii) Returns on investments and servicing of finance
Interest received
Interest paid on bank loans and overdrafts
Interest paid on hire purchase agreements
Dividends paid – non-equity preference shares
(iii) Capital expenditure and financial investment
Purchase of vehicles for hire
Sale of vehicles for hire
Purchase of other fixed assets
Sale of other fixed assets
Purchase of investments – All Employee Share Scheme
Sale of investments – All Employee Share Scheme
(iv) Acquisitions
Investment in joint venture
Acquisition of subsidiary undertakings
Acquisition of a business
17(a)
17(b)
2003
£000
48,279
99,691
384
3
(2,124)
(1,557)
6,220
2002
£000
45,055
86,912
4
10
(1,329)
(4,429)
834
150,896
127,057
2003
£000
1,163
(4,355)
(10,630)
(25)
(13,847)
(216,858)
95,341
(6,027)
2,389
(472)
653
2002
£000
1,630
(4,744)
(10,126)
(25)
(13,265)
(172,603)
68,866
(7,009)
667
(419)
588
(124,974)
(109,910)
10,170
4,502
–
14,672
–
746
5,404
6,150
26 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 27
ACCOUNTING POLICIES
Basis of accounting
The financial statements are prepared in accordance with applicable
United Kingdom accounting standards under the historical cost
convention as modified by the revaluation of freehold and long
leasehold properties.
The Group adopted the transitional provisions of FRS15 in respect
of the valuation of properties. The valuation of previously revalued
properties will not be updated. Details of the latest revaluations are
shown in Note 11.
Basis of consolidation
The consolidated financial statements comprise the accounts of the
Company and all subsidiary undertakings made up to 30 April. Joint
ventures are accounted for by the gross equity method. The results of
subsidiary undertakings and joint ventures are included from their
respective dates of acquisition.
Goodwill
Goodwill representing the excess of the purchase consideration on
acquisition of subsidiary undertakings and joint ventures is capitalised
as an intangible asset in the year of acquisition. It is amortised through
the profit and loss account over the Directors’ estimate of its useful life
of up to a maximum of 20 years. As permitted by FRS10, goodwill
arising on acquisitions prior to 1 January 1998 was eliminated against
reserves as a matter of accounting policy and has not been reinstated
to intangible assets from reserves, but will be charged to the profit and
loss account on subsequent disposal of the businesses to which it relates.
Tangible fixed assets: depreciation
Freehold land and property under construction are not depreciated.
Other tangible fixed assets are depreciated over their estimated useful
lives on a straight line basis as follows:
Freehold buildings
Leasehold property
over 50 years
over 50 years or over the term of
the lease, whichever is the shorter
Plant, equipment and fittings
Vehicles for hire
Motor vehicles
over 3 to 10 years
over 3 to 6 years
over 3 years
Investments
(i)
Current assets are stated at the lower of cost and net realisable
value.
Shares in Group undertakings and other unlisted fixed asset
investments are stated at cost less provision for impairment.
(ii)
Fixed asset investments - own shares
The Company’s shares held by Kleinwort Benson (Guernsey) Trustees
Limited as trustees of the Goode Durrant Employees’ Trust are included
in the consolidated balance sheet as a fixed asset investment until such
time as the interest in the shares is transferred to the employees. The
shares are held as a hedge against the Group’s obligations under the
Long Term Incentive Plan and the Northgate All Employee Share Scheme
and accordingly the shares purchased are recorded at cost. The cost of
meeting these obligations is charged to the profit and loss account on a
systematic basis over the period of service in respect of which options
are granted.
Stocks
Goods for resale and finished goods are stated at the lower of cost and
net realisable value.
Foreign currency
Assets and liabilities of overseas subsidiaries and joint ventures are
translated into sterling at the rates of exchange ruling at the balance
sheet date. The effect of variances in exchange rates between the
beginning and the end of the financial year on the net investment in
subsidiary undertakings and joint ventures is dealt with through reserves.
The results of overseas subsidiary undertakings and joint ventures are
translated into sterling using average exchange rates for the financial
year and variances compared with the exchange rate at the balance
sheet date are dealt with through reserves. All other monetary assets
and liabilities expressed in foreign currencies are translated into sterling
at the rates of exchange ruling at the balance sheet date with resulting
exchange gains and losses being taken to the profit and loss account.
Deferred taxation
In accordance with FRS19, Deferred Tax, full provision is made on timing
differences that have originated but not reversed at the balance sheet
date. Timing differences arise from the inclusion of items of income and
expenditure in taxation computations in periods different from those in
which they are included in financial statements. Deferred tax is not
provided on timing differences arising from the revaluation
of fixed assets where there is no commitment to sell the asset, or on
unremitted earnings of subsidiaries and joint ventures where there is no
commitment to remit these earnings. Deferred tax assets are recognised
to the extent that it is regarded as more likely than not that they will be
recovered. Deferred tax assets and liabilities are not discounted.
Leasing
As lessee: Acquisitions of fixed assets funded through finance leases and
hire purchase agreements are capitalised and depreciated in accordance
with Group policies. Future obligations under these leases and agreements
are included in creditors. Interest costs payable are charged to the profit
and loss account over the life of the lease so as to produce a constant
rate of return on the outstanding balance. All other leases are operating
leases and the payments made are charged to the profit and loss account
evenly over the period of the lease.
As lessor: Motor vehicles and equipment leased to customers under
operating leases are included within fixed assets. Income from such
leases is taken to the profit and loss account evenly over the period of
the operating lease agreements.
Turnover
Turnover represents the amounts charged to customers for goods and
services supplied excluding value added tax.
Pensions
The Group only operates defined contribution type pension arrangements.
Contributions in respect of these arrangements are charged to the
profit and loss account as they become payable by the Group. Pension
contributions in respect of one of these arrangements are held in
trustee administered funds independent of the Group’s finances.
The other arrangements are Group personal pension plans.
Financial instruments and their derivatives
Derivative instruments utilised by the Group are interest rate caps,
collars and swaps. A derivative instrument is considered to be used
for hedging purposes when it alters the risk profile of an existing
underlying exposure of the Group in line with the Group’s risk
management policies.
Interest rate caps and collars – The option premia are recognised
on the Group balance sheet as ‘Prepayments and accrued income’.
The option premia are taken to net interest payable spread evenly
over the lifetime of the cap/collar.
Interest rate swaps – Interest payments/receipts are accrued with net
interest. They are not revalued to fair value or shown in the Group
balance sheet at the year end.
NOTES ON THE ACCOUNTS
1 Segmental information
All trading activities in 2003 and 2002 relate to the business of vehicle hire. The Group operates in the United Kingdom and Republic of Ireland and
turnover relates to customers in the United Kingdom and Republic of Ireland. The joint venture operates in all material respects in Spain.
2 Operating profit
Operating profit is stated after charging (crediting):
Depreciation of owned tangible fixed assets
Depreciation of fixed assets held under
hire purchase agreements
Amortisation of goodwill
Hire of plant and equipment
Hire of other assets
Auditors’ remuneration
Fees paid to auditors for other services
Loss on sale of tangible fixed assets
Other rental income
3 Information regarding employees and Directors
The average number of persons employed by the Group:
Direct operations
Administration
The staff costs of these persons were as follows:
Wages and salaries
Social security costs
Other pensions costs
4 Interest
Income from fixed asset investments
Interest receivable and similar income:
Interest receivable on bank and other deposits
Interest payable and similar charges:
On bank loans, overdrafts and other loans
repayable within five years
Finance charges related to hire purchase agreements
UK interest payable, net
Share of joint venture’s interest payable, net
2003
£000
2002
£000
37,537
38,555
62,154
384
77
3,061
173
239
3
(213,842)
48,357
4
38
2,539
129
177
10
(184,217)
2003
number
2002
number
1,296
370
1,666
£000
32,838
3,016
725
36,579
2003
£000
231
875
1,106
1,059
358
1,417
£000
26,973
2,569
563
30,105
2002
£000
15
1,610
1,625
(4,532)
(10,758)
(15,290)
(14,184)
(848)
(4,760)
(10,246)
(15,006)
(13,381)
–
(15,032)
(13,381)
28 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 29
NOTES ON THE ACCOUNTS CONTINUED
5 Tax on profit on ordinary activities
UK corporation tax on profits of the year
Over provision of corporation tax for prior years
Share of overseas joint venture taxation
Total current taxation
Deferred taxation
Origination and reversal of timing differences
Adjustment in respect of prior years
2003
£000
11,052
(740)
10,312
493
10,805
(337)
1,029
11,497
The tax assessed for the year is higher than the standard rate of corporation tax in the UK (30%). The differences are explained below:
Profit on ordinary activities before tax
Tax on profit on ordinary activities at the standard rate
Expenses not deductible for tax purposes
Capital gain covered by losses
Capital allowances for year in excess of depreciation
Difference in taxation on overseas joint venture
Adjustment to tax charge in respect of previous periods
Other
2003
£000
36,603
10,981
573
(235)
337
(99)
(740)
(12)
2002
£000
12,022
(1,418)
10,604
–
10,604
(2,005)
1,354
9,953
2002
£000
31,674
9,502
490
–
2,005
–
(1,418)
25
6 Profit of parent company
Of the profit attributable to shareholders, a profit of £16,835,000 (2002 – £11,380,000) has been dealt with in the accounts of the parent company.
The Company has taken advantage of the exemption contained in the Companies Act 1985 from presenting its own profit and loss account.
10,805
10,604
7 Dividends
Equity dividend on Ordinary shares:
Interim paid 4.9p per share (2002 – 4.65p)
Final proposed 11.1p per share (2002 – 10.35p)
Total dividend 16.0p per share (2002 – 15.0p)
Non-equity dividend on preference shares
2003
£000
2,965
6,746
9,711
25
9,736
2002
£000
2,819
6,275
9,094
25
9,119
8 Earnings per Ordinary share
The calculation of basic earnings per Ordinary share in respect of the year to 30 April 2003 is based on the profit attributable to equity shareholders of
£25,081,000 (2002 – £21,696,000) and the weighted average of 60,646,882 (2002 – 60,560,376) Ordinary shares in issue (excluding those shares held
by an employee trust in connection with the Goode Durrant Long Term Incentive Plan and the All Employee Share Scheme).
Diluted earnings per Ordinary share have been calculated on the basis of earnings described above and assume that 102,000 shares (2002 – 162,500)
remaining exercisable under the Goode Durrant Share Option Scheme had been fully exercised at the commencement of the relevant period, such that
the weighted average number of shares is 60,893,447 (2002 – 60,876,578) (including those shares held by an employee trust in connection with the
Goode Durrant Long Term Incentive Plan and the All Employee Share Scheme).
9 Intangible assets
Group
Cost
At 1 May 2002
Additions (see Note 17)
At 30 April 2003
Amortisation
At 1 May 2002
Charge for the year
At 30 April 2003
Net book value
At 30 April 2003
At 30 April 2002
10 Vehicles for hire
Group
Cost
1 May 2002
Foreign exchange differences
Additions
Acquisitions
Disposals
30 April 2003
Depreciation
1 May 2002
Foreign exchange differences
Charged to profit and loss account
Disposals
30 April 2003
Net book value
30 April 2003
30 April 2002
Goodwill
£000
146
1,624
1,770
4
384
388
1,382
142
£000
448,337
543
220,694
12,904
(202,324)
480,154
123,221
100
96,840
(106,983)
113,178
366,976
325,116
The net book value of the above vehicles which are held under hire purchase agreements amounts to £255,746,000 (2002 – £215,663,000).
30 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 31
NOTES ON THE ACCOUNTS CONTINUED
11 Other fixed assets
Group
Cost or valuation
1 May 2002
Foreign exchange differences
Additions
Acquisitions
Disposals
30 April 2003
Depreciation
1 May 2002
Foreign exchange differences
Charged to profit and loss account
Disposals
30 April 2003
Net book value
30 April 2003
30 April 2002
Cost or valuation at 30 April 2003 is represented by:
Valuation performed in 1992
Subsequent additions at cost
Land and buildings by category:
Freehold
Short leasehold
Net book value
Land
and
buildings
£000
Plant,
equipment
& fittings
£000
Motor
vehicles
£000
17,101
–
2,758
852
(1,024)
19,687
2,219
–
651
(137)
2,733
16,954
14,882
795
18,892
19,687
8,003
20
2,112
115
(1,258)
8,992
4,869
9
1,673
(1,078)
5,473
3,519
3,134
–
8,992
8,992
1,563
–
1,157
–
(1,297)
1,423
503
–
527
(708)
322
1,101
1,060
–
1,423
1,423
2003
£000
14,393
2,561
16,954
Total
£000
26,667
20
6,027
967
(3,579)
30,102
7,591
9
2,851
(1,923)
8,528
21,574
19,076
795
29,307
30,102
2002
£000
13,130
1,752
14,882
Certain of the above freehold properties were valued as at 30 April 1992 by Jones Lang Wootton, Chartered Surveyors, on the basis of open market
value for existing use.
At 30 April 2003, under the historical cost convention, land and buildings would have been stated at £19,965,000 and related accumulated
depreciation at £2,829,000.
The gross amount of depreciable assets included in land and buildings is £15,317,000.
Company
Cost or valuation
1 May 2002
Additions
30 April 2003
Depreciation
1 May 2002
Charged to profit and loss account
30 April 2003
Net book value
30 April 2003
30 April 2002
Land and
buildings
£000
1,944
293
2,237
12
37
49
2,188
1,932
12 Fixed asset investments
Group
Cost
1 May 2002
Additions
Disposals
30 April 2003
Provisions
1 May 2002
Release on disposals
30 April 2003
Net book value
30 April 2003
30 April 2002
Own
shares
£000
Unlisted
investments
£000
1,289
472
(1,274)
487
859
(621)
238
249
430
184
–
–
184
24
–
24
160
160
Total
£000
1,473
472
(1,274)
671
883
(621)
262
409
590
Own shares
At 30 April 2003, 25,960 (2002 - 62,360) Ordinary shares in Northgate plc with a market value of £107,994 (2002 - £313,670) were held by Kleinwort
Benson (Guernsey) Trustees Limited as a hedge against the Group’s obligations under the Northgate All Employee Share Scheme (“the AESS”).
At 30 April 2003, 90,014 (2002 - 140,306) Ordinary shares in Northgate plc with a market value of £374,458 (2002 - £705,739) were held by Kleinwort
Benson (Guernsey) Trustees Limited as a hedge against the Group’s obligation under the Long Term Incentive Plan (“the Plan”).
All but a nominal dividend right in respect of these shares has been waived. Further details of the AESS and of the Plan are outlined in the Remuneration
Report on pages 12 to 17.
Company
Cost
1 May 2002
Additions
Transfer to subsidiary
Disposals
30 April 2003
Provisions
1 May 2002 and 30 April 2003
Net book value
30 April 2003
30 April 2002
Own
shares
£000
Shares in
subsidiary
undertakings
£000
Investment
in joint
venture
£000
Loans
to group
undertakings
£000
277
–
–
(277)
–
–
–
277
25,319
2
(1,006)
–
24,315
2,435
21,880
22,884
Total
£000
72,596
10,172
(1,006)
(277)
81,485
–
10,170
–
–
10,170
47,000
–
–
–
47,000
–
–
2,435
10,170
–
47,000
47,000
79,050
70,161
At 30 April 2003 the Company’s principal subsidiary undertaking was Northgate Vehicle Hire Limited (NVH), whose business is vehicle hire. NVH is
wholly and directly owned by the Company, incorporated in Great Britain, registered in England and Wales and operates in the country of incorporation.
A full list of the Company’s subsidiaries was included with the Annual Return filed with the Registrar of Companies.
32 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 33
NOTES ON THE ACCOUNTS CONTINUED
13 Stocks
Goods for resale and finished goods
14 Debtors
Amounts falling due within one year:
Trade debtors
Amounts owed by subsidiary undertakings
Corporation tax
Other debtors
Prepayments and accrued income
Amounts falling due after more than one year:
Prepayments and accrued income
15 Creditors: amounts falling due within one year
Amounts falling due within one year:
Borrowings (see Note 16)
Trade creditors
Amounts owed to subsidiary undertakings
Corporation tax
Social security and other taxes
Accruals and deferred income
Proposed dividends
Group
Company
2003
£000
10,328
2002
£000
8,028
2003
£000
–
2002
£000
–
Group
Company
2003
£000
45,821
–
–
4,840
5,927
56,588
682
57,270
2002
£000
43,867
–
1,257
2,840
5,921
53,885
1,040
54,925
2003
£000
–
18,024
–
1,369
62
19,455
2002
£000
–
25,937
–
410
118
26,465
–
–
19,455
26,465
Group
Company
2003
£000
144,331
10,814
–
5,058
3,751
15,058
6,746
185,758
2002
£000
116,993
7,163
–
7,664
3,610
8,049
6,275
149,754
2003
£000
–
–
4,589
–
–
1,574
6,746
2002
£000
115
–
5,322
88
–
1,044
6,275
12,909
12,844
16 Creditors: amounts falling due after more than one year
The only creditors falling due after more than one year are borrowings. Details of total Group borrowings, including those due within one year are
as follows:
Group
Company
Amounts falling due within one year:
Bank loans and overdrafts
Vehicle related bank loans
and overdrafts
Vehicle related hire purchase
Amounts falling due after more than one year:
Bank loans and overdrafts
Vehicle related bank loans
and overdrafts
Vehicle related hire purchase
Total borrowings
Of the amounts falling due after more than one year,
repayments fall due in the following periods:
Due within one to two years
Bank loans and overdrafts
Vehicle related hire purchase
Due within two to five years
Vehicle related bank loans
and overdrafts
Vehicle related hire purchase
2003
£000
–
10,686
133,645
144,331
2002
£000
115
3,126
113,752
116,993
11
28
46,835
108,746
155,592
299,923
11
72,497
72,508
46,835
36,249
83,084
54,027
87,976
142,031
259,024
28
58,651
58,679
54,027
29,325
83,352
2003
£000
2002
£000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
115
–
–
115
–
–
–
–
115
–
–
–
–
–
–
Vehicle related bank loans and overdrafts of £57,521,000 (2002 – £57,153,000) and £11,000 (2002 – £28,000) of the bank loans and overdrafts
are secured by fixed and floating charges over the assets of the subsidiary undertakings. Vehicle related hire purchase of £242,391,000
(2002 – £201,728,000) is secured by a fixed charge over the vehicles to which it relates.
Analysis of net debt
Cash in hand, at bank
Bank overdraft due within one year
Cash in hand, short term deposits
Bank loans and overdrafts
due after one year
Hire purchase obligations
At
1 May
2002
£000
24,768
(3,241)
21,527
1,357
(54,055)
(201,728)
(232,899)
Cash
flow
£000
5,229
(7,389)
(2,160)
191
7,226
(28,796)
(23,539)
Acquisitions
(Note 17)
£000
–
–
–
–
–
(11,547)
(11,547)
Other
non-
cash
changes
£000
Foreign
exchange
movement
£000
–
17
17
–
(17)
–
–
–
(73)
(73)
–
–
(320)
(393)
At
30 April
2003
£000
29,997
(10,686)
19,311
1,548
(46,846)
(242,391)
(268,378)
34 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 35
NOTES ON THE ACCOUNTS CONTINUED
16 Creditors: amounts falling due after more than one year (continued)
At 30 April 2003 the gearing of the Group amounted to 175% (2002 – 170%) which is represented by net borrowings of £268,378,000 (2002 –
£232,899,000) as a percentage of shareholders’ funds of £153,210,000 (2002 – £137,047,000). Net borrowings comprise borrowings less cash at
bank.
Borrowing facilities
The Group has various borrowing facilities available to it. The undrawn committed borrowing facilities at 30 April 2003 in respect of which all
conditions precedent had been met at that date expire as follows:
In one year or less
In more than two years
2003
£000
127,125
27,654
154,779
2002
£000
172,234
13,470
185,704
The total amount permitted to be borrowed by the Company and its subsidiaries in terms of the Articles of Association shall not exceed five times the
aggregate of the issued share capital of the Company and the Group reserves, as defined in those Articles.
Financial instruments and their derivatives
Treasury policies and the management of risk
The function of Group Treasury is to reduce or eliminate financial risk, to ensure sufficient liquidity is available to meet foreseeable requirements, to
secure finance at minimum cost and to invest cash assets securely and profitably. Treasury operations manage the Group’s funding, liquidity and
exposure to interest rate risks within a framework of policies and guidelines authorised by the Board.
The Group uses derivative instruments for risk management purposes only. Consistent with Group policy, Group Treasury do not engage in speculative
activity and it is policy to avoid using the more complex financial instruments.
The policy followed in managing credit risk permits only minimal exposures with banks and other institutions meeting required standards as assessed
normally by reference to the major credit agencies. Deals are authorised only with banks with which dealing mandates have been agreed and which
maintain a Double A rating. Individual aggregate credit exposures are limited accordingly.
Short term debtors and creditors have been excluded from the analysis below. At 30 April 2003 the Group’s total borrowings were £299,923,000
(2002 – £259,024,000). The increase reflects the acquisition of Target Vehicle Rental Limited, the investment in 40% of the share capital of Fualsa and
the growth in fleet numbers and funding thereof during the year. In all other respects the year end figures are consistent with the year as a whole.
Financing and interest rate risk
The Group’s policy is to finance operating subsidiaries by a combination of retained earnings, bank borrowings including medium term loans and hire
purchase finance.
Cash at bank and on deposit yield interest based principally on LIBOR rates applicable to periods of less than three months. The Group’s exposure to
interest rate fluctuations on its borrowings and deposits is managed through the use of interest rate caps, collars and swaps. These derivatives are also
used to manage the Group’s desired mix of fixed and floating rate debt. The policy is to fix or cap a substantial element of the interest cost on
outstanding debt. At 30 April 2003, 38% of gross borrowings were at fixed or capped rates of interest; £30,000,000 of swaps as shown below and
£85,000,000 of caps and collars as detailed on page 37. After taking into account the various interest rate swaps entered into by the Group, the
interest rate exposure of the borrowings of the Group as at 30 April 2003 was:
Gross
borrowings
£000
Floating rate
borrowings
£000
Fixed rate
borrowings
£000
Fixed rate borrowings
Weighted
average
interest rate
at year end
%
Weighted
average
time for which
rate is fixed
Years
299,923
269,923
30,000
259,024
214,024
45,000
7.05
7.16
4.14
3.53
At 30 April 2003
UK Sterling
At 30 April 2002
UK Sterling
The analysis of weighted average interest rates and weighted average years to maturity is on fixed rate borrowings and after adjustments for interest
rate swaps. The floating rate borrowings bear interest at relevant national LIBOR equivalents.
16 Creditors: amounts falling due after more than one year (continued)
The interest rate exposure is further protected by interest rate caps and collars set out as follows:
Contracts effective as at 30 April 2003
Cap amount (£m)
Cap %
Floor %
5
5
5
5
5
5
5
35
8
8
8
8
8
8
7.5
–
–
–
–
–
–
–
Collar amount (£m)
Cap %
Floor %
10
10
10
10
10
50
6
7
7
7
7
4
5
5
5
5
Finish date
July 2003
April 2004
May 2004
December 2004
January 2005
April 2006
June 2006
Finish date
January 2005
April 2007
April 2007
April 2008
April 2008
Total value of current contracts (£m)
85
Contracts effected after 30 April 2003
Swaps amount (£m)
Swap Rate %
25
10
10
10
55
Collar amount (£m)
25
10
10
10
10
10
10
85
Total value of future contracts (£m)
140
4.05
3.93
3.82
5.99
Cap %
5.50
5.25
5.00
4.75
7.00
7.00
6.50
Start date
May 2003
May 2003
June 2003
April 2004
Finish date
May 2008
May 2008
June 2008
April 2009
Floor %
Start date
Finish date
3.22
3.19
3.15
3.25
5.00
5.00
4.50
May 2003
June 2003
June 2003
June 2003
April 2004
April 2005
April 2007
May 2008
June 2008
June 2008
June 2008
April 2009
April 2010
April 2012
Fair values of financial instruments
The comparison of fair and book values of all the Group’s financial instruments as at 30 April 2003 is set out below. Market values have been used to
determine fair values. Where market values are not available, fair values have been calculated by discounting cash flows at prevailing interest rates.
Cash at bank and in hand
Debt
Net borrowings
Derivatives to manage interest rate
2003
2002
Book
value
£000
31,545
(299,923)
(268,378)
1,040
Fair
value
£000
31,545
(299,923)
(268,378)
(6,659)
Book
value
£000
26,125
(259,024)
(232,899)
1,412
Fair
value
£000
26,125
(259,024)
(232,899)
(2,104)
(267,338)
(275,037)
(231,487)
(235,003)
36 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 37
NOTES ON THE ACCOUNTS CONTINUED
17 Acquisitions
17 Acquisitions (continued)
(a) Joint venture
On 16 July 2002 the Group acquired a 40% share in Furgonetas de Alquiler SA ("Fualsa"), a business in Spain, for a cash consideration of £10,170,000
including goodwill of £4,726,000. The investment is accounted for as a joint venture. The goodwill on the investment in Fualsa is capitalised and
amortised over a period of 20 years being the estimated useful economic life.
Provisional fair value of net assets acquired
Goodwill
Acquisition cost (including fees)
Satisfied by cash
£000
5,444
4,726
10,170
10,170
The provisional fair values represent the Directors’ current estimates of the net assets acquired. However, in accordance with FRS7, the values
attributed may be revised as further information becomes available.
In addition to the 40% of Fualsa's share capital acquired to date the Group has an option to acquire the remaining 60%: 40% being exercisable no later
than May 2004 and the remaining 20% no later than May 2006. The balance sheet of Fualsa as at 30 April 2003 is shown below for information purposes.
Fixed assets
Vehicles for hire
Plant, equipment & fittings
Current assets
Stocks
Debtors
Cash at bank
Creditors: amounts falling due within one year
- Borrowings
- Other
Net current liabilities
Total assets less current liabilities
Creditors: amounts falling due after more than one year
- Borrowings
Provisions for liabilities and charges
Deferred income
Net assets
Fualsa's net borrowings at 30 April 2003 were £65,275,000.
£000
69,788
4,681
74,469
94
21,176
385
21,655
36,743
7,959
44,702
(23,047)
51,422
28,917
2,047
1,578
18,880
(b) Subsidiary undertakings
Target Vehicle Rental Limited
On 1 October 2002 the Group acquired the entire issued share capital of Target Vehicle Rental Limited ("Target") for a cash consideration of £3,768,000
including goodwill of £1,424,000. The goodwill on the acquisition of Target is capitalised and amortised over a period of 20 years being the estimated
useful economic life.
KW Sadler Car Hire (Cleethorpes) Limited
On 1 July 2002 the Group acquired the entire issued share capital of KW Sadler Car Hire (Cleethorpes) Limited ("KWS") for a cash consideration of
£1,134,000 including goodwill of £200,000. The goodwill has been amortised in full during the year. No fair value adjustments have been made.
Since the acquisition dates both Target and KWS have been restructured with elements of the businesses being taken on by other companies within
the Group and for that reason the post acquisition results from the businesses are not separately identifiable. The profit after tax of Target for the year
ended 30 September 2002 was £208,800. The profit after tax of KWS for the year ended 31 October 2001 was £273,100 and for the period from
1 November 2001 to 30 June 2002 was £229,700.
Vehicles for hire
Other fixed assets
Stocks
Debtors
Cash at bank
Hire purchase obligations
Bank loan
Creditors
Provisions
Net assets acquired
Goodwill
Acquisition cost (including fees)
Satisfied by cash
Cash equivalents in subsidiary undertaking purchased
Cash outflow on acquisition
Book value at date
of acquisition
£000
Target
Revaluations
£000
KWS
Total
Fair value
net assets
£000
Fair value
net assets
£000
Fair value
net assets
£000
11,720
686
86
2,113
373
(10,960)
–
(579)
(999)
2,440
(41)
(55)
–
–
–
–
–
–
–
(96)
11,679
631
86
2,113
373
(10,960)
–
(579)
(999)
2,344
1,424
3,768
3,768
(373)
3,395
1,225
336
83
322
177
(587)
(150)
(328)
(144)
934
200
1,134
1,134
(27)
1,107
12,904
967
169
2,435
550
(11,547)
(150)
(907)
(1,143)
3,278
1,624
4,902
4,902
(400)
4,502
The revaluation adjustments made to the book values of fixed assets are to align the rates of depreciation in Target with those of the Group.
18 Provisions for liabilities and charges
Group
Company
Deferred tax provided
Accelerated capital allowances
Other timing differences
Movement in deferred tax
1 May 2002
Prior period adjustment
Restated
On acquisition
Credited in profit and loss account
Adjustments to prior years
2003
£000
7,969
(964)
7,005
5,170
–
5,170
1,143
(337)
1,029
7,005
2002
£000
5,678
(508)
5,170
6,681
(865)
5,816
5
(2,005)
1,354
5,170
2003
£000
66
(72)
(6)
(65)
–
(65)
–
27
32
(6)
2002
£000
–
(65)
(65)
36
–
36
–
((101)
–
((65)
38 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 39
NOTES ON THE ACCOUNTS CONTINUED
19 Called up share capital
Group and Company
Authorised:
80,000,000 Ordinary shares of 5p each
1,300,000 5% cumulative preference
shares of 50p each
Allotted and fully paid:
60,892,340 (2002 – 60,831,840)
Ordinary shares of 5p each
1,000,000 5% cumulative preference
shares of 50p each
2003
£000
4,000
650
4,650
3,045
500
3,545
2002
£000
4,000
650
4,650
3,042
500
3,542
During the year 60,500 Ordinary shares with a nominal value of £3,025 were issued pursuant to the exercise of options under the GD Scheme, for a
cash consideration of £167,222.
The cumulative preference shares of 50p each entitle the holder to receive a cumulative preferential dividend at the rate of 5% on the paid up capital
and the right to a return of capital at either winding up or a repayment of capital. The preference shares do not entitle the holders to any further or other
participation in the profits or assets of the Company. These shares have no voting rights other than in exceptional circumstances.
Options
At 30 April 2003 options outstanding for Ordinary shares granted under the GD Scheme were as follows:
Year of
Grant
1995
1996
Number of
Shares
100,000
2,000
Exercise
Price
218.5p
280.5p
Exercisable
From
January 1998
January 1999
To
January 2005
January 2006
There is no commitment to issue Ordinary shares under the Company’s other share schemes.
20 Share premium account
Group and Company
1 May 2002
Premium on shares issued (net of expenses)
30 April 2003
21 Reserves
Group
1 May 2002
Profit transferred to reserves
Foreign exchange differences
30 April 2003
Company
1 May 2002
Profit transferred to reserves
30 April 2003
2003
£000
45,471
164
45,635
Profit
and loss
account
£000
83,290
15,370
626
99,286
60,886
7,099
67,985
2002
£000
45,321
150
45,471
Total
reserves
£000
88,034
15,370
626
104,030
61,303
7,099
68,402
Revaluation
reserve
£000
Merger
reserve
£000
23
–
–
23
–
–
–
4,721
–
–
4,721
417
–
417
The cumulative amount of goodwill written off to reserves is £13,195,000 (2002 – £13,195,000).
22 Reconciliation of movements in shareholders’ funds for the year ended 30 April 2003
Profit for the financial year
Dividends
Issue of Ordinary share capital (net of expenses)
Foreign exchange differences
Net increase in shareholders’ funds
Opening shareholders’ funds
As previously reported
Prior period adjustment
As restated
Closing shareholders’ funds
23 Contingent liabilities
2003
£000
137,047
–
£000
25,106
(9,736)
15,370
167
626
16,163
137,047
153,210
2002
£000
123,427
865
£000
21,721
(9,119)
12,602
153
–
12,755
124,292
137,047
The Company has guaranteed borrowings by subsidiary undertakings of £10,686,000 as at 30 April 2003 (2002 – £3,126,000).
24 Commitments
Capital expenditure commitments:
Capital expenditure contracted for but not provided in the accounts is as follows:
Contracted for but not provided
in the accounts
Financial commitments:
As at 30 April 2003 the Group had annual commitments
to make payments under operating leases as follows:
Leases expiring:
within one year
two to five years
over five years
25 Pensions
Group
2003
£000
947
2002
£000
225
2003
2002
Land and
buildings
£000
469
481
911
1,861
Other
£000
628
315
14
957
Land and
buildings
£000
146
478
872
1,496
Other
£000
234
628
42
904
The total pension cost for the Group was £725,000 (2002 – £563,000).
With effect from 1 April 1997 the former defined benefit schemes were merged and converted into a single defined contribution plan. After full
provision for all liabilities arising on conversion, independent qualified actuaries estimated that a surplus of £500,000 was attributable to the
Company. This surplus was taken to the profit and loss account for the year ended 30 April 1997 as an exceptional credit to employment costs.
The surplus has been used to fund the Group’s contributions under the new defined contribution plan as they fell due. Accordingly an amount of
£Nil (2002 – £30,000) has been included as a pensions prepayment in the balance sheet.
During the year ended 30 April 2003 the Group only operated defined contribution arrangements.
40 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 41
FIVE YEAR FINANCIAL SUMMARY
NOTICE OF ANNUAL GENERAL MEETING
Based on the consolidated financial statements for years ended 30 April and adjusted to reflect the effect of subsequent changes in accounting policy.
Profit and loss account
Turnover
Continuing operations
Joint venture
Turnover: Group and share of joint venture
Less: share of joint venture’s turnover
Group turnover
Operating profit
Group operating profit - continuing operations
Share of joint venture’s operating profit
Exceptional items
Interest
Profit before taxation
Tax
Profit for the financial year
Dividends
Retained profit
Earnings per Ordinary share
Dividends per Ordinary share
Balance sheet
Assets employed
Fixed assets
Net current liabilities
Creditors (after one year) and provisions
Financed by
Share capital
Share premium account
Reserves
Net asset value per Ordinary share
2003
£000
337,875
14,514
352,389
(14,514)
337,875
48,279
2,620
50,899
736
(15,032)
36,603
(11,497)
25,106
(9,736)
15,370
41.4p
16.0p
2003
£000
2002
£000
277,829
–
277,829
–
2001
£000
261,801
–
261,801
–
2000
£000
218,286
–
218,286
–
1999
£000
184,753
–
184,753
–
277,829
261,801
218,286
184,753
45,055
–
45,055
–
(13,381)
31,674
(9,953)
21,721
(9,119)
12,602
35.8p
15.0p
2002
£000
42,569
–
42,569
–
(15,459)
27,110
(8,054)
19,056
(8,517)
10,539
31.4p
14.0p
2001
£000
37,942
–
37,942
–
(13,617)
24,325
(7,328)
16,997
(8,039)
8,958
28.1p
13.25p
2000
£000
28,620
–
28,620
–
(12,010)
16,610
(5,080)
11,530
(7,561)
3,969
19.1p
12.5p
1999
£000
402,422
(86,615)
(162,597)
344,924
(60,676)
(147,201)
318,353
(51,625)
(142,436)
294,788
(32,530)
(148,841)
251,765
(14,905)
(132,493)
153,210
137,047
124,292
113,417
104,367
3,545
45,635
104,030
153,210
252p
3,542
45,471
88,034
3,539
45,321
75,432
3,532
44,992
64,893
3,530
44,902
55,935
137,047
124,292
113,417
104,367
225p
205p
187p
172p
Notice is hereby given that the one hundred and fifth Annual
General Meeting of Northgate plc will be held at Norflex House,
Allington Way, Darlington at 11.30 am on 9 September 2003 for
the following purposes:
1.
2.
3.
4.
5.
6.
7.
8.
To receive and adopt the Directors’ report and audited
accounts of the Company for the year ended 30 April 2003.
To declare a final dividend of 11.1p per Ordinary share.
To re-appoint Deloitte & Touche LLP as auditors of the
Company and to authorise the Directors to agree their
remuneration.
To re-elect Mr P J Moorhouse as a Director.
To re-elect Mr G T Murray as a Director.
To re-elect Mr S J Smith as a Director.
As special business to consider, and if thought fit, to pass the
following resolutions: number 7 is to be proposed as an
Ordinary Resolution and numbers 8 and 9 as Special
Resolutions.
That the Report on Remuneration for the financial year ended
30 April 2003 set out on pages 12 to 17 of the 2003 Annual
Report and Accounts be approved.
That the Directors be and they are hereby empowered
pursuant to Section 95 of the Companies Act 1985 (“the
Act”), to allot equity securities (within the meaning of Section
94 of the Act) for cash, pursuant to the authority given in
accordance with Section 80 of the Act by a resolution passed
at the Annual General Meeting of the Company held on 14
September 2000 as if Section 89(1) of the Act did not apply to
any such allotment, provided that this power shall be limited
to:
(a)
the allotment of equity securities in connection with an
offer of securities, open for acceptance for a period fixed
by the Directors, by way of rights to holders of Ordinary
shares and such other equity securities of the Company
as the Directors may determine on the register on a
fixed record date in proportion to their respective
holdings of such securities or in accordance with the
rights attached thereto (but subject to such exclusions
or other arrangements as the Directors may deem
necessary or expedient to deal with fractional
entitlements that would otherwise arise or with legal or
practical problems under the laws of, or the
requirements of any recognised regulatory body or any
stock exchange in, any territory or otherwise
howsoever);
(b)
the allotment of equity securities in connection with any
employees’ share scheme approved by the members in
general meeting; and
(c)
the allotment (otherwise than pursuant to sub-
paragraphs (a) and (b) above) of equity securities up to
an aggregate nominal amount of £152,000.
and shall expire at the conclusion of the Annual General
Meeting of the Company to be held in 2004 or, if earlier,
fifteen months after the passing of this resolution except
that the Company may before such expiry make offers or
agreements which would or might require equity securities
to be allotted after such expiry and notwithstanding such
expiry the Directors may allot equity securities in pursuance
of such offers or agreements.
9.
That the Company be generally and unconditionally
authorised to make market purchases (as defined in Section
163, Companies Act 1985) of its Ordinary shares of 5p each
provided that:
(a)
the Company does not purchase under this authority
more than 6,000,000 ordinary shares;
(b)
the Company does not pay less than 5p for each share;
(c)
(d)
(e)
the Company does not pay more for each share than 5%
over the average of the middle market price of the
Ordinary shares according to the Daily Official List of the
London Stock Exchange for the ten business days
immediately preceding the date on which the Company
agrees to buy the shares concerned;
this authority shall expire at the conclusion of the
Annual General Meeting of the Company to be held in
2004 unless such authority is renewed prior to such
time; and
the Company may agree before the aforesaid authority
terminates to purchase Ordinary shares where the
purchase will or may be executed (either wholly or in
part) after the authority terminates. The Company may
complete such a purchase even though the authority
has terminated.
By Order of the Board
D. Henderson
Secretary
1 July 2003
Registered Office:
Norflex House
Allington Way
Darlington DL1 4DY
NOTES
1. Only the holders of Ordinary shares registered in the register of members of the Company as at 6.00 pm on 7 September 2003 shall be entitled to attend
and vote at the meeting in respect of the number of shares registered in their name at that time. Changes to entries on the register of members after that
time shall be disregarded in determining the right of any person to attend and vote at the meeting.
2. A member entitled to attend and vote is entitled to appoint one or more proxies to attend and (on a poll) vote instead of him. A proxy so appointed need
not also be a member. A two-way proxy card for this purpose is enclosed.
42 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 43
INFORMATION FOR SHAREHOLDERS
OUR PRODUCTS
Classification
Information concerning day to day movements in the price
of the Company’s Ordinary shares is available on Cityline
(09068 123456) code 2722. The Company’s listing symbol
on the London Stock Exchange is NTG.
Market-makers
The following companies have informed the London Stock
Exchange that they make a market in the Company’s shares:
ABN AMRO Equities (UK).
Altium Capital Ltd.
Credit Suisse First Boston Equities Ltd.
Dresdner Kleinwort Benson Securities Ltd.
Salomon Brothers.
WestLB Panmure Ltd.
Financial calendar
January
Announcement of interim results
February
Payment of interim dividend
July
Announcement of year end results
Report and accounts posted to shareholders
September
Annual general meeting
Payment of final dividend
Secretary and registered office
D Henderson FCIS
Norflex House
Allington Way
Darlington
Co. Durham DL1 4DY
Tel: 01325 467558
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Tel: 0870 1623100
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44 Northgate plc Annual Report & Accounts 2003
Northgate plc Annual Report & Accounts 2003 45
Find out the latest news and information about our business at
www.northgateplc.com
We have hire sites throughout the UK as well as one site in Dublin.
Dialling 0870 607 77 17 connects you to your nearest site.
For a quick and easy way to rent a van go to
www.wannavan.com
To find out more about our non-rental products go to
www.northgate-vehicle-solutions.com
Or you can ring or email for an information pack about all our products.
Call: 01325 370209
Email: info@northgateplc.com