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ANNUAL REPORT AND ACCOUNTS
2005
NORFLEX House Allington Way Darlington DL1 4DY
Telephone: 01325 467558 Fax: 01325 363204
www.northgateplc.com
Commercial vehicles for business
HIGHLIGHTS
2005
2004
Turnover
Group operating profit
Profit before tax
Earnings per share
Dividend per share
£458.3m
£75.7m
£54.5m
59.7p
20.0p
Net assets per Ordinary share
336p
£355.6m
£55.6m*
£44.6m*
50.7p*
17.6p
293p*
*As restated (see Note 9 to the accounts)
Contents
Chairman’s Statement
Operational Review
Financial Review
Directors
Directors’ Responsibilities
Report of the Directors
Remuneration Report
Corporate Governance
Health & Safety and Environmental
Report of the Auditors
Financial Statements
Accounting Policies
Notes to the Accounts
Five Year Financial Summary
Notice of Annual General Meeting
The Northgate Share Option Scheme
Information for Shareholders
02
04
06
10
11
12
14
18
22
23
25
30
32
47
48
49
50
Northgate plc rents vehicles and sells a range of fleet products
to businesses via a network of companies.
www.northgateplc.com
Group profit before tax
Vehicle Fleet – UK
7
5
4
,
4
5
2
9
5
,
4
4
3
0
6
,
6
3
4
7
6
,
1
3
0
1
1
,
7
2
0
0
6
,
2
5
0
0
0
4
0
,
7
7
,
4
5
4
0
0
0
,
5
4
0
0
5
,
0
4
0
0
1
,
6
3
Vehicle Fleet – Spain
0
0
0
,
9
1
0
0
0
0
0
,
5
5
,
1
3
1
0
0
0
,
2
1
2001 2002 2003
2004
2005
2001 2002
2003 2004
2005
2003 2004
2005
CHAIRMAN’S STATEMENT
Dear Shareholder,
This is the first Annual Report Statement I have written as Chairman of your Company. I would
like first to pay tribute to my predecessor, Michael Waring. Few could have foreseen the growth
of the business achieved during the 20 years of his leadership. His skills and determination
have helped the development of the Northgate business and in the formulation of its strategies,
leaving it well placed to continue that growth in the future.
I am, therefore, pleased to report on the Company’s excellent results
With a fleet growth of 27% to 19,000 vehicles and a profit before tax of
in Michael’s last year at Northgate. Turnover for the year increased
£9.9m in the year, Fualsa is an excellent platform for further expansion
by 28.9% to £458.3m (2004 – £355.6m). Profit before tax and goodwill
in Spain. Fualsa’s network of 15 depot locations at 30 April 2005 has grown
amortisation is up by £10.7m to £55.6m (2004 – £44.9m as restated).
further to 17 depots since the year end and is well on course to expand to
Earnings per share rose 17.8% to 59.7p (2004 – 50.7p as restated). All
20 by April 2006.
provide further evidence of Northgate’s progress towards the targets
stated in the three year Strategy for Growth, taking the Company forward
to April 2006.
The Company is currently updating its Strategy for Growth to progress
through 2006 to 2009 and beyond. The growth of the business in Spain has
indicated the attraction of further acquisitions in due course in mainland
Based on these results and the Board’s view of future prospects, the
Europe. Clearly not every EU country shares the growth in the sector
Board has decided to recommend to shareholders a final dividend of 12p
experienced in Spain and Northgate will consequently be very selective in
per share. This will make the total dividend for the year 20p – an increase
its acquisition strategy. Northgate has also identified further consolidation
of 13.6% on last year and it will be covered three times. The dividend will
opportunities in the UK. The Company is in a strong position to make
be payable on 30 September 2005 to those shareholders on the register on
such acquisitions and has an executive team with proven skills in
5 August 2005.
Northgate’s success is due in large part to its corporate culture. Its
structure of separate businesses enables each local team to focus on the
opportunities in its own area. Local relationships allow a diversified range
integrating them into the Northgate business model. Strategic planning
will also focus on opportunities for organic growth both in the UK and in
Spain, using the proven Northgate business model, adapted for local
cultural realities.
of business sectors and geographic areas in the customer base and
The Company’s senior independent director, Ron Williams, has
ensure prompt attention to each customer’s needs on-site. The devolved
announced that he is to retire in September, being over 70 years of age
management structure is complemented by central corporate functions
and with a length of service of over nine years. He has been a great
to monitor and audit Health and Safety standards, asset management,
support to Michael Waring in the development of your Company and he
performance and finance controls. Moreover, the centralised vehicle
has been invaluable to me, the incoming Chairman. The Board will miss
purchasing and sales function, national accounts, marketing and sales,
him greatly. We were joined in April by Tom Brown, a very experienced
treasury and IT teams provide essential support to those local businesses.
public company director, whose skills complement those of other Board
The Northgate culture yields a flexible, robust business model that
members. As the other ‘new boy’ I am very pleased to have joined the
continues to lead the field in commercial vehicle solutions.
Northgate team. The staff and management at local and corporate levels
Northgate’s UK business returned to strong growth in the year with its
fleet advancing 11% to 52,600 vehicles (2004 – 47,400). Whilst hire rates
remained competitive, the operational gearing effect of this larger fleet,
coupled with utilisation averaging 90%, ensured the hire operating margin
have worked very hard to achieve these results, within the vision and
leadership of the senior executives. The Board itself, executives and non-
executives, have a blend of skills and experience that, I believe, will ensure
Northgate will continue to deliver. It is a privilege to be part of that team.
remained healthy at 20.8% (2004 – 20.8% as restated). The residual market
Since the end of the year we have experienced a weaker vehicle residual
for used vehicle sales remained stable and the UK business was
market in the UK than in the prior financial year. In Spain, meanwhile, our
successful in its aim of achieving a greater proportion (up by 60%) of
fleet growth rates are higher than those planned.
used vehicle sales through retail and semi-retail channels. As a result,
the operating profit per vehicle sold improved to £205 (2004 – £189).
Despite the softer residual market and perceived weaknesses in the UK
economy, the Board remains of the opinion that we should achieve further
Northgate’s Spanish vehicle rental business, Fualsa, contributed its first
progress towards our planned objectives in both the UK and Spain during
full year as a wholly owned subsidiary. Its result underscores our belief in
the forthcoming year.
the exceptional opportunity afforded by the vehicle rental market in Spain.
02 Northgate plc Annual Report & Accounts 2005
Martin Ballinger
Chairman
Earnings per share have
increased by 17.8% in
the second year of our three
year Strategy for Growth,
increasing from 50.7p
(as restated) to 59.7p
Northgate plc Annual Report & Accounts 2005 03
OPERATIONAL REVIEW
Three Year Strategy for Growth
We are now reporting on the second year of our three year Strategy for
Growth that was announced in July 2003. The strategy was based on
achieving the following targets by April 2006:
Fleet size of 60,000 in the UK and 18,000 in Spain;
Network of 100 locations in the UK and 20 in Spain;
100% ownership of Fualsa; and
An established portfolio of non-rental products.
In the summer of 2003 very low levels of interest rates and inflation
combined to give conditions that resulted in lower than expected fleet
growth in the UK. Since September 2003 fleet growth has been more in
line with our expectations with growth of 11% in the year to April 2005.
We do not, however, expect to make up the shortfall in fleet growth which
arose in 2003 and as such now anticipate having a UK fleet below our
original target of 60,000 vehicles in April 2006. The fleet growth in Fualsa,
our Spanish subsidiary, has, however, exceeded our expectations such that
the closing fleet at April 2005 of 19,000 vehicles already exceeds the target
for April 2006 of 18,000 vehicles. Through the successful implementation of
than was originally envisaged as a result of the average fleet size per
FUALSA (SPAIN)
location being greater than expected. This enhances the operating margin
This is the first year that Fualsa has been included as a subsidiary of the
of the UK since fixed costs are spread over a larger fleet. Some depots are,
Group following the exercise of options to acquire the remaining equity of
however, constrained from taking advantage of this operational gearing
due to the physical aspects of their location. We, therefore, have plans to
relocate four primary locations to larger depots during the next financial
year, thus increasing the capacity of the network.
VEHICLE FLEET
As highlighted above the historic pattern of fleet growth for the UK has
been one whereby there has been a stronger first half to the financial
year than the second half. This year is no exception with growth of 4,600
vehicles from May to October 2004 of which 850 vehicles were as a result
of the acquisition of Foley Self Drive Limited on 1 August 2004. A further
1.3% growth in the fleet was achieved in the second half of the financial
Fualsa on 3 May 2004. It has been another excellent year of progress with
fleet growth of 27% and a profit before tax of £9.9m. During the year steps
have been taken to strengthen the management team with the
appointment of a Commercial Director and an Operations Director. We
believe we have a strong and committed team capable of taking advantage
of the tremendous opportunity that exists in Spain.
DEPOT NETWORK
The depot network as at 30 April 2005 comprised 15 locations as a result
of Murcia, Cadiz, Badojoz and Alicante opening during the financial year.
Since the year end, depots at Leon and Cordoba have opened bringing
the total number of locations to 17, well on track to achieve the objective
year producing a closing fleet of 52,600 vehicles (2004 – 47,400).
of 20 locations set out in the three year Strategy for Growth.
UTILISATION AND HIRE RATES
VEHICLE FLEET
Utilisation, which averaged 90% (2004 – 89%) for the year, remains the key
management tool within the business.
our strategy we were seeking to achieve annual double-digit earnings per
As we outlined last July, our three year Strategy for Growth does not
share growth in each year of the plan. An increase in earnings per share of
envisage any material improvement in hire rates, with increased profitability
22.9% in the first year of the plan, followed by a further increase of 17.8% in
being driven in the main by growth in the fleet and cost efficiencies.
the year to 30 April 2005 leaves us well placed to achieve that objective.
Review of Current Year
UNITED KINGDOM AND REPUBLIC OF IRELAND
The first half of our financial year usually represents the strongest period
of fleet growth and utilisation for the UK since the second half is impacted
by a significant number of vehicle returns in December and January as
construction and distribution sector customers adjust their vehicle
requirements in line with holiday periods and seasonal demand. The year
Our interim report mentioned that hire rates had softened slightly both
as a result of localised competitor activity and our focus on fleet growth.
With regards to fleet growth, we continue to aim to win selected business
from contract hire companies. Since this business tends to be lower
mileage and longer term, contract hire companies generally operate at
the lower end of our hire rate range. This new business has, therefore,
contributed to a slightly reduced average hire rate over the year but has
improved profitability as a result of operational gearing.
that we are reporting on is a good example of this cycle with 11% fleet
USED VEHICLE SALES
growth for the year as a whole being achieved but with 9.7% of this growth
We sold 17,700 vehicles (2004 – 18,700) during the year and at the same
being in the first half of the financial year and 1.3% in the second.
DEPOT NETWORK
As at 30 April 2005 we operated from 36 primary and 40 branch locations.
We have added new locations in Wakefield, Kidderminster and Worcester
since 1 May 2004 – the latter two being as a result of acquiring Foley Self
Drive Limited on 1 August 2004. Since the year end we have opened a
new branch at Keighley and further branch openings at Chelmsford,
Erith (Kent) and Hove are scheduled for the next few weeks. These new
branches will bring our network to a total of 80 locations, 36 primary
and 44 branches.
time improved the operating profit per vehicle sold to £205 (2004 – £189).
This improvement in margin is mainly driven by the sales mix since the
market has remained reasonably stable over both years. We have actively
sought to increase the proportion of vehicles sold through retail and
semi-retail sales channels since such disposals attract better margins.
For the year ended April 2004 we saw 6% of our disposals go through a
refurbishment process into the semi-retail or retail channels, whereas for
the year to April 2005 this has been increased to over 10%. One of our
objectives is to continue to increase this percentage over the next couple
of years to around 15% of the Group’s UK disposals. In addition to our
Fleet growth during the year was 27% producing a closing fleet of 19,000
vehicles (2004 – 15,000). This growth was evenly spread between the first
and second half of the financial year since Spain does not have the same
seasonality of demand as the UK. The industrial sectors contributing to
this growth continue to be in line with our existing customer profile with
a bias towards the construction sector. With the appointment of the
Commercial Director and the resultant marketing activity into other
sectors, we are aiming to move to a more diversified customer base over
the medium term.
UTILISATION AND HIRE RATES
The overall utilisation rate improved to 89% (2004 – 88%) despite being
held back slightly by lower rates of utilisation as the network continues
to expand. Of the 17 depots operated by Fualsa, nine have been opened
during the last two years.
Hire rates in Spain have been increasing at a modest rate of around 1%
per annum for the last couple of years. A large proportion of this increase
is, however, funding increases in the capital cost of the fleet where price
increases for new vehicles generally exceed the 1% hire rate improvement.
CURRENT TRADING AND OUTLOOK
Since our trading update on 3 May 2005, we have experienced a weaker
vehicle residual market in the UK than that experienced in the last
financial year. As a consequence, we currently expect to achieve a lower
operating profit per unit compared to the £205 per unit achieved in the
financial year to 30 April 2005. We do, however, expect to achieve operating
profits on disposal within our target range of between plus or minus £100
Carnaby and Walsall remarketing centres we sell vehicles from three other
per unit.
As highlighted in previous years we will take the appropriate opportunities
dedicated sales locations in the UK – Darlington, Snodland in Kent and
to consolidate businesses where we feel this will lead to efficiencies
Banbury, as well as direct from selected hire locations.
without detracting from customer choice and service. During the year
Daman Vehicle Rental Limited, which was acquired in April 2004, was
merged with Maincrest Vehicle Hire Limited in the North West of England.
NON-RENTAL PRODUCTS
Although not the main focus of our business, we continue to build on the
portfolio of products that we offer customers as ancillary services to our
One of the features of our growth over the past six years has been the
rental product. In particular, we now have over 1,900 (2004 – 1,400) tracking
achievement of our planned level of fleet growth through fewer locations
units installed on vehicles in our fleet.
Fualsa continues to achieve fleet growth rates higher than those planned.
We remain of the opinion that we should make further progress during the
financial year towards the objectives communicated in our three year
Strategy for Growth.
Steve Smith
Chief Executive
04 Northgate plc Annual Report & Accounts 2005
Earnings per share (p)
.
7
9
5
.
7
0
5
4
.
1
4
8
.
5
3
4
.
1
3
2001
2002
2003
2004
2005
Northgate plc Annual Report & Accounts 2005 05
FINANCIAL REVIEW
Financial Reporting
SALES, MARGINS AND RETURN ON CAPITAL
Group turnover increased by 28.9% to £458.3m (2004 – £355.6m) as a
result of an increase in UK turnover of 8.3% and the first time inclusion
of Fualsa’s turnover that contributed £73.0m.
UNITED KINGDOM AND REPUBLIC OF IRELAND
The composition of the Group’s UK turnover and operating profit as
between hire activities and vehicle sales is set out below:
Subsidiary
(100%)
2005
£000
55,968
17,075
73,043
(100%)
2004
£000
43,492
15,160
58,652
Joint
venture
(40%)
2004
£000
17,397
6,064
23,461
Turnover
Hire
Used vehicle sales
Turnover
Hire
Used vehicle sales
2005
£000
2004
As restated
£000
283,414
101,810
385,224
250,747
104,877
355,624
Operating profit
Hire
52,143
3,533
Used vehicle sales
Goodwill amortisation (435) (71)
55,605
UK Operating profit
58,968
3,632
62,165
Operating margins
(excluding goodwill)
UK overall
Hire
Used vehicle sales
16.3%
20.8%
3.6%
15.7%
20.8%
3.4%
Operating profit
13,170
Hire
Used vehicle sales
1,027
Goodwill amortisation* (681)
13,516
Fualsa Operating profit
8,835
2,610
3,534
1,044
– (236)
4,342
11,445
Operating margins
(excluding goodwill)
Fualsa overall
Hire
Used vehicle sales
19.4%
23.5%
6.0%
19.5%
20.3%
17.2%
19.5%
20.3%
17.2%
*Goodwill amortisation arises on consolidation of Fualsa in the current
year and accounting for Fualsa as a joint venture in the prior year.
Fualsa’s hire turnover increased by 28.7%, in line with the rental fleet
increase of 27%. Hire margins have improved to 23.5% (2004 – 20.3%),
reflecting fleet growth that has generated operational gearing benefits.
This is despite a continued investment programme in new locations
throughout Spain, with four new locations opening during the financial
year. The overall operating margin of 19.4% (2004 – 19.5%) is similar to the
The UK’s overall operating margin increased to 16.3% (2004 – 15.7%)
prior year even though 2004 had been enhanced by £1.75m of non-recurring
mainly as a result of hire representing a larger proportion of total operating
profits on vehicle disposals of which the Group’s share was estimated to
profit than in the prior year. UK hire turnover increased by 13%, reflecting
be £0.7m for the year.
increases in the closing and average UK rental fleet of 11% and 12%
respectively and generated the same operating margin of 20.8%
(2004 – 20.8%) as the prior year.
GROUP
The operating profit generated from used vehicle sales has increased
debt), is 14.2% (2004 – 13.9%).
before tax rather than the very low rate of 2004.
Ordinary shares of the Company have been acquired in the open market
Group return on capital employed, calculated as Group operating profit
the tax rate for Fualsa will remain below the standard rate. The tax rate for
divided by average capital employed (being shareholders’ funds plus net
future years is anticipated to remain in the range of 20% to 30% of profit
by £0.1m representing an operating profit per vehicle sold of £205
(2004 – £189). The number of vehicles disposed of during the year was
in line with expectations at a similar level to the prior year at 17,700
vehicles (2004 – 18,700).
FUALSA
This is the first financial year that Fualsa has been reported within
the Group’s results as a wholly owned subsidiary. The composition
Group return on equity, calculated as profit after tax divided by average
DIVIDEND
shareholders’ funds, is 19.0% (2004 – 18.3%).
PRIOR YEAR ADJUSTMENTS
Prior year adjustments have been made to reflect accounting policy
The Directors recommend a final dividend of 12.0p per share (2004 – 10.6p)
giving a total for the year of 20.0p (2004 – 17.6p), an increase of 13.6%. The
dividend is covered three times (2004 – 2.84 times).
changes following the adoption of Urgent Issues Task Force Abstract
EARNINGS PER SHARE
(“UITF”) 38 and UITF17 (revised), both with effect from 1 May 2004.
Earnings per share increased by 17.8% to 59.7p (2004 – 50.7p as restated),
of Fualsa’s turnover and operating profit as between hire activities
UITF38 is in respect of investments in own shares. The impact of this
and vehicle sales is set out as follows:
06 Northgate plc Annual Report & Accounts 2005
change is to reduce both fixed asset investments and shareholders’ funds
by £1,330,000 at 30 April 2004. There is no impact on the consolidated
profit and loss account for either year.
UITF17 (revised) is in respect of shares granted to employees. The impact
of this change is to increase administrative expenses and reduce profit
reflecting the increase in profit after tax of 23% and the full year effect of
3.04m new shares issued as a result of a 5% Cash Placing on 14 January 2004.
Basic 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 exclude those Ordinary shares held by Walbrook Trustees
(Guernsey) Limited and Capita IRG Trustees Limited for the Company’s
various share schemes until such time as they rank for dividend.
after taxation by £191,000 in the current year and by £141,000 in
INVESTMENTS
the prior year. Within the consolidated cash flow statement, the Group
On 3 May 2004 the Company exercised its option to acquire a further 40%
operating profit is reduced by the same amounts for the respective years
of the equity of Fualsa for the maximum consideration of £15.1m. On the
but there is no effect on the net cash inflow from operating activities in
same date the Company also exercised its option to acquire the final 20%
either year. There is no change to the profit and loss reserve in either year.
of Fualsa’s share capital. The consideration for this exercise is, however,
TAXATION
The Group’s UK operations have a total tax charge of 31% (2004 – 31%)
which is slightly higher than the standard rate of 30% due to disallowable
expenditure incurred within the business.
The Fualsa tax rate of 20% (2004 – 12%) is below the standard Spanish tax
rate of 35% because of tax concessions based on vehicle purchase reliefs
that are available to the business. As was outlined last year it remains the
case that as long as these tax concessions are available it is likely that
deferred until 2006 and will be dependent on the profit after tax of Fualsa
for the calendar years 2004 and 2005. The maximum amount of deferred
consideration payable under the terms of the Share Purchase Agreement is
14.9m. This amount has been used to calculate the cost of the investment
in Fualsa and the resultant goodwill. In prior years this investment has been
treated as a joint venture within the Group’s accounts but with effect from
May 2004 it has been accounted for as a subsidiary undertaking of the Group.
On 1 August 2004 the Group acquired 100% of Foley Self Drive Limited,
a UK vehicle hire operation based in the West Midlands, for a total cash
consideration (including the bank overdraft acquired) of £4.4m.
by Walbrook Trustees (Guernsey) Limited and Capita IRG Trustees Limited
in order to satisfy the Company’s obligations under its various share
schemes. These shares are included within the Group’s balance sheet within
the own shares held reserve.
GOODWILL
The Group amortises goodwill acquired over its useful life up to a maximum
of 20 years. The goodwill that has been paid for the initial 40% equity in
Fualsa and the goodwill arising following the exercise of the options over
the remaining share capital of Fualsa on 3 May 2004 is being amortised over
20 years from the date of the initial investment in July 2002. This gives rise
to a goodwill amortisation charge in the year of £0.7m relating to Fualsa.
Further goodwill amortisation of £0.4m was charged to the profit and loss
account relating to UK businesses.
Northgate plc Annual Report & Accounts 2005 07
FINANCIAL REVIEW
CAPITAL STRUCTURE
negotiated and monitored centrally. On 10 January 2005 the Group entered
INTERNATIONAL FINANCIAL REPORTING STANDARDS
As at 30 April 2005 the Group’s total gearing increased to 203%
(2004 – 137%). The prior year comparative for gearing has been amended
from 132% to reflect our decision that the gearing ratio going forward will
be calculated as net debt (including cash balances) as a percentage of
shareholders’ funds but after the deduction of goodwill. The net cash
balance taken into account in calculating the gearing ratios for this
into a series of unsecured, revolving, bilateral facilities with major UK and
Under European Union legislation, all listed companies will be required to
European banks to provide an aggregate Group facility of £565m over one,
report under International Financial Reporting Standards (“IFRS”) for
three and five years. These new facilities have replaced the bank and
accounting periods commencing on or after 1 January 2005. The first
asset finance facilities that previously existed for the UK. They are also
annual report and accounts for the Group prepared under IFRS will be for
being used to gradually replace debt facilities in Fualsa within the next two
the year ended 30 April 2006. At that time comparative information will be
years. All funds generated by the Group’s operations are controlled by a
restated on the same basis. Interim results for the year to 30 April 2006 will
year is £41.4m (2004 – £46.2m).
central treasury function.
also be prepared on an IFRS basis.
The significant increase in gearing is in line with our expectations and
LIQUIDITY
During the last financial year, work has been ongoing with regard to the
is mainly due to the first time consolidation of Fualsa’s balance sheet
The Group’s aggregate finance facilities, including existing Fualsa loan
first time adoption of IFRS. The restatement of the opening balance sheet
and the funding of fleet growth in the UK and Spain of 11% and 27%
facilities, total £672m compared to net debt of £410.4m. As described
will be completed in 2005. While the exact financial impact of the changes
respectively during the financial year.
above, the core of these arrangements relate to the £565m unsecured
in Group accounting policies as a result of IFRS is still being assessed and
Treasury
CASH FLOWS
The Group’s net debt increased by 64% to £410.4m (2004 – £249.8m)
reflecting the consolidation of Fualsa and the funding of fleet growth
in the UK and Spain. Gross cash generation as reflected by EBITDA*
increased to £205.1m (2004 – £154.2m). The Group funded the purchase of
22,600 new vehicles in the UK and 7,700 new vehicles in Fualsa for a total
cash outflow of £274.5m. The sale of 17,700 UK vehicles and 3,700 Fualsa
vehicles generated a cash inflow of £113.1m. The Group paid cash of
£15.1m following the exercise of its option to acquire a further 40% in
Fualsa on 3 May 2004. The option over the remaining 20% of Fualsa’s
equity, whilst exercised, has not yet given rise to a cash outflow. This
deferred consideration of a maximum of
14.9m is classified as debt in the
Group’s balance sheet but is not expected to be paid until 2006. The
acquisition of Foley Self Drive Limited gave rise to a £4.4m cash outflow.
facilities with the following terms:
has not yet been finalised, the following key areas of difference have been
Term
Within one year
Within three years
Five years
Total
Amount
(£m)
113
226
226
565
INTEREST RATE MANAGEMENT
The Group has variable rate interest agreements for all of its UK
borrowings. Historically, it has sought to manage this risk by having in
place a number of financial instruments covering 30% to 40% of its
borrowings at any time. Some of the earlier financial instruments are at
levels 2% to 4% above prevailing base rates and as a consequence the
Group increased this coverage by entering into additional interest rate
derivatives in May and June 2003. Five-year swaps to cover £45m of debt
identified:
accounting for options and other share-based payments will require a
charge against profit on a different basis.
the treatment of goodwill, whereby existing goodwill and goodwill
on future acquisitions will no longer be amortised. Future annual
impairment reviews of goodwill could result in periodic charges
against profit.
recognition of intangibles arising on acquisition and amortisation of
these assets.
accounting for derivative financial instruments may cause some
volatility of earnings, although the Group’s financial instruments
are restricted to managing some of the Group’s currency and interest
rate risks.
the Group will no longer classify the proceeds from vehicle disposals as
*EBITDA – Earnings before interest, taxation, depreciation and amortisation.
at an average rate of 3.97% were contracted for as were five-year interest
part of its revenue.
rate collars covering £55m of debt with a range of 3.15% to 5.5%. Since
no provision for final dividends payable will be made until approved at a
the year end, the Group has entered into a number of Euro swaps, with a
general meeting.
INTEREST COSTS
Following the consolidation of Fualsa and the subsequent increase in net
debt, the Group’s net interest costs increased by 38.2% to £21.2m
(2004 – £15.4m). The percentage increase in interest costs is significantly
swap rate of 2.27%.
lower than the corresponding percentage increase in net debt because the
Based on the Group’s closing net debt position at 30 April 2005 of £410.4m
cost of debt in Fualsa is based on EURIBOR whereas the UK debt is based
(represented by Sterling debt of £235.2m and Euro debt of £175.2m), a 1%
on the higher cost LIBOR. Interest cover has decreased to 3.6 times
increase in LIBOR and EURIBOR would generate an additional £4.1m per
minimum term of three years, to cover 150m of debt with an average
Whilst the Group anticipates currently that these will be the major
adjustments which arise on transition to IFRS, the Group’s convergence
project is ongoing and IFRS, along with associated interpretations,
continues to be refined and developed. The Group has established a project
timetable to ensure the requirements under IFRS will be met and adopted
(2004 – 3.9 times) as a result of UK base rates being higher in the financial
annum of interest costs if financial instruments were not in place. The
in its interim results for the year to 30 April 2006.
year compared to the prior year.
STRATEGY
The Group’s financing strategy has been approved by the Board. This
strategy is to use medium and long-term debt to finance the Group’s
vehicle fleet and other capital expenditure. Working capital is funded by
internally generated funds and an overdraft facility. The Group’s interest
rate exposure is managed by a series of treasury contracts as described below.
TREASURY MANAGEMENT
Each of the Group’s operations is responsible for its own day-to-day cash
management. The funding arrangements of the Group with banks are
table below indicates the additional annual funding costs to the Group at
this level of debt following increases in LIBOR and EURIBOR for a range
between 1% to 3% after applying the benefits of the Group’s financial
instruments, including those put in place since 30 April 2005:
Gerard Murray
Finance Director
Increase in
interest rate
1%
2%
3%
1.
Sterling debt
£1.2m
£2.1m
£2.5m
Additional interest costs
Euro debt
£0.9m
£1.6m
£2.3m
Total
£2.1m
£3.7m
£4.8m
08 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 09
DIRECTORS
DIRECTORS’ RESPONSIBILITIES
IN RELATION TO THE PREPARATION OF THE ACCOUNTS
Martin Ballinger (61)
Appointed to the Board as a non-executive Director in
November 2004, becoming Chairman on 5 January 2005.
Formerly Chief Executive of Go-Ahead Group plc since 1982.
Alan Noble (54)
Executive Director since 1990. In 1981 he founded the
commercial vehicle hire business, which was acquired by the
Company in 1987.
The following statement, which should be read in conjunction with the
The Directors are responsible for ensuring that the Company keeps
statement of auditors’ responsibilities set out on page 23, is made with a
adequate accounting records and for safeguarding the assets of the
view to distinguishing for shareholders the respective responsibilities of
Group and hence for taking reasonable steps for the prevention and
the Directors and auditors in relation to the accounts.
detection of fraud and other irregularities.
The Directors are required by the Companies Act 1985 to 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 accounting standards
which they consider to be applicable have been followed.
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.
Stephen Smith ACA (48)
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
the Company.
Jan Astrand MBA (58)
Appointed to the Board as a non-executive Director in
February 2001. A Swedish national based in London, he is a
non-executive Director of PHS Group plc and CRC Group plc.
Prior to this, he was Chairman of Car Park Group AB in
Stockholm. 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.
Tom Brown (56)
Appointed to the Board as a non-executive Director in April
2005. He is Chairman of Dyson Group plc and Chamberlin &
Hill plc and a Director of a number of private companies. He
was previously Group Chief Executive of United Industries plc
and before that Group Managing Director of Fenner plc.
Philip Rogerson (60)
Appointed to the Board as a non-executive Director in November
2003. He is Chairman of Aggreko plc, Carillion plc and THUS
Group plc and a non-executive Director of Davis Service Group
plc. He was Deputy Chairman of BG plc (formerly British Gas
plc) until February 1998 having been a Director since 1992.
Ronald Williams FCA (71)
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. Mr Williams will be
retiring from the Board at the conclusion of the Annual General
Meeting to be held on 28 September 2005.
Board Committees
Audit
Philip Rogerson (Chairman from 5 July 2004)
Jan Astrand
Tom Brown (Appointed 8 June 2005)
Ronald Williams (Chairman until 5 July 2004)
Remuneration
Jan Astrand (Chairman)
Tom Brown (Appointed 8 June 2005)
Philip Rogerson
Ronald Williams
Phil Moorhouse FCCA (52)
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.
Nomination
Martin Ballinger (Chairman from 5 January 2005)
Ronald Williams (Chairman until 5 January 2005)
Jan Astrand
Tom Brown (Appointed 8 June 2005)
Philip Rogerson
Stephen Smith
Gerard Murray ACA (42)
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 as Chief Executive from 2001
to 2002.
10 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 11
REPORT OF THE DIRECTORS
The Directors present their report and the audited financial statements for
The following are the interests of the Directors in the share capital of the
the year ended 30 April 2005.
Company as shown in the register required to be maintained under
Results
Profit for the year after taxation was £38,494,000 (2004 – £31,289,000 as
restated). An interim dividend of 8p per share was paid on the Ordinary
shares on 11 February 2005. The Directors recommend a final ordinary
dividend of 12p per share making a total for the year of 20p per share.
The final dividend, if approved, will be paid on 30 September 2005 to
shareholders on the register at close of business on 5 August 2005.
Ordinary and preference dividends paid and recommended for payment
in respect of the year total £12,837,000 (2004 – £11,064,000).
Principal activities
The Company is an investment holding company. The Group’s activities
are reported on pages 4 to 9.
Fualsa
Section 325 of the Companies Act 1985. All interests are beneficial unless
otherwise stated.
M Ballinger
S J Smith
J Astrand
T Brown
P J Moorhouse
G T Murray
A T Noble
P Rogerson
R Williams
ORDINARY SHARES
1 May 2004
30 April 2005
–†
71,729
–
–†
44,396
10,000
731,737
–
5,000
2,500
72,271
–
–
34,938
10,540
732,279
–
5,000
Details of the acquisition of the remaining 60% of the share capital of
† On appointment
Furgonetas de Alquiler SA (Fualsa) on 3 May 2004 are given in Note 18 to
No Director has an interest in the Preference shares of the Company.
the accounts on page 42.
Close company status
No changes in the above interests have occurred between 30 April 2005
and the date of this report. Details of options held by the Directors under
the Company’s various share schemes are given in the Remuneration
So far as the Directors are aware the close company provisions of the
Report on pages 14 to 17.
Income and Corporation Taxes Act 1988 do not apply to the Company.
Interests in shares
Donations
The Group made charitable donations of £45,000 (2004 – £25,000).
The following interests of 3% or more in the issued Ordinary share capital
No political donations were made.
of the Company appear in the register required to be maintained under
the provisions of Section 211 of the Companies Act 1985:
Payment of suppliers
HBOS plc
2,410,852 (3.8%)
payments to suppliers. At 30 April 2005 the Group’s creditor days were 48.
NUMBER OF SHARES
with that supplier. The policy is made known to the staff who handle
The Group’s policy is to pay suppliers within normal trading terms agreed
Columbia Wanger Asset Management
1,935,000 (3.0%)
Directors
Remuneration report
As required by the Directors’ Remuneration Report Regulations 2002,
the Remuneration Report, set out on pages 14 to 17 of these Report and
The names of the present Directors are listed on page 10. All have
Accounts, will be put to shareholders for approval at the Annual General
served throughout the year except Mr Ballinger who was appointed on
Meeting.
10 November 2004 and Mr Brown who was appointed on 13 April 2005.
In addition, Mr F M Waring resigned as Chairman and as a Director on
5 January 2005. Mr Noble is retiring by rotation in accordance with the
Articles of Association and, being eligible, is seeking re-election.
As has previously been announced, Mr Williams, having served as a
non-executive Director since 1996, will resign from the Board at the
conclusion of the Annual General Meeting to be held on 28 September
2005.
The termination provisions in respect of executive Directors’ contracts
are set out in the Remuneration Report on page 14.
12 Northgate plc Annual Report & Accounts 2005
Power to allot shares
A special resolution, pursuant to Section 95 of the Companies 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
£160,000 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 to a total of 6,400,000 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.
Share option scheme
A resolution to amend the rules of the Share Option Scheme will be
proposed at the Annual General Meeting. The proposed changes are
summarised on page 49.
Auditors
A resolution for the re-appointment of Deloitte & Touche LLP as auditors of
the Company will be proposed at the forthcoming Annual General Meeting.
This proposal is supported by the Audit Committee.
By order of the Board
D Henderson
Secretary
4 July 2005
Northgate plc Annual Report & Accounts 2005 13
REMUNERATION REPORT
Remuneration Committee
The Remuneration Committee has written terms of reference which are
available on the Company’s website. Membership of the Committee is
shown on page 10.
Directors have a duty to make reasonable efforts to mitigate any loss
In addition to the above, Mr Astrand receives an amount of £15,000 in
arising from such termination and the Committee will have regard to that
recognition of the additional time commitment required following his
duty on a case by case basis when assessing the appropriate level of
appointment as a non-executive Director of Fualsa with effect from 3 May
compensation which may be payable. It is also the Board’s policy that
2004. The Board do not consider that this appointment in any way affects
where compensation on early termination is due, in appropriate
his independence.
The Committee is responsible for making recommendations to the Board
circumstances it should be paid on a phased basis.
on the remuneration packages and terms and conditions of employment of
the Chairman, the executive Directors of the Company and of other senior
Basic salaries
Pension schemes
Throughout the year all pension arrangements operating throughout the
executives in the Group. The Committee also reviews remuneration policy
The current basic salaries paid to the executive Directors are as follows:
Group were defined contribution schemes. The Group will not incur any
generally throughout the Group. The Committee consults with the
Chairman of the Board and with the Chief Executive who may be invited
to attend meetings. The Company Secretary is secretary to the Committee.
The Committee has access to external independent advice on matters
relating to remuneration. During the year the Committee took advice from
New Bridge Street Consultants LLP (“NBSC”) in relation to the remuneration
S J Smith
P J Moorhouse
G T Murray
A T Noble
£300,000
£220,000
£210,000
£168,000
packages of the Chairman, the executive Directors and senior management.
All were last reviewed on 1 May 2005.
NBSC is appointed by the Committee and undertakes no other work for
the Company.
Remuneration policy
The Committee aims to ensure that executive Directors are fairly and
competitively rewarded for their individual contributions by means of
basic salary, benefits in kind and pension benefits. High levels of
performance are recognised by 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.
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 the Company as
compensation for the time commitment involved. External appointments
Basic salaries are normally reviewed annually taking into account the
currently held are:
performance of the individual, changes in responsibilities and market
P J Moorhouse – Director, Renew (North East) Limited (non fee earning)
trends and changes in salaries elsewhere in the Group.
A T Noble – Director, Tees Valley Regeneration (non fee earning)
Flexible benefits scheme
Non-executive Directors
The Company operates a flexible benefits scheme which is designed
The remuneration of the non-executive Directors is determined by
to help in the recruitment and retention of employees by allowing them
the Board as a whole, within the overall limit set by the Articles of
to tailor their remuneration package to best suit their individual needs.
Association. Non-executive Directors are not eligible for performance
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:
S J Smith
P J Moorhouse
G T Murray
A T Noble
8 January 2003
8 January 2003
8 January 2003
9 June 2004
In the event of early termination of an executive Director’s service
contract, compensation of up to the equivalent of one year’s basic salary
and benefits may be payable: there is no contractual entitlement to
compensation beyond this.
14 Northgate plc Annual Report & Accounts 2005
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. The current fees paid to the non-executive Directors are as follows:
M Ballinger
Chairman
£100,000
R Williams
Deputy Chairman and Senior
non-executive Director
J Astrand
Chairman of Remuneration
Committee
T Brown
Non-executive Director
£40,000
£36,000
£32,000
P Rogerson
Chairman of Audit Committee
£38,000
All were last reviewed on 1 May 2005.
additional costs as a result of the introduction of Pension Simplification
on 6 April 2006.
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 the Company 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: Thomson Financial
£
e
u
l
a
V
300
250
200
150
100
50
0
Northgate plc
FTSE Mid 250
(Excl. inv. Trusts) Index
30-Apr-00
30-Apr-01
30-Apr-02
30-Apr-03
30-Apr-04
30-Apr-05
This graph shows the value, by the 30 April 2005, of £100 invested in
Northgate on 30 April 2000 compared with that of £100 invested in the FTSE
Mid 250 (Excl. inv. Trusts) Index. The other points plotted are the values at
intervening financial year-ends.
The mid-market price of the Company’s Ordinary shares at 30 April 2005
was 812.5p (30 April 2004 – 624p) and the range during the year was 583p
to 944p.
The following elements of this report have been audited:
Emoluments
M Ballinger
F M Waring
S J Smith
J Astrand
T Brown
P J Moorhouse
G T Murray
A T Noble
P Rogerson
R Williams
Total emoluments excluding
pension contributions
Total pension contributions
Salary/fees
£000
Cash
bonus
£000
Cost of Chargeable
expenses
£000
benefits*
£000
37
71
275
49
3
210
190
163
34
40
1,072
–
–
–
124
–
–
63
66
41
–
–
294
–
–
–
25
–
–
25
23
25
–
–
98
–
–
–
1
–
–
3
–
–
–
–
4
–
2005
total
£000
37
71
425
49
3
301
279
229
34
40
–
85
361
29
–
278
225
200
15
36
1,468
–
1,229
–
2005
Pension
2004
Pension
2004
total contributions† contributions†
£000
£000
£000
–
–
30
–
–
29
17
23
–
–
–
99
–
–
26
–
–
28
14
22
–
–
–
90
*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.
Northgate plc Annual Report & Accounts 2005 15
REMUNERATION REPORT
Northgate share option scheme
The Northgate Share Option Scheme (“the NSOS”) was introduced in
2000 and was designed on broadly similar lines to the Executive Incentive
Scheme (“the EIS”) (see below). The NSOS provides incentives, in the
form of Ordinary shares in the Company, to Directors and senior executives,
currently numbering approximately 12 in total. It is proposed that the rules
of the NSOS be amended in order to bring them into line with current
market practice. Shareholders will be asked to approve these changes at
the Annual General Meeting to be held on 28 September 2005. The changes
are summarised on page 49 of these Report and Accounts. The Committee
continues to believe that earnings per share growth is the most appropiate
performance measure for the Company, particularly as there are no other
listed companies whose business is directly comparable to that of
S J Smith
P J Moorhouse
G T Murray
No. of options
15,813
10,542
6,325
These options, granted in July 2004 when the share price was 683p, are
normally exercisable between July 2007 and July 2009. In addition, options
over 50,463 shares awarded to 48 management level employees were
outstanding at 30 April 2005.
The bonuses for executive Directors upon which the award for 2004/05 was
made was 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 bonuses payable are as
Northgate. A consistent calculation methodology will apply following the
follows:
adoption of International Financial Reporting Standards in due course.
The Directors hold the following options granted under the NSOS:
At
01.05.04
Granted
At
30.04.05
Exercise
price
Normally
exercisable
between
S J Smith
P J Moorhouse
G T Murray
CASH
% of basic salary
£000 awarded maximum
50
45
124
40
30
63
40
35
66
SHARES
value % of basic salary
£000 awarded maximum
50
50
40
40
40
40
138
84
76
S J Smith
P J Moorhouse
G T Murray
–
–
20,000
20,000
663p
Aug 07 – Feb 09
15,000
15,000
663p
Aug 07 – Feb 09
It is intended that the number of shares to be awarded will be calculated
based on the closing mid-market price on 5 July 2005, being the date of
the Preliminary Results Announcement.
50,000
–
50,000
–
13,500
13,500
50,000
13,500
63,500
380p
663p
Jan 06 – July 08
Aug 07 – Feb 09
For the financial year 2005/06 the maximum awards will be the same as
for 2004/05. Following Mr Noble’s recovery from illness and his return to
management on a full-time basis, he will participate in the DABP for the
No Director exercised any options during the year and none lapsed.
financial year 2005/06. His maximum award will be 40% for both cash and
It is proposed that the option award for 2005 be made after the Annual
shares.
General Meeting, in line with the new rules, rather than our usual practice
The criteria for executive Directors for 2005/06 will be as follows:
of making awards after the announcement of our year end results. It is the
Share element: to be based solely on earnings per share improvement
30 April 2005.
Deferred annual bonus plan
A Deferred Annual Bonus Plan (“DABP”) was introduced in 2003 for
Directors and senior and middle management. Part of the bonus is
delivered in cash payable immediately after the year end and part (not
normally exceeding 50% of basic salary) in the form of deferred shares
awarded following the announcement of the Group’s full year results.
For other levels of management bonus levels are based on a combination
of the performance of the relevant business unit and individual key
performance indicators and the maximum amounts, again expressed
as a percentage of basic salary and split equally between cash and
shares, range from 20% to 60% in total.
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
All employee share scheme
provide a strong retention mechanism and has the motivational benefits
The All Employee Share Scheme (“the AESS”), which is approved by the
of certainty and clarity for the employee. During the retention period,
Inland Revenue under Schedule 8 Finance Act 2000, was introduced in
executives continue to have an incentive to influence the share price
2000 to provide employees at all levels with the opportunity to acquire
a trust deed, the Trustees being Capita IRG Trustees Limited (“the Capita
tranche to be exercisable in full a growth in earnings per share over the
Trust”).
To participate in the AESS, which operates on a yearly cycle, employees
three financial years from 1 May 1999 to 30 April 2002 of at least 15% per
annum compound was required: the actual growth achieved was 23.3%.
are required to make regular monthly savings (on which tax relief is
The aggregate value (in each case being the exercise price multiplied by
obtained), by deduction from pay, for a year at the end of which these
the number of options) of options granted to an individual in the preceding
payments are used to buy shares in the Company (“Partnership shares”).
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:
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
S J Smith
scheme for a further two years. Those employees who are most committed
to the Company will therefore receive the most benefit.
P J Moorhouse
A T Noble
The fourth annual cycle ended in December 2004 and resulted in 460
employees acquiring 69,824 Partnership shares at 554.75p each and being
allocated the same number of Matching shares. As at 30 April 2005 the
No. of options
Exercise price
180,000
180,000
492.5p
492.5p
174,050
492.5p
5,950 503.5p
180,000
Capita Trust held 489,166 Ordinary shares that have vested to employees
All the above options are normally exercisable between September 2003
from the first four cycles.
The fifth annual cycle started in January 2005 and currently some 600
employees are making contributions to the scheme at an annualised rate
of £550,000.
Executive incentive scheme
The EIS, introduced in 1999, was designed to motivate those key executives
in the Group 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 measured by earnings per share,
that target was achieved in 2003. As the EIS was specifically aligned to 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% per annum. 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 growth over the five years.
However, they become capable 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% per annum over the two, three and
four years following their grant respectively. Partial exercise of these
options over a sliding scale is permitted for growth in earnings per share of
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 567,075 shares granted to 33 employees at exercise
prices ranging from 367.5p to 523p were outstanding at 30 April 2005.
Long term incentive plan
At 30 April 2005 there were no options remaining outstanding under this
scheme. No Director held any options under the plan at any time during
the year. No further options will be awarded under this scheme.
Sourcing of shares
Shares to satisfy the requirements of the Group’s share schemes are
currently sourced as follows:
EIS and NSOS – New issue
benefit trust (“the Trust”) based in Guernsey. At
30 April 2005 the Trust held 185,041 Ordinary shares as
a hedge against the Group’s obligations under this
scheme.
AESS
– Through open market purchases by the Capita Trust.
At 30 April 2005 the Capita Trust held 129,887 Ordinary
shares as a hedge against the Group’s obligations
under this scheme.
By order of the Board
D Henderson
Secretary
4 July 2005
intention that the level of this award will not exceed 100% of basic salary.
over the previous year. The maximum award to be made for growth in
strategy plan, no further options will be awarded under the EIS, the last
In addition, options over 281,000 shares granted to 56 employees
excess of 12%, nil for growth of less than 5% and pro rata for growth
options being granted in January 2002.
at exercise prices ranging from 403.5p to 663p were outstanding at
between those two figures.
An award under the EIS consists of a right to acquire Ordinary shares of the
DABP
– Through open market purchases by an employee
Cash element: to be based on individual key performance indicators
Company at a pre-determined price which, in normal circumstances, can be
relevant to their areas of responsibility and including an element of
exercised, subject to a specified performance condition being satisfied,
discretion by the Remuneration Committee.
between four and ten years following the date of grant.
so as to maximise the value on release.
shares in the Company on preferential terms. The Board believes that
between 8% and 15% per annum over these periods.
The Directors received the following number of shares (in the form of nil
encouraging wider share ownership by all staff will have longer term
cost options) in respect of the financial year ended 30 April 2004:
benefits for the Company and for shareholders. The AESS operates under
In September 2004 the second tranche of 25% of options became
exercisable, the performance condition having been satisfied. For this
16 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 17
CORPORATE GOVERNANCE
UK listed companies are required by the Financial Services Authority
non-executive Director following his retirement. During the year,
The provisions of the New Code applicable to listed companies are divided
meetings of the Audit and Remuneration Committees were by invitation.
(the designated UK Listing Authority) to include a statement in their annual
the Chairmen, respectively Mr Waring until 5 January 2005 and
into four parts, as set out below:
The external auditors attended three Audit Committee meetings.
accounts on compliance with the Principles of Good Corporate Governance
Mr Ballinger from that date, were satisfied that at all times the
and Code of Best Practice set out in the Combined Code published in
balance of skills and experience between the executive and
1 Directors
a revised form in July 2003 (‘the New Code’). This New Code, which
non-executive Directors was appropriate for the requirements of the
incorporates recommendations made in the Higgs Report on the role and
business and Mr Ballinger remains of that view.
effectiveness of non-executive Directors and in the Financial Reporting
– Performance evaluation: during the year, an evaluation process of
Council’s new guidance for audit committees, applies to the Company
the performance of the Board and of its committees was carried out,
for the first time for the financial year ended 30 April 2005.
led by the Chairman, Mr Ballinger. The process consisted of a formal
During the year the Corporate Governance Committee, established by the
Board in 2003, consisting of the Deputy Chairman, the Finance Director and
the Company Secretary, continued to review the Company’s compliance
with best practice and made further recommendations towards achieving
compliance with the New Code. The Board accepted the Committee’s
recommendations and considers that the Company complied with the
New Code throughout the year, except for the following:
– Board composition: the New Code requires that at least half the
Board, excluding the Chairman, should comprise independent
non-executive Directors. With four executive Directors, compliance
would require a total of five non-executive Directors, including the
Chairman. The Company did not comply with this requirement
except for the period between Mr Ballinger’s appointment on
10 November 2004 and Mr Waring’s retirement on 5 January 2005
and the period following Mr Brown’s appointment on 13 April 2005.
As is referred to elsewhere in these Report and Accounts, Mr Williams
will be retiring from the Board at the Annual General Meeting on
28 September 2005. There is no present intention to appoint a further
and detailed questionnaire completed by each Director, followed by
one-to-one meetings with the Chairman. As a result of this process,
Mr Ballinger was satisfied that all the non-executive Directors
continued to demonstrate a commitment to their role and in
particular to devote adequate time to properly carry out their duties
as a member of the Board and Board committees. The process
initiated during the year is an evolutionary one in that it will continue
to be developed during the current year to include in particular an
assessment of the performance of individual Directors. With the
change to the position of Chairman during the year, it was not felt
appropriate to carry out a review of the performance of either of
them: the non-executive Directors will carry out such a review during
the current year.
The business of the Company is managed by the Board of Directors,
currently comprising four executive and five non-executive Directors,
details of whom are set out on page 10. All the non-executive Directors
are considered to be independent both in the sense outlined in the New
Code and in terms of the criteria laid down by the National Association of
Pension Funds for judging the independence of non-executive Directors.
Mr Williams, as Deputy Chairman, is considered to be the senior such
independent Director. The offices of the Chairman and Chief Executive
The internal audit manager attended two Audit Committee meetings.
The non-executive Directors, including the Chairman, but without executive
Directors present, met informally on four occasions during the year.
In addition, the non-executive Directors met informally on two occasions
during the year without the Chairman being present.
Before appointment, non-executive Directors are required to assure the
Board that they can give the time commitment necessary to properly fulfil
their duties, both in terms of availability to attend meetings and discuss
matters on the telephone and meeting preparation time.
Officer are separate. The division of their responsibilities has been set
The Company’s Articles of Association provide that at each Annual General
out in writing, approved by the Board and is available on the Company’s
Meeting of the Company all Directors who held office at the time of the two
website.
The Board meets regularly to review trading results and has responsibility
for the major areas of Group strategy, the annual Business Plan, financial
reporting to and relationships with shareholders, dividend policy, internal
financial and other controls, financing and treasury policy, insurance policy,
major capital expenditure, acquisitions and disposals, Board structure,
remuneration policy, corporate governance and compliance.
The Chairman ensures that all Directors are properly briefed 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.
Directors’ attendance at Board and Committee meetings during the year
is detailed below.
preceding Annual General Meetings and did not retire by rotation shall be
subject to re-election. In addition, any Director appointed by the Board
during the year is obliged to seek re-election at the next following Annual
General Meeting. The Board has established a Nomination Committee,
which is chaired by Mr Ballinger. All the non-executive Directors and the
Chief Executive are members. Its main function is to lead the process for
Board appointments by selecting and proposing to the Board suitable
candidates of appropriate calibre. The Committee would normally expect
to use the services of professional search consultants to help in the search
for candidates. The Committee has written terms of reference which are
available on the Company’s website.
During the year, the Committee lead the process which resulted in the
appointment of Mr Brown to the Board in April 2005 and, previously, under
the Chairmanship of Mr Williams, the appointment of Mr Ballinger to the
Board in November 2004. In both cases the services of external search
All Directors in office at that time were present at the Annual General
consultants were used.
Meeting held in September 2004. Attendance by executive Directors at
M Ballinger
F M Waring
S J Smith
J Astrand
T Brown
P J Moorhouse
G T Murray
A T Noble
P Rogerson
R Williams
BOARD
AUDIT
REMUNERATION
NOMINATION
A
6
9
12
12
1
12
12
12
12
12
B
6
8
12
12
1
12
11
12
12
12
A
–
–
–
7
–
–
–
–
7
7
B
4
4
6
7
–
6
6
6
7
7
A
–
–
–
5
–
–
–
–
5
5
B
1
4
3
5
1
2
–
1
5
5
A
1
2
3
3
–
–
–
–
3
3
B
1
1
3
3
–
–
–
–
3
3
A = Maximum number of meetings the Director was entitled to attend.
B = Number of meetings attended
18 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 19
CORPORATE GOVERNANCE
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 14 to 17.
3 Accountability and audit
An assessment of the Company’s position and prospects is included in the
Chairman’s Statement on page 2 and in the Operational and Financial
Review on pages 4 to 9.
INTERNAL CONTROL
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 prepared by management 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
Provision C2.1 of the New Code requires the Directors to conduct an annual
review of the effectiveness of the Group’s system of internal controls. The
throughout the year.
Turnbull Report, published by the ICAEW in September 1999, provides
CONTROL PROCEDURES
relevant guidance for directors on compliance with the internal control
provisions of the New 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
The Board and the Group’s management have adopted a schedule of
matters which are required to be brought to it for decision, 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.
Group’s system is designed to provide the Directors with reasonable
MONITORING
assurance that, should any problems occur, these are identified on a timely
The Board has delegated to executive management implementation of
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.
Fees paid and payable to Deloitte & Touche LLP in respect of the year
under review are as follows:
30 April
2005
£000
Statutory audit work and interim review
228*
Tax compliance
Other
Total
60
106
394
2004
£000
178
82
73
333
basis and dealt with appropriately. The key features of the Group’s system of
the system of internal control. The Board, including the Audit Committee,
* This includes audit fees paid to Deloitte & Touche LLP for
internal controls, which was in place throughout the period covered by the
receives reports on the system of control from the external auditors and
the statutory audit of Fualsa which has a year end different to
4 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 are
invited to briefings given by the Chief Executive and Finance Director.
The Company’s major institutional shareholders have been advised by
the Chief Executive that, in line with the provisions of the New Code,
the Senior Independent Director and other non-executives may attend
these briefings and, in any event, would attend if requested to do so.
All shareholders are given the opportunity to raise matters for discussion
at the Annual General Meeting, of which more than the recommended
minimum 20 working days notice is given. The Company has adopted the
practice of issuing a brief statement at the Annual General Meeting, which
is simultaneously released to the London Stock Exchange, on current
trading conditions. In addition, the Company issues brief ‘pre-close’
trading statements two months prior to the announcement of both its
interim and full year results. In compliance with the requirement in the
New Code, the Company has adopted the practice at general meetings
of the Company of advising shareholders of the numbers of proxy votes
lodged on each resolution, after the resolution has been dealt with on a
show of hands.
that of the Group. In prior years this audit was performed by
an audit firm other than Deloitte & Touche LLP.
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 management information are identified and can be
monitored. Where appropriate, the business is required to comply with
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.
the procedures set out in written manuals. To demonstrate the Board’s
AUDIT
commitment to maintaining the highest business and ethical standards
Membership of the Audit Committee is shown on page 10. The Committee
and to promote a culture of honesty and integrity amongst all staff, the
has written terms of reference setting out its duties which are available on
Board has established a confidential telephone service, operated by an
the Company’s website. These include matters relating to the appointment
independent external organisation, which may be used by all staff to report
and fees of the external auditors and review of the annual and interim
any issues of concern relating to dishonesty or malpractice within the
statements, of the Group’s internal controls and of the nature, scope and
Group. All issues reported are investigated by senior management.
results of the internal audit programme. The Committee has access to
IDENTIFICATION OF RISKS
The Board and the Group’s management have a clearly defined
responsibility for identifying the major business risks facing the Group and
for developing systems to mitigate and manage those risks. The control of
key risks is reviewed by the Board and the Group’s management at their
monthly meetings. 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.
the resources and facilities it 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 and
the internal audit manager have direct access to members of the Committee
and can meet with the Committee without the Company’s management
being present. In addition to the meetings referred to in the table above,
the members of the Committee, together with the Chairman of the Board,
had informal meetings with the external auditors with no other Directors
present. The Committee also monitors the independence and objectivity
of the external auditors in carrying out their statutory audit work on behalf
of shareholders and providing other fee-paying services to the Company.
20 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 21
HEALTH & SAFETY AND ENVIRONMENTAL
REPORT OF THE AUDITORS
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF NORTHGATE PLC
The Board recognises that the monitoring and control of health and
safety and environmental issues forms a key part of its risk management
programme.
Property
As at 30 April 2005, the vehicle rental business in the UK and Ireland
operated out of 76 properties, of which 36 were primary sites and 40
The Board has designated the Chief Executive as the person ultimately
were branches. All but four of these sites (all of which are branches) are
responsible to the Board for all health, safety and environmental matters
located on industrial estates, so our activities have minimal impact on the
throughout the Group. Responsibility for implementing the Group’s policy
local community of the areas in which we operate. A typical primary site
is devolved to regional and depot management.
The Group has adopted the principles set out in the management model
“HSG 65 Successful Health and Safety Management”. This enables the
Group to apply consistent health and safety standards and disciplines at
all locations.
Comprehensive health and safety procedures and vehicle user manuals
provide guidance and advice on implementing the Group’s health and
safety policy. Relevant training is provided to all employees through a
rolling programme designed to promote a positive health and safety
culture throughout the business.
will have an area of 1.2 acres, will comprise approximately 9,000 sq. ft.
of workshops and office facilities, with the remainder hard-standing and
will employ approximately 35 people. A typical branch location will have
an area of 0.3 acres, have a small office (often of the portacabin type),
a valet/washbay and in some cases a workshop facility, again, often a
modular building. They employ an average of 9 people. Three of the primary
sites, Darlington, Banbury and Snodland are shared with Northgate Vehicle
Sales. In addition, the head office building in Darlington houses all central
administrative and support services and the Northgate Vehicle Solutions
business.
We have audited the financial statements of Northgate plc for the year
We also review whether the company has complied with the requirements
ended 30 April 2005 which comprise the consolidated profit and loss
set out in Listing Rules 9.8.8R(2) with regards to the amount of each element
account, the balance sheets, the consolidated cash flow statement,
in the remuneration package and information on share options, 9.8.8R(3),
the consolidated statement of total recognised gains and losses, the
(4) and (5) with regards to details of long term incentive schemes for
accounting policies and the related Notes 1 to 26 together with the
directors, 9.8.8R(11) with regards to money purchase schemes, and
reconciliation of net cash flow to movement in net debt and the notes to the
9.8.8R(12) with regards to defined benefit schemes, and we give a
consolidated cash flow statement. These financial statements have been
statement, to the extent possible, of details of any non-compliance.
prepared under the accounting policies set out therein. We have also
audited the information in the part of the Remuneration Report that is
described as having been audited.
We read the Report of the Directors 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 Remuneration Report and consider the
This report is made solely to the Company’s members, as a body, in
implications for our report if we become aware of any apparent
accordance with section 235 of the Companies Act 1985. Our audit work
misstatements or material inconsistencies with the financial statements.
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
Basis of audit opinion
no other purpose. To the fullest extent permitted by law, we do not accept or
We conducted our audit in accordance with United Kingdom auditing
assume responsibility to anyone other than the Company and the Company’s
standards issued by the Auditing Practices Board. An audit includes
members as a body, for our audit work, for this report, or for the opinions we
examination, on a test basis, of evidence relevant to the amounts and
A head office steering group reviews health and safety and environmental
Part of the responsibilities of the Group health and safety officer is to
have formed.
performance and policy issues on a quarterly basis. Technical advice and
visit all locations annually to carry out a health and safety audit. Where
support is provided by a qualified health and safety officer.
appropriate, outside professional advice and services are also used:
Health and safety and environmental issues impact on the Group’s
operations in two main areas:
Vehicle fleet
The total fleet in the UK and Ireland at 30 April 2005 was 52,600, with an
average age of between 15 and 16 months, of which 6,400 were cars and the
remainder commercial vehicles. Cars are sold after an average life of 20
months and commercial vehicles of 30 months. Our fleet is therefore
comprised entirely of modern vehicles. Over 99% of the fleet is diesel
–
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 electrical contractors;
–
a programme of surveys has been put in place to meet the
requirements of the new Asbestos Regulations, which came into
force in 2004, using licensed contractors;
–
all hazardous waste (principally engine oils, batteries, tyres and
other vehicle consumables) is collected and disposed of by licensed
powered. Of the 3,400 cars purchased in calendar year 2004, just over 30%
contractors;
were Euro IV compliant. We expect this to rise to 75% in calendar year 2005
–
prior to acquiring new sites, environmental risk assessments,
and to 100% in 2006. Commercial vehicle manufacturers are still debating
to ISO 9000 standard, are carried out by external consultants;
the launch of Euro IV products but current expectations are that such
products should become available in the UK in the last quarter of 2006.
–
all primary sites and some branch locations have above-ground fuel
storage tanks. A programme to upgrade those tanks which do not currently
To encourage a safe driving culture amongst our own staff, we have
comply with the guidelines relating to double-bunding laid down by the
arranged with the Institute of Advanced Motorists a rolling programme
Environment Agency in PPG2 will be completed by September 2005.
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 Remuneration Report.
Our responsibility is to audit the financial statements and the part of the
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 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 Report of the Directors 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
disclosures in the financial statements and the part of the 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 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 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 2005 and of the profit of the
Group for the year then ended; and
the financial statements and that part of the Remuneration Report
described as having been audited have been properly prepared in
accordance with the Companies Act 1985.
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.
The Group was the first UK vehicle rental company to participate in the
Institute of Road Transport Engineers Certification scheme for motor
technicians, run in conjunction with the Society of Operation Engineers.
During the year under review, no major incidents (classed as those
resulting in death, serious injury or significant pollution) occurred at any
explanations we require for our audit, or if information specified by law
of our locations. No health and safety enforcement notices were served
regarding directors’ remuneration and transactions with the Company
on any company in the Group and there were no convictions for health
and other members of the Group is not disclosed.
and safety offences during the year.
We review whether the corporate governance statement reflects the
To date over 30% of our technicians have successfully completed the
The Group’s commitment to health and safety has been recognised during
Company's compliance with the nine provisions of the July 2003 FRC
course. The Group has received an award from Brake, the road safety
the year, with a Merit award from the Royal Society for the Prevention
organisation, for its initiative in adopting the scheme.
of Accidents for demonstrating the effective implementation of safety
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
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
arrangements within the organisation.
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
Leeds
4 July 2005
Group's corporate governance procedures or its risk and control procedures.
22 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 23
FINANCIAL STATEMENTS
24 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 25
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 APRIL 2005
BALANCE SHEETS
30 APRIL 2005
Before goodwill
amortisation
2005
Goodwill
amortisation
2005
Notes
£000
£000
380,486
77,781
–
458,267
–
458,267
(277,376)
(56,537)
(333,913)
103,110
21,244
124,354
(40,471)
(7,086)
–
(47,557)
62,639
14,158
76,797
–
–
76,797
(21,224)
55,573
Turnover
– continuing operations
– acquisitions
– joint venture
Turnover: Group and share of joint venture
Less: share of joint venture's turnover
Group turnover
Cost of sales
– continuing operations
– acquisitions
Total cost of sales
Gross profit
– continuing operations
– acquisitions
Total gross profit
Administrative expenses
– continuing operations
– acquisitions
– goodwill amortisation
Total administrative expenses
Group operating profit
– continuing operations
– acquisitions
Total operating profit
Share of joint venture's operating profit
Amortisation of goodwill on joint venture investment
Profit on ordinary activities before interest
and taxation
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
1
1, 2
4
5
7
8
8
7
Total
2005
£000
Total
2004
As restated
£000
380,486
77,781
–
458,267
355,624
–
23,461
379,085
–
(23,461)
458,267
355,624
(277,376)
(56,537)
(261,255)
–
(333,913)
(261,255)
103,110
21,244
124,354
(40,471)
(7,086)
(1,116)
(48,673)
62,433
13,248
75,681
–
–
94,369
–
94,369
(38,693)
–
(71)
(38,764)
55,605
–
55,605
4,578
(236)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,116)
(1,116)
(206)
(910)
(1,116)
–
–
(1,116)
75,681
59,947
–
(21,224)
(15,355)
(1,116)
54,457
(15,963)
38,494
(12,837)
25,657
59.7p
59.1p
20.0p
44,592
(13,303)
31,289
(11,064)
20,225
50.7p
50.6p
17.6p
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 assets (liabilities)
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
Own shares held
Profit and loss account
Shareholders’ funds
Attributable to equity shareholders
Attributable to non-equity shareholders
Notes
10
11
12
13
14
15
16
17
19
20
21
22
22
22
22
23
Group
Company
2005
£000
2004
As restated
£000
14,110
1,981
531,843
37,947
–
583,900
–
–
–
–
583,900
18,160
92,841
41,375
379,346
23,342
–
404,669
50,389
(40,215)
4,293
14,467
419,136
15,285
56,382
46,160
152,376
117,827
107,284
45,092
628,992
403,319
9,424
216,249
3,709
62,544
1,054
4,721
(2,471)
146,692
216,249
215,749
500
216,249
133,756
(15,929)
403,207
208,079
6,821
188,307
3,702
61,829
23
4,721
(1,330)
119,362
188,307
187,807
500
188,307
2005
£000
–
–
3,056
103,234
106,290
–
–
–
–
2004
£000
–
–
3,117
79,050
82,167
–
–
–
–
106,290
82,167
–
391,968
46,180
438,148
15,846
422,302
528,592
387,639
–
140,953
3,709
62,544
1,371
417
–
72,912
140,953
140,453
500
140,953
–
122,881
44,311
167,192
12,197
154,995
237,162
100,000
(119)
137,281
3,702
61,829
–
417
–
71,333
137,281
136,781
500
137,281
The accounts were approved by the Board of Directors on 4 July 2005.
M Ballinger
Director
G T Murray
Director
26 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 27
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 APRIL 2005
Notes
(i)
(ii)
2005
£000
2004
As restated
£000
192,108
(20,691)
(15,241)
(274,517)
113,133
(7,254)
157,203
(14,679)
(11,279)
(215,129)
106,771
(4,333)
(iii)
(168,638)
(112,691)
Net 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
Acquisitions of subsidiary undertakings (Note 18)
Equity dividends paid
Cash (outflow) inflow before use of liquid resources
and financing
Management of liquid resources
Cash placed on deposit
Financing
Issue of Ordinary shares (net of expenses)
Purchase of investments (net)
– purchase of own shares (Note 9)
Increase in borrowings
Capital element of vehicle loans, hire purchase and finance lease payments
Cash inflow from vehicle loans, hire purchase and finance lease agreements
Net cash inflow from financing
(Decrease) increase in cash for the year
RECONCILIATION OF NET CASH FLOW
TO MOVEMENT IN NET DEBT
FOR THE YEAR ENDED 30 APRIL 2005
(Decrease) increase in cash for the year
Financing
Increase in borrowings
Capital element of vehicle loans, hire purchase and finance lease payments
Cash inflow from vehicle loans, hire purchase and finance lease agreements
Cash placed on deposit
Change in net debt resulting from cash flows
Vehicle loans, hire purchase and finance lease agreements acquired with subsidiary undertakings
Other net debt acquired with subsidiary undertakings
New vehicle loans and hire purchase agreements
Deferred consideration in respect of Fualsa (Note 18)
Foreign exchange differences
Movement in net debt for the year
Opening net debt
Closing net debt
(19,353)
(11,874)
(1,092)
(11,005)
(43,689)
6,457
(21)
722
(1,141)
221,166
(279,243)
93,663
35,167
(8,543)
(205)
16,351
(1,081)
93,833
(263,310)
169,577
15,370
21,622
2005
£000
(8,543)
(221,166)
279,243
(93,663)
21
(44,108)
(66,829)
(27,144)
(15,083)
(9,548)
2,184
(160,528)
(249,826)
(410,354)
2004
£000
21,622
(93,833)
263,310
(169,577)
205
21,727
(3,271)
–
–
–
96
18,552
(268,378)
(249,826)
NOTES TO THE CONSOLIDATED
CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 APRIL 2005
(i) Reconciliation of Group operating profit to net cash inflow from operating activities
Group operating profit
Depreciation
Goodwill amortisation
Loss (profit) on sale of equipment and other fixed assets
Charge for shares granted to employees under UITF17 (revised) (Note 9)
Increase in stocks
(Increase) decrease in debtors
(Decrease) increase in creditors
Net cash inflow from operating activities
(ii) Returns on investments and servicing of finance
Interest received
Interest paid on bank loans and overdrafts
Interest paid on hire purchase agreements and vehicle loans
Non-equity preference dividends paid
(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
Sale of investments – unlisted investment
CONSOLIDATED STATEMENT OF TOTAL
RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 APRIL 2005
Profit for the financial year
Revaluation of land and buildings (Note 18)
Foreign exchange differences
Share options adjustment under UITF17 (revised) (Note 9)
Total recognised gains and losses for the financial year
2005
£000
75,681
128,253
1,116
39
191
(128)
(9,340)
(3,704)
192,108
2005
£000
1,957
(15,966)
(6,657)
(25)
(20,691)
2004
As restated
£000
55,605
98,547
71
(63)
141
(4,922)
1,450
6,374
157,203
2004
£000
1,028
(4,849)
(10,833)
(25)
(14,679)
2005
£000
2004
As restated
£000
(274,517)
113,133
(7,632)
378
–
(215,129)
106,771
(5,729)
1,236
160
(168,638)
(112,691)
2005
£000
38,494
1,031
1,482
191
41,198
2004
As restated
£000
31,289
–
(290)
141
31,140
28 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 29
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 12.
The principal accounting policies are summarised below. They have
been applied consistently throughout the year and the preceding year,
with the exceptions of the changes in the accounting policies with
respect to own shares and shares granted to employees, as explained
in Note 9 to the accounts.
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
over the fair value of net assets acquired 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 to 6 years
Investments
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, except
as described in the accounting policies for foreign currency below.
Own shares
The Company’s shares held by Walbrook Trustees (Guernsey) Limited,
as trustees of the Goode Durrant Employees’ Trust, and by Capita IRG
Trustees Limited, as trustees of The All Employee Share Scheme, are
included in the consolidated balance sheet until such time as the
interest in the shares is transferred to employees. The shares are held
as a hedge against the Group’s obligations under its various share
schemes and, accordingly, the shares purchased are recorded at cost.
In accordance with UITF38, the Group has changed its accounting
policy with respect to own shares, with effect from 1 May 2004.
Shares held by the Group, as described above, were previously shown
as fixed asset investments and are now shown within an own shares
held reserve, as a deduction from equity shareholders’ funds.
Shares granted to employees
In accordance with UITF17 (revised), the Group has changed its
accounting policy with respect to shares granted to employees under
the Group’s various share schemes. Previously, the cost of granting
shares to employees was recognised in the profit and loss account, as
the difference between the price paid by employees and the historic
cost to the Group of acquiring the shares. Under UITF17 (revised), the
cost to the Group of granting the shares is recognised in the profit
and loss account as the difference between the price paid by
employees and the market value of the shares, on the day that the
shares are granted. The difference between the market value and the
book value of the shares is recognised in the profit and loss account
reserve over the relevant performance period.
Stocks
Goods for resale and finished goods are stated at the lower of cost
and net realisable value.
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.
Current tax
Current tax, including UK corporation tax and foreign tax, is provided
at the amounts expected to be paid (or recovered) using the tax rates
enacted, or substantively enacted, at the balance sheet date.
Financial instruments and 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 swaps – Interest payments and receipts relating to
swaps are accrued with net interest. They are not revalued to fair
value or shown in the Group balance sheet at the year end.
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.
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.
The Company maintains certain borrowings in the same currency as
the functional currency of its overseas subsidiary undertaking, as a
hedge against the net assets of the subsidiary. These borrowings are
translated into Sterling using the exchange rate prevailing at the
balance sheet date. Any variances are reflected directly in the profit
and loss reserve.
Goodwill arising on the consolidation of an overseas subsidiary is
denominated in the local currency of the subsidiary and retranslated
into Sterling at the exchange rate prevailing at the balance sheet date.
The Company has denominated the investment in its overseas
subsidiary undertaking in the functional currency of the subsidiary.
This investment is translated into Sterling using the exchange rate
prevailing at the balance sheet date. In accordance with SSAP20,
any variances are reflected directly in the profit and loss reserve
to the extent that they offset foreign exchange differences upon
retranslation of the foreign currency borrowings held as a hedge
by the Company. Any remaining difference is recognised in the profit
and loss account.
Turnover
Turnover represents the revenue resulting from Group operating
activities, excluding value added tax. These comprise the hire of
vehicles, the sale of used vehicles and the supply of related goods
and services.
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.
30 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 31
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2005
1 Segmental analysis
The Directors consider that the only material class of business is that of vehicle hire. As such, the only segmental analysis provided is by
geographical area.
United Kingdom and Republic of Ireland
Spain
Total turnover
United Kingdom and Republic of Ireland
Spain
Total operating profit
United Kingdom and Republic of Ireland
Spain
Total profit before taxation
United Kingdom and Republic of Ireland
Spain
Total net assets
2005
£000
385,224
73,043
458,267
62,165
13,516
75,681
44,598
9,859
54,457
192,373
23,876
216,249
2004
£000
355,624
–
355,624
55,605
–
55,605
41,536
3,056
44,592
173,840
14,467
188,307
Prior to the acquisition of Furgonetas de Alquiler SA ("Fualsa") on 3 May 2004 (Note 18), all turnover from the joint venture arose 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 and finance lease agreements
Amortisation of goodwill
Hire of plant and equipment and other assets
Auditors’ remuneration
Fees paid to auditors for other services
Loss (profit) 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
Details of Directors’ remuneration, pension contributions and share options are provided in the
audited part of the Remuneration Report on pages 14 to 17.
2005
£000
2004
£000
80,260
39,679
47,993
1,116
5,080
228
166
39
(297,935)
58,868
71
3,710
178
155
(63)
(216,318)
2005
£000
1,723
446
2,169
45,855
5,386
1,125
52,366
2004
£000
1,362
375
1,737
37,496
3,401
944
41,841
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
Finance charges related to hire purchase and
finance lease agreements
Interest payable, net
Share of joint venture interest payable, net
Interest payable on bank loans, overdrafts and other loans of £17,040,000 includes £489,000 relating to
the amortisation of the discounted element of the Fualsa deferred consideration, as explained in Note 17.
5 Tax on profit on ordinary activities
Corporation tax
UK corporation tax charge for the current year
Overprovision of corporation tax for prior years
Overseas taxation
Overseas tax charge for the current year
Total current taxation
Deferred taxation
Origination and reversal of timing differences
Adjustment in respect of prior years
2005
£000
–
1,814
1,814
2004
£000
202
1,231
1,433
(17,040)
(5,066)
(5,998)
(21,224)
–
(10,436)
(14,069)
(1,286)
(21,224)
(15,355)
2005
£000
15,308
(1,214)
14,094
1,696
15,790
(784)
957
2004
£000
13,860
(599)
13,261
389
13,650
(932)
585
15,963
13,303
The tax assessed for the year differs from the standard rate of corporation tax in the UK (30%). The differences are explained below:
Profit on ordinary activities before taxation
Tax on profit on ordinary activities at the standard rate
Expenses not deductible for tax purposes
Depreciation in excess of capital allowances for the year
Difference in taxation on overseas subsidiary / joint venture
Adjustment to tax charge in respect of prior years
Other
Total current taxation
6 Profit of parent company
2005
£000
54,457
16,337
895
784
(1,030)
(1,214)
18
2004
As restated
£000
44,592
13,378
552
932
(598)
(599)
(15)
15,790
13,650
Of the profit attributable to shareholders, a profit of £14,225,000 (2004 – £14,271,000 as restated) 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.
32 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 33
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2005 (CONTINUED)
7 Dividends
Equity dividend on Ordinary shares:
Interim paid 8p per share (2004 – 7p)
Final proposed 12p per share (2004 – 10.6p)
Total dividend 20p per share (2004 – 17.6p)
Non-equity dividend on Preference shares
8 Earnings per Ordinary share
2005
£000
5,136
7,676
12,812
25
12,837
2004
£000
4,259
6,780
11,039
25
11,064
The calculation of basic earnings per Ordinary share in respect of the year ended 30 April 2005 is based on the profit attributable to equity
shareholders of £38,469,000 (2004 – £31,264,000 as restated) and the weighted average of 64,443,741 (2004 – 61,647,279) Ordinary shares in issue
(excluding those shares held by employee trusts in connection with the Group’s various share schemes).
Diluted earnings per Ordinary share have been calculated on the basis of earnings described above and assume that 465,690 shares (2004 – nil),
remaining exercisable under the Group's various share schemes, had been fully exercised at the commencement of the relevant period, such that
the weighted average number of shares is 65,064,599 (2004 – 61,817,783), including 155,168 shares (2004 – 170,504) held by employee trusts in
connection with the Group's various share schemes.
9 Prior year adjustments
Investments in own shares
On 1 May 2004, the Group changed its accounting policy in respect of investments in its own shares, in accordance with Urgent Issues Task Force
Abstract 38. A prior year adjustment has been made to reflect this change in accounting policy. The impact of this change is to reduce both fixed
asset investments and shareholders' funds by £1,330,000 at 30 April 2004. The change in accounting policy gives rise to an own shares held reserve.
This represents shares held by employee trusts in order to meet commitments under the Group's various share schemes. The impact of the change
in accounting policy in the current year is to decrease fixed asset investments by £1,141,000 and to increase the own shares held reserve by the
same amount. Within the consolidated cash flow statement, the change in accounting policy has caused a reduction in the cash outflow from
capital expenditure and financial investment and a reduction in the net cash inflow from financing of the same amount. This amount is £1,081,000
for the year ended 30 April 2004 and £1,141,000 for the year ended 30 April 2005. There is no impact on the consolidated profit and loss account in
either year.
Shares granted to employees
On 1 May 2004, the Group changed its accounting policy in respect of shares granted to employees, in accordance with Urgent Issues Task Force
Abstract 17 (revised). A prior year adjustment has been made to reflect this change in accounting policy. The impact of this change is to increase
administrative expenses by £141,000 and reduce profit after taxation by £141,000 for the year ended 30 April 2004. There is no impact on the profit
and loss account reserve as at 30 April 2004. Within the consolidated cash flow statement, the change in accounting policy has caused a reduction
in Group operating profit of £141,000. There is no impact on the net cash inflow from operating activities for the year ended 30 April 2004. The impact
of the change in accounting policy in the current year is to increase administrative expenses by £191,000 and decrease profit after taxation by
£191,000. There is no impact on the profit and loss account reserve as at 30 April 2005. Within the consolidated cash flow statement, the Group
operating profit is reduced by £191,000. There is no impact on the net cash inflow from operating activities for the year ended 30 April 2005.
10 Intangible assets
Group
Cost
At 1 May 2004
Additions (Note 18)
Reclassification from joint venture
At 30 April 2005
Amortisation
At 1 May 2004
Reclassification from joint venture
Charge for the year
At 30 April 2005
Net book value
At 30 April 2005
At 30 April 2004
Goodwill
£000
2,440
8,952
4,726
16,118
459
433
1,116
2,008
14,110
1,981
11 Vehicles for hire
Group
Cost
At 1 May 2004
Transfer to motor vehicles
Foreign exchange differences
Additions
Acquisitions (Note 18)
Disposals
At 30 April 2005
Depreciation
At 1 May 2004
Transfer to motor vehicles
Foreign exchange differences
Charge for the year
Disposals
At 30 April 2005
Net book value
At 30 April 2005
At 30 April 2004
£000
488,793
(134)
(757)
295,851
95,342
(201,603)
677,492
109,447
(35)
(252)
124,959
(88,470)
145,649
531,843
379,346
The net book value of the above vehicles held under hire purchase or finance lease agreements amounts to £26,085,000 (2004 – £152,539,000).
12 Other fixed assets
Group
Cost or valuation
At 1 May 2004
Transfer from vehicles for hire
Foreign exchange differences
Additions
Acquisitions (Note 18)
Disposals
At 30 April 2005
Depreciation
At 1 May 2004
Transfer from vehicles for hire
Foreign exchange differences
Charge for the year
Disposals
At 30 April 2005
Net book value
At 30 April 2005
At 30 April 2004
Cost or valuation at 30 April 2005 is represented by:
Valuation performed in 1992
Valuation performed in 2004 (Note 18)
Additions at cost
Land
and
buildings
£000
Plant,
equipment
& fittings
£000
Motor
vehicles
£000
23,096
–
(42)
5,817
9,833
(179)
38,525
3,495
–
(2)
1,061
(175)
4,379
34,146
19,601
525
3,403
34,597
38,525
9,945
–
(8)
1,222
798
(1,560)
10,397
7,209
–
(2)
1,756
(1,457)
7,506
2,891
2,736
–
–
10,397
10,397
1,405
134
–
593
–
(851)
1,281
400
35
–
477
(541)
371
910
1,005
–
–
1,281
1,281
Total
£000
34,446
134
(50)
7,632
10,631
(2,590)
50,203
11,104
35
(4)
3,294
(2,173)
12,256
37,947
23,342
525
3,403
46,275
50,203
34 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 35
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2005 (CONTINUED)
12 Other fixed assets (continued)
Group (continued)
Land and buildings by category:
Freehold
Short leasehold
2005
£000
26,031
8,115
34,146
2004
£000
16,943
2,658
19,601
Certain of the above freehold properties were valued as at 30 April 1992 by Jones Lang Wootton, Chartered Surveyors, and certain other freehold
properties as at 3 May 2004 by Amercian Appraisal, Professional Valuers, on the basis of open market value for existing use.
At 30 April 2005, under the historical cost convention, land and buildings would have been stated at £38,803,000 (2004 – £23,374,000) and related
accumulated depreciation of £4,472,000 (2004 – £3,591,000).
Company
Cost
At 1 May 2004 and 30 April 2005
Depreciation
At 1 May 2004
Charge for the year
At 30 April 2005
Net book value
At 30 April 2005
At 30 April 2004
13 Fixed asset investments
Company
Cost
At 1 May 2004
Acquisitions (see below)
Foreign exchange differences on investment denominated in
foreign currency (see below)
At 30 April 2005
Provisions
At 1 May 2004 and 30 April 2005
Net book value
At 30 April 2005
At 30 April 2004
£000
3,221
104
61
165
3,056
3,117
Total
£000
81,485
24,202
Shares in
subsidiary
undertakings
£000
Investment
in joint
venture
£000
Loans
to group
undertakings
£000
24,315
34,372
(18)
58,669
2,435
56,234
21,880
10,170
(10,170)
47,000
–
–
–
–
–
10,170
–
(18)
47,000
105,669
–
2,435
47,000
47,000
103,234
79,050
14 Stocks
Stocks comprise goods for resale and finished goods.
15 Debtors
Amounts falling due within one year:
Trade debtors
Amounts due from subsidiary undertakings
Social security and other taxes
Corporation tax
Deferred tax asset (Note 19)
Other debtors
Prepayments and accrued income
Amounts falling due after more than one year:
Prepayments and accrued income
16 Creditors: amounts falling due within one year
Borrowings (Note 17)
Trade creditors
Amounts due to subsidiary undertakings
Corporation tax
Social security and other taxes
Accruals and deferred income
Proposed dividends
Group
Company
2005
£000
76,291
–
1,447
492
–
2,389
12,222
92,841
–
92,841
2004
£000
41,801
–
–
–
–
7,647
6,496
55,944
438
56,382
2005
£000
–
388,300
1,163
–
700
1,144
661
391,968
2004
£000
–
122,583
–
–
–
242
56
122,881
–
–
391,968
122,881
Group
Company
2005
£000
48,410
20,008
–
7,231
2,138
21,779
7,718
2004
£000
87,907
9,838
–
7,143
7,050
15,038
6,780
2005
£000
18
48
5,693
–
88
2,281
7,718
2004
£000
–
–
3,097
–
81
2,239
6,780
107,284
133,756
15,846
12,197
At 30 April 2005, the principal subsidiary undertakings of the Company were as follows:
Name of undertaking
Northgate Vehicle Hire Limited
Furgonetas de Alquiler SA (see below)
Principal activity
Vehicle hire
Vehicle hire
Country of registration
England and Wales
Spain
A full list of the Company's subsidiaries was included with the Annual Return filed with the Registrar of Companies.
At 30 April 2004, the investment in joint venture related to the Company's interest in the share capital of Furgonetas de Alquiler SA ("Fualsa").
During the current year, the Company increased its interest in the share capital of Fualsa to 100% (Note 18), such that it became a wholly owned
subsidiary of the Company from May 2004. All amounts relating to this investment, included within fixed asset investments, are now shown as
shares in subsidiary undertakings.
The investment in Fualsa is denominated in Euro in the Company balance sheet. The foreign exchange movement recognised in investments
arose when this investment amount was retranslated into Sterling at the foreign exchange rate prevailing on the balance sheet date.
36 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 37
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2005 (CONTINUED)
17 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
17 Creditors: amounts falling due after more than one year (continued)
Borrowing facilities
The Group has various borrowing facilities available to it. The undrawn committed borrowing facilities at 30 April 2005, in respect of which all
conditions precedent had been met at that date, expire as follows:
Amounts falling due within one year:
Bank overdraft
Vehicle related bank loans
Vehicle loans, hire purchase and finance leases
Other
Amounts falling due after more than one year:
Bank overdraft
Vehicle related bank loans
Vehicle loans, hire purchase and finance leases
Other
Due within one to two years:
Bank overdraft
Vehicle related bank loans
Vehicle loans, hire purchase and finance leases
Other
Due within two to five years:
Vehicle related bank loans
Vehicle loans, hire purchase and finance leases
Due in more than five years:
Other
2005
£000
7,318
3,946
36,491
655
48,410
–
378,275
12,151
12,893
403,319
–
185
11,470
10,530
22,185
378,090
681
378,771
2,363
2,363
2004
£000
3,485
–
84,422
–
87,907
51
140,628
67,400
–
208,079
51
–
44,933
–
44,984
140,628
22,467
163,095
–
–
2005
£000
18
–
–
–
18
–
378,091
–
9,548
387,639
–
–
–
9,548
9,548
378,091
–
378,091
–
–
2004
£000
–
–
–
–
–
–
100,000
–
–
100,000
–
–
–
–
–
100,000
–
100,000
–
–
Vehicle related loans, hire purchase and finance lease agreements of £48,642,000 (2004 – £151,822,000) are secured by fixed charges over the
vehicles to which they relate.
At 30 April 2004, vehicle related bank loans and overdrafts of £144,113,000 and bank loans and overdrafts of £51,000 were secured by fixed and
floating charges over the assets of the subsidiary undertakings. There were no such charges in place as at 30 April 2005.
Other borrowings falling due within one to two years include £9,548,000 in respect of the deferred consideration for 20% of the issued share
capital of Fualsa (Note 18). This amount is unsecured and represents the actual amount payable of £10,040,000, which has been discounted by
the Group’s cost of capital, in accordance with FRS7. This has resulted in a charge to the profit and loss account of £489,000 for the year ended
30 April 2005, that has been classified as interest (Note 4). Accordingly, an additional amount of £492,000 will be charged to the profit and loss
account on a straight line basis from May 2005 until the expected date that the consideration falls due.
Other borrowings of £458,000 (2004 – £nil), falling due within one year, and £3,284,000 (2004 – £nil), falling due in more than one year, represent
Fualsa property loans which are secured by fixed charges over the properties to which they relate.
All other borrowings are unsecured.
In one year or less
In one year to five years
2005
£000
144,338
87,421
231,759
2004
£000
138,010
14,097
152,107
On 10 January 2005, the Company agreed new committed term loan facilities with seven major UK and European banks. The total facilities of
£565,000,000 have commitment termination dates one, three and five years from the agreement dates.
The total amount permitted to be borrowed by the Company and its subsidiary undertakings 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 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 of Directors.
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 2005 the Group’s total gross borrowings were
£451,729,000 (2004 – £295,986,000).
Financing and interest rate risk
The Group’s policy is to finance operating subsidiary undertakings by a combination of retained earnings and bank borrowings including
medium term loans.
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 2005, 48% of gross borrowings were at fixed or capped rates of interest: £85,000,000 of swaps and
£125,000,000 plus 12,000,000 of caps and collars as detailed on page 40. 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 2005 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
269,272
182,457
451,729
184,272
149,835
334,107
85,000
32,622
117,622
5.29
3.81
2.86
1.25
295,986
210,986
85,000
5.29
3.86
At 30 April 2005
UK Sterling
Euro
At 30 April 2004
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 UK Sterling floating rate borrowings bear interest at relevant national LIBOR equivalents. The Euro floating rate
borrowings bear interest at relevant national EURIBOR equivalents.
38 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 39
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2005 (CONTINUED)
17 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:
UK Sterling contracts effective as at 30 April 2005
Cap amount (£m)
5
5
10
Collar amount (£m)
10
10
10
10
25
10
10
10
10
10
115
Cap %
8.00
7.50
Cap %
7.00
7.00
7.00
7.00
5.50
5.25
5.00
4.75
7.00
7.00
Floor %
–
–
Floor %
5.00
5.00
5.00
5.00
3.22
3.19
3.15
3.25
5.00
5.00
Finish date
April 2006
June 2006
Finish date
April 2007
April 2007
April 2008
April 2008
May 2008
June 2008
June 2008
June 2008
April 2009
April 2010
Total value of current contracts (£m)
125
UK Sterling contracts to commence after 30 April 2005
Collar amount (£m)
10
10
Euro contracts effective as at 30 April 2005
Cap amount ( m)
12
12
Cap %
6.50
Cap %
3.75
Floor %
4.50
Start date
April 2007
Finish date
April 2012
Floor %
Start date
Finish date
–
October 2003
October 2006
Euro contracts to commence after 30 April 2005
In addition to the instruments reflected in the tables above, the Group has further Euro swaps with forward starting dates, as follows:
Swap amount ( m)
50
50
50
150
Swap %
2.30
2.28
2.23
Start date
Finish date
June 2005
June 2005
June 2005
June 2008*
June 2009*
June 2009*
*The counterparty to these contracts has a right to cancel this arrangement, with no cost to the Company or the counterparty, on the third
anniversary of the inception date of the contract.
17 Creditors: amounts falling due after more than one year (continued)
Fair values of financial instruments
The comparison of fair and book values of all the Group’s financial instruments as at 30 April 2005 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
Analysis of net debt
Cash at bank and in hand
Bank overdraft due within one year
Short term deposits
Bank loans and overdrafts
Vehicle loans, hire purchase
and finance leases
Other borrowings
2005
2004
Book
value
£000
41,375
(451,729)
(410,354)
_
Fair
value
£000
41,375
(451,729)
(410,354)
(923)
Book
value
£000
46,160
(295,986)
(249,826)
682
Fair
value
£000
46,160
(295,986)
(249,826)
180
(410,354)
(411,277)
(249,144)
(249,646)
At
1 May
2004
£000
44,407
(3,485)
40,922
1,753
(140,679)
(151,822)
–
Cash
flow
£000
(4,712)
(3,831)
(8,543)
21
(226,732)
185,580
5,566
(249,826)
(44,108)
Acquisitions
(Note 18)
£000
–
–
Other
non-cash
changes
£000
–
–
Foreign
exchange
movements
£000
(94)
(2)
At
30 April
2005
£000
39,601
(7,318)
–
–
(17,577)
(66,829)
(9,567)
(93,973)
–
–
–
(15,083)
(9,548)
(24,631)
(96)
32,283
–
2,767
(488)
1
1,774
(382,221)
(48,642)
(13,548)
2,184
(410,354)
The Group calculates gearing to be net borrowings as a percentage of shareholders’ funds less goodwill, where net borrowings comprise
borrowings less cash at bank and short term deposits. At 30 April 2005, the gearing of the Group amounted to 203% (2004 – 137% as restated)
where net borrowings are £410,354,000 (2004 – £249,826,000) and shareholders’ funds less goodwill are £202,139,000 (2004 – £182,033,000 as
restated).
40 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 41
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2005 (CONTINUED)
18 Acquisitions
18 Acquisitions (continued)
Furgonetas de Alquiler SA ("Fualsa")
On 16 July 2002, the Group acquired a 40% share in Fualsa, a company registered in Spain, for a cash consideration of £10,170,000, including
goodwill of £4,726,000. In the year to 30 April 2004, this investment was accounted for as a joint venture.
On 3 May 2004, the Group exercised its option to acquire a further 40% of the issued share capital of Fualsa for a consideration of £15,143,000
under the share purchase agreement. On the same date, the Group also exercised its option to acquire the final 20% of the issued share capital
of Fualsa. The consideration for this exercise is deferred until May 2006 and will be dependent upon the profit after tax of Fualsa for the calendar
years 2004 and 2005. With effect from May 2004, Fualsa has been accounted for as a subsidiary undertaking and in accordance with acquisition
accounting principles.
The detail relating to the 60% share of Fualsa, that was acquired on 3 May 2004, is as follows:
Provisional
fair value
adjustment
£000
Book value
£000
Fair value
£000
Fixed assets – vehicles for hire
Other fixed assets
Stocks
Debtors
Cash at bank and in hand
Bank overdraft
Borrowings falling due in less than one year
Other creditors falling due in less than one year
Borrowings falling due after more than one year
Provisions for liabilities and charges
60% interest in net assets acquired
Goodwill
Acquisition cost (including expenses)
Fair value of consideration:
Cash
Deferred consideration
Cash payment made
Cash equivalents with subsidiary undertaking acquired
Cash outflow in the year on acquisition of Fualsa
85,624
6,398
2,536
27,624
1,194
(1,104)
(54,871)
(8,417)
(31,957)
(1,594)
25,433
15,260
–
2,578
–
–
–
–
–
–
–
–
2,578
1,547
85,624
8,976
2,536
27,624
1,194
(1,104)
(54,871)
(8,417)
(31,957)
(1,594)
28,011
16,807
7,395
24,202
15,143
9,059
24,202
15,143
(90)
15,053
The total goodwill of £12,121,000, arising on this acquisition, comprises £4,726,000 relating to the initial 40% share and £7,395,000
relating to the 60% share of Fualsa. This is being amortised over a 20 year period from July 2002.
The deferred consideration is included within creditors falling due after more than one year (Note 17).
The fair value adjustment made to other fixed assets represents a revaluation of land and buildings as at 3 May 2004 in line with an
open market valuation performed by professional valuers (Note 12). The Group revaluation reserve in the consolidated balance sheet
has been credited with 40% of the total revaluation, relating to the Group’s existing interest in Fualsa prior to 3 May 2004, amounting
to £1,031,000.
In its financial year to 31 December 2003, Fualsa made a profit after tax of £7,044,000. For the period from that date to the date of
acquisition, Fualsa had hire turnover of £15,407,000, operating profit of £3,852,000, profit before taxation of £2,786,000, taxation of £697,000
and profit after taxation of £2,089,000. The post acquisition results of Fualsa are detailed in the segmental analysis in Note 1, being
the results arising in Spain for the year ended 30 April 2005. In addition, Fualsa contributed a post acquisition net cash inflow from
operating activities of £25,153,000 and paid £33,429,000 in respect of net capital expenditure for the year ended 30 April 2005.
Foley Self Drive Limited ("Foley")
On 1 August 2004, the Group acquired the entire issued share capital of Foley for a cash consideration of £3,895,000, including goodwill
of £1,557,000. The goodwill on the acquisition of Foley is capitalised and written off over a period of five years, being its estimated
useful economic life. The transaction has been accounted for in accordance with acquisition accounting principles.
Fixed assets – vehicles for hire
Other fixed assets
Stocks
Debtors
Bank overdraft
Borrowings falling due in less than one year
Other creditors falling due in less than one year
Borrowings falling due after more than one year
Other creditors falling due after more than one year
Provisions for liabilities and charges
Fair value of net assets acquired
Goodwill
Acquisition cost (including expenses)
Fair value of consideration:
Cash
Bank overdraft with subsidiary undertaking acquired
Cash outflow in the year on acquisition of Foley
The provisional fair values equate to the book values.
Book &
fair value
£000
9,718
1,655
237
896
(475)
(3,692)
(758)
(3,453)
(954)
(836)
2,338
1,557
3,895
3,895
475
4,370
In its financial year to 31 March 2004, Foley made a profit after tax of £527,000. For the period from that date to the date of acquisition,
Foley made a profit after tax of £124,000.
F Herriman & Sons Limited ("Daman")
On 30 April 2004, the Group acquired the entire issued share capital of Daman for a cash consideration of £960,000, including goodwill
of £670,000. During the current year, the Group received £70,000 from the vendor, under the retention terms of the sale and purchase
agreement. There is no impact on goodwill in the current year.
In all of the above acquisitions, the fair values represent the Directors' current estimates of the net assets acquired. In accordance with
FRS7, the values attributed may be revised as further information becomes available.
42 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 43
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2005 (CONTINUED)
19 Provisions for liabilities and charges
22 Reserves
Group
Company
Deferred tax provided:
Accelerated capital allowances
Other timing differences
Movement in deferred tax:
At 1 May
Acquisitions (Note 18)
Credited in profit and loss account
Adjustments to prior years
Foreign exchange movement
Reclassification to debtors (Note 15)
At 30 April
20 Called up share capital
Group and Company
Authorised:
80,000,000 Ordinary shares of 5p each
1,300,000 cumulative Preference shares of 50p each
Allotted and fully paid:
64,183,217 (2004 – 64,034,340) Ordinary shares of 5p each
1,000,000 5% cumulative Preference shares of 50p each
2005
£000
11,329
(1,905)
9,424
6,821
2,430
(784)
957
–
–
9,424
2004
£000
8,562
(1,741)
6,821
7,005
166
(932)
585
(3)
–
6,821
2005
£000
167
(867)
(700)
(119)
–
(671)
90
–
700
–
2005
£000
4,000
650
4,650
3,209
500
3,709
2004
£000
110
(229)
(119)
(6)
–
(119)
6
–
–
(119)
2004
£000
4,000
650
4,650
3,202
500
3,702
During the year 148,877 Ordinary shares with a nominal value of £7,444 were issued pursuant to the exercise of options under the Group's
various share schemes, for a cash consideration of £722,164.
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.
21 Share premium account
Group and Company
At 1 May
Premium on shares issued (net of expenses) (Note 20)
At 30 April
2005
£000
61,829
715
62,544
2004
£000
45,635
16,194
61,829
Revaluation
reserve
£000
Merger
reserve
£000
Own
shares held
£000
Group
At 1 May 2004 (as originally stated)
Prior year adjustment (Note 9)
At 1 May 2004 (as restated)
Profit transferred to reserves
Share options adjustment under UITF17 (revised) (Note 9)
Revaluation of land and buildings (Note 18)
Foreign exchange differences on
retranslation of net assets of subsidiaries
Foreign exchange differences on long term borrowings
Increase in own shares held
Disposal of own shares held
23
–
23
–
–
1,031
–
–
–
–
4,721
–
4,721
–
–
–
–
–
–
–
At 30 April 2005
1,054
4,721
Company
At 1 May 2004
Profit transferred to reserves
Share options adjustment under UITF17 (revised) (Note 9)
Foreign exchange differences on retranslation
of investments in subsidiaries
Foreign exchange differences on long term borrowings
Revaluation of foreign currency denominated investment
in subsidiary upon inception of hedge (see below)
At 30 April 2005
–
–
–
–
–
1,371
1,371
417
–
–
–
–
–
417
–
(1,330)
(1,330)
–
–
–
–
–
(2,567)
1,426
(2,471)
–
–
–
–
–
–
–
Profit
and loss
account
£000
119,362
–
119,362
25,657
191
–
(153)
1,635
–
–
Total
reserves
£000
124,106
(1,330)
122,776
25,657
191
1,031
(153)
1,635
(2,567)
1,426
146,692
149,996
71,333
1,388
191
(1,389)
1,389
–
72,912
71,750
1,388
191
(1,389)
1,389
1,371
74,700
During the year, the Company took out borrowings denominated in Euro in order to hedge its Euro denominated investment in Fualsa.
The investment balance was translated into Sterling at the exchange rate prevailing when this hedge was put into place and the gain arising
was reflected in the revaluation reserve of the Company. The Company retranslated the borrowings and the investment into Sterling using the
exchange rate prevailing at the balance sheet date. In accordance with SSAP20, the full loss on the retranslation of the investment has been
recognised directly in reserves and the gain on the retranslation of the borrowings has been recognised directly in reserves to the extent that it
offsets the loss arising on the retranslation of the investment. The remaining gain on the retranslation of the borrowings has been recognised in
the profit and loss account of the Company.
The cumulative amount of goodwill written off directly to reserves is £13,195,000 (2004 – £13,195,000).
At 30 April 2005, a total of 314,928 (2004 – 239,779) Ordinary shares in the Company, with a market value of £2,558,790 (2004 – £1,496,221) were
held by Walbrook Trustees (Guernsey) Limited and Capita IRG Trustees Limited as a hedge against the Group’s obligations under its various
share schemes. All but a nominal dividend right in respect of these shares has been waived. Further details of the Group’s share schemes are
outlined in the Remuneration Report on pages 14 to 17.
44 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 45
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2005 (CONTINUED)
FIVE YEAR FINANCIAL SUMMARY
23 Reconciliation of movements in shareholders’ funds
Based on the consolidated financial statements for years ended 30 April and adjusted to reflect the effect of subsequent changes in
accounting policy.
Profit for the financial year
Dividends
Issue of Ordinary share capital (net of expenses)
Share options adjustment under UITF17 (revised) (Note 9)
Revaluation of land and buildings (Note 18)
Increase in own shares held (net)
Foreign exchange differences
Opening shareholders’ funds (as originally stated)
Prior year adjustment - UITF38 (Note 9)
Prior year adjustment - UITF17 (revised) (Note 9)
Opening shareholders’ funds (as restated)
Closing shareholders’ funds
24 Contingent liabilities
The Company has guaranteed borrowings by subsidiary undertakings of £nil (2004 – £44,033,000) as at 30 April 2005.
25 Commitments
Capital expenditure commitments:
Capital expenditure contracted for but not provided in the accounts is as follows:
2005
£000
38,494
(12,837)
25,657
722
191
1,031
(1,141)
1,482
27,942
188,307
–
–
188,307
216,249
2004
as restated
£000
31,289
(11,064)
20,225
16,351
–
–
–
(290)
36,286
153,210
(1,330)
141
152,021
188,307
Group
2005
£000
119
2004
£000
475
Contracted for but not provided in the accounts
Financial commitments:
As at 30 April 2005 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
26 Pensions
2005
2004
Land and
buildings
£000
736
671
912
2,319
Other
£000
533
2,026
11
2,570
Land and
buildings
£000
250
590
1,299
2,139
Other
£000
683
1,161
12
1,856
Profit and loss account
Turnover
Continuing operations
Acquisitions
Joint venture
Turnover: Group and share of joint venture
2005
£000
380,486
77,781
–
458,267
2004
£000
355,624
–
23,461
379,085
2003
£000
337,875
–
14,514
352,389
Less: share of joint venture’s turnover
–
(23,461)
(14,514)
2002
£000
277,829
–
–
277,829
–
2001
£000
261,801
–
–
261,801
–
Group turnover
458,267
355,624
337,875
277,829
261,801
Operating profit
Group operating profit - continuing operations
Group operating profit - acquisitions
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 assets (liabilities)
Creditors (after one year) and provisions
Financed by
Share capital
Share premium account
Reserves
Net asset value per Ordinary share
62,433
13,248
–
75,681
–
(21,224)
54,457
(15,963)
38,494
(12,837)
25,657
59.7p
20.0p
2005
£000
55,605
–
4,342
59,947
–
(15,355)
44,592
(13,303)
31,289
(11,064)
20,225
50.7p
17.6p
2004
£000
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
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
583,900
45,092
(412,743)
419,136
(15,929)
(214,900)
402,173
(86,615)
(162,597)
344,494
(60,676)
(147,201)
317,754
(51,625)
(142,436)
216,249
188,307
152,961
136,617
123,693
3,709
62,544
149,996
216,249
336p
3,702
61,829
122,776
188,307
293p
3,545
45,635
103,781
152,961
250p
3,542
45,471
87,604
3,539
45,321
74,833
136,617
123,693
224p
203p
The pension cost for the Group was £1,125,000 (2004 – £944,000).
During the year ended 30 April 2005 the Group only operated defined contribution arrangements.
46 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 47
NOTICE OF ANNUAL GENERAL MEETING
THE NORTHGATE SHARE OPTION SCHEME
and shall expire at the conclusion of the Annual General
Meeting of the Company to be held in 2006 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.
10. 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)
(b)
(c)
(d)
(e)
the Company does not purchase under this authority more than
6,400,000 Ordinary shares;
the Company does not pay less than 5p for each share;
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 five 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 2006 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.
11. That the amendments to the Rules of the Northgate Share
Option Scheme, produced in draft to this Meeting in the
document marked ‘A’ and signed by the Chairman of the
Meeting for the purposes of identification, be and the same are
hereby approved and the Directors be and they are hereby
authorised to cause such Rules to be adopted in the form of
such draft and to do all acts and things which they may
consider necessary or expedient for implementing and giving
effect to the same.
Notice is hereby given that the one hundred and seventh Annual
General Meeting of Northgate plc will be held at Norflex House,
Allington Way, Darlington at 11.30 am on 28 September 2005 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 2005.
To declare a final dividend of 12p per Ordinary share.
To approve the Remuneration Report for the financial year
ended 30 April 2005 set out on pages 14 to 17 of the 2005
Annual Report and Accounts.
To re-appoint Deloitte & Touche LLP as auditors of the
Company.
To authorise the Audit Committee to determine the
remuneration of the auditors.
To re-elect Mr M Ballinger as a Director.
To re-elect Mr T Brown as a Director.
To re-elect Mr A T Noble as a Director.
As special business to consider, and if thought fit, to pass
the following resolutions: numbers 9 and 10 are to be proposed as
Special Resolutions and number 11 as an Ordinary Resolution.
9.
(a)
(b)
(c)
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 8 September 2004 as
if Section 89(1) of the Act did not apply to any such allotment,
provided that this power shall be limited to:
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);
the allotment of equity securities in connection with any
employees’ share scheme approved by the members in general
meeting; and
the allotment (otherwise than pursuant to sub-paragraphs (a)
and (b) above) of equity securities up to an aggregate nominal
amount of £160,000.
NOTES
1.
2.
3.
Only the holders of Ordinary shares registered in the register of members of the Company as at 6.00 pm on 26 September 2005 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.
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 three-way proxy card for this purpose is enclosed.
Copies of the draft document referred to in Resolution 11 will be available for inspection at the registered office and at the offices of
New Bridge Street Consultants LLP, 20 Little Britain, London EC1A 7DH until the conclusion of the Annual General Meeting.
With assistance from New Bridge Street Consultants LLP, the
Company has recently reviewed the provisions of the Northgate Share
Option Scheme (the “Scheme”) against current market practice and
corporate governance.
In summary the proposed changes, which will only apply to future
grants, are:
Eligibility: in line with current market practice flexibility has been
incorporated to enable grants up to six months before retirement (the
current rules prohibit grants within two years of retirement);
Option Price: the default option price for unapproved options has
been set to be the middle market quotation on the dealing day prior to
grant or on such other dealing day within the preceding 5 days (i.e.
curbing the 30 day window in the current rules to 5 days);
Option Term: the term has been increased from 5.5 years to 10 years
which is the norm for share options;
Timing of grants: authority to make grants for a further ten years from
the date of the AGM to be held on 28 September 2005;
Dilution limits: the dilution limits within the existing rules have been
replaced with two new limits which are in line with current market
practice. The first limit provides that in any ten year period the
Company may not issue (or have the possibility to issue) more than
10 per cent of the issued Ordinary share capital of the Company
under the Scheme and any other employees’ share scheme adopted
by the Company. The second limit provides that on the same basis no
more than 5 per cent of the issued Ordinary share capital of the
Company may be issued under a discretionary executive share option
plan. The limits provide flexibility to periodically recalculate the
“dilution” position to take into account grants structured or
restructured as Share Appreciation Rights (see below);
Individual limits: The four times remuneration limit within the existing
rules of the Scheme has been removed. Unapproved options are now
limited to grants not exceeding 150% of salary per financial year.
Approved options are subject to the £30,000 limit prescribed by the
relevant legislation (or such higher limit prescribed by the legislation
from time to time);
Rights on cessation of employment: For future grants performance
conditions will continue to apply in all circumstances (the
performance conditions will expressly deal with the measurement of
performance over a curtailed period). Where options vest early, they
will also ordinarily be pro-rated to time, reflecting the number of days
elapsed from the grant date to the date of cessation bears to three
years. There is discretion not to pro-rate;
Rights on takeover, reconstruction and winding up: For future grants
performance conditions will continue to apply on a change of control,
reconstruction or winding up of the Company (again, the performance
conditions will expressly deal with the measure of performance over a
curtailed period). Where options vest early, they will ordinarily be
pro- rated for time, reflecting the number of days elapsed from the
grant date to the date of cessation bears to three years. There is
discretion not to pro-rate; and
Share appreciation rights: Flexibility has been incorporated into the
rules to grant Share Appreciation Rights (SARs) and/or restructure
“unapproved” option grants as SARs. SARs deliver the net gain made
on the exercise of an unapproved share option in shares (they cannot
currently be used in connection with Inland Revenue approved
grants). The way they can work is as follows:
A participant is granted an option with an exercise price equal to the
market value of the shares at grant;
On the exercise of the option the participant does not pay the exercise
price;
The Company calculates the amount of gain which the participant
would make on the exercise of his option, i.e. the amount by which
the market value of the shares exceeds the exercise price;
The resulting gain is then divided by the Company’s share price;
The resulting number of shares is either issued or transferred to
the Participant.
As SARs only deliver the gain in shares, this reduces the number of
shares which have to be used to satisfy an option.
Performance conditions
The performance condition that has been attached to grants to date
has been a single hurdle target of EPS growth over three financial
years to exceed inflation by a simple average of 3% per annum with
two re-tests at the end of the fourth and fifth financial years if the test
has not been met.
The vesting schedule proposed for grants made in 2005 and
subsequently is as follows.
Average annual EPS growth
in excess of inflation over three
year performance period
Proportion of share option
exercisable
5%
5%
11%
Zero
Options over shares at
grant worth 75% of salary or less
Options over shares at grant
worth 150% of salary or less
Between 5% and 11%
Pro-rata between the above
For example, were an executive to receive a grant over options
equating to 100% of salary, assuming a zero rate of inflation, for any
part of the option to vest, EPS for the final financial year would need
to exceed EPS for the base year by 15%. For such performance 75% of
the option would become exercisable (i.e. such portion representing
75% of salary). In the same scenario, for the option to vest in full, EPS
for the last financial year would need to exceed the EPS of the base
year by 21% (plus inflation) or more (i.e. 7% average p.a. falls one
third between 5% and 11% p.a., corresponding to 100% of salary
falling one third between 75% and 150% of salary).
The re-testing provisions will be removed.
48 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 49
INFORMATION FOR SHAREHOLDERS
NOTES
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.
The Company’s sponsoring broker is Hoare Govett Limited
(part of ABN AMRO) and the Company’s Ordinary shares
are traded on SETSmm.
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
DL1 4DY
Tel: 01325 467558
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Tel: 0870 1623100
50 Northgate plc Annual Report & Accounts 2005
Northgate plc Annual Report & Accounts 2005 51
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