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6
NORFLEX House Allington Way Darlington DL1 4DY
Telephone: 01325 467558
www.northgateplc.com
ANNUAL REPORT
AND ACCOUNTS 2006
OFFERING FLEXIBLE VEHICLE
SOLUTIONS FOR 25 YEARS
CELEBRATING OUR SILVER JUBILEE
We have celebrated our 25th year in business in a number of ways with our customers,
suppliers, employees and the local community. Putting something back into the local
community has played a major role in our celebrations.
An initiative was launched to provide a free van to local charities
up and down the UK. This has proved to be a huge success. In
the last few months we have helped four registered charities,
providing each one with the use of a free van to use in a special
charity project. Throughout our silver jubilee we will endeavour
to help as many charities as we can through this scheme.
In addition we have provided funding to a childrens’ museum
called Eureka. Our funding has helped to support a new project
called Mission Active! The aim of this project is to educate
children on the benefits of healthy eating and exercise, in a fun
way. Mission Active! consists of a mobile exhibition which is
currently travelling throughout the North East of England.
Our 25th anniversary celebrations have also seen us supporting
Conrad Dickinson, an intrepid explorer whose mission was to
trek 480 miles (775 km) to the North Pole unaided.
He succeeded and, having already skied across the Greenland
ice cap and trekked to Antarctica and back, he became the first
British explorer to achieve the "polar trilogy" in battling the
elements in Greenland plus the North and South Poles.
A T Noble
Executive Director
04
06
08
12
14
16
24
27
28
29
30
37
85
86
87
Chairman’s Statement
Operational Review
Financial Review
Board of Directors
Report of the Directors
Remuneration Report
Corporate Governance
Health & Safety and Environmental
Directors’ Responsibilities
Report of the Auditors
Financial Statements
Notes to the Accounts
Five Year Financial Summary
Notice of Annual General Meeting
Information for Shareholders
01 Northgate plc Annual Report and Accounts 2006
HIGHLIGHTS
Vehicle fleet – UK
– Spain
Group profit from operations
Profit before tax
Earnings per share
Dividend per share
Net assets per Ordinary share
2006
64,000
47,000
£72.6m
£56.1m
61.1p
23.0p
453p
2005
52,600
19,000
£76.2m
£55.0m
60.7p
20.0p
351p
> Group revenue for the year increased
by 9.8% to £372.6m (2005 – £339.4m)
> Underlying profit before tax* increased
by 7.3% to £59.9m (2005 – £55.8m)
> Adjusted earnings per share* increased
by 5.8% to 65.7p (2005 – 62.1p)
*Stated before intangible amortisation charges and
exceptional restructuring costs
Vehicle Fleet - UK
Vehicle Fleet - Spain
Group profit before tax (£000)
Earnings per share (p)
* Fualsa fleet only
** Fualsa and Record fleet combined
64,000
* UK GAAP basis ** IFRS basis
* UK GAAP basis ** IFRS basis
61.1
60.7
52,600
47,400
45,000
40,500
56,062
54,988
50.7
47,000
44,592
41.4
35.8
36,603
31,674
19,000
15,000
12,000
2002
2003
2004
2005
2006
2003*
2004*
2005* 2006**
2002* 2003*
2004*
2005** 2006**
2002* 2003*
2004*
2005**
2006**
02-03 Northgate plc Annual Report and Accounts 2006
POSITIONED FOR GROWTH
The Group’s acquisitions of Arriva Vehicle Rental, a leading commercial vehicle hire
operator and Fleet Technique, a fleet management company, have positioned
the Group’s UK business well for future growth.
Similarly the investment in Record Rent a Car SA, in Spain to complement Fualsa
means that the Group has a market leading position in a fast growing Spanish market.
STRENGTH IN SPAIN
In July 2002, we made our first significant investment in Spain, when we acquired
40% of the equity of Fualsa. The success of Fualsa encouraged us to acquire the
remainder of its equity in May 2004. The purchase of 49% of the equity of Record
Rent a Car, another of Spain’s leading commercial vehicle rental companies,
followed in August 2005 with the remaining 51% being acquired in May 2006.
With a fleet of 47,000 vehicles, operating from 35 locations we are established
as Spain’s market leader in commercial vehicle rental.
04-05 Northgate plc Annual Report and Accounts 2006
CHAIRMAN’S STATEMENT
The year’s performance was one of strong growth in Spain and a
resilient delivery from the UK business. It was also the third and
final year of Northgate’s three-year Strategy for Growth Plan,
which was set out in 2003.
The limited fleet growth due to market weakness experienced in
the construction, retail and distribution sectors referred to in my
Interim Statement has been largely overcome with the UK business
achieving expected levels of growth in the six months to April 2006.
The Group has achieved compound earnings per share growth
of 14% per annum over the three years, and in the process has
developed a robust and geographically diverse business. This is
particularly pleasing as it coincides with our 25th anniversary in
the business of renting light commercial vehicles.
A new three-year rolling strategy has been adopted which foresees
the continuation of earnings growth through building on our market
leading positions in the UK and Spain. Management began the
implementation of this new strategy in January 2006.
This is the first financial year that the Group has prepared its results
under IFRS. The impact of IFRS on profit before tax for the year was
immaterial. The main presentational change to the Group's financial
results is that proceeds received from the disposal of used vehicles
are no longer classified as revenue. This change in policy has had
the effect of reducing Group revenue as previously reported under
UK GAAP. Group revenue now comprises income derived from the
hire of vehicles and the supply of related goods and services.
The results for the year are set out below:
- Group revenue increased by 10% to £372.6m
(2005 – £339.4m)
- Underlying profit before tax* for the year was £59.9m
(2005 – £55.8m)
- Adjusted earnings per share* increased by 3.6p to 65.7p
(2005 – 62.1p)
*Stated before intangible amortisation of £1.2m (2005 – £0.8m)
and exceptional restructuring costs of £2.6m (2005 – £nil).
Based on these results and the Board’s view of future prospects,
the Board has decided to recommend to shareholders a final
dividend of 14p per share. This will produce a total dividend for the
year of 23p – an increase of 15% over the prior year and is covered
2.7 times. The dividend will be payable on 29 September 2006 to
those shareholders on the register on 1 September 2006.
As previously reported, the UK market was impacted by lower
residual values in the first half of the financial year. The second
half has seen residual values recover, albeit not to the unusually
high levels of the prior year. Continued development of retail and
semi-retail channels for vehicle sales has contributed to this
improvement in profitability.
Whilst UK hire rates have remained competitive, we have
experienced five months of relative stability since January 2006.
Our new strategy included a plan to acquire Arriva Vehicle Rental
Limited (“AVR”), a business with a rental fleet of over 11,000
vehicles in markets largely complementary to Northgate’s UK
business. The acquisition, which was funded in part by a placing
to raise £63m, was completed in January 2006 and management
have worked hard so that the integration of the business is now
substantially complete.
The growth of the UK network and the AVR acquisition have
demonstrated that efficiency improvements are achievable through
managing larger numbers of vehicles per business and Northgate’s
autonomous management structure is more cost-effective as a
result. Further strategic restructuring in the UK along these lines
is currently underway.
During the year, the Group also acquired Fleet Technique Limited
(“FTL”). An important element of Northgate’s growth strategy, this
business has given the Group the facility to manage operators’
fleets regardless of how they choose to acquire their vehicles.
In Spain, the growing vehicle rental market continues to justify
Northgate's confidence in both its original investment in Fualsa
and in its future strategy. In August 2005, the Group purchased
49% of Record Rent a Car SA (“Record”) and completed the
acquisition of the remaining 51% on 11 May 2006.
I have been encouraged by the strategic approach of the executive
team and the energy and enthusiasm that they display in the
continued development of the Group. The commitment of the staff
and management at all levels this year has been impressive. Your
Board will ensure that the new strategy is professionally adopted
throughout the Group with long-term benefits for all stakeholders.
Current Trading and Outlook
In the current financial year, in addition to the expected organic
growth in the UK, we will see the full benefit of the AVR acquisition.
We will also see further development of our fleet management
activities through FTL.
In Spain, along with good organic growth, we will have 100%
ownership of Record for the full year, an expected improvement in
Fualsa's operating performance and the benefit of further synergies
from combining business activities.
Consequently the Board remains confident of good progress in
the year ahead and trading remains in line with the Board’s
expectations.
Martin Ballinger
Chairman
06-07 Northgate plc Annual Report and Accounts 2006
OPERATIONAL REVIEW
Strategy for Growth
In July 2003 we announced our Strategic Plan for the three years
to April 2006, the key targets of which were:
- A fleet size of 60,000 in the UK and 18,000 in Spain;
- A 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 year under review the acquisition of AVR has resulted in
us exceeding the fleet size objective in the UK. In Spain, Fualsa
exceeded its fleet target by 5,000 units and had a network of
17 locations at 30 April 2006. The final payment of €14.9m in
respect of the consideration for the purchase of Fualsa was made
to the vendors on 8 May 2006.
The completion of the acquisition of Record on 11 May 2006
effectively doubled both the vehicle fleet and the depot network
in Spain.
We now have a number of ancillary products such as vehicle
tracking and parts procurement available to customers and the
acquisition of FTL on 23 January 2006 significantly extended our
non-rental product range.
Through the successful implementation of our strategy we were
seeking to achieve double-digit earnings growth in each year of the
plan. Over the three-year period the Company has achieved growth
in earnings per share at an annualised compound rate of 14%.
In January 2006 we announced, with our interim results, our
new Strategy for Growth based on a three-year rolling business
plan aimed at achieving continued double-digit growth in earnings
per share. The acquisitions of AVR and FTL and the completion
of the purchase of Record are very much in line with that Strategic
Plan and give us a platform to continue to successfully grow our
business.
Review of Current Year
UNITED KINGDOM AND REPUBLIC OF IRELAND
The first half of the financial year was one of the most difficult we
have encountered with limited fleet growth, competitive pressures
reducing hire rates and lower used vehicle residual values. The
second half, as predicted at the time of our interim results, has
seen more normal levels of fleet growth, stable hire rates since
January 2006 and an improvement in residual values.
DEPOT NETWORK
We currently operate from 88 locations, of which 35 are primary
and 53 are branches. This represents an increase of 12 locations
over the financial year, of which we acquired ten as a result of
the purchase of AVR.
VEHICLE FLEET
The historic pattern of fleet growth for the UK has been one of a
stronger first half than second half of the financial year. This year
has seen the opposite pattern with no growth in the first half of
the year, followed by an organic increase in the fleet of 2% in the
second half.
As noted in the interim report in January, in the first six months the
Group was affected by some weakness in demand from customers
operating in the construction, retail and distribution sectors along
with a major customer off-hiring a large number of vehicles. From
September demand returned to more normal levels and was in line
with our expectations for the remainder of the financial year. In
addition, the acquisition of AVR added significantly to our fleet in
February 2006, and we consequently ended the financial year with
a fleet of 64,000 vehicles.
Once integrated into our fleet it became impossible to distinguish
between our existing fleet and the AVR fleet, particularly for
common customers. As a consequence we cannot precisely split
growth arising from the AVR acquisition and organic growth for the
second half of the year but estimate that of the increase of 11,600
vehicles between 31 October 2005 and 30 April 2006, 10,500 came
from the acquisition, once non-utilised AVR vehicles were disposed
of, and 1,100 from existing businesses.
UTILISATION AND HIRE RATES
Utilisation again averaged 90% for the year (2005 – 90%).
From the beginning of August 2005 we experienced strong
competition resulting in declining hire rates. This continued until
January 2006 and as a result hire rates reduced year on year by
2.5%. Since January we have not experienced the same level of
aggressive activity and as a consequence hire rates have
remained stable.
USED VEHICLE SALES
We sold 23,000 vehicles (2005 – 17,700) during the year, the largest
volume we have ever disposed of. In the first half we experienced a
weaker market for used vehicle values, particularly in the long
wheel base van sector. Since October 2005, we have seen an
improvement in values as a result of the market improving, a
significant reduction in our stock levels and the continued
development of our semi-retail and retail channels.
Under IFRS the profit for used vehicle disposals is no longer
accounted for separately since depreciation is adjusted in order
that vehicles are retired from the fleet at their anticipated market
value less any direct costs incurred in their disposal. If this profit
arising from the used vehicle disposals had been calculated on the
same basis as last year, applying UK GAAP, the UK would have
recorded an operating profit per vehicle of £83 (2005 – £205).
We continue to seek to increase both the overall capacity of our
used vehicle sales network and our ability to sell more vehicles
through the semi-retail and retail channels. To that end we have
opened new facilities at Newmains in Scotland, Colchester and
Warrington during the year and now have nine outlets, of which six
are devoted primarily to retail and semi-retail disposals. In the year
under review 12% (2005 – 10%) of our disposals were to semi-retail
or retail customers and we remain on target to achieve 15%
through these channels in the medium term.
PURCHASE OF FLEET TECHNIQUE LIMITED (“FTL”)
In line with the Group’s Strategic Plan announced at the time of the
interim results, the Group acquired the entire issued share capital
of FTL for a consideration in cash of £5.7m, on 23 January 2006.
FTL is a specialist fleet management business, based in the North
East of England, serving customers across the UK. Third party
fleets under management totalled some 15,000 vehicles, including
both cars and commercials as at 30 April 2006. In addition, FTL has
developed a leading software package for the industry and has a
reputation for excellent service to its customers.
In the three months of ownership FTL contributed £0.1m to the
Group's profit from operations for the year. More importantly,
FTL provides us with the platform to develop a significant fleet
management business through offering customers a full range
of flexible vehicle solutions whilst capitalising on our core skills
of purchasing, maintaining and disposing of large volumes of
vehicles.
PURCHASE OF ARRIVA VEHICLE RENTAL LIMITED (“AVR”)
On 31 January 2006 we announced that we had entered into an
agreement to acquire the entire issued share capital of AVR and
that 6.05 million new Ordinary shares were being placed to partially
fund payment of the consideration. The placing became wholly
unconditional on 3 February 2006. The total consideration, including
acquired debt, paid to date for AVR is £124.4m. This is subject to
final agreement with the vendor of the net asset values acquired.
At the time of acquisition AVR operated a fleet of over 11,000
vehicles through a branch network of 33 locations and employed
around 650 people.
Our plan was to fully integrate AVR into our existing operating
structure by the end of our financial year and we are pleased to
report that this was achieved. Of the 33 branches ten were retained
as new locations for Northgate and another four were used as
replacements for existing Northgate sites. The staffing levels were
reduced from around 650 employed by Arriva to around 250
additional staff in the enlarged structure. Customer retention has
to date been excellent and those vehicles not being utilised have
been disposed of profitably.
On 8 March 2006 the Office of Fair Trading announced that it was to
examine the transaction. Having considered the evidence the OFT
decided on 18 May 2006 not to refer the merger to the Competition
Commission. A text of the decision is available on their website
at www.oft.gov.uk
REORGANISATION
On 20 June 2006 the Group commenced a restructuring plan to
create a functional, rather than geographic, management structure
for the UK business by streamlining the number of hire companies
to give fewer, but larger, business units, whilst retaining the existing
network of locations.
It is intended that this process, which will take around six to nine
months to complete, will leave us better able to deliver consistent
customer service throughout the Group and with improved
productivity from increased utilisation of the fleet and reduced
costs. Whilst it is likely that the benefits will be negated by the
one-off transactional cost of the changes in the current financial
year, future periods will benefit as evidenced by an improved
operating margin.
SPAIN
On 5 August 2005 we significantly increased our presence in Spain
with the purchase of 49% of Record, like Fualsa, one of Spain’s
leading vehicle rental companies. Since the remaining 51% of the
equity was not acquired until 11 May 2006, in the year under review
Record is accounted for as an associate. We are therefore reporting
on Fualsa and Record as two separate businesses this year but
going forward, will review our Spanish businesses as one operation.
During the year, the growth in the Spanish vehicle rental market
has been in part due to the continued high level of activity in
the construction sector. Whilst our aim remains to reduce our
dependency on this sector over time, we continue to take
advantage of the opportunities that exist in the medium term.
FUALSA
As at 30 April 2006 Fualsa operated a fleet of 23,000 vehicles from a
depot network of 17 locations, an increase of 4,000 vehicles and two
locations over April 2005. The utilisation rate averaged 89%, the
same as the prior year. Hire rates continued to improve modestly
and were up by just under 2% on the prior year, albeit the benefit
of this increase is reduced by a similar increase in the capital cost
of new vehicles.
The operating margin at 20.9% was down by over 4% on the prior
year, as a result of an increase in external maintenance costs,
increased depreciation due to lower residual values and some
planned increases in expenditure on management, IT and other
aspects of Fualsa’s infrastructure. Maintenance costs increased
due to the cumulative fleet growth of the last few years
overstretching the management structure combined with a
shortage of skilled personnel, particularly mechanics, leading to
more work having to be completed externally. Both of these issues
have been addressed and we are confident of an improvement in
the year ahead. These corrective actions, along with the operational
gearing benefit we will derive from a larger fleet size, should lead
to an improvement of over 1% in the operating margin for the
current year.
RECORD
Since our investment on 5 August 2005 the vehicle fleet has
grown by 20% producing a closing fleet of 24,000 vehicles at
18 locations. The utilisation rate averaged 92% in the period, a
slight improvement on the level achieved prior to our investment.
A similar increase to Fualsa was achieved in hire rates.
Whilst we remain of the belief that our customers are best served
by retaining two separate brands in Spain, there are opportunities
to obtain synergies by combining certain areas of the two
operations.
We have already brought together the purchasing activities of
the two companies to benefit from the economies of scale from
purchasing larger volumes, particularly vehicles. In the year ahead
we intend to merge vehicle disposals into one unit. Within the next
six months we expect to have appointed a CEO for Spain to allow us
to further merge the businesses in the second half of the financial
year. Further integration is to some extent dependent on having a
common IT platform, a project currently being developed and
expected to conclude in the 2007 calendar year.
Steve Smith
Chief Executive
08-09 Northgate plc Annual Report and Accounts 2006
FINANCIAL REVIEW
FINANCIAL REPORTING
The Group has delivered a resilient set of financial results,
particularly taking into account the difficult trading conditions that
existed in the UK during the first half of the financial year. The
financial impact on these results of businesses acquired in the UK
and Spain throughout the year are described separately below.
Whilst the additional contribution to earnings per share in this year
from these acquisitions has been marginal, they position the Group
for strong growth in the future.
This report represents the first annual results prepared under IFRS.
The transition to IFRS has not had a material impact on reported
profit before tax or cash flow. The main presentational change to
the Group's financial results is that proceeds received from the
disposal of used vehicles are no longer classified as revenue. This
change in policy has had the effect of reducing Group revenue as
previously reported under UK GAAP. Group revenue now comprises
the hire of vehicles and the supply of related goods
and services in the normal course of business.
Sales, Margins and Return on Capital
Group revenue increased by 10% to £372.6m (2005 – £339.4m)
as a result of an increase in UK revenue of 6% to £300.8m
(2005 – £283.4m) and a 28% increase in revenue from Fualsa
to £71.8m (2005 – £56.0m).
The Group acquired 49% of Record, a leading commercial vehicle
rental company in Spain on 5 August 2005. The results of Record
have been accounted for as an associate under the net equity
method and as a consequence none of Record's revenues have
been consolidated into Group revenue.
UNITED KINGDOM & REPUBLIC OF IRELAND
The composition of the Group's UK revenue and profit from
operations as between vehicle rental activities and fleet
management is set out below:
Revenue
Vehicle rental
Fleet management
Profit from operations
Vehicle rental
Fleet management
Intangible amortisation
2006
£000
297,433
3,338
300,771
58,722*
119
(692
)
58,149
2005
£000
283,414
–
283,414
62,863
–
(321
)
62,542
* The UK profit from operations is stated after an exceptional restructuring
cost of £2.6m relating to AVR following its acquisition on 3 February 2006.
Operating margins
(excluding exceptional cost and intangible amortisation)
UK overall
Vehicle rental
Fleet management
2006
20.4%
20.6%
3.6%
2005
22.2%
22.2%
–
The overall UK operating margin has declined to 20.4% (2005 – 22.2%)
partly as a result of acquiring FTL, a fleet management company
that generates a lower operating margin than vehicle rental. One
of the main reasons for the reduction in margin, however, was a
higher depreciation charge as a consequence of lower values
being obtained for vehicles sold at the end of their life. This was
particularly the case in the first half of the financial year when the
Group held more stock than normal and long wheel base products
experienced significant declines in value. The UK also experienced
a highly competitive environment in hire rates and as a result the
average hire rate declined by over 2% compared to 2005. In order
to compensate for lower hire rates and lower residual values the
operating expenses of the UK business were addressed and
savings achieved. After a particularly difficult first half to the
financial year an underlying operating margin in the UK vehicle
rental business of 20.6% (2005 – 22.2%) is a satisfactory outcome.
SPAIN
Fualsa, a major commercial vehicle rental company in Spain, has
been a wholly owned subsidiary since May 2004. On 5 August 2005
the Group acquired a 49% interest in the equity of Record, another
leading Spanish commercial vehicle rental company. Fualsa has
been reported as a subsidiary undertaking within the consolidated
financial statements whereas Record has been accounted for as an
associate.
Fualsa
The revenue and profit from operations generated by Fualsa during
the year are set out below:
Revenue
Vehicle rental
Profit from operations
Vehicle rental
Intangible amortisation
2006
£000
2005
£000
71,838
55,968
14,984
(535)
14,449
14,229
(534)
13,695
2005
25.4%
Operating margins (excluding intangible amortisation)
Overall
2006
20.9%
Fualsa's vehicle rental revenue increased by 28%, in line with
the increase in the average rental fleet size of 26% and hire rate
increases of just under 2%. The operating margin achieved by Fualsa
of 25.4% in 2005 was forecast to reduce as a result of investing in
the infrastructure of the business. Planned expenditure was incurred
with the appointment of senior managers, upgrading IT systems
and introducing credit insurance. In addition to these costs, Fualsa's
vehicle repair expenditure increased substantially in the second half
of the financial year as a result of a shortage of skilled technicians
to service the enlarged fleet resulting in a higher proportion of
maintenance being carried out by third parties. These additional
costs combined with increased depreciation due to lower residual
values have resulted in the operating margin reducing by 4.5%.
IAS 16 (Property, Plant and Equipment): Under IAS 16, the
Group is required to review its depreciation rates and estimated
useful lives on a regular basis to ensure that the net book value
of disposals of tangible fixed assets are broadly equivalent to
their market value. Depreciation charges are adjusted for any
differences that arise between net book values and open market
values of used vehicles upon transfer into non-current assets
held for sale, taking into account the further direct costs to sell
the vehicles.
IAS 18 (Revenue): Under IFRS, income from the sale of used
vehicles is not recognised within revenue and the net book value
of the vehicles sold, along with associated direct selling costs,
are removed from cost of sales.
IAS 19 (Employee Benefits): An accrual is recognised for
employee annual leave accrued, but not taken, at each balance
sheet date. Where this applies to business combinations, the
accrual required at the date of acquisition is deemed to reduce
the fair value of the net assets acquired with a corresponding
adjustment to goodwill.
IAS 21 (The Effects of Changes in Foreign Exchange Rates):
Certain exchange differences, previously recognised directly
within the profit and loss account reserve under UK GAAP, are
reclassified into a separate translation reserve, directly within
equity, under IFRS.
IAS 32 (Financial Instruments: Disclosure and Presentation):
The Company's cumulative preference shares are deemed to be
debt rather than equity under IFRS. They are reclassified from share
capital to borrowings in the balance sheet and preference dividends
are reclassified from dividends to finance costs in the income
statement.
IAS 38 (Intangible Assets): Certain software assets are
reclassified from tangible to intangible assets under IFRS. Amounts
previously charged to the profit and loss account as depreciation
under UK GAAP relating to these fixed assets are reclassified as
amortisation within the IFRS income statement.
Separate intangible assets are also recognised within business
combinations (see IFRS 3, above). These assets are amortised to
the income statement over their estimated useful lives.
IAS 39 (Financial Instruments: Recognition and Measurement):
Interest rate derivatives, to which the Group is party, are recognised
on the balance sheet at their fair value. Subsequent changes in the
fair value are recognised either within the income statement, as a
finance cost, or directly in equity to the extent that the Group elects
to hedge account, within the provisions of IFRS. This standard
has not been applied to the prior year as allowed under the
transitional rules.
Record
The Group’s 49% share of Record's profit before tax in the nine
month period since the date of the initial investment was £5.0m.
The equivalent operating margin for Record during this period was
23.7% reflecting higher utilisations and an absence of the issues
surrounding repair costs that existed in Fualsa. The fleet growth
of 20% in the period since acquisition indicates that the market
remains very strong for our flexible rental product in Spain.
GROUP
Group return on capital employed, calculated as Group profit
from operations divided by average capital employed (being
shareholders' funds plus net debt), is 10% (2005 – 14%).
Group return on equity, calculated as profit after tax divided
by average shareholders' funds, is 16% (2005 – 19%).
IFRS
This is the first set of Group results that have been prepared under
IFRS. The Group released an announcement on 21 December
2005 detailing the impact of IFRS on the results for the year ended
30 April 2005. The comparative financial information has been
restated to reflect the application of IFRS. The main impacts of
IFRS on the Group’s reported results, as compared with the results
for 2005 reported under previous accounting standards, are set
out below.
IFRS 2 (Share-based Payment): An income statement charge
is recognised in respect of the cost of share options granted under
the Group’s various share schemes. This cost is deemed to be the
fair value of the options granted and is charged over the vesting
period. An amount equivalent to the charge is credited directly
to equity, resulting in no impact on net assets. This accounting
treatment is the same as UK GAAP except that the fair values
used under IFRS 2 differ from those under UK GAAP.
IFRS 3 (Business Combinations): Separate intangible assets are
recognised at fair value on the acquisition of businesses after the
date of transition to IFRS, which previously formed part of goodwill
under UK GAAP. These include non-contractual customer
relationships, brand names and non-compete agreements, all of
which are amortised over their respective estimated useful lives.
The residual goodwill balance under IFRS is therefore lower in value
than under UK GAAP but it is no longer amortised and is, instead,
tested annually for impairment.
IFRS 5 (Non-current Assets Held for Sale and Discontinued
Operations): Vehicles held for resale are reclassified from
inventories into non-current assets held for sale under IFRS.
IAS 10 (Events After the Balance Sheet Date): Under IFRS,
dividends are not appropriated within the accounts until they are
either paid or formally approved.
IAS 12 (Income Taxes): Deferred taxation changes arise under
IFRS as a result of differences between the accounting treatment
and taxation treatment in respect of share options (IFRS 2),
intangible assets (IFRS 3) and holiday pay accruals (IAS 19).
Under IAS 12, deferred tax liabilities are also recognised on
all capitalised buildings, regardless of whether a contractual
commitment to sell exists.
10-11 Northgate plc Annual Report and Accounts 2006
FINANCIAL REVIEW
Taxation
Capital Structure
Strategy
Interest Rate Management
The Group’s UK operations have a total tax charge of 32%
(2005 – 31%), which is slightly higher than the standard rate of
30% due to disallowable expenditure incurred within the business.
Both Fualsa’s effective tax rate of 18% (2005 – 20%) and Record’s of
29% are below the standard Spanish tax rate of 35% because of tax
concessions based on vehicle purchase reliefs that are available to
the businesses. There is draft legislation in Spain that proposes to
reduce the standard rate of Corporation Tax from 35% to 30% whilst
at the same time removing some of the vehicle purchase reliefs
that the businesses currently claim. The timing of any change is not
certain and the precise impact on the likely effective tax in Spain
has not been quantified. It is expected, however, that this effective
rate will be nearer to 30% in the medium term.
Dividend
The Directors recommend a final dividend of 14p per share
(2005 – 12p) giving a total for the year of 23p (2005 – 20p),
an increase of 15%. The dividend is covered 2.7 times
(2005 – 3.0 times).
Earnings per Share
Earnings per share increased to 61.1p (2005 – 60.7p), reflecting
the growth in underlying profits being offset by an exceptional
restructuring cost associated with the acquisition of AVR and
its subsequent reorganisation and the increased number of
Ordinary shares in issue following the placing of 6.05 million
shares in February 2006. Excluding intangible amortisation of
£1.2m (2005 – £0.8m) and exceptional restructuring costs of
£2.6m (2005 – £nil), basic earnings per share grew by 6% to
65.7p (2005 – 62.1p).
Basic earnings per share have been calculated in accordance
with IAS 33.
Investments
On 5 August 2005 the Company acquired 49% of the share capital
of Record for €54.8m. In the UK, the entire share capital of FTL was
acquired for a consideration in cash of £5.7m on 23 January 2006
and on 3 February 2006 the Company acquired the entire share
capital of AVR for £50.3m.
Ordinary shares of the Company have been acquired in the open
market 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.
As at 30 April 2006 the Group’s total gearing measured as net
debt (including cash balances) as a percentage of shareholders'
funds but after the deduction of goodwill and intangible assets
increased to 204% (2005 – 198%). The net cash balance taken
into account in calculating the gearing ratios for this year is
£24.0m (2005 – £41.4m).
This level of gearing is in line with our expectations and is mainly
due to the cash outflows following the purchase of 49% of Record
and the acquisition of AVR being offset by cash generation from
operations and proceeds received from the issue of 6.05 million
Ordinary shares in February 2006. Since the year end the Group has
acquired the remaining 51% of Record's equity. If this purchase had
taken place on 30 April 2006 the consolidated balance sheet of the
Group would have had gearing of 314% on a pro-forma basis.
TREASURY
Cash Flows
The Group’s net debt increased by 28% to £524.5m
(2005 – £410.9m) excluding the debt in Record's balance sheet.
This increase reflects cash outflows associated with the purchase
of 49% of Record (£37.9m), the acquisition of AVR (£124.4m),
funding of fleet growth in the UK and Spain and the receipt of
the proceeds of the placing of 6.05 million Ordinary shares on
3 February 2006. Gross cash generation as reflected by EBITDA*
increased to £210.0m (2005 – £197.9m). The Group funded the
purchase of 22,500 new vehicles in the UK and 9,400 new vehicles
in Fualsa for a total cash outflow of £306.3m. The sale of 23,000 UK
vehicles and 4,900 Fualsa vehicles generated a cash inflow of
£150.8m. 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 €14.9m is classified as debt in the
Group’s balance sheet and was paid after the Group’s financial
year end in May 2006.
*EBITDA – Earnings before interest, taxation, depreciation and
amortisation.
Interest Costs
The Group’s net interest costs have decreased by 6% to £20.1m
(2005 – £21.2m) despite an increase in closing net debt of 28%.
This is because the Group has benefited from the full effects of the
refinancing arrangements put in place in January 2005 and also
from having a higher proportion of debt denominated in Euros than
in the prior year. Interest cover remained a healthy 3.6 times
(2005 – 3.6 times).
The Group’s financing strategy, which has been approved by the
Board, 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 negotiated and monitored centrally. In January 2006 the
Group extended its facilities to a total of £745m under a series of
unsecured, revolving, bilateral agreements. These extended
facilities have provided funding for the acquisition of AVR and
will also fund the refinancing of Record’s borrowings. All funds
generated by the Group’s operations are controlled by a central
treasury function.
Liquidity
The Group’s aggregate finance facilities, including existing Fualsa
loan facilities, total £756m compared to net debt of £524m. As
described above, the core of these arrangements relate to the
£745m unsecured facilities with the following terms:
Term
Within one year
Within three years
Within four years
Total
Amount (£m)
149
298
298
745
The Group’s bilateral agreements incorporate variable interest rate
clauses. 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. The current value of financial instruments
represents 60% of net debt at 30 April 2006 with an average term
outstanding of two years. This coverage fell to 44% of net debt
following the acquisition of Record after the year end in May 2006.
In assessing the effectiveness of these instruments, the table below
details the additional interest costs to the Group, based on the
Group's closing net debt position at 30 April 2006 of £524m, of a
series of interest rate increases, after applying the benefit of the
instruments. This table is based on the cash amounts and does
not take into account the effects of applying IAS 39:
Increase in
interest rate
Additional interest costs
Sterling debt
Euro debt
1%
2%
3%
£1.8m
£3.2m
£4.3m
£1.4m
£2.7m
£4.0m
Total
£3.2m
£5.9m
£8.3m
Gerard Murray
Finance Director
12-13 Northgate plc Annual Report and Accounts 2006
BOARD OF DIRECTORS
Appointed to the Board as
a non-executive Director in
November 2004, becoming
Chairman in January 2005.
Formerly Chief Executive
of Go-Ahead Group plc
since 1982.
Martin Ballinger
(age 62)
Stephen Smith ACA
(age 49)
Appointed Chief Executive Officer
in October 1999, having been a
member of the Board since August
1997. Managing Director of vehicle
hire operations since 1990.
Steve qualified as a Chartered
Accountant with Coopers & Lybrand
and held a number of senior financial
positions in industry prior to joining
the Company.
Appointed to the Board as a non-
executive Director in February 2001.
A Swedish national based in London,
Jan is a Senior Independent Director
of CRC Group plc. Prior to this, he
was Chairman of Car Park Group
AB in Stockholm and also Senior
Independent Director of PHS Group
plc. From 1994 to 1999 he was
President and Chief Executive of Axus
(International) Inc. (previously known
as Hertz Leasing International). From
1989 to 1994 he was Vice President,
Finance and Administration and Chief
Financial Officer of Hertz (Europe) Ltd.
Jan Astrand MBA
(age 59)
Tom Brown
(age 57)
Appointed to the Board as a
non-executive Director in April 2005.
Tom is Chairman of 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.
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. Phil 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.
Phil Moorhouse FCCA
(age 53)
Appointed Group Finance Director
in January 2003. Gerard 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.
Executive Director since 1990.
In 1981 Alan founded the
commercial vehicle hire business,
which was acquired by the
Company in 1987.
Appointed to the Board as a non-
executive Director in November 2003.
Philip 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.
Gerard Murray ACA
(age 43)
Alan Noble
(age 55)
Philip Rogerson
(age 61)
Board Committees
AUDIT
Philip Rogerson
(Chairman)
Jan Astrand
Tom Brown
(Appointed 8 June 2005)
Ronald Williams
(Resigned 28 September 2005)
REMUNERATION
Tom Brown
(Appointed 8 June 2005 –
Chairman from 1 August 2005)
Jan Astrand
(Chairman until 1 August 2005)
Philip Rogerson
Ronald Williams
(Resigned 28 September 2005)
NOMINATION
Martin Ballinger
(Chairman)
Jan Astrand
Tom Brown
(Appointed 8 June 2005)
Philip Rogerson
Stephen Smith
Ronald Williams
(Resigned 28 September 2005)
14-15 Northgate plc Annual Report and Accounts 2006
REPORT OF THE DIRECTORS
The Directors present their report and the audited financial
statements for the year ended 30 April 2006.
Results
Profit for the year after taxation was £40,594,000
(2005 – £39,231,000).
An interim dividend of 9p per share was paid on the Ordinary
shares on 9 February 2006.
The Directors recommend a final ordinary dividend of 14p per share
making a total for the year of 23p per share.
The final dividend, if approved, will be paid on 29 September 2006
to shareholders on the register at close of business on 1 September
2006.
Principal activities and Business Review
The Company is an investment holding company.
The principal subsidiary and associated undertakings are listed
in Note 18 to the accounts.
Details of the acquisitions of Arriva Vehicle Rental Limited, Fleet
Technique Limited and 49% of the share capital of Record Rent a
Car SA are given in Note 18 to the accounts.
The information that fulfils the requirements of the Business Review
can be found in the Operational and Financial Reviews on pages
6 to 11, which are incorporated in this report by reference.
Close company status
So far as the Directors are aware the close company provisions
of the Income and Corporation Taxes Act 1988 do not apply
to the Company.
Interests in shares
The following interests of 3% or more in the issued Ordinary share
capital of the Company appear in the register required to be
maintained under the provisions of Section 211 of the Companies
Act 1985:
AEGON UK Plc
Lazard Asset Management
Standard Life Group
Number Of Shares
3,609,506 (5.1%)
4,151,896 (5.9%)
2,717,305 (3.8%)
Directors
Details of the present Directors, all of whom have served
throughout the year, are listed on pages 12 and 13. Mr Williams
retired from the Board on 28 September 2005. Mr Smith, Mr
Moorhouse and Mr Murray are retiring by rotation in accordance
with the Articles of Association and, being eligible, are seeking
re-election.
The termination provisions in respect of executive Directors’
contracts are set out in the Remuneration Report on pages 16 to 21.
The following are the interests of the Directors in the share capital
of the Company as shown in the register required to be maintained
under Section 325 of the Companies Act 1985. All interests are
beneficial unless otherwise stated.
M Ballinger
S J Smith
J Astrand
T Brown
P J Moorhouse
G T Murray
A T Noble
P Rogerson
Ordinary Shares
30 April 2006
1 May 2005
2,500
71,121
–
2,000
35,288
10,890
732,629
–
2,500
72,271
–
–
34,938
10,540
732,279
–
No Director has an interest in the Preference shares of the Company.
No changes in the above interests have occurred between 30 April
2006 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 Report on
pages 16 to 21.
Directors indemnities
The Directors have the benefit of qualifying third party indemnity
provisions contained in the Company’s Articles of Association
which were in force throughout the financial year and remained
in force as at the date of signing of this report. The Company’s
Articles of Association are available on the Company’s website.
Donations
During the year the Group made charitable donations of £18,000
(2005 – £45,000) principally to local charities serving the
communities in which the Group operates.
No political donations were made.
Payment of suppliers
The Group’s policy is to pay suppliers within normal trading terms
agreed with that supplier. The policy is made known to the staff who
handle payments to suppliers. At 30 April 2006 the Group’s creditor
days were as shown in Note 23 to the accounts.
Disabled employees
Applications for employment by disabled persons are given full
consideration, taking into account the aptitudes of the applicant
concerned. Every effort is made to try to ensure that employees
who become disabled whilst already employed are able to
continue in employment by making reasonable adjustments in
the workplace, arranging appropriate training or providing suitable
alternative employment. It is Group policy that the training,
career development and promotion of disabled persons should,
as far as possible, be the same as that of other employees. The
Group’s equal opportunity policy is available on the
Company’s website.
Remuneration report
As required by the Directors’ Remuneration Report Regulations
2002, the Remuneration Report, set out on pages 16 to 21, will
be put to shareholders for approval at the Annual General Meeting.
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 £175,000 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
7,000,000 Ordinary shares (representing approximately 10% of the
issued Ordinary share capital) and within the price constraints set
out in the special resolution to be proposed at the Annual
General Meeting.
There is no present intention to make any purchase of own shares
and, if granted, the authority would only be exercised if to do so
would result in an improvement in earnings per share for
remaining shareholders.
Financial Instruments
Details of the Group's use of financial instruments are given in
the Financial Review on pages 10 and 11.
Auditors
In the case of each of the persons who are Directors of the
Company at the date when this report was approved:
- so far as each of the Directors is aware, there is no relevant audit
information (as defined in the Companies Act 1985) of which the
Company’s auditors are unaware; and
- each of the Directors has taken all the steps that he ought to
have taken as a Director to make himself aware of any relevant
audit information (as defined) and to establish that the
Company’s auditors are aware of that information.
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
3 July 2006
16-17 Northgate plc Annual Report and Accounts 2006
REMUNERATION REPORT
The Remuneration Committee has written terms of reference
which are available on the Company’s website. Membership of
the Committee is shown on page 13.
The Committee is responsible for making recommendations to the
Board on the remuneration packages and terms and conditions
of employment of the Chairman, the executive Directors of the
Company and of the Company Secretary. The Committee also
reviews remuneration policy 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 packages of the Chairman, the
executive Directors and the Company Secretary. NBSC is appointed
by the Committee and undertakes no other work for the Company
or the Group. The terms of engagement between the Committee
and NBSC are available on request.
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. Directors have a duty
to make reasonable efforts to mitigate any loss arising from such
termination and the Committee will have regard to that duty on
a case by case basis when assessing the appropriate level of
compensation which may be payable. It is also the Board’s policy
that where compensation on early termination is due, in appropriate
circumstances it should be paid on a phased basis.
Remuneration Policy
Basic salaries
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 annual 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.
Executive remuneration is structured so that a significant
proportion relates to variable pay. The charts below show the
balance between fixed and variable performance based pay
for each executive Director for the year ended 30 April 2006.
Mr S J Smith
Variable
Fixed
Mr P J Moorhouse
Variable
Fixed
Mr G T Murray
Variable
Fixed
Mr A T Noble
Variable
Fixed
Flexible Benefits Scheme
The Company operates a flexible benefits scheme which is designed
to help in the recruitment and retention of employees by allowing
them to tailor their remuneration package to best suit their
individual needs.
Service Contracts
The executive Directors have rolling service contracts which
may be terminated by 12 months notice on either side.
The current basic salaries paid to the executive Directors are
as follows:
S J Smith
P J Moorhouse
G T Murray
A T Noble
£350,000
£240,000
£240,000
£185,000
All were last reviewed on 1 May 2006.
Basic salaries are reviewed annually taking into account the
performance of the individual, changes in responsibilities and
market trends. The Committee has determined that the most
appropriate comparator group against which to benchmark
executive Directors’ basic salaries is the FTSE 250, taking into
account the roles, responsibilities and experience of each
Director. Accordingly, for the 2006/07 financial year, it agreed
to increase executive Directors’ basic salaries by an average of
13%, to reflect the continued strong performance of the business.
Even after this increase, basic salaries are below market levels.
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 currently
held are:
P J Moorhouse – Director, Renew (North East) Limited
(non fee earning)
A T Noble – Director, Tees Valley Regeneration (non fee earning)
Non-executive Directors
Performance Graph
The remuneration of the non-executive Directors (other than
the Chairman) is determined by the Board as a whole, within
the overall limit set by the Articles of Association. Non-executive
Directors are not eligible for performance related payments nor may
they participate in the Company’s share option or pension schemes.
Non-executive Directors do not have contracts of service with the
Company and their appointments are terminable without notice.
The current fees paid to the non-executive Directors are
shown below:
As required by The Directors’ Remuneration Report Regulations
2002, the graph below 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. The mid-market price of
the Company’s Ordinary shares at 30 April 2006 was 1,100p
(30 April 2005 – 812.5p) and the range during the year was
812.5p to 1,245p.
M Ballinger Chairman
J Astrand
T Brown
P Rogerson Chairman of Audit Committee
& Senior Independent Director
Non-executive Director
Chairman of Remuneration Committee
£105,000
£35,000
£39,000
£41,000
All were last reviewed on 1 May 2006. The fee structure for non-
executive Directors reflects the time commitment and responsibility
for carrying out non-executive duties. Fees are set taking into
account market practice for similar roles in FTSE 250 companies.
In addition to the fees shown, Mr Astrand receives an amount of
£25,000 in recognition of the additional time commitment required
following his appointment as a non-executive Director of Fualsa in
May 2004 and Record in August 2005. The Board does not consider
that those appointments in any way affect his independence.
Pension Schemes
Throughout the year all pension arrangements (other than
the Willhire Group Scheme – see Note 39 of the accounts)
operating throughout the Group were defined contribution
schemes. The Group will not incur any additional costs as a
result of the introduction of Pension Simplification on 6 April 2006.
The following elements of this report have been audited:
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
2001
2002
2003
2004
2005
2006
This graph shows the value, by 30 April 2006, of £100 invested in Northgate
on 30 April 2001 compared with that of £100 invested in the
FTSE 250 (Excl. inv. Trusts) Index.
Salary/fees
Cash
bonus benefits*
Cost of Chargeable
expenses
£000
£000
£000
£000
2006
Total
£000
2005
Total
£000
2006
Pension
2005
Pension
contributions† contributions†
£000
£000
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
100
–
300
56
35
220
210
168
38
17
1,144
–
–
–
108
–
–
45
55
25
–
–
233
–
–
–
26
–
–
24
23
26
–
–
99
–
–
–
1
–
–
3
–
–
–
–
4
–
100
–
435
56
35
292
288
219
38
17
37
71
425
49
3
301
279
229
34
40
1,480
–
1,468
–
–
–
33
–
–
31
19
24
–
–
–
107
*These benefits include: company car, private medical insurance, permanent health insurance and life assurance.
† All contributions are to a defined contribution type scheme.
–
–
30
–
–
29
17
23
–
–
–
99
18-19 Northgate plc Annual Report and Accounts 2006
REMUNERATION REPORT
SHARE INCENTIVE PLANS
During the year, the Committee has reviewed the Group’s
share-based incentive arrangements.
Following the fulfilment of the Executive Incentive Scheme
(“EIS”) the Board, on the advice of the Committee adopted
a Performance Share Plan (“PSP”) for the benefit of
senior management at below Board level, including, for the
first time, senior managers of our Spanish operations.
The Group therefore now operates three share-based incentive
schemes: Directors participate in the Northgate Share Option
Scheme (“NSOS”) and Deferred Annual Bonus Plan (“DABP”)
and below the Board, other executives in the PSP and DABP.
No executives will participate in all three schemes. Expressed
in face value terms, this effectively gives Directors a cap of
200% of basic salary for share awards each year (150% under
the NSOS and 50% under the DABP) and other executives
a cap of 150% (100% under the PSP and 50% under the DABP).
With the introduction of the PSP and the changes to the rules
of the NSOS approved by shareholders at last year’s Annual
General Meeting, the Committee is satisfied that the share
incentive arrangements now in place and the performance
measures currently applying to awards are appropriate for the
Group at the present time.
Performance Share Plan
The PSP is designed to reward achievement of and individual
contribution to, the Group’s new three-year rolling business plan
(“the Plan”).
Participants will receive a conditional award of free shares which
will vest after three years subject to achievement of performance
conditions and continued employment during the vesting period.
The maximum award in any financial year will normally be 100%
of salary.
The Committee believes that the most appropriate measure of
performance against the Plan is one based on divisional or Group
profit before tax, as relevant to the individual. There is a straight
line sliding scale of vesting starting at 30% for 90% of target
achievement rising to 100% for achieving 100% of target. The
Committee has discretion to alter the performance targets to
take account of any significant event occurring after the grant
of an award but prior to vesting. Such events may include a
major acquisition, debt restructuring or an equity issue.
The first awards under the Plan, totalling 134,000 shares,
were made in May 2006 to 55 executives including nine in Spain.
Northgate Share Option Scheme
The NSOS was originally introduced in 2000 as a medium
term incentive for senior management below the Board.
With the introduction of the PSP for management below Board
level, it is intended that, with effect from awards made in 2006,
only Directors will participate in the NSOS.
In line with the rule changes approved by shareholders at last
year’s Annual General Meeting, the performance condition applying
to all options granted from 2005 onwards will be based on the
growth in the Company’s earnings per share (“EPS”) in excess of
inflation measured over a three-year period commencing with the
EPS for the financial year ending immediately prior to the date of
grant. This requires substantial improvement in the underlying
financial performance of the Company before options may be
exercised. Options over shares at grant worth 75% of basic salary
or less will vest provided average annual EPS growth is at least RPI
plus 5% over the performance period. Options over shares at grant
worth 150% of basic salary (the maximum grant level) or less will
vest provided average annual EPS growth is at least RPI plus 11%
over the performance period. For grants between 75% and 150% of
basic salary a pro rata sliding scale of EPS growth between 5% and
11% will apply. There is no provision for re-testing.
For options granted prior to last year’s rule change, full vesting
requires average annual EPS growth of at least 3% plus RPI over
the three-year vesting period, with re-tests at the end of years four
and five.
The Committee will apply a consistent calculation methodology
following the adoption of International Financial Reporting
Standards.
Options granted to Directors under the NSOS are shown
on page 20.
No options held by Directors lapsed during the year.
It is proposed that an option award for 2006/07 be made in the
six-week period following the announcement of the results for
the year ended 30 April 2006.
In addition, options over 238,500 shares granted to 55 employees
at exercise prices ranging from 403.5p to 931p were outstanding
at 30 April 2006.
Deferred Annual Bonus Plan
The 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.
The shares will be retained in an employee benefit trust for three
years and be subject to forfeiture if the employee leaves during
that time. This will provide a strong retention mechanism and has
the motivational benefits of certainty and clarity for the employee.
During the retention period, executives continue to have an
incentive to influence the share price so as to maximise the value
on release.
The Directors hold deferred shares (in the form of nil cost options)
in the DABP as set out on page 20.
In addition, options over 93,418 shares awarded to 69 management
employees were outstanding at 30 April 2006. No options held by
Directors either lapsed or were exercised during the year.
The bonuses for executive Directors upon which the award for the
year ended 30 April 2006 was made were based upon business and
individual performance, including elements based on a target of
growth in underlying earnings per share of between 5% and 12%.
The bonuses payable are set out below.
S J Smith
P J Moorhouse
G T Murray
A T Noble
S J Smith
P J Moorhouse
G T Murray
A T Noble
Value
Cash
% of basic salary
£000 Awarded Maximum
108
45
55
25
36
20
26
15
50
40
40
40
Value
Shares
% of basic salary
£000 Awarded Maximum
18
11
10
8
6
5
5
5
50
40
40
40
It is intended that the number of shares to be awarded will be
calculated based on the closing mid-market price on 4 July 2006,
being the date of the Preliminary Results Announcement.
For the financial year ending 30 April 2007 the maximum awards
will be the same as for the year ended 30 April 2006.
The criteria for the executive Directors for 2006/07 will be as follows:
- Share element: to be based solely on underlying earnings per
share improvement over the previous year. The maximum award
to be made for growth of 20%, nil for growth of less than 5% and
pro rata for growth between those two figures.
- Cash element: to be based on individual key performance
indicators relevant to their areas of responsibility and including
an element of discretion by the Remuneration Committee.
Bonuses for other management 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.
During the year the Committee exercised its discretion in favour
of a manager who was made redundant to enable him to exercise
an award of 500 shares made to him as part of his bonus for the
year ended 30 April 2005.
All Employee Share Scheme
The All Employee Share Scheme (“the AESS”), which is approved
by H M Revenue and Customs under Schedule 8 Finance Act 2000,
was introduced in 2000 to provide employees at all levels with the
opportunity to acquire shares in the Company on preferential terms.
The Board believes that encouraging wider share ownership by all
staff will have longer-term benefits for the Company and for
shareholders. The AESS operates under a trust deed, the Trustees
being Capita IRG Trustees Limited (“the Capita Trust”).
To participate in the AESS, which operates on a yearly cycle,
employees are required to make regular monthly savings (on which
tax relief is obtained), by deduction from pay, for a year at the end
of which these payments are used to buy shares in the Company
(“Partnership shares”).
For each Partnership share acquired, the employee will receive
one additional free share (“Matching shares”). Matching shares
will normally be forfeited if, within three years of acquiring the
Partnership shares, the employee either sells the Partnership
shares or leaves the Group. After this three-year period Partnership
and Matching shares may be sold, although there are significant
tax incentives to continue holding the shares in the scheme for
a further two years. Those employees who are most committed
to the Company will therefore receive the most benefit.
20-21 Northgate plc Annual Report and Accounts 2006
REMUNERATION REPORT
SHARE INCENTIVE PLANS
At 1 May Number Number
2005 granted exercised
Date of Exercise Share price Gross gain At 30 April
2006
exercise
on date of on exercise
price
Normally
exercisable
Northgate Share Option Scheme
S J Smith
P J Moorhouse
G T Murray
20,000
–
20,000
15,000
–
15,000
50,000
13,500
–
63,500
A T Noble
–
–
27,500
27,500
–
19,000
19,000
–
–
19,000
19,000
17,000
–
–
–
–
–
–
–
–
–
–
–
–
(50,000) 20Feb 2006
–
–
–
–
(50,000)
–
98,500
82,500
(50,000)
Deferred Annual Bonus Plan
S J Smith
P J Moorhouse
G T Murray
15,813
–
15,813
10,542
–
10,542
6,325
–
6,325
–
15,832
15,832
–
9,672
9,672
–
8,751
8,751
32,680
34,255
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
p
663
931
–
663
931
–
380
663
931
–
931
–
–
–
–
–
–
–
–
–
–
–
exercise
p
–
–
–
–
–
–
1,120
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£
–
–
–
–
–
–
370,000
–
–
370,000
–
20,000
27,500
47,500
15,000
19,000
34,000
–
13,500
19,000
32,500
17,000
Aug 2007 - Feb 2009
Oct 2008 - Apr 2010
Aug 2007 - Feb 2009
Oct 2008 - Apr 2010
Aug 2007 - Feb 2009
Oct 2008 - Apr 2010
Oct 2008 - Apr 2010
370,000
131,000
Aug 2007 - Aug 2009
Oct 2008 - Oct 2010
Aug 2007 - Aug 2009
Oct 2008 - Oct 2010
Aug 2007 - Aug 2009
Oct 2008 - Oct 2010
–
–
–
–
–
–
–
–
–
–
15,813
15,832
31,645
10,542
9,672
20,214
6,325
8,751
15,076
66,935
Executive Incentive Scheme
S J Smith
180,000
P J Moorhouse
180,000
A T Noble
174,050
5,950
180,000
540,000
–
–
–
–
–
–
(45,000) 9 Nov 2005
(50,000) 20Feb 2006
(43,513) 9 Nov 2005
(2,975) 9 Nov 2005
(46,488)
(141,488)
–
–
492.5
492.5
492.5
503.5
–
–
988
220,887
135,000
Sep 2003 - Sep 2009
1,120
313,750
130,000
Sep 2003 - Sep 2009
983
983
–
–
213,587
14,275
227,862
762,499
130,537
2,975
133,512
398,512
Sep 2003 - Sep 2009
Sep 2003 - Sep 2009
All Employee Share Scheme (continued)
The fifth annual cycle ended in December 2005 and resulted in 553
employees acquiring 58,876 Partnership shares at 873.25p each
and being allocated the same number of Matching shares. As at
30 April 2006 the Trust held 509,480 Ordinary shares that have
vested to employees from the first five cycles.
The sixth annual cycle started in January 2006 and currently
some 724 employees are making contributions to the scheme
at an annualised rate of £651,480.
The performance condition for the fourth and final tranche of 30%
of options to become exercisable, in September 2006, has also been
satisfied. The earnings per share growth over the five financial years
to 30 April 2004 was 21.7% against the 15% required.
Options held by the Directors under the EIS are shown on page 20.
No Directors were granted options during the year and none
lapsed. In addition to those held by Directors, options over 341,446
shares granted to 33 employees at exercise prices ranging from
367.5p to 523p were outstanding at 30 April 2006.
Executive Incentive Scheme
Sourcing of shares
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 strategy plan,
no further options will be awarded under the EIS, the last options
being granted in January 2002.
An award under the EIS consists of a right to acquire Ordinary
shares of the Company at a pre-determined price which, in
normal circumstances, can be exercised, subject to a specified
performance condition being satisfied, between four and ten
years following the date of grant.
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 between 8% and 15% per annum
over these periods.
In September 2005, the third tranche of 25% of options became
exercisable, the performance condition having been satisfied. For
this tranche to be exercisable in full a growth in earnings per share
over the four financial years from 1 May 1999 to 30 April 2003 of at
least 15% per annum compound was required: the actual growth
achieved was 21.3%.
Shares to satisfy the requirements of the Group’s share schemes
are currently sourced as follows:
EIS and NSOS –
New issue. During the year 517,544 (2005 – 148,877) Ordinary
shares were issued to satisfy the exercise of options under the
two schemes.
DABP and PSP –
Through open market purchases by an employee benefit trust
based in Guernsey (“the Guernsey Trust”). During the year 12,013
(2005 – 140,000) Ordinary shares were purchased by the Trust and
500 (2005 – 440) were used to satisfy the exercise of awards under
the DABP. At 30 April 2006 the Trust held 198,073 (2005 – 186,560)
Ordinary shares as a hedge against the Group’s obligations under
these schemes.
AESS –
Through open market purchases by the Capita Trust. During the
year 110,000 (2005 – 125,000) Ordinary shares were purchased
by the Capita Trust and 103,229 were used to satisfy the allocation
made in respect of the 2005 cycle of the scheme. In the previous
cycle 125,466 shares were sourced through the Guernsey Trust in
respect of the 2004 allocation. In addition 14,635 (2005 – 14,182)
shares were forfeited by leavers. At 30 April 2006 the Capita Trust
held 138,189 (2005 – 129,887) Ordinary shares as a hedge against
the Group’s obligations under this scheme.
By order of the Board
D Henderson
Secretary
3 July 2006
22-23 Northgate plc Annual Report and Accounts 2006
A FLEET MANAGEMENT SOLUTION
Through Fleet Technique Limited, an independent company owned by Northgate plc, we
are able to provide UK customers with a complete fleet management solution. Leading
edge software combined with the efficiency of the World Wide Web offers the customer
an efficient way to manage their entire fleet. Fuel management to vehicle registration
and placing new vehicle orders can all be managed on-line.
Our business is about providing customers with vehicle solutions which are flexible.
Our ability to now offer fleet management has further strengthened our product portfolio.
24-25 Northgate plc Annual Report and Accounts 2006
CORPORATE GOVERNANCE
UK listed companies are required by the Financial Services
Authority (the designated UK Listing Authority) to include a
statement in their annual accounts on compliance with the
Principles of Good Corporate Governance and Code of Best
Practice set out in the Combined Code (“the Code”).
The provisions of the Code applicable to listed companies
are divided into four parts, as set out below:
1 Directors
The business of the Company is managed by the Board
of Directors, currently comprising four executive and four
non-executive Directors, details of whom are shown on pages
12 and 13. All the non-executive Directors are considered to be
independent both in the sense outlined in the Code and in terms
of the criteria laid down by the National Association of Pension
Funds for judging the independence of non-executive Directors.
Following the retirement of Mr Williams in September 2005,
Mr Rogerson was appointed Senior Independent Director.
The offices of the Chairman and Chief Executive Officer are
separate. The division of their responsibilities has been set
out in writing, approved by the Board and is available on the
Company’s 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.
All Directors in office at that time were present at the Annual
General Meeting held in September 2005.
Attendance by executive Directors at meetings of the Audit and
Remuneration Committees were by invitation.
The external auditors attended three Audit Committee meetings.
The internal audit manager attended two Audit Committee
meetings.
The non-executive Directors, including the Chairman, but without
executive Directors present, met informally on three occasions
during the year. In addition, the non-executive Directors met
informally on one occasion 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.
The Company’s Articles of Association provide that at each Annual
General Meeting of the Company all Directors who held office at
the time of the two 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.
There were no formal meetings of the Committee during the year.
M Ballinger
S J Smith
J Astrand
T Brown
P J Moorhouse
G T Murray
A T Noble
P Rogerson
R Williams
A = Maximum number of meetings the Director was entitled to attend.
B = Number of meetings attended
BOARD
AUDIT
REMUNERATION
A
12
12
12
12
12
12
12
12
5
B
12
12
11
12
11
12
12
12
5
A
–
–
4
3
–
–
–
4
2
B
4
4
3
4
4
4
4
4
2
A
–
–
5
4
–
–
–
5
2
B
4
3
5
4
–
–
–
5
2
During the year, an evaluation process of the performance of
individual Directors, of the Board as a whole and of its committees
was carried out, led by the Chairman. The process consisted of
a formal and detailed questionnaire completed by each Director,
followed by one-to-one meetings with the Chairman. This was
followed by a letter from the Chairman to each Director
suggesting areas for further training, experience and intra-Board
communication so as to encourage Directors individually to
improve their performance and with it the performance of the
Board as a whole. As a result of this process, the Chairman
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. In addition the non-executive
Directors, led by the Senior Independent Director, reviewed
the performance of the Chairman, taking into account the views
of the executive Directors.
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 16 to 21.
3 Accountability and Audit
An assessment of the Company’s position and prospects is
included in the Chairman’s Statement and in the Operational
and Financial Reviews on pages 6 to 11.
INTERNAL CONTROL
Provision C2.1 of the Code requires the Directors to conduct an
annual review of the effectiveness of the Group’s system of internal
controls. The Turnbull Report, published by the ICAEW in
September 1999, provides relevant guidance for directors on
compliance with the internal control provisions of the Code.
The Directors are responsible for the Group’s system of internal
controls which aims to safeguard Group assets, ensure proper
accounting records are maintained and that the financial
information used within the business and for publication is reliable.
Although no system of internal controls can provide absolute
assurance against material misstatement or loss, the Group’s
system is designed to provide the Directors with reasonable
assurance that, should any problems occur, these are identified on
a timely basis and dealt with appropriately. The key features of the
Group’s system of internal controls, which was in place throughout
the period covered by the financial statements, are described below:
CONTROL ENVIRONMENT
The Group has a clearly defined organisational structure within
which individual responsibilities of line and financial management
for the maintenance of strong internal controls and the production
of accurate and timely financial management information are
identified and can be monitored. Where appropriate, the business
is required to comply with the procedures set out in written
manuals.
To demonstrate the Board’s commitment to maintaining the
highest business and ethical standards and to promote a culture of
honesty and integrity amongst all staff, the Board has established a
confidential telephone service, operated by an independent external
organisation, which may be used by all staff to report any issues
of concern relating to dishonesty or malpractice within the Group.
All issues reported are investigated by senior management.
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 risk 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.
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 throughout the year.
CONTROL PROCEDURES
The Board and the Group’s management have adopted a schedule
of matters which are required to be brought to it for 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.
MONITORING
The Board has delegated to executive management implementation
of the system of internal control. The Board, including the Audit
Committee, receives reports on the system of control from the
external auditors and from management. An independent internal
audit function reports bi-annually to the Audit Committee primarily
on the key areas of risk within the business. The Directors confirm
that they have reviewed the effectiveness of the system of internal
controls covering financial, operational and compliance matters
and risk management, for the period covered by these financial
statements in accordance with the guidance contained in the
Turnbull Report.
26-27 Northgate plc Annual Report and Accounts 2006
CORPORATE GOVERNANCE
HEALTH & SAFETY AND ENVIRONMENTAL
AUDIT
Details of membership of the Audit Committee is shown on
page 13 and of meetings held during the year on page 24.
The Committee’s terms of reference are available on the
Company's website.
In summary, these include:
- monitoring the integrity of financial reporting;
- reviewing the Group’s internal controls and risk
management systems;
- monitoring the effectiveness of the Group's internal
audit function;
- making recommendations to the Board regarding the
appointment of the external auditors and approving their
remuneration and terms of engagement;
- monitoring the independence and objectivity of the external
auditors and developing a policy for the provision of non-audit
services by the external auditor;
- monitoring the audit process and any issues arising therefrom.
Guidance contained in the Smith Report on Audit Committees
recommends that at least one member of the Committee should
have appropriate financial experience and preferably a recognised
professional accountancy qualification: the Chairman of the
Committee currently satisfies this provision.
Due to the cyclical nature of its agenda, which is linked to events
in the Group's financial calendar, the Committee will generally meet
four times a year. The other Directors are normally invited to attend,
together with the external auditors, on at least two occasions
during the year. The internal audit manager also normally makes
a presentation to the Committee twice a year.
Since May 2005, the Committee has:
- reviewed the financial statements for the years ended
30 April 2005 and 2006 and the interim report issued in
January 2006. As part of this review process, the Committee
received reports from Deloitte & Touche on each occasion;
- reviewed and agreed the scope of the audit work to
be undertaken by Deloitte & Touche and agreed their fees;
- reviewed half-yearly reports by the internal audit manager
and approved the internal audit programme;
- monitored an in-depth review of the Group’s risk management
process and approved a new strategic risk matrix;
- reviewed the work undertaken by the Group in preparation for
the introduction of International Financial Reporting Standards,
including the approval of the principal accounting policies
and first time adoption choices to be applied to the financial
statements for the year ended 30 April 2006 and the basis of
valuation of the intangible assets included in acquisitions
made in 2004 and 2005;
- reviewed the Group's whistle blowing service;
- verified the ongoing independence and objectivity
of Deloitte & Touche; and
- reviewed its own effectiveness.
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:
Group statutory audit fees
Services relating to taxation
Other
30 April
2006
£000
30 April
2005
£000
332
129
88
549
228
60
106
394
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 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. In recent
years 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.
Details of proxies lodged in respect of the Annual General
Meeting will be published on the Company’s website immediately
following the meeting.
Compliance with the Code
The Board considers that the Company complied with the
provisions of the Code throughout the year with the exception
that the Code states that at least half the Board, excluding the
Chairman, should be comprised of independent non-executive
Directors: the Directors believe that the current composition of
the Board is effective.
The Board recognises that the monitoring and control of health
and safety and environmental issues forms a key part of its risk
management programme.
The Board has designated the Chief Executive as the person
ultimately responsible to the Board for all health, safety and
environmental matters throughout the Group. Responsibility
for implementing the Group’s policy is devolved to 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.
A head office steering group reviews health and safety and
environmental policy issues on a regular basis, and Technical
advice and support is provided by a chartered health and
safety practitioner.
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 Republic of Ireland at 30 April 2006
was 64,000, with an average age of between 15 and 16 months,
of which 14% 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 powered.
Of the cars purchased in calendar year 2005, just over 98% were
Euro IV compliant. We expect this to rise to 100% in calendar year
2006. Commercial vehicle manufacturers are still debating 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.
To encourage a safe driving culture amongst our own staff, we
have arranged with the Institute of Advanced Motorists a rolling
programme of driver assessment and training for all employees
who have a company vehicle or who are otherwise required to
drive as part of their duties.
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. Since 2004 over 30% of our technicians
have successfully completed the course with another 15%
scheduled to undergo the training in this financial year.
The Group are sponsors of Brake, the road safety charity.
Property
As at 30 April 2006, the vehicle rental business in the UK and
Republic of Ireland operated out of 88 properties, of which 35 were
primary sites and 53 were branches. All but eight of these sites
(all of which are branches) are located on industrial estates, so our
activities have minimal impact on the local community of the areas
in which we operate. A typical primary site 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 nine people. Four of
the primary sites are shared with Northgate Vehicle Sales who have
a further five dedicated sales sites. Fleet Technique operate from
offices in Gateshead and the Group’s head office building in
Darlington accommodates all central administrative and
support services.
During the year all sites had an internal health, safety and
environmental audit. Where appropriate, outside professional
advice and services are also used:
- in compliance with the Electricity at Work Regulations, a rolling
programme of electrical inspections and surveys, covering all
Group locations, is carried out by qualified electrical contractors;
- a programme of surveys and ongoing monitoring has been
put in place to meet the requirements of the 2004 Asbestos
Regulations, using licensed contractors;
- all workshop and hazardous waste (principally engine oils,
batteries, tyres and other vehicle consumables) is collected and
disposed of by a licensed waste removal contractor who has
confirmed that over 94% of such waste is recycled. In addition,
100% of paper based waste from head office and all IT
equipment and mobile phones are recycled;
- prior to acquiring new sites, environmental risk assessments,
to ISO 9000 standard, are carried out by external consultants;
- all primary sites and some branch locations have above-ground
fuel storage tanks. All such tanks comply with the guidelines
relating to double-bunding laid down in the Environment
Agency’s PPG2 regulations;
- the Group is a member of the British Safety Council and a
training programme leading to the British Safety Council Level 1
Certificate in Health and Safety is being implemented, initially
for managerial staff, then progressively to all employees across
the UK.
During the year under review, no major incidents (classed as
those resulting in death, serious injury or significant pollution)
occurred at any of our locations. No health and safety enforcement
notices were served on any company in the Group. There was one
conviction for a minor offence under the Road Traffic Act.
Following a Merit award in 2005, the Group has received a
Silver award in 2006 from the Royal Society for the Prevention
of Accidents for demonstrating the effective implementation
of safety arrangements within the organisation.
We are currently undertaking a review of health and safety and
environmental arrangements at Fualsa and Record with a view
to ensuring a consistent approach at our Spanish operations.
28-29 Northgate plc Annual Report and Accounts 2006
DIRECTORS’ RESPONSIBILTIES
REPORT OF THE AUDITORS
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company, for safeguarding the assets, for
taking reasonable steps for the prevention and detection of fraud
and other irregularities and for the preparation of a Report of the
Directors and Directors’ Remuneration Report which comply
with the Companies Act 1985.
The Directors are responsible for the maintenance and integrity
of the Group website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
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.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the annual report
and accounts.
The Directors are required to prepare financial statements for
the Group in accordance with International Financial Reporting
Standards (“IFRS”) and have also elected to prepare financial
statements for the Company in accordance with IFRS. Company
law requires the Directors to prepare such financial statements
in accordance with IFRS, the Companies Act 1985 and Article 4
of the IAS Regulation.
International Accounting Standard 1 requires that the financial
statements present fairly for each financial year the Company’s
financial position, financial performance and cash flows. This
requires the faithful representation of the effects of transactions,
other events and conditions in accordance with the definitions and
recognition criteria for assets, liabilities, income and expenses set
out in the International Accounting Standards Board's “Framework
for the Preparation and Presentation of Financial Statements”.
In virtually all circumstances, a fair presentation will be achieved by
compliance with all applicable IFRS. Directors are also required to:
- Properly select and apply accounting policies;
- Present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information; and
- Provide additional disclosures where compliance with the
specific requirements of IFRS are insufficient to enable users to
understand the impact of a particular transaction, other events
and conditions on the entity’s financial statements.
We have audited the Group and individual Company financial
statements (“the financial statements”) of Northgate plc for the
year ended 30 April 2006, which comprise the consolidated
income statement, the consolidated and individual Company
balance sheets, the consolidated and individual Company cash flow
statements, the consolidated and individual Company statements
of recognised income and expense and statements of changes in
shareholders’ equity and the related Notes 1 to 42. These financial
statements have been prepared under the accounting policies set
out therein. We have also audited the information in the Directors'
Remuneration Report that is described as having been audited.
This report is made solely to the Company’s members, as a body,
in accordance with section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to
them in an auditors’ report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members
as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of Directors and auditors
The Directors’ responsibilities for preparing the annual report, the
Directors’ Remuneration Report and the financial statements in
accordance with applicable law and International Financial
Reporting Standards (“IFRS”) as adopted for use in the European
Union are set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the financial statements and the part
of the Directors’ Remuneration Report described as having been
audited in accordance with relevant United Kingdom legal and
regulatory requirements and International Standards on Auditing
(UK and Ireland).
We report to you our opinion as to whether the financial statements
give a true and fair view in accordance with the relevant financial
reporting framework and whether the financial statements and the
part of the Directors’ Remuneration Report described as having
been audited have been properly prepared in accordance with
the Companies Act 1985 and Article 4 of the IAS Regulation.
We report to you whether, in our opinion, the information given
in the Report of the Directors is consistent with the financial
statements. We also report to you if, in our opinion, the Company
has not kept proper accounting records, if we have not received
all the information and explanations we require for our audit or
if information specified by law regarding Directors' remuneration
and other transactions is not disclosed.
We also report to you if, in our opinion, the Company has not
complied with any of the four Directors’ remuneration disclosure
requirements specified for our review by the Listing Rules of the
Financial Services Authority. These comprise the amount of
each element in the remuneration package and information on
share options, details of long term incentive schemes, and money
purchase and defined benefit pension schemes.
We give a statement, to the extent possible, of details of any
non-compliance.
We review whether the corporate governance statement reflects the
Company’s compliance with the nine provisions of the 2003 FRC
Combined Code specified for our review by the Listing Rules of the
Financial Services Authority, and we report if it does not. We are
not required to consider whether the Board’s statements on
internal control cover all risks and controls, or form an opinion on
the effectiveness of the Group's corporate governance procedures
or its risk and control procedures.
We read the other information contained in the annual report
including the unaudited part of the Directors' Remuneration Report
and we consider the implications for our report if we become aware
of any apparent misstatements or material inconsistencies with the
financial statements.
We report to you whether in our opinion the information given
in the Report of the Directors is consistent with the financial
statements.
Basis of audit opinion
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the financial
statements and the part of the Directors’ Remuneration Report
described as having been audited. It also includes an assessment
of the significant estimates and judgments made by the Directors
in the preparation of the financial statements and of whether
the accounting policies are appropriate to the Company's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements and the part of the
Directors’ Remuneration Report described as having been audited
are free from material misstatement, whether caused by fraud or
other irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the
financial statements and the part of the Directors’ Remuneration
Report described as having been audited.
Opinion
In our opinion:
- the Group financial statements give a true and fair view, in
accordance with IFRS as adopted for use in the European Union,
of the state of the Group's affairs as at 30 April 2006 and of its
profit for the year then ended;
- the individual Company financial statements give a true and fair
view, in accordance with IFRS as adopted for use in the European
Union as applied in accordance with the requirements of the
Companies Act 1985, of the state of the individual Company's
affairs as at 30 April 2006; and
- the financial statements and the part of the Directors’
Remuneration Report described as having been audited have
been properly prepared in accordance with the Companies Act
1985 and Article 4 of the IAS Regulation; and
- the information given in the Report of the Directors is consistent
with the financial statements.
Separate opinion in relation to IFRS
As explained in Note 2 to the financial statements, the Group, in
addition to complying with its legal obligation to comply with IFRS
as adopted for use in the European Union, has also complied with
the IFRS as issued by the International Accounting Standards
Board. Accordingly, in our opinion the financial statements give
a true and fair view, in accordance with IFRS, of the state of the
Group’s affairs as at 30 April 2006 and of its profit for the year
then ended.
Deloitte & Touche LLP
Chartered Accountants
and Registered Auditors
Leeds
3 July 2006
30-31 Northgate plc Annual Report and Accounts 2006
FINANCIAL STATEMENTS
32-33 Northgate plc Annual Report and Accounts 2006
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 APRIL 2006
BALANCE SHEETS
AS AT 30 APRIL 2006
Revenue
Cost of sales
Gross profit
Administrative expenses (excluding amortisation)
Amortisation
Total administrative expenses
Profit from operations
Investment income
Finance costs
Share of profit before taxation of associate
Share of taxation of associate
Share of profit of associate
Profit before taxation
Taxation
Profit for the year
Notes
4,5
5
5,6
15
7
9
10
19
11
34
2006
£000
372,609
(248,051)
124,558
(50,733)
(1,227)
(51,960)
72,598
2,047
(22,125)
4,964
(1,422)
3,542
56,062
(15,468)
40,594
2005
£000
339,382
(215,097)
124,285
(47,193)
(855)
(48,048)
76,237
1,814
(23,063)
–
–
–
54,988
(15,757)
39,231
Profit for the year is wholly attributable to equity holders of the parent Company.
All results arise from continuing operations.
Earnings per share
Basic
Diluted
13
13
61.1p
60.6p
60.7p
60.3p
STATEMENTS OF RECOGNISED INCOME AND EXPENSE
FOR THE YEAR ENDED 30 APRIL 2006
Notes
Group
Company
Gains on revaluation of land and properties
Revaluation of foreign currency denominated investment
in subsidiary undertaking upon inception of hedge
Foreign exchange differences on retranslation of net assets
of subsidiary undertakings
Foreign exchange differences on retranslation of investments
in subsidiary undertakings
Foreign exchange differences on retranslation of interest
in associate
Net foreign exchange differences on long term borrowings
held as hedges
Net fair value gains on cash flow hedges
Share options fair value amount credited directly to equity
Net deferred tax credit recognised directly in equity
Actuarial gains on defined benefit pension scheme
Net income recognised directly in equity
Profit attributable to equity holders
Total recognised income and expense for the year
17
33
33
33
32
26
39
2006
£000
–
–
1,303
–
413
(1,571)
2,956
20
882
356
4,359
40,594
44,953
2005
£000
1,031
–
(153)
–
–
1,635
–
88
1,084
–
3,685
39,231
42,916
2006
£000
–
–
–
646
413
(1,059)
2,554
20
882
–
3,456
41,059
44,515
2005
£000
–
1,371
–
(1,389)
–
1,389
–
88
311
–
1,770
12,767
14,537
Notes
Group
Company
Non-current assets
Goodwill
Other intangible assets
Property plant and equipment: vehicles for hire
Other property, plant and equipment
Total property, plant and equipment
Investments
Interest in associate
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Non-current assets classified as held for sale
Total assets
Current liabilities
Trade and other payables
Tax liabilities
Short term borrowings
Non-current liabilities
Long term borrowings
Deferred tax liabilities
Retirement benefit obligation
Total liabilities
Net assets
Equity
Share capital
Share premium account
Revaluation reserve
Own shares
Merger reserve
Hedging reserve
Translation reserve
Retained earnings
Total equity
14
15
16
17
18
19
20
21
22
23
24
24
26
39
27
28
29
30
31
32
33
34
2006
£000
2005
£000
44,582
18,208
643,824
50,236
694,060
–
41,927
798,777
8,918
116,939
24,048
149,905
14,705
963,387
57,584
19,715
30,024
12,448
4,866
531,843
37,851
569,694
–
–
587,008
6,696
92,841
41,375
140,912
11,464
739,384
44,769
7,231
48,410
107,323
100,410
518,485
15,846
1,444
535,775
643,098
320,289
3,538
64,998
1,054
(3,331)
67,463
2,956
1,627
181,984
320,289
403,819
10,124
–
413,943
514,353
225,031
3,209
62,544
1,054
(2,471)
4,721
–
1,482
154,492
225,031
2006
£000
–
–
–
3,012
3,012
257,221
–
260,233
–
509,359
8,945
518,304
–
2005
£000
–
–
–
3,056
3,056
103,234
–
106,290
–
375,866
46,180
422,046
–
778,537
528,336
8,084
–
25,982
34,066
515,937
–
–
515,937
550,003
228,534
3,538
64,998
1,371
–
63,159
2,554
–
92,914
8,248
–
18
8,266
388,139
–
–
388,139
396,405
131,931
3,209
62,544
1,371
–
417
–
–
64,390
228,534
131,931
Total equity is wholly attributable to equity holders of the parent Company.
The financial statements were approved by the Board of Directors and authorised for issue on 3 July 2006.
They were signed on its behalf by:
M Ballinger Director
G T Murray Director
34-35 Northgate plc Annual Report and Accounts 2006
CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2006
Net cash from operating activities
(a)
172,178
150,457
(20,278)
(16,084)
Profit (loss) from operations
Group
Company
2006
£000
2005
£000
2006
£000
2005
£000
(a) Net cash from operating activities
Investing activities
Interest received
Dividends received from subsidiary undertakings
Proceeds from disposal of vehicles for hire
Purchases of vehicles for hire
Proceeds from disposal of other property, plant and equipment
Purchases of other property, plant and equipment
Purchases of intangible assets
Acquisitions of subsidiary undertakings, including net cash
and bank overdraft balances acquired
Purchase of investments in subsidiary undertakings
Purchase of interest in associate
Net cash (used in) from investing activities
Financing activities
Dividends paid
Repayments of obligations under finance leases
New finance lease agreements
Increase in bank loans and other borrowings
Loans to subsidiary undertakings
Proceeds from issue of share capital
Proceeds from sale of own shares
Payments to acquire own shares
Net cash from financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at 1 May
Effect of foreign exchange movements
Cash and cash equivalents at 30 April
(b)
1,931
–
150,849
(306,273)
3,307
(12,208)
(927)
(130,047)
–
(37,972)
(331,340)
(13,459)
(36,994)
–
130,988
–
65,525
511
(1,371)
145,200
(13,962)
34,057
164
20,259
1,957
–
116,895
(274,517)
378
(7,613)
(19)
(19,353)
–
–
(182,272)
(11,874)
(279,243)
93,663
221,166
–
722
–
(1,141)
23,293
(8,522)
42,675
(96)
34,057
13,603
–
–
–
–
(18)
–
–
(50,316)
(37,972)
(74,703)
(13,459)
–
–
63,202
(70,430)
65,525
–
–
44,838
(50,143)
46,162
–
(3,981)
10,052
15,500
–
–
–
–
–
–
(15,143)
–
10,409
(11,874)
–
–
21,330
(2,652)
722
–
–
7,526
1,851
44,311
–
46,162
Adjustments for:
Depreciation of property, plant and equipment
Exchange differences
Amortisation of intangible assets
(Gain) loss on disposal of property, plant and equipment
Defined benefit pension credit
Share options fair value amount credited directly to equity
Operating cash flows before movements in working capital
(Increase) decrease in inventories
(Increase) decrease in receivables
Increase (decrease) in payables
Cash generated from (used in) operations
Income taxes paid
Interest paid
Net cash from operating activities
(b) Cash and cash equivalents
Group
Company
2006
£000
72,598
136,209
(16)
1,227
(209)
(386)
20
209,443
(2,191)
(1,131)
3,139
209,260
(15,156)
(21,926)
172,178
2005
£000
76,237
120,831
–
855
39
–
88
198,050
1,665
(7,735)
(3,634)
188,346
(15,241)
(22,648)
150,457
2006
£000
2005
£000
(4,082)
(4,186)
62
–
–
710
–
20
(3,290)
–
1,257
(230)
(2,263)
–
(18,015)
(20,278)
61
–
–
(324)
–
88
(4,361)
–
(2,577)
297
(6,641)
–
(9,443)
(16,084)
Cash and cash equivalents consist of cash in hand and at bank, investments in money market instruments and bank overdrafts.
Bank overdrafts are included within cash equivalents on the grounds that they are repayable on demand and form an integral
part of the Group’s cash management.
Cash and cash equivalents, as described above, included in the cash flow statement comprise the following balance sheet amounts.
Cash in hand and at bank
Short term investments
Gross cash and cash equivalents as reported
Bank overdrafts
Net cash and cash equivalents
Group
Company
2006
£000
22,201
1,847
24,048
(3,789)
20,259
2005
£000
39,601
1,774
41,375
(7,318)
34,057
2006
£000
8,945
–
8,945
(12,926)
(3,981)
2005
£000
46,180
–
46,180
(18)
46,162
36-37 Northgate plc Annual Report and Accounts 2006
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
Amounts attributable to equity holders of the parent Company
Gains on revaluation of land and properties
Foreign exchange differences on retranslation of net assets
of subsidiary undertakings
Foreign exchange differences on retranslation of interest in associate
Net foreign exchange differences on long term borrowings held as hedges
Net fair value gains on cash flow hedges
Share options fair value amount credited directly to equity
Actuarial gains on defined benefit pension scheme
Net deferred tax credit recognised directly in equity
Net income recognised directly in equity
Profit attributable to equity holders
Total recognised income and expense for the year
Dividends paid
Issue of Ordinary share capital (net of expenses)
Net increase in own shares held
Net changes in total equity
Opening total equity as at 1 May
Transitional adjustment on adoption of IAS 32 & IAS 39
Opening total equity after adoption of IAS 32 & IAS 39
Closing total equity as at 30 April
Notes
17
33
33
33
32
39
26
12
27, 28, 31
30
42
2006
£000
–
1,303
413
(1,571)
2,956
20
356
882
4,359
40,594
44,953
(13,437)
65,525
(860)
96,181
225,031
(923)
224,108
320,289
2005
£000
1,031
(153)
–
1,635
–
88
–
1,084
3,685
39,231
42,916
(11,916)
722
(1,141)
30,581
194,450
–
194,450
225,031
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2006
Notes
2006
£000
2005
£000
Amounts attributable to equity holders of the parent Company
Revaluation of foreign currency denominated investment in subsidiary undertaking
upon inception of hedge
Foreign exchange differences on retranslation of investments in subsidiary undertakings
Foreign exchange differences on retranslation of interest in associate
Net foreign exchange differences on long term borrowings held as hedges
Net fair value gains on cash flow hedges
Adjustment for share options granted
Net deferred tax credit recognised directly in equity
29
33
33
33
32
26
Net income recognised directly in equity
Profit attributable to equity holders
Total recognised income and expense for the year
Dividends paid
Issue of Ordinary share capital (net of expenses)
Net changes in total equity
Opening total equity as at 1 May
Closing total equity as at 30 April
12
27, 28, 31
–
646
413
(1,059)
2,554
20
882
3,456
41,059
44,515
(13,437)
65,525
96,603
131,931
228,534
1,371
(1,389)
–
1,389
–
88
311
1,770
12,767
14,537
(11,916)
722
3,343
128,588
131,931
(1) General information
Northgate plc is a Company incorporated in England and Wales under the Companies Act 1985. The address of the registered office is given
on page 88. The nature of the Group’s operations and its principal activities are set out in Note 5 and in the Operational and Financial reviews
on pages 6 to 9.
The financial statements are presented in UK Sterling because this is the currency of the primary economic environment in which the
Group operates. Foreign operations are included in accordance with the policies set out in Note 2.
At the date of authorisation of these financial statements, the following Standards and Interpretations, which have not been applied in these
financial statements were in issue but not yet effective:
IFRS 7 Financial instruments: Disclosures
IAS 1 Presentation of financial statements (Amendment on capital disclosures)
The Directors anticipate that the adoption of the Standard and Interpretations in future periods will have no material impact on the financial
statements of the Group except for additional disclosures on capital and financial instruments when the relevant standards come into effect
for periods commencing on or after 1 January 2007.
(2) Principal accounting policies
Statement of compliance and first time adoption choices
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and their
interpretations adopted by the International Accounting Standards Board (IASB). These are the Group’s first consolidated financial statements
prepared under IFRS and IFRS1 has been applied. The disclosures required by IFRS1 concerning the transition from UK GAAP to IFRS are
given in Note 42.
Basis of preparation
The financial information has been prepared on the historical cost basis, except for the revaluation of certain land and buildings and the
treatment of certain financial instruments.
Basis of consolidation
Subsidiary undertakings are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to
govern the financial and operating policies of the entity so as to obtain benefits from its activities. The consolidated financial statements
include the financial statements of the Company and its undertakings made up to 30 April 2005 and 30 April 2006. The results of new
subsidiary undertakings are included from the dates of acquisition. Where an entity has ceased to be a subsidiary undertaking during
the year, its results are included to the date of cessation.
On acquisition, the assets, liabilities and contingent liabilities of a subsidiary undertaking are measured at their fair values at the date
of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill.
Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited
to the income statement in the period of acquisition. The interest of minority shareholders is stated at the minority’s proportion of the fair values
of the assets and liabilities recognised. Subsequently any losses applicable to the minority interest in excess of the minority interest are
allocated against the interests of the parent.
Where necessary, adjustments are made to the financial statements of subsidiary undertakings to bring the accounting policies used into line
with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Revenue recognition
Group revenue is measured at the fair value of the consideration received or receivable in respect of the hire of vehicles and the supply of related
goods and services in the normal course of business, net of value added tax and discounts.
Revenue from vehicle rentals is recognised evenly over the rental period and revenue from sales of other related goods and services is
recognised at the point of sale.
Goodwill
All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of
subsidiary undertakings and interests in associates and is the difference between the cost of the acquisition and the fair value of the net
identifiable assets and liabilities acquired.
Goodwill is stated at cost less any accumulated impairment losses identified through an annual test for impairment.
Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being
tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not included
in determining any subsequent profit or loss on disposal.
38-39 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(2) Principal accounting policies (continued)
Intangible assets – arising on business combinations
Amortisation of intangible assets is charged to the income statement on a straight-line basis over the estimated useful lives of each intangible asset.
Intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:
Customer relationships
Brand names
Non-compete agreements
Intangible assets – other
5 to 13 years
5 to 10 years
2 to 4 years
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.
Software assets are amortised over their estimated useful lives, which do not exceed three years.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and any provision for impairment. Depreciation is provided
so as to write off the cost of assets to residual values on a straight-line basis over the assets’ useful estimated lives as follows:
Freehold buildings
Leasehold buildings
50 years
Over 50 years
or over the life of the lease
Plant, equipment and fittings
Over 8 to 10 years
Vehicles for hire
Motor vehicles
3 to 6 years
3 to 6 years
Vehicles for hire are depreciated on a straight-line basis using depreciation rates that reflect economic lives of between three and six years. These
depreciation rates have been determined with the anticipation that the net book values at the point the vehicles are transferred into non-current assets
held for sale is in line with the open market values for those vehicles. Depreciation charges are adjusted for any differences that arise between net
book values and open market values of used vehicles upon transfer into non-current assets held for sale, taking into account the further direct costs
to sell the vehicles.
Property under construction is not depreciated. Depreciation commences when these assets are ready for their intended use.
Freehold land is not depreciated.
Depreciation on revalued buildings is charged to the income statement. On the subsequent sale or retirement of a revalued property, the attributable
revaluation surplus remaining in the revaluation reserve is transferred directly to retained earnings.
The residual value, if not insignificant, is reassessed annually.
Non-current assets held for sale
Non-current assets classified as held for sale are valued at the lower of carrying amount or fair value less estimated costs to sell. Non-current assets
are classified as held for sale if their carrying amount will be recovered through a sales transaction.
Fixed asset investments
Fixed asset investments are shown at cost less any provision for impairment.
Impairment
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any).
The recoverable amount is the higher of fair value less selling costs and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted.
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(2) Principal accounting policies (continued)
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax
is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity.
Financial instruments and hedge accounting
Financial assets and liabilities are recognised in the Group’s balance sheet when the Group becomes a party to the contractual provision of
the instrument.
Trade receivables are non-interest bearing and are stated at their nominal value less any appropriate provision for irrecoverable amounts. Trade
payables are non-interest bearing and are stated at their nominal value.
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing
and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes.
Derivative financial instruments are stated at fair value. Any gain or loss on remeasurement to fair value is recognised immediately in the income
statement. However, where derivatives qualify for hedge accounting, recognition of resultant gain or loss depends on the nature of the items
being hedged.
The fair value of interest rate derivatives is the estimated amount that the Group would receive or pay to terminate the derivative at the balance sheet
date, taking into account current interest rates and the current creditworthiness of the derivative counterparties.
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly
in equity, and the ineffective portion is recognised in the income statement. If the cash flow hedge of a firm commitment or forecasted transaction
results in the recognition of an asset or liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative
that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in
recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item
affects net profit or loss.
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement
as they arise.
Hedge accounting for cash flow hedges is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies
for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the
forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is
transferred to the income statement as a net profit or loss for the period.
Bank loans and issue costs
An impairment loss is recognised in the income statement whenever the carrying amount of an asset exceeds its recoverable amount. Impairment
losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash generating
units and then to reduce the carrying amount of other assets in the unit on a pro rata basis.
Bank loans are stated at the amount of proceeds after deduction of issue costs, which are amortised over the period of the loan. Finance charges,
including premiums payable on settlement or redemption and direct issue costs, are accounted for in the income statement on an accrual basis and
are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Inventories
Inventories comprise spare parts and consumables and are valued at the lower of cost or net realisable value. Net realisable value represents the
estimated selling price less costs to be incurred in marketing, selling and distribution.
40-41 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(2) Principal accounting policies (continued)
Foreign currencies
Transactions in foreign currencies other than UK Sterling are recorded at the rate prevailing at the date of the transaction or at the contracted rate
if the transaction is covered by a forward exchange contract. At each balance sheet date, monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange prevailing at the balance sheet date or, if appropriate, at the forward contract rate and any variances
are reflected in the income statement.
The accounts of overseas subsidiary undertakings are translated into UK Sterling at the rate of exchange ruling at the balance sheet date.
The exchange difference arising on the retranslation of opening net assets is recognised directly in equity. All other translation differences are taken
to the income statement with the exception of differences in equity on foreign currency borrowings to the extent that they are used to finance or
provide a hedge against Group equity investments in foreign enterprises, which are recognised directly in equity, together with the exchange difference
on the net investment in these enterprises.
The results of overseas subsidiary undertakings and joint ventures are translated into UK Sterling using average exchange rates for the financial
period and variances compared with the exchange rate at the balance sheet date are recognised directly in equity.
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 UK Sterling using the exchange rate prevailing at the balance sheet date.
Any variances are recognised directly in equity.
Goodwill and fair value adjustments, arising on acquisition of a foreign entity, are treated as assets and liabilities of the foreign entity.
They are denominated in the functional currency of the foreign entity and translated at the exchange rate prevailing at the balance sheet date, with
any variances reflected directly in equity.
All foreign exchange differences reflected directly in equity are shown in the currency translation reserve component of equity.
Leasing and hire purchase commitments
As Lessee:
Assets held under finance leases and hire purchase contracts are capitalised in the balance sheet at their fair value or, if lower, the present value
of the future minimum lease payments and are depreciated over their useful economic lives using Group policies. The capital elements of future
obligations under finance leases and hire purchase contracts are included as liabilities in the balance sheet. The interest elements of the rental
obligations are charged to the income statement over the periods of the leases and hire purchase contracts so as to produce a constant rate of return
on the outstanding balance.
Rentals payable under operating leases are charged to the income statement on a straight-line basis over the lease term.
As Lessor:
Motor vehicles and equipment leased to certain customers under operating leases are included within property, plant and equipment. Income from
such leases is taken to the income statement evenly over the period of the operating lease agreement.
Retirement benefit costs
The Group predominantly operates defined contribution pension schemes and has one defined benefit scheme as a result of the acquisition of
Northgate (AVR) Limited (formerly Arriva Vehicle Rental Limited) as detailed in Note 35. Contributions in respect of defined contribution arrangements
are charged to the income statement in the period they fall due. Pension contributions in respect of one of these arrangements are held in trustee
administered funds, independently of the Group’s finances.
For the defined benefit scheme, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being
carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside
the income statement and presented in the statement of recognised income and expense.
Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight line basis over
the average period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for
unrecognised past service cost, and as reduced by the fair value of the scheme assets. Any asset resulting from this calculation is limited to
past service cost, plus the present value of available refunds and reductions in future contributions to the scheme.
The Group also operate Group personal pension plans.
Employee share schemes and share based payments
The Group has applied the requirements of IFRS 2 (Share-based Payment). In accordance with the transitional provisions, IFRS 2 has been applied to
all grants of equity instruments after 7 November 2002 that were unvested as of 30 April 2005.
The Group issues equity-settled and cash-settled share-based payments to certain employees.
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(2) Principal accounting policies (continued)
Equity-settled employee schemes, including employee share options and deferred annual bonuses, provide employees with the option to acquire
shares of the Company. Employee share options and deferred annual bonuses are generally subject to performance or service conditions.
The fair value of equity-settled share-based payments is measured at the date of grant and charged to the income statement over the period
during which performance or service conditions are required to be met, or immediately where no performance or service criteria exist. The fair
value of equity-settled share-based payments granted is measured using the Black-Scholes model. The amount recognised as an expense is adjusted
to reflect the actual number of employee share options that vest, except where forfeiture is only due to market based performance
criteria not being met.
For cash-settled share-based payments a liability equal to the portion of the goods or services received is recognised at the current fair value
determined at each balance sheet date.
The Group also operates a Share Incentive Plan (SIP) under which employees each have the option to purchase an amount of shares annually
and receive an equivalent number of free shares. The Group recognises the free shares as an expense evenly throughout the period over which
the employees must remain in the employ of the Group in order to receive the free shares.
Dividends
Dividends on Ordinary shares are recognised as a liability in the period in which they are either paid or formally approved, whichever is earlier.
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it
is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
(3) Critical accounting judgments and key sources of estimation uncertainty
In the process of applying the Group’s accounting policies, which are described in Note 2, the Directors have made the following judgments that have
the most significant effect on the amounts recognised in the financial statements.
Depreciation
Vehicles for hire are depreciated on a straight-line basis using depreciation rates that reflect economic lives of between three and six years.
These depreciation rates have been determined with the anticipation that the net book values at the point the vehicles are transferred into
non-current assets held for sale is in line with the open market values for those vehicles.
Under IAS 16, the Group is required to review its depreciation rates and estimated useful lives regularly to ensure that the net book
value of disposals of tangible fixed assets are broadly equivalent to their market value.
Depreciation charges are adjusted for any differences that arise between net book values and open market values of used vehicles upon transfer into
non-current assets held for sale, taking into account the further direct costs to sell the vehicles.
Intangible assets
Amortisation of intangible assets is charged to the income statement on a straight-line basis over the estimated useful lives of each intangible asset.
The Directors have made assumptions with regard to the evidence in the market, at the time of acquisitions, when determining these estimated
useful lives.
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated.
The value in use calculation requires the entity to estimate the future cash flows expected to arise from each cash generating unit and a suitable
discount rate in order to calculate present value. The carrying value of goodwill at the balance sheet date was £44,582,000 (Note 14).
42-43 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(4) Revenue
All revenue recognised is from the rendering of services.
(5) Business and geographical segments
Business segments
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(6) Restructuring costs
In February 2006, the Group acquired the entire issued share capital of Northgate (AVR) Limited (formerly Arriva Vehicle Rental Limited) (Note 35).
To the extent that employees could not be integrated, termination terms were agreed and, to the extent that properties would not be utilised
in the future, amounts have been provided in respect of onerous contracts.
For management purposes, the Group currently has one material business segment, which is the hire of vehicles.
As such, the Directors consider that this is the only business segment on which the Group should report.
Geographical segments
The Group’s operations are located in the United Kingdom, Republic of Ireland and Spain.
The Directors consider the United Kingdom and Republic of Ireland to be a single geographical segment on the grounds that the results and net assets
of operations in the Republic of Ireland are immaterial to the Group as a whole. The results of the associate in the current year all arose in Spain.
Redundancy costs (net of pension credit – see Note 39)
Onerous contracts
Revenue
Gross profit
Administrative expenses
Amortisation
Profit from operations
Investment income
Finance costs
Share of profit of associate
Profit before taxation
Other Information
Capital additions
Depreciation
Balance Sheet
Segment assets
Interest in associate
Consolidated total assets
Segment liabilities
Revenue
Gross profit
Administrative expenses
Amortisation
Profit from operations
Investment income
Finance costs
Profit before taxation
Other Information
Capital additions
Depreciation
Balance Sheet
Segment assets
Segment liabilities
UK & Republic
of Ireland
2006
£000
300,771
102,724
(43,883)
(692)
58,149
Spain
2006
£000
71,838
21,834
(6,850)
(535)
14,449
239,304
113,537
75,374
22,672
726,536
194,924
482,187
160,911
UK & Republic
of Ireland
2005
£000
283,414
103,509
(40,646)
(321)
62,542
240,474
103,712
583,771
382,970
Spain
2005
£000
55,968
20,776
(6,547)
(534)
13,695
63,009
17,119
155,613
131,383
Total
2006
£000
372,609
124,558
(50,733)
(1,227)
72,598
2,047
(22,125)
3,542
56,062
314,678
136,209
921,460
41,927
963,387
643,098
Total
2005
£000
339,382
124,285
(47,193)
(855)
76,237
1,814
(23,063)
54,988
303,483
120,831
739,384
514,353
The above amounts have been included within administrative expenses in the income statement.
(7) Profit from operations
Profit from operations is stated after
charging (crediting):
Depreciation of property, plant and equipment
Amortisation of intangible assets
Net foreign exchange gains
Restructuring costs
Staff costs
Auditors’ remuneration for audit services (see below)
Amounts payable to Deloitte & Touche LLP and their
associates by the Company and its subsidiary undertakings
in respect of non-audit services
Notes
16, 17
15
6
8
Further detailed analysis of auditors’ remuneration on a worldwide basis is provided below:
Audit services
– statutory reporting
Tax services
– compliance services
– advisory services
Other services
2006
£000
1,673
934
2,607
2005
£000
–
–
–
2006
£000
2005
£000
136,209
1,227
(16)
2,607
62,699
332
120,831
855
–
–
52,366
228
217
166
2006
£000
332
332
55
74
129
88
549
2005
£000
228
228
60
–
60
106
394
A description of the work of the audit committee is set out in the corporate governance statement on pages 24 to 26 and includes an explanation of
how auditor objectivity and independence is safeguarded when non-audit services are provided by the auditors.
44-45 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(8) Staff costs
(11) Taxation
The average number of persons employed by the Group:
United Kingdom and Republic of Ireland:
Direct operations
Administration
Spain:
Direct operations
Administration
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
(9) Investment income
Interest on bank and other deposits
Change in fair value of interest rate derivatives (Note 25)
(10) Finance costs
Interest on bank overdrafts and loans
Interest on obligations under finance leases
Amortisation of deferred consideration (Note 24)
Total borrowing costs
Preference share dividends
2006
Number
2005
Number
1,647
489
2,136
323
68
391
2,527
2006
£000
54,678
6,575
1,446
62,699
2006
£000
1,744
303
2,047
2006
£000
20,220
1,345
535
1,476
387
1,863
250
56
306
2,169
2005
£000
45,855
5,386
1,125
52,366
2005
£000
1,814
–
1,814
2005
£000
16,551
5,998
489
22,100
23,038
25
22,125
25
23,063
Current tax:
UK corporation tax
Overprovision from prior years
Foreign tax
Deferred tax:
Current year
Adjustment in respect of prior years
2006
£000
13,615
(270)
1,390
14,735
247
486
733
2005
£000
15,308
(1,214)
1,696
15,790
(807)
774
(33)
15,468
15,757
Corporation tax is calculated at 30% (2005 – 30%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the
rates prevailing in those respective jurisdictions.
The charge for the year can be reconciled to the profit before taxation as stated in the income statement as follows:
Profit before taxation
Tax at the UK corporation tax rate of 30% (2005 – 30%)
Tax effect of expenses that are not deductible in determining
taxable profit
Amortisation charge not deductible in determining taxable profit
Difference in taxation in overseas subsidiary undertakings
Tax effect of share of results of associate
Adjustment to tax charge in respect of prior years
Tax expense and effective tax rate for the year
2006
£000
56,062
16,819
753
368
(1,631)
(1,057)
216
15,468
%
30.0
1.3
0.7
(2.9)
(1.9)
0.4
27.6
2005
£000
54,988
16,496
474
257
(1,030)
–
(440)
15,757
%
30.0
0.9
0.5
(1.9)
–
(0.8)
28.7
In addition to the amount charged to the income statement, a deferred tax asset relating to share options of £882,000 (2005 – £901,000) has been
credited directly to equity (Note 26). A further deferred tax asset of £183,000 relating to holiday pay was credited directly to equity upon the
transition of the Group to IFRS on 1 May 2004.
(12) Dividends
Amounts recognised as distributions to equity holders of the parent Company
Final dividend for the year ended 30 April 2005 of 12p per share
Interim dividend for the year ended 30 April 2006 of 9p per share
Final dividend for the year ended 30 April 2004 of 10.6p per share
Interim dividend for the year ended 30 April 2005 of 8p per share
2006
£000
7,676
5,761
–
–
13,437
2005
£000
–
–
6,780
5,136
11,916
The proposed final dividend of 14p per share is subject to approval by the shareholders at the Annual General Meeting and has not been included
as a liability as at 30 April 2006.
46-47 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(13) Earnings per share
(14) Goodwill (continued)
2006
2005
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from the
business combination. Before recognition of impairment losses, the carrying amount of goodwill has been allocated as follows:
(a) Basic and diluted earnings per share
The calculation of basic and diluted earnings per share is
based on the following data:
Earnings
Earnings for the purposes of basic and diluted earnings per share,
being net profit attributable to equity holders of the parent
Number of shares
Weighted average number of Ordinary shares for the purposes
of basic earnings per share
Effect of dilutive potential Ordinary shares:
– share options
Weighted average number of Ordinary shares for the purposes
of diluted earnings per share
Basic earnings per share
Diluted earnings per share
(b) Earnings per share before amortisation and exceptional restructuring costs
Earnings for the purposes of basic earnings per share (above)
Amortisation
Exceptional restructuring costs (net of UK corporation tax at 30%)
Earnings for the purpose of basic earnings per share before amortisation
and exceptional restructuring costs
Basic earnings per share before amortisation and exceptional restructuring costs
Diluted earnings per share before amortisation and exceptional restructuring costs
(14) Goodwill
Group
Cost:
As at 1 May
Exchange differences
Recognised on acquisitions of subsidiary undertakings (Note 35)
As at 30 April
£000
£000
40,594
39,231
Number
Number
66,481,499
64,598,909
464,060
465,690
66,945,559
65,064,599
61.1p
60.6p
£000
40,594
1,227
1,825
43,646
65.7p
65.2p
2006
£000
12,448
490
31,644
44,582
60.7p
60.3p
£000
39,231
855
–
40,086
62.1p
61.6p
2005
£000
6,274
–
6,174
12,448
Group
Northgate (AVR) Limited
Furgonetas de Alquiler SA (“Fualsa”)
Fleet Technique Limited
Other UK vehicle hire companies
2006
£000
28,055
9,670
3,589
3,268
44,582
2005
£000
–
9,180
–
3,268
12,448
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined from the value in use calculations. The key assumptions for the value in use calculations are
those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The Directors estimate
discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth
rates are based on industry growth rates forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future
changes in the market.
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by the Directors and extrapolates cash flows for
the periods indicated below.
The relevant growth rates and discount rates applied to each CGU are set out below:
Growth Rate
Discount Rate
Cash Flow Period
Northgate (AVR) Limited
Fualsa
Fleet Technique Limited
Other UK vehicle hire companies
Nil
4%
25%
Nil
8%
8%
8%
8%
10 years
10 years
5 years
5 years
The periods over which cash flows for Northgate (AVR) Limited and Fualsa have been extrapolated exceed five years on the basis that economic
benefit is expected to flow to the Group over a longer period in these instances.
The growth rates used do not exceed the average long-term growth rate for relevant markets, with the exception of Fleet Technique Limited which
has been increased due to the immature market in which this company operates.
48-49 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(15) Other intangible assets
(16) Property, plant and equipment: vehicles for hire
Group
Fair value
At 1 May 2004
Additions
Acquisitions of subsidiary undertakings
Disposals
At 1 May 2005
Additions
Acquisitions of subsidiary undertakings
Exchange differences
At 30 April 2006
Amortisation:
At 1 May 2004
Charge for the year
Eliminated on disposals
At 1 May 2005
Charge for the year
Exchange differences
At 30 April 2006
Carrying amount:
At 30 April 2006
At 30 April 2005
Brand
names
£000
Customer
relationships
£000
Non compete
agreements
£000
Software
technology
£000
Other
software
£000
Total
£000
–
–
3,953
–
3,953
–
535
–
4,488
–
408
–
408
456
–
864
3,624
3,545
–
–
1,273
–
1,273
–
12,614
–
13,887
–
159
–
159
515
–
674
13,213
1,114
–
–
137
–
137
–
148
–
285
–
26
–
26
39
–
65
220
111
–
–
–
–
–
–
168
–
168
–
–
–
–
11
–
11
157
–
1,913
19
109
(84)
1,957
925
177
8
3,067
1,681
262
(82)
1,861
206
6
2,073
1,913
19
5,472
(84)
7,320
925
13,642
8
21,895
1,681
855
(82)
2,454
1,227
6
3,687
994
96
18,208
4,866
Group
Cost or valuation:
At 1 May 2004
Additions
Acquisitions of subsidiary undertakings
Transfer to motor vehicles
Exchange differences
Disposals
At 1 May 2005
Additions
Acquisitions of subsidiary undertakings (Note 35)
Transfer to motor vehicles
Exchange differences
Disposals
At 30 April 2006
Depreciation:
At 1 May 2004
Charge for the year
Exchange differences
Transfer to motor vehicles
Eliminated on disposals
At 1 May 2005
Charge for the year
Exchange differences
Transfer to motor vehicles
Eliminated on disposals
At 30 April 2006
Carrying amount:
At 30 April 2006
At 30 April 2005
£000
488,793
295,851
95,342
(134)
(757)
(201,603)
677,492
301,546
92,423
(171)
3,917
(267,865)
807,342
109,447
117,799
(252)
(35)
(81,310)
145,649
133,367
630
(32)
(116,096)
163,518
643,824
531,843
The carrying amount of the Group’s vehicles for hire includes an amount of £12,103,000 (2005 – £26,085,000) in respect of assets leased under
finance lease agreements.
50-51 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(17) Other property, plant and equipment
(17) Other property, plant and equipment (continued)
Group
Cost or valuation:
At 1 May 2004
Additions
Acquisitions of subsidiary undertakings
Transfer from vehicles for hire
Exchange differences
Disposals
At 1 May 2005
Additions
Acquisitions of subsidiary undertakings (Note 35)
Transfer from vehicles for hire
Exchange differences
Disposals
At 30 April 2006
Depreciation:
At 1 May 2004
Charge for the year
Exchange differences
Transfer from vehicles for hire
Eliminated on disposals
At 1 May 2005
Charge for the year
Exchange differences
Transfer from vehicles for hire
Eliminated on disposals
At 30 April 2006
Carrying amount:
At 30 April 2006
At 30 April 2005
Cost or valuation at 30 April 2006 is represented by
Valuation performed in 1992
Valuation performed in 2004
Additions at cost
Land &
buildings
£000
Plant,
equipment &
fittings
£000
Motor
vehicles
£000
23,096
5,817
9,833
–
(42)
(179)
38,525
9,737
5,246
–
322
(2,567)
51,263
3,495
1,061
(2)
–
(175)
4,379
1,238
5
–
(133)
5,489
45,774
34,146
525
3,403
47,335
51,263
8,032
1,203
689
–
(8)
(1,476)
8,440
1,765
216
–
30
(844)
9,607
5,528
1,494
(2)
–
(1,375)
5,645
1,283
(1)
–
(742)
6,185
3,422
2,795
–
–
9,607
9,607
1,405
593
–
134
–
(851)
1,281
705
169
171
–
(985)
1,341
400
477
–
35
(541)
371
321
–
32
(423)
301
1,040
910
–
–
1,341
1,341
Total
£000
32,533
7,613
10,522
134
(50)
(2,506)
48,246
12,207
5,631
171
352
(4,396)
62,211
9,423
3,032
(4)
35
(2,091)
10,395
2,842
4
32
(1,298)
11,975
50,236
37,851
525
3,403
58,283
62,211
Group
Land and buildings category:
Freehold
Short leasehold
2006
£000
38,985
6,789
45,774
2005
£000
26,031
8,115
34,146
At 30 April 2006, the Group had entered into contractual commitments for the acquisitions of plant, property and equipment amounting to £530,000
(2005 – £119,000).
Certain of the above freehold properties were valued as at 30 April 2002 by Jones Lang Wootton, Chartered Surveyors, and certain other freehold
properties as at 3 May 2004 by American Appraisal, Professional Valuers, on the basis of open market value for existing use.
At 30 April 2006, under the historical cost convention, land and buildings would have been stated at £51,544,000 (2005 – £38,803,000) and related
accumulated depreciation of £5,584,000 (2005 – £4,472,000).
During the prior year the Group increased its holding in Fualsa from 40% to 100%. A fair value adjustment was made in the prior year to revalue
fixed assets which resulted in 40% of the revaluation, relating to the Group’s existing interest in Fualsa prior to 3 May 2004, being debited to fixed
assets. The Group revaluation reserve in the consolidated balance sheet was credited with the corresponding amount of £1,031,000.
Company
Cost
At 1 May 2004 and 1 May 2005
Additions
At 30 April 2006
Depreciation
At 1 May 2004
Charge for the year
At 1 May 2005
Charge for the year
At 30 April 2006
Carrying amount:
At 30 April 2006
At 30 April 2005
£000
3,221
18
3,239
104
61
165
62
227
3,012
3,056
52-53 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(18) Investments
Company
Cost:
At 1 May 2005
Acquisitions of subsidiary undertakings
Purchase of interest in associate
Foreign exchange differences on investments
denominated in foreign currency
At 30 April 2006
Accumulated provisions:
At 1 May 2005 and 30 April 2006
Carrying amount:
At 30 April 2006
At 30 April 2005
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
Shares in
subsidiary
undertakings
£000
Investment
in associate
£000
Loans
to group
undertakings
£000
58,669
114,749
–
853
174,271
–
–
37,972
413
38,385
47,000
–
–
–
47,000
Total
£000
105,669
114,749
37,972
1,266
259,656
2,435
–
–
2,435
171,836
56,234
38,385
–
47,000
47,000
257,221
103,234
(21) Other financial assets
Trade and other receivables
Trade amounts receivable
Amounts due from subsidiary undertakings
Other taxes
Corporation tax
Deferred tax asset (Note 26)
Financial instrument asset (Note 25)
Other debtors
Prepayments
The average credit periods taken on goods are
Group
Company
2006
£000
94,855
–
3,199
691
–
2,747
2,916
12,531
116,939
2005
£000
76,291
–
1,447
492
–
–
2,389
12,222
92,841
2006
£000
–
503,161
1,171
–
1,829
2,747
–
451
509,359
2005
£000
–
371,300
1,163
–
1,598
–
1,144
661
375,866
UK
Spain
UK
Spain
2006
2005
49 days
138 days
49 days
135 days
2006
£000
2,786
1,469
4,255
2005
£000
2,101
1,129
3,230
On 5 August 2005, the Company purchased 49% of the issued share capital of Record Rent a Car S.A. (“Record”), a company registered in Spain,
for a cash consideration of £37,972,000 (Note 19). The principal activity of Record is vehicle hire.
Allowances for estimated irrecoverable amounts
On 3 February 2006, the Company acquired 100% of the issued share capital of Northgate (AVR) Limited (formerly Arriva Vehicle Rental Limited) for a
cash consideration of £50,316,000 (Note 35).
Total
On 3 February 2006, the Company acquired 100% of the issued share capital of Northgate (St Helier) Limited. The consideration of £64,432,500 was
settled through the issue of 6,050,000 Ordinary shares, with nominal value £302,500 (Note 27).
At 30 April 2006, the principal subsidiary undertakings of the Company were as follows:
Northgate Vehicle Hire Limited
Furgonetas de Alquiler SA (“Fualsa”)
Fleet Technique Limited
Vehicle hire
Vehicle hire
Vehicle management
England and Wales
Spain
England and Wales
A full list of the Company’s subsidiary undertakings was included with the Annual Return filed with the Registrar of Companies.
The investments in Fualsa and Record are denominated in Euro in the Company balance sheet. The foreign exchange movements recognised in
investments arise when the investment amounts are retranslated at the foreign exchange rate prevailing on the balance sheet date.
(19) Interest in associate
On 5 August 2005, the Group purchased 49% of the issued share capital of Record, a company registered in Spain, for a cash consideration, payable
to the vendors of €54,800,000. In accordance with IAS 28, this investment, including associated costs, has been accounted as an associate under
the equity method of accounting.
Relevant book values relating to 100% of Record are as follows:
Total assets
Total liabilities
Results for the period 5 August 2005 to 30 April 2006
Revenues
Profit before taxation
Taxation
Profit after taxation
49% share of profit after taxation of associate
Purchase of investment in associate (Note 18)
Interest in associate at 30 April 2006
(20) Inventories
Inventories comprise spare parts and consumables.
£000
220,104
160,592
55,816
10,131
(2,902)
7,229
3,542
38,385
41,927
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Bank balances and cash
These comprise cash held by the Group and short-term deposits with an original maturity of three months or less.
The Directors consider that the carrying amounts of these assets approximates to their fair value.
Credit risk
Consideration of the Group’s credit risk is documented in Note 24.
(22) Non-current assets classified as held for sale
These comprise vehicles held for resale.
(23) Other financial liabilities
Trade and other payables
Trade payables
Amounts due to subsidiary undertakings
Financial instrument liability (Note 25)
Social security and other taxes
Accruals and deferred income
Trade payables comprise amounts outstanding for trade purchases.
Group
Company
2006
£000
27,941
–
411
5,779
23,453
57,584
2005
£000
20,008
–
–
2,138
22,623
44,769
2006
£000
58
5,696
–
102
2,228
8,084
2005
£000
48
5,693
–
88
2,419
8,248
54-55 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(23) Other financial liabilities (continued)
The average credit periods taken for trade purchases are
UK
Spain
44 days
84 days
43 days
68 days
2006
2005
The Directors consider that the carrying amount of the trade and other payables approximates to their fair value.
(24) Borrowings
The creditors falling due after more than one year comprise bank loans, finance lease obligations and other borrowings.
The Directors consider that the carrying amounts of the Group’s borrowings approximate to their fair value.
Total borrowings
Bank overdrafts
Bank loans
Vehicle related finance lease obligations
Deferred consideration
Property loans
Cumulative Preference shares
Other
Group
Company
2006
£000
2005
£000
2006
£000
2005
£000
3,789
518,393
12,326
10,290
2,019
500
1,192
548,509
7,318
382,221
48,642
9,548
3,742
500
258
452,229
12,926
518,203
–
10,290
–
500
–
541,919
18
378,091
–
9,548
–
500
–
388,157
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(24) Borrowings (continued)
The borrowings are repayable as follows:
On demand or within one year (shown under current liabilities)
Bank overdrafts
Bank loans
Vehicle related finance lease obligations
Deferred consideration
Property loans
Other
In the second year
Bank loans
Vehicle related finance lease obligations
Deferred consideration
Property loans
Other
In the third to fifth years
Bank loans
Vehicle related finance lease obligations
Property loans
Due after more than five years
Cumulative Preference shares
Property loans
Total borrowings
Less: Amount due for settlement within one year
(shown under current liabilities)
Amount due for settlement after one year
Bank overdrafts
Bank overdrafts are repayable on demand and are unsecured.
Group
Company
2006
£000
3,789
2,956
11,527
10,290
270
1,192
30,024
–
610
–
216
–
826
515,437
189
697
516,323
500
836
1,336
548,509
30,024
518,485
2005
£000
7,318
3,946
36,491
–
458
197
48,410
185
11,470
9,548
921
61
22,185
378,090
681
–
378,771
500
2,363
2,863
2006
£000
12,926
2,766
–
10,290
–
–
25,982
–
–
–
–
–
–
515,437
–
–
515,437
500
–
500
2005
£000
18
–
–
–
–
–
18
–
–
9,548
–
–
9,548
378,091
–
–
378,091
500
–
500
452,229
541,919
388,157
48,410
403,819
25,982
515,937
18
388,139
They are denominated in UK Sterling and bear interest at 1% above the Bank of England base rate, thereby exposing the Group to cash flow interest
rate risk.
Bank loans
On 10 January 2006, the Company committed term loan facilities with seven major UK and European banks. The total facilities of £745,000,000
(2005 – £565,000,000) have commitment dates one, three and four years from the agreement dates.
Bank loans are unsecured and bear interest at rates of 0.475% to 0.525% above the relevant interest rate index, being LIBOR for Sterling
denominated debt and EURIBOR for Euro denominated debt. This exposes the Group to cash flow interest rate risk.
Cumulative Preference shares
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.
The total number of authorised cumulative Preference shares of 50p each is 1,300,000 (2005 - 1,300,000), of which 1,000,000
(2005 - 1,000,000) were allotted and fully paid at the balance sheet date.
56-57 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(24) Borrowings (continued)
(24) Borrowings (continued)
Vehicle related finance lease obligations
The Group previously had a policy of leasing certain of its vehicles for hire under finance leases. The average lease term is three years. For the year
ended 30 April 2006, the average borrowing rate for vehicle related finance leases was 4.4% (2005 – 4.1%). All leases are on a fixed repayment basis
and no arrangements have been entered into for contingent rental payments.
Finance lease obligations are secured by fixed charges over the vehicles to which they relate.
Other borrowings
Other borrowings of £1,192,000 represent Spanish debt discounting arrangements which are unsecured and are all due within one year.
Total borrowing facilities
The Group has various borrowings facilities available to it. The undrawn committed facilities at the balance sheet date, in respect of which all
conditions precedent had been met at that date, are as follows:
Group
Amounts payable under finance leases:
Within one year
In the second year to fifth years inclusive
Less future finance charges
Present value of lease obligations
Less: amount due for settlement within one year
(shown under current liabilities)
Amount due for settlement after one year
Minimum
lease payments
Present value of
minimum lease payments
2006
£000
11,703
853
12,556
(230)
12,326
2005
£000
37,544
12,212
49,756
(1,114)
48,642
2006
£000
11,527
799
12,326
–
12,326
2005
£000
36,491
12,151
48,642
–
48,642
(11,527)
799
(36,491)
12,151
Vehicle related finance lease obligations are denominated in Sterling and Euro.
Deferred consideration
The deferred consideration is due in respect of 20% of the issued share capital of Fualsa, the purchase of which occurred in May 2004. At the point
of the purchase, the amount due was discounted by the Group’s cost of capital and resulted in an income statement charge of £489,000 for the year
ended 30 April 2005, which was classified as a financing cost. After allowing for exchange differences, an additional amount of £535,000 was
charged to the income statement for the year ended 30 April 2006 and the balance of £10,290,000 represents the actual amount payable. This
amount is unsecured.
Property loans
All property loans relate to land and buildings held in Spain. The loans are secured on the properties to which they relate.
The average loan term is eight years. For the year ended 30 April 2006, the average borrowing rate for property loans was 3.3% (2005 – 3.3%). All
loans are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
Group
Amounts payable under property loans:
Within one year
In the second year to fifth years inclusive
After more than five years
Less future finance charges
Present value of lease obligations
Less: amount due for settlement within one year
(shown under current liabilities)
Amount due for settlement after one year
Minimum
lease payments
Present value of
minimum lease payments
2006
£000
274
992
973
2,239
(220)
2,019
2005
£000
465
996
2,474
3,935
(193)
3,742
2006
£000
270
913
836
2,019
–
2,019
(270)
1,749
2005
£000
458
921
2,363
3,742
–
3,742
(458)
3,284
In one year or less
In one year to five years
2006
£000
194,215
129,608
323,823
2005
£000
144,338
87,421
231,759
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.
Analysis of consolidated net debt
Cash at bank and in hand
Short term investments
Bank overdraft due within one year
Bank loans
Vehicle related finance lease obligations
Deferred consideration
Preference shares
Property loans and other borrowings
1 May
2005
£000
39,601
1,774
(7,318)
34,057
(382,221)
(48,642)
(9,548)
(500)
(4,000)
(410,854)
Cash flow
£000
Acquisitions
(Note 35)
£000
Other
non-cash
changes
£000
Foreign
exchange
movements
£000
(22,131)
73
81,244
59,186
(131,865)
36,994
–
–
877
(34,808)
4,567
–
(77,715)
(73,148)
–
–
–
–
–
(73,148)
–
–
–
–
–
–
(535)
–
–
(535)
164
–
–
164
(4,307)
(678)
(207)
–
(88)
(5,116)
30 April
2006
£000
22,201
1,847
(3,789)
20,259
(518,393)
(12,326)
(10,290)
(500)
(3,211)
(524,461)
The Group calculates gearing to be net borrowings as a percentage of shareholders’ funds less goodwill and the net book value of intangible assets,
where net borrowings comprise borrowings less cash at bank and short term investments. At 30 April 2006, the gearing of the Group amounted to
203.7% (2005 – 197.8%) where net borrowings are £524,461,000 (2005 – £410,854,000) and shareholders’ funds less goodwill and the net book value
of intangible assets are £257,499,000 (2005 – £207,717,000).
Financial instruments
Financial assets
The Group’s principal financial assets are bank balances and cash, trade and other receivables and investments.
The Group’s credit risk is primarily attributable to its trade. The trade receivable amounts presented in the balance sheet are net of allowances for
doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence
of a reduction in the recoverability of the cash flows.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings
assigned by international credit-rating agencies.
The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers in the UK.
The credit risk associated with trade receivables in Fualsa is more concentrated in larger customers and, consequently, the Group has put a credit
insurance policy in place to mitigate this risk.
58-59 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(24) Borrowings (continued)
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 does not engage
in speculative activity and it is policy to avoid using the more complex financial instruments. Further details regarding derivative financial
instruments are shown in Note 25.
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.
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 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 2006, 58% of gross borrowings were at fixed or capped rates of interest: £205,000,000 plus €162,000,000 of interest rate
derivatives as detailed in Note 25.
Foreign currency exchange risk
The Group maintains borrowings in the same currency as its cash requirements, with the exception of borrowings maintained in Euro as net
investment hedges against its Euro denominated investments, as detailed in Note 25.
An analysis of the Group’s borrowings by currency is given below:
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(25) Derivative financial instruments
Interest rate derivatives
The Group’s exposure to interest rate fluctuations on its borrowings and deposits is managed through the use of interest rate swaps, caps and
collars. 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. In addition to those derivatives currently running, the Group has further structures with forward
starting dates. The nominal value, interest rate and length of each contract is shown below:
UK Sterling contracts effective as at 30 April 2006
Cap amount (£m)
5
5
Cap %
7.50
Collar amount (£m)
Cap %
Floor %
10
10
10
10
25
10
10
10
10
10
115
7.00
7.00
7.00
7.00
5.50
5.25
5.00
4.75
7.00
7.00
5.00
5.00
5.00
5.00
3.22
3.19
3.15
3.25
5.00
5.00
Finish date
June 2006
Finish date
April 2007
April 2007
April 2008
April 2008
May 2008
June 2008
June 2008
June 2008
April 2009
April 2010
Finish date
March 2007
March 2007
July 2007
July 2007
May 2008
May 2008
June 2008
Sterling
£000
Euro
£000
Total
£000
3,789
292,082
1,255
500
–
–
–
297,626
–
226,311
11,071
–
10,290
2,019
1,192
250,883
3,789
518,393
12,326
500
10,290
2,019
1,192
548,509
Swap amount (£m)
Swap %
10
10
10
10
25
10
10
85
Total value of current contracts (£m)
205
6.45
5.99
7.36
7.35
4.05
3.93
3.82
Sterling
£000
Euro
£000
Total
£000
UK Sterling contract to commence after 30 April 2006
Collar amount (£m)
10
10
Cap %
6.50
Floor %
4.50
Start date
April 2007
Finish date
April 2012
7,318
258,500
3,454
500
–
–
–
269,772
–
123,721
45,188
–
9,548
3,742
258
182,457
7,318
382,221
48,642
500
9,548
3,742
258
452,229
Group
At 30 April 2006
Borrowings
Bank overdrafts
Bank loans
Vehicle related finance lease obligations
Cumulative Preference shares
Deferred consideration
Property loans
Other
At 30 April 2005
Borrowings
Bank overdrafts
Bank loans
Vehicle related finance lease obligations
Cumulative Preference shares
Deferred consideration
Property loans
Other
60-61 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(25) Derivative financial instruments (continued)
Euro contracts effective as at 30 April 2006
Cap amount (€m)
12
12
Swap amount (€m)
50
50
50
150
Total value of current contracts (€m)
162
Cap %
3.75
Swap %
2.30
2.28
2.23
Finish date
October 2006
Finish date
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. Both contracts were incepted in June 2005.
Fair values of interest rate derivatives
Market values have been used to determine fair values of interest rate derivatives at each balance sheet date.
The estimated fair values are as follows:
Group
Interest rate swaps
Interest rate collars
Interest rate caps
2006
£000
2,576
(240)
–
2,336
2005
£000
(577)
(346)
–
(923)
All of the interest rate swaps are designated and effective as cash flow hedges and their fair value, along with changes in fair value between
balance sheet dates, has been deferred in equity. To the extent that the interest rate swaps are not 100% effective, an amount of £197,000 has been
credited to the income statement.
Interest rate caps and collars are not hedge accounted for and, accordingly, an amount of £106,000 has been credited in the income statement.
The total change in fair values of interest rate derivatives recognised in the income statement of £303,000 is shown within investment income
(Note 9). No such adjustments were made in the year ended 30 April 2005 as the Group did not adopt IAS 39 until 1 May 2005, in accordance with
the transitional provisions of IFRS 1.
At 30 April 2006, the net negative fair value of the Group’s interest rate derivatives is recognised in the balance sheet and comprises an asset of
£2,747,000 (Note 21) and a liability of £411,000 (Note 23).
Net investment hedges
The Group manages its exposure to movements in the reported results of Fualsa by maintaining UK based borrowings denominated in Euro in
the parent Company equivalent to the net assets plus goodwill of Fualsa. The level of these Euro borrowings is revised every month to reflect the
closing net assets and goodwill of Fualsa at the previous month end.
The hedging objective is to reduce the risk of spot re-translation foreign exchange gains or losses arising in the consolidated results of the Group
upon the translation of Fualsa from Euro to Sterling at each reporting date in the hedging period, which is each period between each roll-over of
the Euro denominated borrowings which comprise the net investment hedge.
The hedge is considered fully effective in the current and prior year and the exchange differences arising on the loans have been recognised
directly within equity along with the exchange differences on retranslation of the net assets of Fualsa.
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(26) Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior years:
Accelerated
capital
allowances
£000
Revaluation
of buildings
£000
Share
based
payment
£000
Intangible
assets
£000
Retirement
benefit
obligations
£000
Other
timing
differences
£000
Group
At 1 May 2004
Charge (credit) to income
Credit to equity
Acquisitions of subsidiary
undertakings
At 1 May 2005
Charge (credit) to income
Credit to equity
Acquisitions of subsidiary
undertakings
Exchange differences
Transfer relating to acquired
subsidiary undertaking
At 30 April 2006
8,562
392
–
2,430
11,384
(1,929)
–
11,153
64
–
20,672
300
(13)
–
666
953
(9)
–
2,548
–
–
3,492
(589)
31
(901)
–
(1,459)
(6)
(882)
–
–
–
(2,347)
–
(202)
_
1,839
1,637
(331)
–
4,039
–
–
5,345
–
–
_
–
–
253
–
(686)
–
–
(433)
Total
£000
6,349
(33)
(1,084)
4,892
10,124
733
(882)
16,960
64
(1,924)
(241)
(183)
(43)
(2,391)
2,755
–
(94)
–
(11,153)
(10,883)
(11,153)
15,846
The following are the major deferred tax liabilities and assets recognised by the Company and movements thereon during the current and prior years:
Company
At 1 May 2004
Charge (credit) to income
Credit to equity
At 1 May 2005
Charge (credit) to income
Credit to equity
At 30 April 2006
Accelerated
capital
allowances
£000
Share
based
payment
£000
Other
timing
differences
£000
110
57
–
167
25
–
192
(590)
31
(311)
(870)
(7)
(882)
(1,759)
(256)
(639)
–
(895)
633
–
(262)
Total
£000
(736)
(551)
(311)
(1,598)
651
(882)
(1,829)
At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of the subsidiary undertakings
for which deferred tax liabilities have not been recognised was £1,201,000 (2005 – £569,000). No liability has been recognised in respect of these
differences because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such
differences will not reverse in the foreseeable future.
Temporary differences in connection with interests in associates are insignificant.
62-63 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(27) Share capital
(29) Revaluation reserve
Group and Company
Authorised:
80,000,000 Ordinary shares of 5p each
Allotted and fully paid:
70,750,761 (2005 – 64,183,217) Ordinary shares of 5p each
2006
£000
4,000
3,538
2005
£000
4,000
3,209
The Company has one class of Ordinary share which carries no right to fixed income.
During the year the Company completed a placing of 6,050,000 new Ordinary shares in exchange for ordinary and preference shares in Northgate
(St Helier) Limited. The price of the issued Ordinary shares of the Company was 1,065p each, raising £63,045,000 (net of expenses). In accordance
with Section 131 of the Companies Act 1985 the premium on the issue has been credited to the merger reserve (Note 31).
During the year the Company issued 517,544 Ordinary shares with a nominal value of £25,877 pursuant to the exercise of options under the Group’s
various share schemes, for cash consideration of £2,480,116. The premium on the issue of these shares has been credited to the share premium
account (Note 28).
(28) Share premium account
Group and Company
At 1 May
Premium on Ordinary shares issued (Note 27)
At 30 April
2006
£000
62,544
2,454
64,998
2005
£000
61,829
715
62,544
At 1 May 2004
Revaluation of land and buildings (Note 17)
Revaluation of foreign currency denominated investment in subsidiary undertaking upon inception of hedge
At 1 May 2005 and 30 April 2006
(30) Own shares
At 1 May 2004
Purchase of own shares
Sale of own shares
At 1 May 2005
Purchase of own shares
Sale of own shares
At 30 April 2006
Group
£000
Company
£000
23
1,031
–
1,054
–
–
1,371
1,371
Group
£000
(1,330)
(2,567)
1,426
(2,471)
(1,371)
511
(3,331)
Company
£000
–
–
–
–
–
–
–
The own shares reserve represents shares held by employee trusts in order to meet commitments under the Group’s various share schemes
(Note 38).
(31) Merger reserve
At 1 May 2004 and 1 May 2005
Premium on Ordinary shares issued (Note 27)
At 30 April 2006
Group
£000
4,721
62,742
67,463
Company
£000
417
62,742
63,159
64-65 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(32) Hedging reserve
(34) Retained earnings
At 1 May 2005
Movement in fair value of hedged interest rate derivatives
Transfer to income statement
At 30 April 2006
Group
£000
Company
£000
–
3,153
(197)
2,956
–
2,747
(193)
2,554
The hedging reserve represents the cumulative amounts of changes in fair values of hedged interest rate derivative financial instruments that are
deferred in equity, as explained in Note 2 and Note 25, less amounts transferred to the income statement.
(33) Translation reserve
At 1 May 2004
Foreign exchange differences on retranslation of net assets of subsidiary undertakings
Foreign exchange differences on retranslation of investments in subsidiary undertakings
Net foreign exchange differences on long term borrowings held as hedges
At 1 May 2005
Foreign exchange differences on retranslation of net assets of subsidiary undertakings
Foreign exchange differences on retranslation of investments in subsidiary undertakings
Foreign exchange differences on retranslation of interest in associate
Net foreign exchange differences on long term borrowings held as hedges
At 30 April 2006
Group
£000
Company
£000
–
(153)
–
1,635
1,482
1,303
–
413
(1,571)
1,627
–
–
(1,389)
1,389
–
–
646
413
(1,059)
–
During the year, the Company maintained borrowings denominated in Euro in order to hedge its Euro denominated investments in Fualsa and Record.
The investment balance in Fualsa was translated into Sterling at the exchange rate prevailing when this hedge was put into place and the exchange
difference arising was reflected in the revaluation reserve of the Company. The Company retranslated the borrowings and the investments into
Sterling using the exchange rate prevailing at the balance sheet date. The exchange differences on the retranslation of the investments have been
recognised directly in reserves and the exchange difference on the retranslation of the borrowings has been recognised directly in reserves to the
extent that it offsets the exchange differences arising on the retranslation of the investments. The remaining exchange difference on the
retranslation of the borrowings has been recognised in the income statement of the Company.
At 1 May 2004
Profit for the year
Dividends paid
Share options fair value amount credited directly to equity
Net deferred tax credit recognised directly in equity
At 1 May 2005
Transitional adjustment in respect of IAS 32 and IAS 39 (Note 42)
At 1 May 2005 after adoption of IAS 32 and IAS 39
Profit for the year
Dividends paid
Share options fair value amount credited directly to equity
Defined benefit pension credit recognised directly in equity
Net deferred tax credit recognised directly in equity
At 30 April 2006
Group
£000
Company
£000
126,005
63,140
39,231
(11,916)
88
1,084
154,492
(923)
153,569
40,594
(13,437)
20
356
882
181,984
12,767
(11,916)
88
311
64,390
–
64,390
41,059
(13,437)
20
–
882
92,914
(35) Acquisitions of subsidiary undertakings
Fleet Technique Limited
On 23 January 2006, the Group acquired the entire issued share capital of Fleet Technique Limited (“FTL”) for a cash consideration of £6,583,000,
including goodwill of £3,589,000. The transaction has been accounted for in accordance with the purchase method of accounting.
Net assets acquired:
Intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Bank overdraft
Trade and other payables
Deferred tax liabilities
Goodwill
Acquisition cost (including expenses)
Fair value of consideration:
Cash
Net cash acquired with subsidiary undertaking
Cash outflow in the year on acquisition of FTL
Book
value
£000
Fair value
adjustments
£000
177
204
2,763
1,266
(358)
(3,038)
–
1,014
2,785
–
30
–
–
–
(835)
1,980
Fair
value
£000
2,962
204
2,793
1,266
(358)
(3,038)
(835)
2,994
3,589
6,583
6,583
(908)
5,675
The goodwill arising on the acquisition of FTL is attributable to the fair value of the workforce, in place at the date of acquisition, and other potential
future economic benefit that it is anticipated will be derived from the business.
FTL contributed £3,338,000 of revenue and £110,000 profit before tax for the period between 23 January 2006 and the balance sheet date.
If the acquisition of FTL had been completed on the first day of the financial year then, excluding the impact of the acquisition of Northgate (AVR)
Limited (see below), Group revenues for the year would have been £382,279,000 and Group profit before taxation would have been £56,382,000.
66-67 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(35) Acquisitions of subsidiary undertakings (continued)
(37) Operating lease arrangements
Northgate (AVR) Limited
On 3 February 2006, the Group acquired the entire issued share capital of Northgate (AVR) Limited (formerly Arriva Vehicle Rental Limited) (“AVR”)
for a cash consideration of £50,316,000, including goodwill of £28,055,000. The transaction has been accounted for in accordance with the purchase
method of accounting.
As lessee
Group
Minimum lease payments under operating leases recognised in the income statement for the year
2006
£000
5,981
2005
£000
5,080
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases,
which fall due as follows:
Group
Within one year
In the second to fifth years inclusive
After five years
2006
£000
4,592
9,141
7,926
21,659
2005
£000
4,840
11,415
8,934
25,189
Operating lease payments represent rentals payable by the Group for certain of its operating sites as well as rentals for certain vehicles.
Leases are negotiated for an average term of nine years and rentals are fixed for an average number of four years.
As lessor
The revenue of the Group is generated from the hire of vehicles under operating lease arrangements. There is no minimum contracted rental period.
The revenue of the Group under these arrangements is as shown in the consolidated income statement. There are no contingent rentals recognised
in income.
Net assets acquired:
Goodwill
Intangible assets
Property, plant and equipment: vehicles for hire
Other property, plant and equipment
Inventories
Non-current assets held for sale
Trade and other receivables
Cash and cash equivalents
Bank overdraft
Trade and other payables
Deferred tax liabilities
Defined benefit pension obligation
Goodwill
Acquisition cost (including expenses)
Fair value of consideration:
Cash
Net bank overdraft acquired with subsidiary undertaking
Cash outflow in the year on acquisition of AVR
Book
value
£000
Fair value
adjustments
£000
16,909
4,219
93,728
5,764
44
2,320
16,378
3,301
(77,357)
(11,956)
(11,145)
(1,537)
40,668
(16,909)
6,461
(1,305)
(337)
(17)
–
(8)
–
–
(568)
(4,980)
(744)
(18,407)
Fair
value
£000
–
10,680
92,423
5,427
27
2,320
16,370
3,301
(77,357)
(12,524)
(16,125)
(2,281)
22,261
28,055
50,316
50,316
74,056
124,372
The goodwill arising on the acquisition of AVR is attributable to the fair value of the workforce, in place at the date of acquisition, and other
potential future economic benefit that it is anticipated will be derived from the business.
Between the date of acquisition and the balance sheet date, the trade of AVR was transferred into existing subsidiary undertakings of the Group.
The underlying trade of AVR contributed £14,180,000 of revenue and £851,000 of profit before taxation for the period between 3 February 2006 and
the balance sheet date.
If the acquisition of AVR had been completed on the first day of the financial year then, excluding the impact of the acquisition of Fleet Technique
Limited (see above), Group revenues for the year would have been £419,414,000 and Group profit before taxation would have been £59,029,000.
In both of the above acquisitions, the fair values represent the Directors’ current estimates of the net assets acquired. In accordance with IFRS 3,
the values attributed may be revised as further information becomes available.
(36) Profit of the parent Company
A profit of £41,059,000 (2005 – £12,767,000) is dealt with in the accounts of the Company. The Directors have taken advantage of the exemption
available under Section 230 of the Companies Act 1985 and not presented an income statement for the Company alone.
68-69 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(38) Share based payments
The Group’s various share option incentive plans are explained on pages 18 to 21.
(38) Share based payments (continued)
Executive Incentive Scheme
The Group recognised total expenses of £1,301,000 (2005 – £1,184,000) related to equity-settled share-based payment transactions in the year.
No options have been granted since 24 January 2002 under this scheme.
Number of
share options
2006
Weighted
average
exercise price
£
Number of
share options
2005
Weighted
average
exercise price
£
At 1 May
Exercised during the year
Lapsed during the year
At 30 April
1,107,075
(365,944)
(1,173)
739,958
4.90
4.92
3.675
4.90
1,348,500
(182,176)
(59,249)
1,107,075
Exercisable at the end of the year
337,083
4.91
392,692
4.91
4.94
4.93
4.90
4.93
Share options were exercised at several points during the year. The weighted average share price of the Company’s Ordinary shares during the year
was £10.24. The options outstanding at 30 April 2006 had a weighted average exercise price of £4.91 and a weighted average remaining contractual
life of 3.6 years.
Further details regarding the plans are outlined below.
Northgate Share Option Scheme
At 1 May
Granted during the year
Exercised during the year
Lapsed during the year
At 30 April
Exercisable at the end of the year
Number of
share options
2006
Weighted
average
exercise price
£
Number of
share options
2005
Weighted
average
exercise price
£
379,500
141,600
(151,600)
–
369,500
38,400
5.16
9.31
4.42
–
7.03
4.61
385,850
83,500
(75,850)
(14,000)
379,500
23,000
4.72
6.63
4.53
4.98
5.16
4.32
Share options were exercised at several points during the year. The weighted average share price of the Company’s Ordinary shares during the year
was £10.24. The options outstanding at 30 April 2006 had a weighted average exercise price of £7.03 and a weighted average remaining contractual
life of 5.3 years. In the current year, options were granted in October 2005. The aggregate of the estimated fair values of the options granted on this
date is £215,000. In the prior year, options were granted in August 2004. The aggregate of the estimated fair values of the options granted on this
date is £102,000.
The inputs into the Black-Scholes model are as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividends
2006
2005
£9.31
£9.31
19.5%
4.7 years
4.3%
3.2%
£6.84
£6.63
19.5%
4.7 years
5.0%
3.2%
Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous three years.
70-71 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(38) Share based payments (continued)
Deferred Annual Bonus Plan
All options granted under this scheme are nil cost options.
At 1 May
Granted during the year
Exercised during the year
Expired during the year
At 30 April
2006
Number of
share options
2005
Number of
share options
83,143
77,960
(500)
(250)
160,353
–
84,346
(440)
(763)
83,143
No options were exercisable at the end of either year.
The weighted average share price at the date of exercise of options was £9.82 (2005 – £7.10).
The options outstanding at 30 April 2006 had a weighted average remaining contractual life of 1.7 years. In the current year, options were granted in
July 2005. The aggregate of the estimated fair values of the options granted on this date is £515,000. In the prior year, options were granted in July
2004. The aggregate of the estimated fair values of the options granted on this date is £641,000.
The inputs into the Black-Scholes model are as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividends
2006
2005
£9.05
£nil
19.5%
3 years
4.2%
3.2%
£6.83
£nil
19.5%
3 years
5.1%
3.2%
Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous three years.
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(38) Share based payments (continued)
All Employee Share Scheme
The vesting period for partnership shares is one year. The vesting period for matching shares is four years.
Matching share options are nil cost options and are forfeited if the employee either sells the partnership shares or leaves the Group before the
matching share options vest.
Details of the share options outstanding during the year are as follows:
At 1 May
Granted during the year
Forfeited during the year
Exercised during the year
At 30 April
2006
Number of
share options
2005
Number of
share options
200,171
58,876
(11,343)
(60,417)
187,287
199,352
69,434
(16,976)
(51,639)
200,171
No options were exercisable at the end of either year.
The weighted average share price at the date of exercise for share options exercised during the period was £10.27 (2005 – £7.79). The options
outstanding at 30 April 2006 had a weighted average remaining contractual life of 1.6 years. In the current year, matching share options were
granted in January 2006. The aggregate of the estimated fair values of the options granted on this date is £522,000. In the prior year, options were
granted in January 2005. The aggregate of the estimated fair values of the options granted on this date is £467,000.
The inputs into the Black-Scholes model are as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividends
2006
2005
£10.35
£nil
19.5%
5 years
4.2%
3.2%
£8.73
£nil
19.5%
5 years
4.4%
3.2%
Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous three years.
72-73 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(39) Retirement benefit schemes
Defined contribution schemes
During the year the Group operated two defined contribution arrangements. The pension cost to the Group of these arrangements was £1,369,000
(2005 – £1,125,000).
Upon the acquisition of Northgate (AVR) Limited on 3 February 2006 (Note 35), the Group also acquired a further defined contribution scheme and a
defined benefit scheme (see below).
The defined contribution scheme acquired with Northgate (AVR) Limited is established under Trust. Independent fund managers are employed
by the Trustees to invest the contributions received from the employer and the employees.
The pension cost to the Group of this arrangement was £77,000 (2005 – £nil).
Defined benefit scheme
The Willhire Group Limited 1991 Retirement and Death Benefit Plan (“the Plan”) was acquired by the Group as part of the acquisition of Northgate
(AVR) Limited on 3 February 2006 (Note 35).
Certain employees of the Group participate in the Plan which is financed through separate Trustee administered funds managed by independent
professional fund managers on behalf of the Trustees.
Contributions to the Plan are based upon actuarial advice following the most recent actuarial valuation of the fund. Actuarial valuations of the Plan
were performed as at 3 February 2006 and 30 April 2006 by a Fellow of the Institute of Actuaries representing Watson Wyatt Actuaries.
The present value of the defined benefit obligation, the related current service cost and the past service cost were measured using the projected
unit credit method.
The principal actuarial assumptions used were:
Discount rate
Inflation rate
Salary increases
Future pension increases
Amounts recognised in the income statement in respect of the Plan are as follows:
Service cost
Interest cost
Expected return on scheme assets
Curtailments
Total pension credit
Valuation at
30 April 2006
%pa
Valuation at
3 February 2006
%pa
5.1
3.0
4.5
3.0
4.7
2.9
4.4
2.9
From 3 February 2006
to 30 April 2006
£000
48
62
(53)
(443)
(386)
All of the credit for the period has been included in administrative expenses. The £443,000 credit in respect of curtailments relates to the restructuring of
Northgate (AVR) Limited subsequent to acquisition by the Group. Consequently, this credit is included within restructuring costs as referred to in Note 6.
Actuarial gains and losses have been reported directly in equity, within retained earnings.
The actual return on the Plan assets was £48,000. There are no reimbursement rights.
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(39) Retirement benefit schemes (continued)
The amount included in the balance sheet arising from the Group’s obligations in respect of the Plan is as follows:
Present value of defined benefit obligations
Fair value of Plan assets
Deficit in Plan
30 April
2006
£000
3 February
2006
£000
(4,595)
3,151
(1,444)
(5,236)
2,955
(2,281)
The deficit of £2,281,000 as at 3 February 2006 has been included as part of the fair value of net assets of Northgate (AVR) Limited acquired (Note 35).
The net movements in the deficit were as follows:
At 3 February 2006
Pension credit recognised in the income statement
Actuarial gains
Contributions
At 30 April 2006
Movements in the present value of the defined benefit obligations were as follows:
At 3 February 2006
Current service cost
Interest cost
Actuarial gains
Past service cost
Curtailments
At 30 April 2006
Movements in the fair value of the defined benefit assets were as follows:
At 3 February 2006
Expected return on Plan assets
Contributions
Actuarial gains
At 30 April 2006
2006
£000
2,281
(386)
(356)
(95)
1,444
2006
£000
5,236
35
62
(308)
13
(443)
4,595
2006
£000
2,955
53
95
48
3,151
The derivation of the overall expected return on assets reflects the actual allocation at the measurement date combined with an expected return for
each asset class. The bond return is based on the prevailing return available on bonds. The return on equities and property is based on a number of
factors including the income yield at the measurement date, the long-term growth prospects for the economy in general, the long-term relationship
between each asset class and bond returns and the movement in market indices since the previous measurement date.
74-75 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(39) Retirement benefit schemes (continued)
(40) Events after the balance sheet date
The analysis of the Plan assets and the expected rate of return at the balance sheet date was as follows:
Equity instruments
Debt instruments
Other
30 April 2006
Expected return
%
7.9
4.5
4.0
Fair value
of assets
£000
2,663
305
183
3,151
The Plan assets do not comprise any of the Group’s own financial instruments nor does the Group occupy any property or use any other assets held
by the Plan.
The estimated amount of contributions expected to be paid to the Plan during the year ended 30 April 2007 is £265,000.
The history of experience adjustments is supplied only for the period since the acquisition of the Plan as part of the acquisition of Northgate (AVR)
Limited by the Group on 3 February 2006.
Funded status:
Present value of defined benefit obligation
Fair value of Plan assets
Deficit in the Plan
Experience adjustments on Plan obligations:
Amount
Percentage of Plan obligations
Experience adjustments on Plan assets:
Amount
Percentage of Plan obligations
Period ended
30 April 2006
£000
4,595
3,151
1,444
48
1.5%
493
10.7%
On 5 August 2005, the Group acquired a 49% share in Record Rent a Car SA (“Record’), a Company registered in Spain, for a cash consideration,
payable to the vendors, of €54,800,000. In accordance with IAS 28, this investment, including associated costs, has been accounted for as an
associate (Note 19).
On 11 May 2006, the Group acquired the remaining 51% of the issued share capital of Record for a consideration of €72,700,000 under the
share purchase agreement.
The book values of the net assets acquired are detailed below.
Net assets acquired:
Intangible assets
Property, plant and equipment: vehicles for hire
Other property, plant and equipment
Non-current assets classified as held for sale
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Deferred tax liabilities
Book value
£000
57
158,526
14,038
3,162
44,022
299
(7,618)
(146,244)
(6,730)
59,512
In accordance with IFRS 3, the Directors will assess the fair values of the net assets acquired as further information becomes available.
(41) Related party transactions
Trading transactions
Transactions between the Company and its subsidiary undertakings, which are related parties, have been eliminated on consolidation and are not
disclosed here.
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out in the audited part of the
Remuneration Report on pages 16 to 21.
76-77 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(42) Transition to International Financial Reporting Standards ("IFRS")
(42) Transition to IFRS (continued)
The year ended 30 April 2006 is the first year that the Group has presented its financial statements under IFRS. The following disclosures are
required for the year of transition. The last financial statements under UK GAAP were for the year ended 30 April 2005 and the date of transition to
IFRS was 1 May 2004.
Differences between UK GAAP and IFRS
All relevant accounting standards have been applied to the financial information and the following accounting standards are those that have the
most significant impact on the Group.
IFRS 2 (Share-based Payment): An income statement charge is recognised in respect of the cost of share options granted under the Group’s various
share schemes. This cost is deemed to be the fair value of the options granted and is charged over the vesting period. An amount equivalent to the
charge is credited directly to equity, resulting in no net impact on net assets. This accounting treatment is the same as UK GAAP except that the
fair values used under IFRS 2 differ from those under UK GAAP.
IFRS 3 (Business Combinations): Separate intangible assets are recognised at fair value on the acquisition of businesses after the date of transition
to IFRS, which previously formed part of goodwill under UK GAAP. These include non-contractual customer relationships, brand names and non-
compete agreements, all of which are amortised over their respective estimated useful lives. The residual goodwill balance under IFRS is therefore
lower in value than under UK GAAP but it is no longer amortised and is, instead, tested annually for impairment.
IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations): Vehicles held for resale are reclassified from inventories into non-current
assets held for sale under IFRS.
IAS 10 (Events After the Balance Sheet Date): Under IFRS, dividends are not appropriated within the accounts until they are either paid or
formally approved.
IAS 12 (Income Taxes): Deferred taxation changes arise under IFRS as a result of differences between the accounting treatment and taxation
treatment in respect of share options (IFRS 2), intangible assets (IFRS 3) and holiday pay accruals (IAS 19). Under IAS 12, deferred tax liabilities
are also recognised on all capitalised buildings, regardless of whether a contractual commitment to sell exists.
IAS 16 (Property, Plant and Equipment): Under IAS 16, the Group is required to review its depreciation rates and estimated useful lives on an annual
basis to ensure that the net book value of disposals of tangible fixed assets are broadly equivalent to their market value. Depreciation charges are
adjusted for any differences that arise between net book values and open market values of used vehicles upon transfer into non-current assets held
for sale, taking into account the further direct costs to sell the vehicles.
IAS 18 (Revenue): Under IFRS, income from the sale of used vehicles is not recognised within revenue and the net book value of vehicles sold is
removed from cost of sales.
IAS 19 (Employee Benefits): An accrual is recognised for employee annual leave accrued, but not taken, at each balance sheet date. Where this
applies to business combinations, the accrual required at the date of acquisition is deemed to reduce the fair value of the net assets acquired
with a corresponding adjustment to goodwill.
IAS 21 (The Effects of Changes in Foreign Exchange Rates): Certain exchange differences, previously recognised directly within the profit and
loss account reserve under UK GAAP, are reclassified into a separate translation reserve, directly within equity, under IFRS.
IAS 32 (Financial Instruments: Disclosure and Presentation): The Company’s cumulative Preference shares are deemed to be debt rather than equity
under IFRS. They are reclassified from share capital to borrowings in the balance sheet and preference dividends are reclassified from dividends to
finance costs in the income statement.
IAS 38 (Intangible Assets): Certain software assets are reclassified from tangible to intangible assets under IFRS. Amounts previously charged
to the profit and loss account as depreciation under UK GAAP relating to these fixed assets are reclassified as amortisation within the IFRS
income statement.
Separate intangible assets are also recognised within business combinations (see IFRS 3 above). These assets are amortised to the income
statement over their estimated useful lives.
IAS 39 (Financial Instruments: Recognition and Measurement): Interest rate derivatives, to which the Group is party, are recognised on the balance
sheet at their fair value. Subsequent changes in the fair value are recognised either within the income statement, as a finance cost, or directly in
equity to the extent that the Group elects to hedge account, within the provisions of IFRS. As explained under IFRS 1 options below, this standard
was applied by the Group from 1 May 2005 only.
IFRS 1 (First-time Adoption of IFRS) has been applied to the financial statements for the year ended 30 April 2006 and the relevant comparative
financial information. The first-time adoption choices are as follows:
IFRS options
Share based payments
There are two first-time adoption exemptions for accounting for
share based payments:
• Share based payments granted on or before 7 November 2002
and vested before 1 May 2005 may be restated but restatement
is not mandatory;
• Share based payments granted on or before 7 November 2002 and
not vested before 1 May 2005 may be restated but restatement is
not mandatory.
Business combinations and goodwill
Basis of election
• Share options granted on or before 7 November 2002 and vested
before 1 May 2005 have not been restated in accordance with
IFRS 2.
• IFRS 2 has been applied to all share options granted on or after
7 November 2002 which had not vested by 1 May 2005.
The standard is mandatory for all acquisitions after the Company’s
transition date, 1 May 2004.
The standard has been applied only to business combinations
taking place after the Group’s transition date of 1 May 2004.
However, the standard allows a first-time adopter to apply the
standard to all business combinations that occurred before
this date.
Goodwill relating to acquisitions prior to the transition date will be
held at net book value on 1 May 2004, no longer amortised and
subject to annual impairment review (IAS 36).
Financial instruments
The standard is applicable from the Company’s transition date,
1 May 2004.
The Group will not account retrospectively for financial
instruments, including derivatives.
However, the standard grants a first year exemption from its
application to the comparative period but also allows first-time
adopters to retrospectively account for financial instruments
in line with the standard.
Foreign exchange differences
IFRS requires certain translation differences to be recognised
as a separate component of equity, rather than within retained
earnings, and to be considered as part of the profit or loss on
disposal of foreign operations in future.
However, the standard allows first-time adopters to deem the
cumulative translation differences to be zero at the date of
transition.
The restated results for the year to 30 April 2005 do not reflect the
impact of IAS 32 and IAS 39 and the related applicable financial
instruments have been accounted for under UK GAAP, with the
exception of the Preference shares.
The Group will deem cumulative exchange differences to be zero
as at 1 May 2004 and will not consider any cumulative exchange
differences arising prior to 1 May 2004 if the relevant foreign
operations are disposed of in the future.
78-79 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(42) Transition to IFRS (continued)
Group
Reconciliation of equity at 1 May 2004
Notes
(a)
(b)
(c)
(c)
(e)
(f)
(g)
(f)
Goodwill
Other intangible assets
Property, plant and equipment
Interest in joint venture
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Non-current assets classified as held for sale
Total assets
Trade and other payables
Tax liabilities
Short term borrowings
Proposed dividends
Total current liabilities
Long term borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Share capital
Share premium account
Revaluation reserve
Own shares
Merger reserve
Retained earnings
Total equity
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(42) Transition to IFRS (continued)
Group
Reconciliation of equity at 30 April 2005
Notes
(a)
(b)
(c)
(c)
(e)
(f)
(g)
(f)
(h)
Goodwill
Other intangible assets
Property, plant and equipment
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Non-current assets classified as held for sale
Total assets
Trade and other payables
Tax liabilities
Short term borrowings
Proposed dividends
Total current liabilities
Long term borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Share capital
Share premium account
Revaluation reserve
Own shares
Merger reserve
Translation reserve
Retained earnings
Total equity
Effect of
transition
to IFRS
£000
UK GAAP
£000
14,110
–
569,790
583,900
18,160
92,841
41,375
152,376
–
736,276
43,925
7,231
48,410
7,718
107,284
403,319
9,424
412,743
520,027
216,249
3,709
62,544
1,054
(2,471)
4,721
–
146,692
216,249
(1,662)
4,866
(96)
3,108
(11,464)
–
–
(11,464)
11,464
3,108
803
–
–
(7,677)
(6,874)
500
700
1,200
(5,674)
8,782
(500)
–
–
–
–
1,482
7,800
8,782
IFRS
£000
12,448
4,866
569,694
587,008
6,696
92,841
41,375
140,912
11,464
739,384
44,728
7,231
48,410
41
100,410
403,819
10,124
413,943
514,353
225,031
3,209
62,544
1,054
(2,471)
4,721
1,482
154,492
225,031
Effect
of transition
to IFRS
£000
UK GAAP
£000
1,981
–
402,688
14,467
419,136
15,285
56,382
46,160
117,827
–
536,963
31,926
7,143
87,907
6,780
133,756
208,079
6,821
214,900
348,656
188,307
3,702
61,829
23
(1,330)
4,721
119,362
188,307
–
232
(232)
–
–
(9,671)
–
–
(9,671)
9,671
–
609
–
–
(6,780)
(6,171)
500
(472)
28
(6,143)
6,143
(500)
–
–
–
–
6,643
6,143
IFRS
£000
1,981
232
402,456
14,467
419,136
5,614
56,382
46,160
108,156
9,671
536,963
32,535
7,143
87,907
–
127,585
208,579
6,349
214,928
342,513
194,450
3,202
61,829
23
(1,330)
4,721
126,005
194,450
80-81 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(42) Transition to IFRS (continued)
Group
Reconciliation of profit for the year ended 30 April 2005
Notes
(i)
(j)
(k)
(l)
(m)
(n)
(m)
(o)
Notes
(d)
(e)
(f)
(g)
(f)
Revenue
Cost of sales
Gross profit
Administrative expenses
Amortisation
Profit from operations
Investment income
Finance costs
Profit before taxation
Taxation
Profit after taxation
Preference dividends
Ordinary dividends
Profit for the year
Company
Reconciliation of equity at 1 May 2004
Property, plant and equipment
Investments
Total non-current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Trade and other payables
Proposed dividends
Total current liabilities
Borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Share capital
Share premium account
Merger reserve
Retained earnings
Total equity
UK GAAP
£000
458,267
(333,913)
124,354
(47,557)
(1,116)
75,681
1,814
(23,038)
54,457
(15,963)
38,494
(25)
(12,812)
25,657
Effect of
transition
to IFRS
£000
(118,885)
118,816
(69)
364
261
556
–
(25)
531
206
737
25
896
1,658
UK GAAP
£000
Effect of
transition
to IFRS
£000
3,117
79,050
82,167
122,881
44,311
167,192
249,359
5,417
6,780
12,197
100,000
(119)
99,881
112,078
137,281
3,702
61,829
417
71,333
137,281
–
–
–
(15,500)
–
(15,500)
(15,500)
90
(6,780)
(6,690)
500
(617)
(117)
(6,807)
(8,693)
(500)
–
–
(8,193)
(8,693)
IFRS
£000
339,382
(215,097)
124,285
(47,193)
(855)
76,237
1,814
(23,063)
54,988
(15,757)
39,231
–
(11,916)
27,315
IFRS
£000
3,117
79,050
82,167
107,381
44,311
151,692
233,859
5,507
–
5,507
100,500
(736)
99,764
105,271
128,588
3,202
61,829
417
63,140
128,588
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(42) Transition to IFRS (continued)
Company
Reconciliation of equity at 30 April 2005
Notes
(d)
(e)
(f)
(f)
Property, plant and equipment
Investments
Total non-current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Trade and other payables
Borrowings
Proposed dividends
Total current liabilities
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Share capital
Share premium account
Revaluation reserve
Merger reserve
Retained earnings
Total Equity
Company
Reconciliation of profit for the year ended 30 April 2005
Profit for the year under UK GAAP
Adjustment for fair value of share options granted
De-recognition of intergroup dividend for the year ended 30 April 2005
Recognition of intergroup dividend for the year ended 30 April 2004
Holiday pay accrual
Preference dividends reclassified as finance costs
Taxation adjustments
Profit for the year under IFRS
UK GAAP
£000
Effect of
transition
to IFRS
£000
3,056
103,234
106,290
391,968
46,180
438,148
544,438
8,110
18
7,718
15,846
387,639
387,639
403,485
140,953
3,709
62,544
1,371
417
72,912
140,953
–
–
–
(16,102)
–
(16,102)
(16,102)
97
–
(7,677)
(7,580)
500
500
(7,080)
(9,022)
(500)
–
–
–
(8,522)
(9,022)
IFRS
£000
3,056
103,234
106,290
375,866
46,180
422,046
528,336
8,207
18
41
8,266
388,139
388,139
396,405
131,931
3,209
62,544
1,371
417
64,390
131,931
£000
14,225
103
(17,000)
15,500
(7)
(25)
(29)
12,767
82-83 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(42) Transition to IFRS (continued)
Notes to the reconciliation of equity as at 1 May 2004 and 30 April 2005
Group
Company
30 April 2005
£000
01 May 2004
£000
30 April 2005
£000
01 May 2004
£000
(a) Goodwill
UK GAAP
Amounts reclassified into other intangible assets
Reversal of goodwill amortisation, not charged under IFRS 3
Deferred tax adjustments in respect of intangible assets
Deferred tax adjustments in respect of assets and liabilities
acquired with Fualsa and Foley
Reduction in Fualsa net assets acquired due to recognition
of holiday pay accrual
IFRS
(b) Other intangible assets
UK GAAP
Reclassification of software assets at net book value
Brand names recognised*
Non-contractual customer relationships recognised*
Non-compete agreements recognised*
Amortisation of recognised intangible assets
IFRS
* Previously classified within goodwill under UK GAAP
(c) Inventories
UK GAAP
Net book value of used vehicles held for resale reclassified from inventories
to non-current assets held for sale in accordance with IFRS 5
IFRS
(d) Trade and other receivables
UK GAAP
Deferred tax adjustments (Note (g))
De-recognition of intergroup dividends
IFRS
(e) Trade and other payables
UK GAAP
Holiday entitlement accrued by employees but not taken as at the
balance sheet date under IAS 19
Unpaid preference dividends reclassified under IAS 32
IFRS
(f) Borrowings
UK GAAP
Book and fair value of Preference shares reclassified from equity
to debt under IAS32
IFRS
(g) Deferred tax
UK GAAP
Date of transition adjustments
Deferred tax provision on intangible assets
Deferred tax provision on buildings
Deferred tax asset on share options
Deferred tax asset on holiday pay accrual
IFRS
(h) Translation reserve
UK GAAP
Cumulative exchange difference from 1 May 2004
to 30 April 2005 reclassified from retained
earnings into separate component
IFRS
14,110
(5,363)
1,116
1,839
623
123
1,981
–
–
–
–
–
12,448
1,981
–
96
3,953
1,273
137
(593)
4,866
–
232
–
–
–
–
232
18,160
15,285
(11,464)
6,696
(9,671)
5,614
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
92,841
–
–
92,841
43,925
802
1
44,728
56,382
–
–
56,382
31,926
609
–
32,535
391,968
898
(17,000)
375,866
122,881
–
(15,500)
107,381
8,110
96
1
8,207
5,417
90
–
5,507
403,319
208,079
387,639
100,000
500
403,819
500
208,579
500
500
388,139
100,500
9,424
(472)
1,637
652
(869)
(248)
10,124
–
1,482
1,482
6,821
–
–
300
(589)
(183)
6,349
–
–
–
(700)
(617)
–
–
(280)
(1)
(1,598)
–
–
–
(119)
–
–
–
(589)
(28)
(736)
–
–
–
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(42) Transition to IFRS (continued)
Notes to the reconciliation of Group profit for the year ended 30 April 2005
(i) Revenue
UK GAAP
Removal of used vehicle sales proceeds from revenue
in accordance with IAS18
IFRS
(j) Cost of sales
UK GAAP
Removal of cost of used vehicles sold from cost of sales
to correspond with revenue adjustment (Note (i))
Adjustment to depreciation on updated estimate of residual values
of vehicles sold
Additional holiday pay accrual
IFRS
(k) Administrative expenses
UK GAAP
Adjustment to fair value of share options granted
Additional holiday pay accrual
Reclassification of depreciation of software assets as amortisation
IFRS
(l) Amortisation
UK GAAP
Reversal of goodwill amortisation
Amortisation of intangible assets
Reclassification of depreciation of software assets as amortisation
IFRS
(m) Finance costs and preference dividends
UK GAAP
Preference dividends reclassified from dividends to finance costs
to match reclassification of Preference shares from equity to debt
IFRS
(n) Taxation
UK GAAP
Deferred tax credit on intangible assets
Deferred tax credit on buildings
Deferred tax charge on share options
Deferred tax credit on holiday pay
IFRS
(o) Ordinary dividends
UK GAAP
Reversal of 2005 final dividend not formally approved at 30 April 2005
2004 final dividend formally approved in the year ended 30 April 2005
IFRS
2005
£000
458,267
(118,885)
339,382
333,913
(111,725)
(7,160)
69
215,097
47,557
(103)
1
(262)
47,193
1,116
(1,116)
593
262
855
23,038
25
23,063
15,963
(202)
(13)
31
(22)
15,757
12,812
(7,676)
6,780
11,916
84-85 Northgate plc Annual Report and Accounts 2006
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2006
(42) Transition to IFRS (continued)
Adoption of IAS 32 and IAS 39 on 1 May 2005
FIVE YEAR FINANCIAL SUMMARY
Based on the consolidated financial statements for years ended 30 April and adjusted to reflect the effect of subsequent changes in
accounting policy.
In accordance with the transitional provisions of IFRS 1, the date of transition of the Group in respect of IAS 32 and IAS 39 only is 1 May 2005.
The reconciliation of equity as at 1 May 2005 in respect of IAS 32 and IAS 39 only is as follows:
Income statement
Group
Total equity at 30 April 2005
Fair value of financial instruments
Total equity at 1 May 2005 after the adoption of IAS 32 and IAS 39
There is no impact on the total equity of the Company.
£000
225,031
(923)
224,108
Explanation of material adjustments to the cash flow statement for the year ended 2005
The significant differences between the Group cash flow statements under IFRS, as compared to UK GAAP, are as follows:
Movements in non-current assets held for sale and movements in trade debtors relating specifically to these non-current assets, between the
previous and current balance sheet dates, are both classified within “proceeds of disposal of vehicles for hire” and form part of cash flows
from investing activities under IFRS. Under UK GAAP, the non-current assets were classified within “stock” and their movement formed part
of “(increase) decrease in stock” and the changes in debtors formed part of “(increase) decrease in debtors”, both of which were classified
within net cash flows from operating activities.
Preference dividends form part of finance costs under IFRS and payments of preference dividends are classified as “interest paid” within net
cash from operating activities. Under UK GAAP, these amounts were separately classified within “returns on investments and servicing of finance”.
Revenue
Profit from operations
Share of joint venture profit from operations
Net finance costs
Share of profit before taxation of associate
Share of taxation of associate
Profit before taxation
Taxation
Profit for the year
Basic earnings per Ordinary share
Dividends
Dividends per Ordinary share
All UK GAAP to IFRS adjustments that impact on profit from operations have no net impact on net cash flows from operating activities under IFRS.
Balance sheet
Assets employed
Non-current assets
Net current assets (liabilities)
Non-current assets held for sale
Non-current liabilities
Financed by
Share capital
Share premium account
Reserves
Net asset value per Ordinary share
IFRS
2006
£000
372,609
72,598
–
72,598
(20,078)
4,964
(1,422)
56,062
(15,468)
40,594
61.1p
13,437
23.0p
IFRS
2006
£000
798,777
42,582
14,705
(535,775)
320,289
3,538
64,998
251,753
320,289
453p
IFRS
2005
£000
339,382
76,237
–
76,237
(21,249)
–
–
54,988
(15,757)
39,231
60.7p
11,916
20.0p
UK GAAP
2004
£000
UK GAAP
2003
£000
UK GAAP
2002
£000
355,624
55,605
4,342
59,947
(15,355)
–
–
44,592
(13,303)
31,289
50.7p
11,064
17.6p
337,875
277,289
49,015
2,620
51,635
(15,032)
–
–
36,603
(11,497)
25,106
41.4p
9,736
16.0p
45,055
–
45,055
(13,381)
–
–
31,674
(9,953)
21,721
35.8p
9,119
15.0p
IFRS
2005
£000
UK GAAP
2004
£000
UK GAAP
2003
£000
UK GAAP
2002
£000
587,008
40,502
11,464
(413,943)
225,031
3,209
62,544
159,278
225,031
351p
419,136
(15,929)
–
(214,900)
188,307
3,702
61,829
122,776
188,307
293p
402,173
(86,615)
–
(162,597)
152,961
3,545
45,635
103,781
152,961
250p
344,494
(60,676)
–
(147,201)
136,617
3,542
45,471
87,604
136,617
224p
86-87 Northgate plc Annual Report and Accounts 2006
NOTICE OF ANNUAL GENERAL MEETING
INFORMATION FOR SHAREHOLDERS
Notice is hereby given that the one hundred and eighth Annual General Meeting of Northgate plc will be held at Norflex House, Allington Way,
Darlington at 11.00 am on 27 September 2006 for the following purposes:
Classification
Information concerning day to day movements in the price of the Company’s Ordinary shares is available on Cityline (09068 123456) code 2722.
To receive and adopt the Report of the Directors and audited accounts of the Company for the year ended 30 April 2006.
The Company’s listing symbol on the London Stock Exchange is NTG.
To declare a final dividend of 14p per Ordinary share.
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
February
July
September
Announcement of interim results
Payment of interim dividend
Announcement of year end results
Report and accounts posted to shareholders
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
The Group’s website address is www.northgateplc.com
1.
2.
3.
4.
5.
6.
7.
8.
To approve the Remuneration Report for the financial year ended 30 April 2006 set out on pages 16 to 21 of the 2006 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 S J Smith as a Director.
To re-elect Mr P J Moorhouse as a Director.
To re-elect Mr G T Murray as a Director.
As special business to consider, and if thought fit, to pass the following resolutions which are to be proposed as Special Resolutions:
9.
(a)
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);
(b)
the allotment of equity securities in connection with any employees’ share scheme approved by the members in general meeting; and
(c)
the allotment (otherwise than pursuant to sub-paragraphs (a) and (b) above) of equity securities up to an aggregate nominal amount
of £175,000.
And shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2007 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)
the Company does not purchase under this authority more than 7,000,000 Ordinary shares;
(b)
the Company does not pay less than 5p for each share;
(c)
(d)
(e)
the Company does not pay more for each share than 5% over the average of the middle market price of the Ordinary shares according to the
Daily Official List of the London Stock Exchange for the 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 2007 unless such authority is
renewed prior to such time; and
the Company may agree before the aforesaid authority terminates to purchase Ordinary shares where the purchase will or may be executed
(either wholly or in part) after the authority terminates. The Company may complete such a purchase even though the authority has
terminated.
By Order of the Board
D Henderson
Secretary
3 July 2006
Registered Office:
Norflex House
Allington Way
Darlington DL1 4DY
NOTES
1. Only the holders of Ordinary shares registered in the register of members of the Company as at 6.00 pm on 25 September 2006 shall be entitled
to attend and vote at the meeting in respect of the number of shares registered in their name at that time. Changes to entries on the register of
members after that time shall be disregarded in determining the right of any person to attend and vote at the meeting.
2. A member entitled to attend and vote is entitled to appoint one or more proxies to attend and (on a poll) vote instead of him. A proxy so
appointed need not also be a member. A three-way proxy card for this purpose is enclosed.
88 Northgate plc Annual Report and Accounts 2006
NOTES