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8
ANNUAL
REPORT&
ACCOUNTS
2008
Registered office:
Norflex House, Allington Way, Darlington DL1 4DY
Telephone: 01325 467558 Fax: 01325 363204
www.northgateplc.com
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 2
01 NORTHGATE PLC
02 FINANCIAL HIGHLIGHTS
04 CHAIRMAN’S STATEMENT
06 OPERATIONAL REVIEW
08 FINANCIAL REVIEW
12 BOARD OF DIRECTORS
14 REPORT OF THE DIRECTORS
16 REMUNERATION REPORT
22 AUDIT COMMITTEE REPORT
23 CORPORATE GOVERNANCE
25 HEALTH & SAFETY AND ENVIRONMENTAL
26 DIRECTORS’ RESPONSIBILITIES
27 INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF NORTHGATE PLC
28 FINANCIAL STATEMENTS
35 NOTES TO THE ACCOUNTS
79 FIVE YEAR FINANCIAL SUMMARY
80 NOTICE OF ANNUAL GENERAL MEETING
82 SUMMARY OF THE PRINCIPAL TERMS OF THE
EXECUTIVE PERFORMANCE SHARE PLAN
85 EXPLANATORY NOTES ON THE PROPOSED
AMENDMENTS TO THE ARTICLES
OF ASSOCIATION
86 INFORMATION FOR SHAREHOLDERS
NORTHGATE PLC
IS THE LEADING
LIGHT COMMERCIAL
VEHICLE RENTAL
BUSINESS IN THE
UK AND SPAIN,
WITH A MODERN
FLEET IN EXCESS
OF 130,000 VEHICLES
FROM MORE THAN
125 SITES IN THE UK,
IRELAND AND SPAIN.
01
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 4
FINANCIAL
HIGHLIGHTS
GROUP REVENUE FOR THE YEAR
INCREASED BY 10% TO £578.5m
(2007-£526.5m)
PROFIT BEFORE TAX UP BY 5%
TO £79.5m (2007-£75.4m)
UNDERLYING PROFIT BEFORE TAX*
INCREASED BY 5% TO £83.1m
(2007-£79.3m)
ADJUSTED EARNINGS PER SHARE*
INCREASED BY 13% TO 91.8p
(2007-81.6p)
*Stated before intangible amortisation of £4.7m (2007 - £3.9m) and an exceptional property
profit of £1.1m in Spain.
VEHICLE FLEET
- UK
VEHICLE FLEET
- SPAIN
GROUP PROFIT
BEFORE TAX (£000)
* UK GAAP basis
EARNINGS PER
SHARE (p)
* UK GAAP basis
0
0
6
,
8
6
0
0
3
,
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8
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1
2004 2005 2006 2007
2008
2004 2005 2006 2007
2008
2004 2005 2006 2007
2008
2004 2005 2006 2007
2008
Vehicle fleet – UK
– Spain
Group profit from operations
Profit before tax
Earnings per share
Dividend per share
Net assets per Ordinary share
2008
68,600
62,750
£118.2m
£79.5m
86.7p
28.0p
564p
2007
65,300
55,000
£107.1m
£75.4m
76.1p
25.5p
509p
02/03
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 6
CHAIRMAN’S
STATEMENT
AGAINST A BACKDROP OF CHALLENGING
ECONOMIC CONDITIONS, PARTICULARLY
IN THE LATTER PART OF THE FINANCIAL
YEAR, THE GROUP HAS DEMONSTRATED
THE RESILIENCE OF ITS BUSINESS MODEL
AND CONTINUED TO MAKE PROGRESS
AGAINST THE TARGETS SET OUT IN OUR
STRATEGY FOR GROWTH ANNOUNCED
IN JANUARY 2006.
The Group achieved the following results for the year:
Group revenue increased by 10% to £578.5m (2007 – £526.5m),
7% at constant exchange rates;
Underlying profit before tax* for the year increased by 5% to £83.1m
(2007 – £79.3m), 1% at constant exchange rates;
Adjusted earnings per share* increased by 13% to 91.8p (2007 – 81.6p)
reflecting the growth in profit before tax and a reduced tax rate.
Based on these results, the Board has recommended to shareholders a
final dividend of 16.5p, making 28.0p in respect of the year (2007 – 25.5p)
covered 3.3 times by profits*. The dividend will be payable on 18 September
2008 to those shareholders on the register on 15 August 2008.
UK
In the UK, we have benefited from a stable hire rate environment and a
buoyant used vehicle market for much of the year. We have supplemented
these positive external factors with our usual focus on maintaining a high
level of utilisation and achieving the benefits from the restructuring of the
business carried out in the last financial year. We also grew the business
both organically and through the acquisition of Hampsons (Self Drive Hire)
Limited (“Hampsons”) on 1 November 2007 and the vehicle fleet of Abington
Vehicle Rentals Limited (“Abington”) on 30 November 2007.
The UK fleet has grown by 5% to close the year at 68,600 vehicles, including
1,600 arising from the acquisition of Hampsons and 270 from Abington.
The improvement in vehicle utilisation to 91%, achieved in the prior year,
has been maintained in the current year.
While the market remains competitive, we have successfully managed to
retain hire business without discounting prices heavily and, as a consequence,
hire rates have remained stable throughout the year. Due to the strong used
vehicle market we have achieved residual prices £12.0m higher than expected
(2007 – £8.5m). The overall outcome for the UK is an increase in operating
profit* of 4% to £74.4m (2007 – £71.7m) and an overall operating margin*
of 20.6% (2007 – 20.4%). The UK operating profit represented 61% of the
Group’s profit from operations.
*Stated before intangible amortisation of £4.7m (2007 – £3.9m)
and an exceptional property profit of £1.1m in Spain.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
SPAIN
In Spain, we have grown the fleet by 14%, including 700 vehicles acquired
with the purchase of the trade and assets of Alquiservicios S.A. (“Alquiservicios”)
on 18 July 2007. A utilisation level of 89% is slightly below the prior year
(2007 – 90%). Economies of scale in the larger Spanish business have partly
compensated for the effect of the weaker vehicle residual market.
Revenue grew by 24% and operating margin* was 21.8% (2007 – 22.4%).
Improved trading and the currency effect produced an increase of 21% in
operating profit* to £47.4m (2007 – £39.3m), representing 39% of the Group’s
profit from operations*. The strength of the Euro relative to Sterling during
the year accounted for £13.1m of the increase in revenue and £4.7m of the
increase in operating profits.
As planned, the transition to a common IT platform for Fualsa and Record
took place in May 2008. This now provides us with the opportunity to
implement further efficiencies through sharing common support services.
GROUP
For the Group overall, while progress at the operating profit* level has been
satisfactory with growth of 10%, net finance costs have increased by 22%
to £38.7m (2007 – £31.7m). Of this £7.0m increase £1.7m (24%) arises
from the strengthening of the Euro against Sterling; the remainder arises
from a combination of higher interest rates and borrowings.
BOARD CHANGES
On 26 September 2007, Andrew Allner joined the Board as a non-executive
Director. Andrew has a strong financial background and assumed the
chairmanship of the Audit Committee from the date of his appointment.
On 31 December 2007, Gerard Murray left the Company to take up the position
of Finance Director with The Vardy Group of Companies. The Board wishes
him well in his new role and thanks him for his significant contribution to the
continued growth and development of the Group during the last five years.
I am pleased to announce that Bob Contreras was appointed as Group
Finance Director from 2 June 2008. Bob has a strong financial and operational
background together with significant European experience, which will support
the Group’s expansion plans.
CURRENT TRADING AND OUTLOOK
The Group has continued to make progress in the past year despite more
challenging economic conditions in the second half. In the current year
conditions in the used vehicle market are weaker than last year, with the
result that profits overall are expected to be at similar levels to last year.
If economic conditions were to deteriorate, we believe our business model
has the proven flexibility to enable us to defleet rapidly in order to leave us
in a strong financial position when markets improve. Additionally, we believe
that the Group’s flexible rental model is attractive to customers when capital
is constrained and they are unwilling to commit to long-term financing
arrangements. In the medium term we remain convinced that the low rental
penetration level throughout Europe offers an opportunity for further expansion.
Philip Rogerson
Chairman
IN THE MEDIUM TERM WE
REMAIN CONVINCED THAT THE
LOW RENTAL PENETRATION
LEVEL THROUGHOUT EUROPE
OFFERS AN OPPORTUNITY
FOR FURTHER EXPANSION.
04/05
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 8
OPERATIONAL
REVIEW
STRATEGY FOR GROWTH
The year to 30 April 2008 is the second year that we are reporting against
the three-year rolling strategic plan announced in January 2006. The aim
was to maintain annual double-digit earnings growth through delivering
the following key elements of the plan:
UK & REPUBLIC OF IRELAND
An increase in fleet size from both acquisition and organic growth;
The introduction of fleet management to enable the Group to provide
a comprehensive vehicle solutions product to customers;
A streamlining of the hire company network and management structure.
SPAIN
Acquisition of the remaining 51% of the equity of Record;
Continued double-digit organic fleet growth;
The delivery of the synergies available from combining aspects
of our two Spanish businesses.
NEW TERRITORY
Expansion into a new jurisdiction.
The last two objectives for the UK and the first objective for Spain were
completed in the year to 30 April 2007, leaving continued fleet growth in
the UK and Spain and the merging of some activities in Spain as our key
targets for this year.
We are pleased that we have substantially achieved our targets, despite a
more difficult economic climate and higher interest rates in the second half of
the year, thereby continuing our delivery of good growth in earnings per share.
REVIEW OF CURRENT YEAR
UNITED KINGDOM AND REPUBLIC OF IRELAND
A continued high level of utilisation and a stable hire rate environment
has produced an increase in hire revenues of 2.3%. When combined with
a very strong residual market for used vehicles, particularly in the first half
of the year, and some further efficiencies in operations, this has led to
an increase in the operating margin to 20.6% (2007 – 20.4%).
DEPOT NETWORK
Following the restructuring in the prior year, there has been little change in
the depot network, with the exception of the eight additional locations arising
from the acquisition of Hampsons. By 30 April 2008, we operated through
21 hire companies with a network of 86 locations. In the year ahead, we do
not expect a material change to the overall number of locations, but would
expect to relocate certain primary and secondary sites to achieve our
optimum operating structure and improve efficiencies.
VEHICLE FLEET AND UTILISATION
In the UK, the fleet has increased from 65,300 to 68,600 vehicles, including
1,600 vehicles relating to the acquisition of Hampsons and 270 vehicles
purchased from Abington, a growth rate of 5% (2% organically). Although
below our target of 5%, organic growth has been stronger in the second
half, with the fleet increasing by 930 vehicles organically, compared to 500
in the traditionally stronger first half of the year.
We have successfully maintained a utilisation rate of 91% for the year, despite
the last few months of the year experiencing a higher level of “churn” with
more frequent rental returns being compensated by additional business gains.
This demonstrates the value of our product to our customers alongside the
capability of our business model to react to changing circumstances. Utilisation
remains our most important key performance indicator and the one on which
we focus whatever the prevailing economic climate.
HIRE RATES
While competition for new business remains keen, we have not experienced
the same level of downward pressure on hire rates last seen in 2005/06.
Consequently, as in the previous financial year, we have been able to
maintain our hire rates at constant levels.
USED VEHICLE SALES
Through the extended network of vehicle sales sites created last year, we
have once again achieved a record number of disposals in the year with
total sales of 26,800 vehicles (2007 – 24,700).
The extended network and, in particular, the additional retail sites and our
brand “Van Monster” have also enabled us to increase the proportion of
vehicles disposed of through our retail and semi-retail channels to achieve
our medium-term target of 20% through these channels (2007 – 16%).
The continued supply of good quality vehicles being generated by the hire
company network, which improved following the acquisition of the Arriva
Vehicle Rental business in 2006, is also crucial to this success.
The year has also seen one of the strongest used vehicle markets for some
time, driven by both good demand and a shortage of supply, particularly in
the first half of the year.
As a consequence of both the improved sales channels and the buoyant
market, we have achieved residual prices £12m (2007 – £8.5m) better than
expected. In accordance with our accounting policies this has been reflected
in our depreciation charge for the year.
As we stated in our interim report, we expected the vehicle supply shortages
to continue only in the short term and, since January this year, we have seen
evidence of improved supply from manufacturers. Concerns over the economy
and the credit crunch affecting availability of finance have also caused a
decrease in demand for second hand vehicles. As a consequence, residual
prices have eased, particularly in the latter part of the financial year, as
evidenced by the split in the first half and second half adjustments to
depreciation of £7m and £5m respectively.
The first part of the current financial year has seen a further easing in
used vehicle prices and, as in the prior year, this would be reflected in our
depreciation charge. Ongoing depreciation rates, in accordance with our
accounting policies, are reviewed regularly together with vehicles’ expected
residual values and useful economic life.
FLEET MANAGEMENT
Over 72,000 jobs were carried out in the year by Fleet Technique Limited
(“FTL”), our fleet management subsidiary, on behalf of our customers and
generating revenue of £15.5m, an increase of 13% over the prior year. Within
this total were a number of significant contract wins, including becoming sole
supplier to a large construction company, a four year extension with a utilities
company and the provision of scheduled maintenance management for a
vehicle manufacturer.
There was also an improvement in operating efficiency within the business
and in particular the employee cost per job, which fell by 9%.
The combination of the above produced an operating profit of £0.8m
(2007 – £0.6m) with an improved operating margin of 5% (2007 – 4.2%).
Equally important however is the role played by FTL in helping to secure
rental business, particularly from larger companies which require a full
vehicle solutions package rather than just a rental offering. This was recently
demonstrated when we secured our first complete fleet solutions offering
with a FTSE listed support services company. Following a fleet audit for
this customer, we were able to identify the potential for reductions in CO2
emissions and increased efficiencies, both operational and financial, through
our single sourced solution. Every product in our portfolio will be utilised to
support a service that will cover over 1,800 vehicles. We expect that the
success of this project will enable Northgate to deliver similar fleet solutions
in the year ahead.
BODY REPAIR FACILITY
On 31 August 2007 we acquired a dedicated body repair business, situated
in the Midlands, called GPS Body Repairs Limited (“GPS”). This acquisition
has given us the capability to carry out a significantly higher proportion of
our body repair work in-house, thereby reducing both downtime and whole
life cost. Our intention is to replicate these facilities in other parts of the UK
to create a small network capable of handling a substantial part of our
internal work.
SPAIN
The fleet has grown during the year by 14% to 62,750 vehicles
(2007 – 55,000), including 700 arising from the acquisition in July 2007
of Alquiservicios. While slightly behind our target rate of 15%, this is
nevertheless an excellent achievement, particularly given the difficulties
the Spanish economy is experiencing.
This fleet growth combined with utilisation of 89% (2007 – 90%) and a
modest improvement in hire rates has produced an increase in Spanish
rental revenue of 24% (17% at constant exchange rates).
Benefits from economies of scale, particularly in purchasing, have partly
compensated for the additional depreciation charge arising from the weaker
than expected used vehicle market and resulted in an operating margin of
21.8%* (2007 – 22.4%).
DEPOT NETWORK
The network of depots increased to 37 as a result of the acquisition of
Alquiservicios, with its branch in Orense. In addition, we have relocated to
larger premises in Barcelona, Pamplona and Zaragoza. It is not anticipated
that the network will change significantly in the year ahead as our current
locations already provide good geographic coverage across Spain, although
there will again be a small number of relocations.
VEHICLE FLEET AND UTILISATION
In the first half of the financial year, the fleet increased by 8.2% to reach
59,500 vehicles at 31 October 2007. In the second six months, fleet growth,
all organic, was 5.5% which produced a closing fleet of 62,750 vehicles.
We have seen more churn in the hire fleet in the period since 1 January 2008
due to a higher rate of off-hires, mainly from smaller businesses. As higher
churn makes it more difficult to maintain utilisation in the short term, we
consequently fell marginally below our targeted level of 90%. Overall, however,
we still achieved an average of 89% for the year.
Given the current state of the Spanish economy, we do not expect to achieve
fleet growth at the same levels in the year ahead and are forecasting single
digit organic growth.
HIRE RATES
We continue to achieve a modest improvement in hire rates with the average
rate up by 1% over the prior year in local currency.
USED VEHICLE SALES
We sold 13,600 vehicles during the year (2007 – 12,200) at residual values
£1.9m lower than expected (2007 – £1.9m higher). In accordance with our
accounting policies this has been reflected in our depreciation charge for
the year. Of these disposals 4% (2007 – 5%) were through semi-retail and
retail channels.
In the new financial year we plan to align operating procedures and vehicle
holding periods in our two Spanish companies, Fualsa and Record, and as
a consequence would expect the depreciation charge in the year to increase
by some £2m.
The creation of a used vehicle disposals structure, with a capability similar to
that of the UK, remains our medium-term goal and a key target for the business.
The property stage is well under way and during the next few months we
should have dedicated used vehicle sales locations operating in Barcelona,
Madrid, Murcia and Seville. The development of other disposal channels
within Spain and the creation of an export capability are also progressing.
IT
In May 2008 we successfully migrated Fualsa onto the Record operating system.
This now gives us the opportunity to implement further synergies through
the sharing of common support services as well as providing information
to management on a comparable basis for both businesses.
OTHER TERRITORIES
We continue to discuss potential opportunities with a number of target
companies within the European Union. We expect to move forward with
one of these opportunities in the current calendar year, as envisaged in
our strategic plan.
Steve Smith
Chief Executive
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
06/07
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 10
FINANCIAL
REVIEW
FINANCIAL REPORTING
SALES, MARGINS AND RETURN ON CAPITAL
Group revenue increased by 10% to £578.5m (2007 – £526.5m). In the UK,
organic fleet growth of 2%, together with the 1,870 vehicles arising from
acquisitions contributed to an increase in total revenue of 2.7% to £360.8m
(2007 – £351.1m). In Spain, organic fleet growth of 13%, coupled with the
700 vehicles arising from the acquisition of Alquiservicios on 18 July 2007,
contributed to an increase in revenue of 24% to £217.7m (2007 – £175.4m)
-17% at constant exchange rates.
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
2008
£000
345,227
15,525
360,752
73,627
770
(2,569)
71,828
Operating margins (excluding intangible amortisation)
UK overall
Vehicle rental
Fleet management
2008
20.6%
21.3%
5.0%
2007
£000
337,370
13,738
351,108
71,137
576
(2,035)
69,678
2007
20.4%
21.1%
4.2%
The UK operating margin has improved to 20.6% (2007 – 20.4%), driven mainly
by stable utilisation and hire rates and achieving residual values better than
expected. In a weakening economic environment we would expect residual
values to soften. In accordance with our accounting policies we constantly
review anticipated net book values and possible changes in disposal values.
SPAIN
For both years, set out below, each of Fualsa and Record have been
reported as subsidiary undertakings and therefore the figures are on a
comparable basis.
The revenue and profit generated by our Spanish operations are set out below:
2008
2007
Operating margins (excluding intangible
amortisation and non-recurring property profit)
21.8%
22.4%
Spain’s operating margin was 21.8% (2007 – 22.4%). Sales and profit from
operations in 2008, expressed at constant exchange rates, would have been
lower than reported by £13.1m and £4.7m respectively.
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% (2007 – 10%).
Group return on equity, calculated as profit after tax divided by average
shareholders’ funds, is 16% (2007 – 16%).
TAXATION
The Group’s effective tax charge for its UK and overseas operations is 23%
(2007 – 28%).
The UK current year rate has been affected by the reduction in UK corporation
tax from 30% to 28%, effective from 1 April 2008, being applied to the
deferred tax provision and further adjustments arising from the agreement
of earlier year tax computations with HMRC.
The Spanish effective tax rate continues to benefit from concessions based
on vehicle purchase reliefs that are available in Spain, some elements of
which will be phased out by 2011. Additionally, the standard rate of Spanish
corporation tax will reduce to 30% in 2009 from 32.5% currently.
The Group’s treasury operations, part of which are based in Malta, have not
had a significant effect upon the Group’s effective tax charge for the year.
However, it is anticipated this operation will contribute to maintaining the
current effective rate in future periods.
EARNINGS PER SHARE
Basic earnings per share increased by 14% to 86.7p (2007 – 76.1p),
reflecting the growth in profits in both the UK and Spain and the reduced
tax rate. Excluding intangible amortisation of £4.7m (2007 – £3.9m) and the
exceptional property profit in Spain of £1.1m, adjusted basic earnings per
share grew by 13% to 91.8p (2007 – 81.6p).
Basic earnings per share have been calculated in accordance with IAS 33.
DIVIDEND
The Directors recommend a final dividend of 16.5p per share (2007 – 15.5p)
giving a total for the year of 28.0p (2007 – 25.5p), an increase of 10%. The
dividend is covered 3.3 times* (2007 – 3.2 times).
INVESTMENTS
On 18 July 2007, we acquired the trade and assets of Alquiservicios for £5.2m.
Revenue
Vehicle rental
Profit from operations
Vehicle rental
Non-recurring property profit
Intangible amortisation
2008
£000
2007
£000
On 31 August 2007 we acquired 100% of the equity of GPS for £0.3m.
On 1 November 2007, we acquired 100% of the equity of Hampsons
for £9.9m plus acquired debt of £7.4m.
217,710
175,357
On 30 November 2007 we acquired the trade and vehicles of Abington
for £1.3m.
47,404
1,098
(2,124)
46,378
39,265
–
(1,887)
37,378
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. Additionally, the Company acquired and cancelled
800,000 of its Ordinary shares during 2007.
*Stated before intangible amortisation of £4.7m (2007 – £3.9m)
and an exceptional property profit of £1.1m in Spain.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
CAPITAL STRUCTURE
As at 30 April 2008 the Group’s total gearing, measured as net debt
(including cash balances) as a percentage of shareholders’ funds was 224%
(2007 – 208%). Gearing calculated by deducting goodwill and intangible
assets from shareholders’ funds was 312% (2007 – 290%). The level of
reported net debt has been significantly impacted by the exchange rate
movement on Euro denominated debt. At constant exchange rates, net debt
would have been £85m lower and the gearing level, calculated by deducting
goodwill and intangible assets from shareholders’ funds, reduced to 274%.
TREASURY
STRATEGY
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 sourcing of finance for the Group and the related
commercial terms is arranged and monitored through the Group’s treasury
function. In December 2007 the Group extended its loan facilities by £130m
to a total of £885m, this extension being under a series of three-year
unsecured, revolving, bilateral agreements. Also in December, the Group
concluded a second Private Placement in the United States of America by
issuing unsecured loan notes with a maturity period of five years raising
$62m of new finance. The Group also entered into a series of financial
instruments to fix the rate of interest at an effective rate of 5.19% per annum
for the period of these new loan notes. All funds generated by the Group’s
operations are controlled by the treasury function, part of which is based in
Malta to reflect the Group’s European expansion.
LIQUIDITY
The Group’s aggregate finance facilities, including existing Spanish loan
facilities, total £1,103m compared to net debt of £894m at 30 April 2008
giving adequate funding for our expected growth. In addition, under the
terms of our facilities, there is permission to obtain debt finance from other
sources up to a maximum of £100m. As described above, the core of these
arrangements relate to the £885m unsecured bank loan facilities and £201m
of unsecured US loan notes which, combined with the other facilities, have
the following maturity profile:
Maturing
Within 1 year
Within 1 - 3 years
Within 4 years
Within 7 years
Within 10 years
Total
Amount (£m)
152
750
31
63
107
1,103
08/09
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 12
FINANCIAL
REVIEW
Our plan is to seek to extend the maturity profile of this debt in the current
financial year consistent with the Group’s strategic plan.
CASH FLOWS
The Group’s net debt increased by 18% to £894m (2007 – £755.3m). This
increase mainly reflects net capital expenditure relating to fleet growth in the
UK £141.5m and Spain £131.9m. Additionally £85m of this increase in debt
is related to currency translation resulting from the 16% year on year increase
in the value of Euro against Sterling. Gross cash generation as reflected by
EBITDA* increased to £339.6m (2007 – £304.9m).
*EBITDA – Earnings before interest, taxation, depreciation and amortisation.
INTEREST COSTS
The Group’s profit before tax has been reduced by the £7m increase in interest
costs in 2008. Of this increase £1.7m (24%) arises from the strengthening of
the Euro against Sterling; the remainder arises from a combination of higher
interest rates and increased borrowings.
As virtually all our UK borrowings were hedged during the year the increase
in UK interest rates did not have a material effect upon interest costs.
The Group’s net interest costs have increased by 22% to £38.7m
(2007 – £31.7m) compared to an increase in net debt of 18%. Despite
the increase in the cost of debt finance, interest cover remains healthy
at 3.1 times (2007 – 3.4 times).
INTEREST RATE MANAGEMENT
The Group’s bilateral facilities 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 but more recently has adopted a policy to increase this coverage
to a higher level of between 50% to 75%. The proportion of net debt hedged
into fixed rates was 66% at 30 April 2008. The weighting of this coverage
is very much towards Sterling debt where over 90% is fixed. The Euro
denominated debt has 55% of its value fixed with an average fixed rate term
of 3.6 years. Some £164m of financial instruments (interest rate swaps) at an
average rate of 2.74% expired in June 2008. These interest rate swaps were
replaced with interest rate swaps totalling £158m at an average interest rate
of approximately 5%.
RISKS AND UNCERTAINTIES
The operation of a public company involves a number of risks and uncertainties
across a range of commercial, operational and financial areas. The principal
risks and uncertainties that have been identified as being capable of impacting
the Group’s performance over the next financial year are set out below:
VEHICLE HOLDING COSTS
We aim to minimise the whole life holding cost of the vehicles in our fleet.
An increase in new pricing or a reduction in the disposal values of vehicles
being sold would increase our holding cost. Were we not able to recover any
such increases from our customers, this would impact on our profitability. We
manage the risk on new pricing by using our significant purchasing power to
negotiate, before the end of the calendar year, fixed supply terms for the year
ahead. As regards disposal values our business model allows us flexibility
over the period we hold a vehicle, and therefore, in the event of a decline in
residual values, we would attempt to mitigate the impact by ageing out our
existing fleet.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
CUSTOMERS AND REDUCTION IN DEMAND
The Spanish business generates 47% of its revenues from customers
participating in construction. While the vast majority of these customers are
focused on infrastructure projects funded by central government and EU funds
with reasonable forward visibility, if there was a significant downturn in demand,
vehicles could be returned. Our initial response to such an event would be
to seek to place these vehicles with customers in other sectors. Were the
downturn to be more widespread, we would look to maintain utilisation at
90% through a combination of a decrease, or cessation, of vehicle purchases
and an increase in vehicle disposals, which although affecting short-term
profitability, should generate cash and reduce debt levels.
We believe that in response to a downturn in commercial activity affecting
the wider Group then similar actions would be taken with the same effect.
The Group, however, could benefit in a downturn as customers who are
either unable to finance the purchase of their own vehicle fleet or are unwilling
to commit to long-term leasing arrangements turn to the Group’s flexible
rental model.
HIRE RATES
The business model is operationally geared and any increase or decrease
in hire rates will impact profit to a greater effect.
In the UK the business has previously experienced pressure on hire rates
particularly during 2005. Since the beginning of 2006 hire rates in the UK
have been stable.
Spanish hire rates have reflected a moderate increase year on year for
the past few years, mainly reflecting the inflationary nature of the Spanish
economy and the increase in the capital cost of vehicles.
ACCESS TO CAPITAL
The Group requires capital both to replace vehicles that have reached their
estimated useful life and for growth in the size of the existing vehicle fleet,
either organically or through acquisition.
If cash generated from operations and/or available under its credit facilities
is not sufficient to fund its capital requirements, additional debt and/or equity
financing will be required. If such financing were not available then this could
potentially adversely affect the prospects of the Group.
The Group has sufficient banking facilities to support its plans. During the
year we have been able to obtain both new facilities and additional financing
from the unsecured loan notes issued through a Private Placement in the
United States of America. We believe that a combination of our operating
cash flows and available facilities are adequate for our foreseeable needs.
We are also confident that we will be able to extend the maturity profile of
our existing facilities in the current financial year.
INFORMATION TECHNOLOGY SYSTEMS
The Group is dependent upon its IT systems for the effective running of its
operations. Prior to any material systems changes being implemented the
Board approves a project plan. The project is then led by a member of the
executive team with an ongoing implementation review being carried out by
internal audit and external consultants where appropriate. The objective is
always to minimise the risk that business interruption could occur as a result
of the system changes. In Spain we successfully transferred the Fualsa
operations onto the Record IT systems in May 2008 without any material
business interruption. We also commenced changing the IT systems
platform for the UK business and this process will continue throughout
2008/09.
Additionally, the Group has an appropriate business continuity plan in the
event of interruption arising from an IT systems failure.
Bob Contreras
Finance Director
10/11
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 14
BOARD OF
DIRECTORS
Philip Rogerson (age 63)
Stephen Smith ACA (age 51)
Andrew Allner FCA (age 54)
Jan Astrand MBA (age 61)
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. His
appointment as Chairman of the Company
on an interim basis in November 2006 was
made permanent on 5 June 2007.
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 September 2007. Andrew is
currently also a non-executive Director of
Marshalls plc. His most recent executive
appointment was Group Finance Director of
RHM plc. He was previously Chief Executive
Officer of Enodis plc and prior to that held
Board appointments with Dalgety plc, PIC
International Group plc and Amersham
International plc. He was also a non-executive
Director of Moss Bros Group plc from 2001 to
2005. He qualified as a Chartered Accountant
with Price Waterhouse in 1978, subsequently
becoming a Partner.
Appointed to the Board as a non-executive
Director in February 2001. A Swedish national
based in London, Jan was Chairman of CRC
Group plc until January 2007. 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.
Tom Brown MBA (age 59)
Bob Contreras ACA (age 45)
Phil Moorhouse FCCA (age 55)
Alan Noble (age 57)
Appointed to the Board as a non-executive
Director in April 2005 and appointed Senior
Independent Director in June 2007. Tom is
Chairman of Chamberlin 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 Group Finance Director on 2 June
2008. A Chartered Accountant, Bob has held
senior positions with Azlan Group plc, Damovo
Group SA and most recently with Mölnlycke
Healthcare Group.
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.
Executive Director since 1990. In 1981 Alan
founded the commercial vehicle hire business,
which was acquired by the Company in 1987.
BOARD COMMITTEES
AUDIT
Andrew Allner (Chairman from 26 September 2007)
Jan Astrand
Tom Brown
Philip Rogerson (resigned as Chairman
and from the Committee 26 September 2007)
REMUNERATION
Tom Brown (Chairman)
Andrew Allner (from 26 September 2007)
Jan Astrand
Philip Rogerson
NOMINATION
Philip Rogerson (Chairman)
Andrew Allner (from 26 September 2007)
Jan Astrand
Tom Brown
Stephen Smith
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
12/13
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 16
REPORT OF
THE DIRECTORS
THE DIRECTORS PRESENT THEIR
REPORT AND THE AUDITED
FINANCIAL STATEMENTS FOR
THE YEAR ENDED 30 APRIL 2008.
DIRECTORS
Details of the present Directors are listed on pages 12 and 13. All have
served throughout the year except Mr Allner who was appointed on
26 September 2007 and Mr Contreras who was appointed on 2 June 2008.
Mr Murray resigned on 31 December 2007. Mr Brown and Mr Noble
are retiring by rotation in accordance with the Articles of Association
and, being eligible, are seeking re-election.
RESULTS
Profit for the year after taxation was £61,334,000 (2007 – £54,483,000).
The termination provisions in respect of executive Directors’ contracts
are set out in the Remuneration Report on pages 16 to 21.
An interim dividend of 11.5p per share was paid on the Ordinary shares
on 31 January 2008.
The following are the interests of the Directors in the share capital
of the Company. All interests are beneficial unless otherwise stated.
The Directors recommend a final ordinary dividend of 16.5p per share
making a total for the year of 28.0p per share.
The final dividend, if approved, will be paid on 18 September 2008 to
shareholders on the register at close of business on 15 August 2008.
There is a DRIP option.
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.
P Rogerson
S J Smith
J Astrand
T Brown
P J Moorhouse
A T Noble
A Allner
† on appointment
Ordinary Shares
30 April 2008
1 May 2007
2,000
83,821
–
2,000
46,488
733,329
–
–
71,429
–
2,000
35,596
732,937
–†
The information that fulfils the requirements of the Business Review can
be found in the Operational and Financial Reviews on pages 6 to 10, which
are incorporated in this report by reference.
Mr Contreras had no interests in the share capital of the Company on
the date of appointment or at the date of this report.
No Director has an interest in the Preference shares of the Company.
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.
SHARE CAPITAL
Details of the Company’s share capital are given in Note 26 to the accounts.
INTERESTS IN SHARES
The following interests in the issued Ordinary share capital of the Company
have been notified to the Company in accordance with the provisions of
Chapter 5 of the Disclosure and Transparency Rules:
No changes in the above interests have occurred between 30 April 2008
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.
AXA S.A.
Capital Group
Columbia Wanger
Asset Management LP
Lazard Asset
Management LLC
Direct
Indirect
1,310,434 (1.9%)
5,705,982 (8.1%)
–
4,149,068 (5.9%)
3,602,000 (5.1%)
–
–
3,494,276 (4.9%)
Legal & General Group plc
2,861,739 (4.1%)
–
Lloyds TSB Group
Standard Life
Investments Limited
2,278,596 (3.2%)
4,502 ( – )
5,567,049 (7.9%)
4,358,090 (6.2%)
DONATIONS
During the year the Group made charitable donations of £34,000
(2007 – £27,000) 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 2008 the Group’s creditor days were as shown in
Note 22 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
The present authority of the Directors under Section 80 of the Companies
Act 1985 to allot unissued shares was granted at the Annual General Meeting
held in September 2004 and expires on 8 September 2009. A resolution to
renew that authority for a period expiring at the conclusion of the Annual General
Meeting to be held in 2009 will be proposed at the Annual General Meeting.
The authority will permit the Directors to allot up to £722,597.75 nominal of
share capital which represents all the authorised and unissued Ordinary share
capital. This is less than 33% of the present issued Ordinary share capital and
is within the limits approved by the Investment Committees of the Association
of British Insurers and the National Association of Pension Funds.
The Directors have no present intention of exercising such authority and
no issue of shares which would effectively alter the control of the Company
will be made without the prior approval of shareholders in general meeting.
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.
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.
ARTICLES OF ASSOCIATION
As intimated in the explanatory notes on page 80 of last year’s Report and
Accounts, further changes to our Articles of Association are required in light
of the additional provisions of the Companies Act 2006 (“the Act”) which have
been brought into effect since that time. The Government has postponed
the implementation of the final provisions of the Act until October 2009. It is
therefore anticipated that shareholders may be asked to approve still further
changes to our Articles of Association at next year’s Annual General Meeting.
The principal differences between the present and the proposed new Articles
of Association are summarised on page 85. A copy of the proposed new
Articles of Association will be available for inspection at the Company’s
registered office until 16 September 2008 and also at the Annual General
Meeting. Copies are also available to shareholders on request and can be
viewed on the Company’s website. A special resolution adopting the new
Articles of Association will be proposed at the Annual General Meeting.
SHARE SCHEME
As referred to in the Remuneration Report on page 18 it is proposed that a
new executive performance share plan (“the Executive PSP”) be introduced.
Accordingly, a resolution seeking shareholder approval of the Executive PSP
will be proposed at the Annual General Meeting.
A summary of the main provisions of the Executive PSP is set out on page 82.
FINANCIAL INSTRUMENTS
Details of the Group’s use of financial instruments are given in the Financial
Review on page 10 and in Notes 24 and 39 to the Accounts.
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.
This confirmation is given and should be interpreted in accordance with
the provisions of Section 234ZA Companies Act 1985.
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
30 June 2008
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
14/15
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 18
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
PAGE13.
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 Chief Executive
who may be invited to attend meetings. The Company Secretary is secretary
to the Committee. Neither the Chief Executive nor the Company Secretary
took part in discussions relating to their own remuneration.
The Committee has access to external independent advice on matters
relating to remuneration. During the year the Committee took advice from
Hewitt New Bridge Street (“HNBS”) (formerly New Bridge Street Consultants
LLP) on remuneration matters and share scheme implementation. HNBS is
appointed by the Committee and undertakes no other work for the Company
or the Group. The terms of engagement between the Committee and HNBS
are available on request from the Company Secretary.
REMUNERATION POLICY
The Committee aims to ensure that executive Directors are fairly and
competitively rewarded for their individual contributions by means of basic
salary, benefits in kind and pension benefits. High levels of performance are
recognised by annual bonuses and the motivation to achieve the maximum
benefit for shareholders in the future is provided by the allocation of
long-term share incentives. Only basic salary is pensionable.
In line with the Association of British Insurers’ Guidelines on Responsible
Investment Disclosure, the Committee will seek to ensure that the incentive
structure for executive Directors and senior management will not raise
environmental, social or governance (“ESG”) risks by inadvertently motivating
irresponsible behaviour. More generally, with regard to the overall remuneration
structure, there is no restriction on the Committee which prevents it from
taking into account ESG matters.
SERVICE CONTRACTS
The executive Directors have rolling service contracts which may
be terminated by 12 months notice on either side.
The dates of the contracts are:
S J Smith
R L Contreras
P J Moorhouse
A T Noble
8 January 2003
2 June 2008
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.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
BASIC SALARIES
The current basic salaries paid to the executive Directors are as follows:
S J Smith
R L Contreras
P J Moorhouse
A T Noble
£420,000
£275,000
£275,000
£210,000
All were last reviewed on 1 May 2008, except for R L Contreras whose
salary was determined on appointment.
Basic salaries are reviewed annually taking into account the performance
of the individual, changes in responsibilities, market trends and pay and
employment conditions elsewhere in the Group. 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
and the relative size and complexity of the Group.
TOTAL REMUNERATION
Executive remuneration is structured so that a significant proportion relates
to variable pay. The chart below shows the balance between fixed and
variable performance based pay for each executive Director for the year
ended 30 April 2008 and an estimate for the year ending 30 April 2009.
Total reward can only be estimated, because the actual value of share
options and performance shares will not be known until the end of the
three-year performance period. An estimated value has been used being
25% of the face value in respect of share options and 55% in respect of
performance shares.
For the year ending 30 April 2009, on target performance has been assumed
for the annual bonus scheme.
Mr Murray has not been included as his deferred shares and share options
lapsed when he left the Company in December 2007.
S J Smith
2008
2009
R L Contreras*
2009
P J Moorhouse
A T Noble
2008
2009
2008
2009
* from 2 June 2008
200
400
600
800
1000
Base Salary
Pension & Benefits
Annual Bonus - Cash
Annual Bonus - Deferred Shares
Share Options / Performance Shares
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)
OTHER SENIOR EXECUTIVES
The senior executives below Board level, both in the UK and Spain, also
have a significant influence on the ability of the Company to achieve its
goals. Accordingly, in addition to setting the remuneration of the Executive
Directors, the Committee reviews the remuneration for these senior
employees, to ensure that rewards are competitive with the market and that
they are appropriate relative to the Board and to the remaining employees.
PENSION SCHEMES
Throughout the year all pension arrangements (other than the Willhire Pension
Scheme – see Note 38 of the accounts) operated by the Group were defined
contribution type schemes.
NON-EXECUTIVE DIRECTORS
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 original dates of appointment to the Board and of their current letters
of appointment are:
P Rogerson
A Allner
J Astrand
T Brown
Date of appointment
5 November 2003
26 September 2007
13 February 2001
13 April 2005
Letter of appointment
5 June 2007
5 September 2007
5 June 2007
12 May 2008
The current fees paid to the non-executive Directors are shown below:
P Rogerson
A Allner
J Astrand
T Brown
Chairman
Chairman of Audit Committee
Non-executive Director
Senior Independent Director and
Chairman of Remuneration Committee
£130,000
†£46,000
£39,000
*£45,000
† Including £7,000 in respect of his Chairmanship of the Audit Committee.
* Including £6,000 in respect of his Chairmanship of the Remuneration
Committee.
All were last reviewed on 1 May 2008. 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 of a comparable size. In addition to
the fees shown, Mr Astrand receives an amount of £25,000 in recognition
of the additional time commitment required in respect of his appointment
as a non-executive Director of both Fualsa and Record and, in respect of
the year ended 30 April 2008, received further fees of £41,438 in respect
of work undertaken in connection with researching new jurisdictions. The
Board does not consider that this work in any way affected his independence.
Mr Astrand’s involvement in researching new jurisdictions for expansion of
the Group has been a very cost effective exercise, leveraging off his experience
in European markets and avoided the inevitably higher fees that external
advisers would have charged for a similar assignment. He reported directly
to the Board on the work performed and operated within guidelines drawn
up and agreed by the Board. His involvement in this assignment has now
been completed.
THE FOLLOWING ELEMENTS OF THIS REPORT HAVE BEEN AUDITED:
Salary/
fees
£000
Cash
bonus
£000
Cost of
benefits*
£000
P Rogerson
M Ballinger
S J Smith
A J Allner***
J Astrand
T Brown
P J Moorhouse
G T Murray****
A T Noble
120
–
400
23
104
42
260
173
200
Total emoluments excluding
pension contributions
Total pension contributions
1,322
–
–
–
100
–
–
–
75
140
50
365
–
–
–
33
–
–
–
33
17
30
113
–
Total
2008
£000
120
–
533
23
104
42
368
330
280
1,800
–
Total
2007
£000
73
61
499
–
97
39
333
350
256
1,708
–
Pension contributions**
2008
£000
2007
£000
–
–
72
–
–
–
47
31
36
–
186
–
–
63
–
–
–
43
43
33
–
182
* These benefits include: company car, private medical insurance, permanent health insurance and life assurance.
** All contributions are to a defined contribution type scheme.
*** From 26 September 2007.
**** Until 31 December 2007. His bonus in respect of 2007/8 was paid wholly in cash. Mr Murray received no compensation
for loss of office and his unvested share awards lapsed on his departure from the Company.
16/17
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 20
REMUNERATION
REPORT
PERFORMANCE GRAPH
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 2008 was 594p (30 April 2007 – 1,100p) and the
range during the year was 537.5p to 1,118p.
Total Shareholder Return Source: Thomson Financial
Northgate plc
FTSE 250
(Excl. inv. Trusts) Index
350
300
250
200
150
100
50
0
£
e
u
l
a
V
2003
2004
2005
2006
2007
2008
This graph shows the value, by the 30 April 2008, of £100 invested in
Northgate on 30 April 2003 compared with that of £100 invested in the
FTSE 250 (excl. inv. trusts) Index. The other points plotted are the values
at intervening financial year-ends.
SHARE INCENTIVE PLANS
The Group currently 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 participate in the Management Performance Share Plan
(“Management PSP”) and DABP. No executive participates in all three
schemes. Expressed in face value terms, this effectively has provided
Directors with 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 Management PSP and 50% under
the DABP).
At this year’s Annual General Meeting shareholders will be asked to approve
a new performance share plan (the Executive Performance Share Plan
(“Executive PSP”)). This would be solely for the benefit of executive Directors
and would replace the NSOS. In anticipation of the Executive PSP coming
into effect in September, no awards have been made under the NSOS since
July 2007 and it is intended that no further grants will be made under this
scheme. This change is being made in order to bring the long-term incentive
arrangements for executive Directors more into line with current market
practice. Details of the Executive PSP are given below and on page 82.
DEFERRED ANNUAL BONUS PLAN
The DABP was introduced in 2003 for executive Directors and senior and
middle management. Part of the bonus is delivered in cash 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
total maximum potential bonus (cash and shares) which may be achieved by
each executive Director is 100% of basic salary earned in the financial year.
The shares are retained in an employee benefit trust for three years and are
subject to forfeiture if the employee leaves during that time. This provides
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 145,169 shares awarded to 95 executives were
outstanding at 30 April 2008.
The bonuses for executive Directors upon which the award for the year
ended 30 April 2008 was made were based upon business performance
for the share element, including elements based on a target of growth in
underlying earnings per share of between 6% and 11%, and individual
KPIs for the cash element. The actual underlying EPS growth achieved
over the year was 13% resulting in the maximum award for the share
element. The bonuses payable are set out below.
Value
£000
100
75
50
Value
£000
200
130
100
Cash
% of basic salary
Awarded
Maximum
25.0
28.8
25.0
50.0
50.0
50.0
Shares
% of basic salary
Awarded
Maximum
50.0
50.0
50.0
50.0
50.0
50.0
S J Smith
P J Moorhouse
A T Noble
S J Smith
P J Moorhouse
A T Noble
It is intended that the number of shares to be awarded will be calculated
based on the closing mid-market price on 1 July 2008, being the date of
the Preliminary Results Announcement.
Mr Murray received a bonus of £140,000 in respect of the eight months
to 31 December 2007, payable wholly in cash.
In respect of the year ending 30 April 2009, 75% of the total bonus for the
CEO and FD shall be weighted towards EPS performance and the remaining
25% to personal KPIs. For the other executive Directors, the weighting shall
remain 50% EPS/50% KPIs.
For all executive Directors, 75% of the total bonus earned will be paid in
cash and the remaining 25% deferred in the form of Ordinary shares of the
Company vesting three years thereafter, subject to continued employment.
The increase in the proportion of the bonus that is payable in cash is being
introduced in tandem with a strengthening of the performance targets for
the annual bonus plan such that the level of bonus payable for “on-target”
performance is being reduced from 80% of salary to 50% of salary.
The maximum bonus potential will be unchanged at 100% of salary.
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.
NORTHGATE SHARE OPTION SCHEME
Only Directors have participated in the NSOS since 2006.
The performance condition applying to all options granted from 2005
onwards is 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. Options over shares at grant worth 75% of basic salary or less will
vest provided EPS growth is at least RPI plus 5% p.a. over the performance
period. Options over shares at grant worth 150% of basic salary (the
maximum grant level) or less will vest provided EPS growth is at least RPI
plus 11% p.a. 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. This requires substantial improvement in the underlying
financial performance of the Company before options may be exercised.
There is no provision for re-testing.
Options granted to executive Directors under the NSOS are shown on
page 20. In addition, options over 117,026 shares granted to 18 employees
at exercise prices ranging from 524p to 931p were outstanding at 30
April 2008. The awards granted in October 2005 are exercisable based
on performance over the three financial years ending 30 April 2008.
Underlying EPS performance over this period was 31.1% above RPI
resulting in 98.7% of the awards becoming exercisable on the third
anniversary of grant.
Subject to approval of the new Executive PSP for executive Directors at the
AGM, it is intended that no further grants will be made under this Scheme.
EXECUTIVE PERFORMANCE SHARE PLAN
Shareholder approval is being sought at the AGM for the adoption of
the Executive PSP to replace the existing NSOS. It is intended that only
the executive Directors would participate in the Executive PSP with other
executives continuing to participate in the Management PSP (see below).
Awards under the Executive PSP will vest after three years subject to
continued employment and the satisfaction of challenging performance
targets. The maximum individual grant level under the plan is 150% of salary
face value, but it is intended that grants will initially be restricted to 100%
of salary. The performance targets applying to grants made in 2008 will
be a mixture of EPS (2/3rds) and return on capital employed growth targets
(1/3rd) measured over a three year period. 25% of each part of the award
will vest for achieving the threshold performance target (EPS ≥ RPI + 3% p.a.
or a 5% improvement in average ROCE as relevant) increasing to full vesting
for achieving the stretch performance target (EPS ≥ RPI + 8% p.a. or an 8%
improvement in average ROCE as relevant). In determining achievement of
the performance condition, the Committee will take into account the average
performance over each year of the performance period to encourage the
participants to deliver a sustained level of growth. The Committee considers
that EPS and ROCE are the most appropriate performance measures for
the Executive PSP since they incentivise the executives to both improve the
earnings profile of the Group and the balance sheet efficiency (important for
a capital intensive business), both of which should flow through to superior
returns to its shareholders. It is intended that the first grants will be made
under the plan as soon as practicable following its approval at the AGM.
MANAGEMENT PERFORMANCE SHARE PLAN
The Management PSP is designed to reward achievement of and individual
contribution to, the Group’s three-year rolling business plan (“the business
plan”). This PSP operates only for executives below Board level.
Participants 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 business plan is one based on divisional or Group profit before
tax, as relevant to the individual. 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.
There is an over-riding condition that no part of an award can vest if there
has been a decrease in profit before tax compared to the prior year.
Awards over 242,818 shares granted to 48 executives, including seven
in Spain, were outstanding at 30 April 2008.
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.
The seventh annual cycle ended in December 2007 and resulted in 643
employees acquiring 79,490 Partnership shares at 768.75p each and being
allocated the same number of Matching shares. As at 30 April 2008 the Trust
held 583,506 Ordinary shares that have been allocated to employees from
the first seven cycles.
The eighth annual cycle started in January 2008 and currently some 776
employees are making contributions to the scheme at an annualised rate
of £716,784.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
18/19
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 22
REMUNERATION
REPORT
At 1 May
2007
Number
Number
granted exercised
Date of
exercise
Share price
Exercise
Price
p
on date of Gross gain
exercise on exercise
£
p
Number At 30 April
2008
Lapsed
Normally
exercisable
NORTHGATE SHARE OPTION SCHEME
251,000
155,750
(24,000)
DEFERRED ANNUAL BONUS PLAN
S J Smith
20,000
27,500
50,000
–
97,500
P J Moorhouse 15,000
19,000
25,000
–
G T Murray
A T Noble
59,000
13,500
19,000
25,000
–
57,500
17,000
20,000
–
37,000
S J Smith
15,813
15,832
1,750
–
33,395
P J Moorhouse 10,542
9,672
1,100
–
G T Murray
A T Noble
21,314
6,325
8,751
1,050
–
16,126
850
–
850
–
–
–
55,650
55,650
–
–
–
36,150
–
–
–
–
–
–
–
–
–
–
(10,500)
–
–
–
29.01.08
–
–
–
36,150
(10,500)
–
–
–
–
36,150
(13,500)
–
–
–
13.08.07
–
–
–
36,150
(13,500)
–
–
27,800
27,800
–
–
–
–
–
–
–
–
–
–
–
–
–
16,234
(15,813)
–
–
–
27.07.07
–
–
–
16,234
(15,813)
–
–
–
8,905
8,905
–
–
–
8,905
8,905
–
6,865
6,865
–
–
–
–
–
(6,325)
–
–
–
(6,325)
–
–
–
–
–
–
–
–
–
10.07.07
–
–
–
–
–
–
–
–
–
71,685
40,909
(22,138)
EXECUTIVE INCENTIVE SCHEME
S J Smith
90,000
P J Moorhouse 50,000
A T Noble
43,512
183,512
–
–
–
–
–
(50,000)
10.07.07
–
(50,000)
–
–
–
–
–
–
–
712
–
–
–
–
1,056
–
–
–
–
–
–
–
–
–
1,055.52
–
–
–
–
–
–
–
–
–
1,102.8
–
–
–
–
–
–
–
–
–
663
931
1,037
1,078
–
663
931
1,037
1,078
–
663
931
1,037
1,078
–
931
1,037
1,078
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
492.5
492.5
492.5
–
–
–
–
–
–
5,145
–
–
–
5,145
53,055
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(19,000)
(25,000)
(36,150)
53,055
(80,150)
20,000
27,500
50,000
55,650
153,150
4,500
19,000
25,000
36,150
84,650
–
–
–
–
–
–
–
–
–
–
–
–
–
17,000
20,000
27,800
64,800
58,200
(80,150)
302,600
166,909
–
–
–
166,909
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
69,752
–
–
–
–
(8,751)
(1,050)
(8,905)
69,752
(18,706)
–
15,832
1,750
16,234
33,816
10,542
9,672
1,100
8,905
30,219
–
–
–
–
–
–
–
–
–
–
–
850
6,865
7,715
236,661
(18,706)
71,750
Aug 2007 – Feb 2009
Oct 2008 – Oct 2015
Jul 2009 – Jul 2016
Jul 2010 – Jul 2017
Aug 2007 – Feb 2010
Oct 2008 – Oct 2015
Jul 2009 – Jul 2016
Jul 2010 – Jul 2017
Aug 2007 – Feb 2009
Oct 2008 – Oct 2015
Jul 2009 – Jul 2016
Jul 2010 – Jul 2017
Oct 2008 – Oct 2015
Jul 2009 – Jul 2016
Jul 2010 – Jul 2017
Jul 2007 – Jul 2009
Oct 2008 – Oct 2010
Jul 2009 – Jul 2011
Jul 2010 – Jul 2012
Jul 2007 – Jul 2009
Oct 2008 – Oct 2010
Jul 2009 – Jul 2011
Jul 2010 – Jul 2012
Jul 2007 – Jul 2009
Oct 2008 – Oct 2010
Jul 2009 – Jul 2011
Jul 2010 – Jul 2012
Jul 2009 – Jul 2011
Jul 2010 – Jul 2012
–
1,102.8
305,150
–
–
–
305,150
–
–
–
–
90,000
Sep 2003 – Sep 2009
–
Sep 2003 – Sep 2009
43,512
Sep 2003 – Sep 2009
133,512
EXECUTIVE INCENTIVE SCHEME
The EIS, introduced in 1999, was designed to motivate those key executives
in the Group most able to influence the successful implementation of our
five-year Strategy for Growth, with a target to double the size of the business
over the period 1999 – 2004. As measured by earnings per share, that target
was achieved in 2003. As the EIS was specifically aligned to that strategy
plan, no further options have been awarded under the EIS since January
2002 and none are planned.
Options held by the Directors under the EIS are shown on page 20.
No options held by Directors lapsed during the year. In addition to those
held by Directors, options over 134,876 shares granted to 13 employees
at exercise prices ranging from 367.5p to 523p were outstanding at
30 April 2008.
SOURCING OF SHARES AND DILUTION
Shares to satisfy the requirements of the Group’s existing share schemes
are currently sourced as follows:
EIS AND NSOS
Through the issue of new Ordinary shares. During the year 142,793
(2007 – 454,491) Ordinary shares were issued to satisfy the exercise
of options under the two schemes.
The total number of options exercised and exercisable as a result of awards
made under the EIS and NSOS over the last 10 years is 1,952,751, which
equates to 2.8% of the issued Ordinary share capital at 30 April 2008.
DABP AND MANAGEMENT PSP
Through open market purchases by an employee benefit trust based in
Guernsey (“the Guernsey Trust”). During the year 250,000 (2007 – 115,273)
Ordinary shares were purchased by the Trust and 47,249 (2007 – 7,876) were
used to satisfy the exercise of awards under the DABP and Management
PSP. At 30 April 2008 the Trust held 508,473 (2007 – 305,722) Ordinary
shares as a hedge against the Group’s obligations under these schemes.
It is intended that shares for the Executive PSP will also be sourced through
the Guernsey Trust.
AESS
Through open market purchases by the Capita Trust. During the year 300,000
(2007 – nil) Ordinary shares were purchased by the Capita Trust and 15,819
(2007 – 15,032) shares were forfeited as a result of early withdrawals.
At 30 April 2008 the Capita Trust held 188,291 (2007 – 35,691) Ordinary
shares as a hedge against the Group’s obligations under this scheme.
Tom Brown
Chairman of the Remuneration Committee
30 June 2008
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
20/21
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 24
AUDIT COMMITTEE
REPORT
ROLE
The Audit Committee is appointed by, and reports to, the Board. The
Committee’s terms of reference, which include all matters referred to
in the Combined Code, are reviewed annually by the Committee and
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; and
monitoring the audit process and any issues arising therefrom
MEMBERSHIP
The members of the Committee, who are all independent non-executive
Directors of the Company, are:
A J Allner (Chairman)
J Astrand
T Brown
Date of appointment
26 September 2007
6 June 2001
8 June 2005
Qualification
FCA
MBA
MBA
The Combined Code requires that at least one member of the Committee
should have recent and relevant financial experience: currently, the Chairman
of the Committee fulfils this requirement. All members of the Committee are
expected to be financially literate.
MEETINGS
The Committee is required to meet at least three times a year. Details
of attendance at meetings held in the year ended 30 April 2008 are
given on page 23.
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, together with the head of internal audit and
the external auditors, are normally invited to attend all meetings.
ACTIVITY
Since May 2007, the Committee has:
reviewed the financial statements for the years ended 30 April 2007
and 2008, the half yearly report issued in December 2007 and Interim
Management Statements issued in September 2007 and March 2008.
As part of this review process, the Committee received reports from
Deloitte & Touche LLP on each occasion;
reviewed and agreed the scope of the audit work to be undertaken
by Deloitte & Touche LLP and agreed their fees;
monitored the Group’s risk management process;
reviewed the effectiveness of the Group’s system of internal controls;
reviewed the Group’s whistle blowing service;
reviewed its own effectiveness and terms of reference;
reviewed papers on the Group’s depreciation policy and recommended
changes to the policy;
received a report by Deloitte & Touche LLP on the Group’s corporate
taxation arrangements;
monitored the progress of major IT projects in the UK and Spain,
including commissioning external reports; and
reviewed a report on goodwill impairment.
EXTERNAL AUDITORS
The Board’s policy on non-audit services provided by the external auditors,
developed and recommended by the Committee, 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 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.
During the year, the Committee reviewed and was satisfied as to the
effectiveness and independence of the external auditors, including
conducting a one-to-one meeting with the audit partner.
Consequently, the Committee has recommended to the Board the
reappointment of Deloitte & Touche LLP at the Annual General Meeting.
Fees paid and payable to Deloitte & Touche LLP in respect of the year
under review are as shown in Note 6 on page 42.
INTERNAL AUDIT
In fulfilling it’s duty to monitor the effectiveness of the internal audit function,
the Committee has:
reviewed the adequacy of the resources of the internal audit department
for both the UK and Spain;
ensured that the head of internal audit has direct access to the
Chairman of the Board and to all members of the Committee;
conducted a one-to-one meeting with the head of internal audit;
approved the internal audit programme; and
reviewed half-yearly reports by the head of internal audit.
The Chairman of the Committee will be available at the Annual General
Meeting to answer any questions about the work of the Committee.
Andrew Allner
Chairman of the Audit Committee
30 June 2008
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
Mr Rogerson’s appointment as Chairman on a permanent basis on 5 June
2007, Mr Brown 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.
BOARD
AUDIT
REMUNERATION
No of Meetings
P Rogerson
S J Smith
A J Allner
J Astrand
T Brown
P J Moorhouse
G T Murray
A T Noble
7
7
7
5
7
7
7
4
7
3
1
–
2
3
3
–
–
–
5
5
–
3
5
5
–
–
–
All Directors in office at that time were present at the Annual General
Meeting held in September 2007.
The external auditors attended three Audit Committee meetings.
The internal audit manager attended three Audit Committee meetings.
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 Rogerson. 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.
The Committee met formally on 4 occasions during the year and recommended
the appointment to the Board of Andrew Allner as a non-executive Director
in September 2007 and of Bob Contreras as Finance Director in June 2008.
During the year, the Chairman led an evaluation process of the performance
of individual Directors, of the Board as a whole and of its committees. The
process consisted of a formal and detailed questionnaire completed by each
Director, one-to-one meetings with the Chairman and a Board discussion. In
addition the non-executive Directors, led by the Senior Independent Director,
have 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 10.
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 guidance provides relevant guidance for directors on compliance
with the internal control provisions of the Code.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
22/23
Northgate AR&A 2008 Front AW:x69614_Rhouse_front_p2_cg 23/7/08 16:31 Page 26
CORPORATE
GOVERNANCE
HEALTH & SAFETY
AND ENVIRONMENTAL
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:
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 Turnbull guidance.
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.
AUDIT
An account of the work of the Audit Committee is given in the Audit
Committee Report on page 22.
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 compliance with the
Transparency Rules, introduced in January 2007, the Company publishes
Interim Management Statements in March and September each year.
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, and that the Chairman should
not be a member of the Audit Committee.
Since the retirement through illness of Mr Ballinger as Chairman in
November 2006, Mr Rogerson acted as Chairman on a temporary basis
while retaining his roles as Senior Independent Director and Chairman of
the Audit Committee. Following his appointment as Chairman on a permanent
basis in June 2007, Mr Brown was appointed Senior Independent Director.
In September 2007 Mr Allner was appointed Chairman of the Audit Committee
at which time Mr Rogerson ceased to be a member of the Audit Committee.
THE BOARD RECOGNISES THAT
THE MONITORING AND CONTROL
OF ENVIRONMENTAL, HEALTH
AND SAFETY (EHS) AND STRICT
ADHERENCE TO LEGISLATIVE
REQUIREMENTS IN ALL AREAS
OF OPERATION 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 operational management.
In the UK the principles set out in the management model “HSG 65
Successful Health and Safety Management” have been adopted. This
enables consistent health and safety standards and disciplines to be
applied at all locations.
The Group is committed to pursuing sound EHS management policies
and practices and continually seeks to improve EHS standards in the
workplace by:
Monitoring and managing the EHS impacts, risks and opportunities
for the business for the benefit of employees, customers and the
local communities in which we operate;
Promoting awareness of EHS policy across the business to
assess performance and to set objectives for improvement; and
Reporting on the status of the EHS performance of the business.
Common standards are applied to a wide range of EHS matters, and
legislative requirements are the minimum standard accepted. Working
practices and procedures are continually assessed to ensure that everything
is being done to meet the highest possible standards of safety using
comprehensive and robust safety operating procedures manuals.
Group policies are agreed through a Steering Committee, which meets at
regular intervals to consider EHS issues, review performance and to determine
the necessary controls for compliance with all legislative requirements.
In the UK we are licensed to carry out a number of training courses for the
British Safety Council (BSC) and the Institute of Occupational Safety and
Health (IOSH). During this reporting period over five hundred employees
have attended BSC Level one health & safety training courses and have
successfully gained this recognised qualification. The Group remains
committed to continually raising safety standards through training and
has begun a process of training at least one employee within each hire
company to a Nebosh General Certificate standard.
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 2008 was 68,600
vehicles with an average age of 16 months, of which 15% were cars and the
remainder commercial vehicles. The total fleet in Spain at 30 April 2008 was
62,750 vehicles with an average age of 19 months, of which 33% were cars
and the remainder commercial vehicles.
Cars are sold after an average life of 20 months in the UK and 35 months
in Spain. Commercial vehicles are sold after an average life of 32 months
in the UK and 38 months in Spain.
Our fleet is, therefore, comprised entirely of modern vehicles. All purchases
in the year ended 30 April 2008 were Euro IV compliant.
PROPERTY
As at 30 April 2008, the vehicle rental business in the UK and Republic of
Ireland operated out of 87 properties, of which 21 are primary sites and 66
are branches. All but 9 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. Our sites vary in size from
the larger sites which will typically 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. The
smaller sites will have an area of approximately 0.3 acres, have a small
office (often of the portacabin type), a valet washbay and in some cases a
workshop facility, again, often a modular building. They employ an average
of 9 people. Four of the larger sites share premises with Northgate Vehicle
Sales who have a further six 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 UK locations underwent comprehensive internal EHS
audits and, having completed an evaluation of EHS arrangements in Fualsa
and Record, we have now established an EHS function in Spain based on
the same standards and general principles as the UK. Both Fualsa and
Record are certified to the internationally recognised Environmental
standard ISO 14001.
In both the UK and Spain all waste products from our workshops and
bodyshops are collected by registered waste contractors: 100% of tyres
are recycled and 95% of all other such waste.
The Group are sponsors of Brake, the road safety charity, and are members
of the British Safety Council and the Royal Society for the Prevention of
Accidents. We have received a Silver Award from RoSPA in recognition of
the Group’s EHS arrangements in the UK and have also been recognised
by RoadSafe, the Government backed Driving for Better Business campaign,
with an award for our fleet road safety programme.
During the year under review, no incidents resulting in fatality or significant
pollution occurred at any of our locations. No health and safety enforcement
notices were served on any company in the Group.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
24/25
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DIRECTORS’
RESPONSIBILITIES
THE DIRECTORS ARE RESPONSIBLE
FOR PREPARING THE ANNUAL REPORT,
DIRECTORS REMUNERATION REPORT
AND THE FINANCIAL STATEMENTS IN
ACCORDANCE WITH APPLICABLE LAW
AND REGULATIONS.
Company law requires the Directors to prepare financial statements for
each financial year. The Directors are required by the EU IAS Regulation to
prepare the group financial statements under International Financial
Reporting Standards (“IFRS”) as adopted by the European Union and
have also elected to prepare the parent company financial statements in
accordance with IFRS as adopted by the European Union. The financial
statements are also required by law to be properly prepared in accordance
with the Companies Act 1985 and Article 4 of the EU IAS Regulation.
International Accounting Standard 1 requires that 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. However,
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 when compliance with the specific
requirements in IFRS are insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the entity’s financial position and financial performance.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply
with the Companies Act 1985. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
DIRECTORS’ -RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
the financial statements, prepared in accordance with IFRS, give a true
and fair view of the assets, liabilities, financial position and profit or loss of
the Company and the undertakings included in the consolidation taken as
a whole; and
the Operational and Financial Reviews which are incorporated into
the Directors’ report, include a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face.
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.
By order of the Board
R Contreras
Director
30 June 2008
INDEPENDENTAUDITORS’ REPORT
TO THE MEMBERS OF NORTHGATE PLC
We have audited the Group and parent Company financial statements (“the
financial statements”) of Northgate plc for the year ended 30 April 2008
which comprise the Group Income Statement, the Group and Parent
Company Balance Sheets, the Group and Parent Company Cash Flow
Statements, the Notes to the Cash Flow Statements, the Group and
Parent Company Statements of Changes in Equity, the Group Statement of
Recognised Income and Expense and the related Notes 1 to 40. 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 by 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 to be audited in accordance with relevant
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 and whether the financial statements and the part
of the Directors’ Remuneration Report to be audited have been properly
prepared in accordance with the Companies Act 1985 and, as regards
the Group financial statements, Article 4 of the IAS Regulation. We also
report to you whether in our opinion the information given in the Directors’
Report is consistent with the financial statements. The information given
in the Directors’ Report includes that specific information presented in
the Operational Review and Financial Review that is cross referred from
the Business Review section of the Directors’ Report.
In addition we 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 review whether the Corporate Governance Statement reflects the
Company’s compliance with the nine provisions of the 2006 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 as described
in the contents section and consider whether it is consistent with the audited
financial statements. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the
financial statements. Our responsibilities do not extend to any further
information outside the Annual Report.
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 to be 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 Group’s and 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 to be 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 to be audited.
OPINION
In our opinion:
the Group financial statements give a true and fair view, in accordance
with IFRS as adopted by the European Union, of the state of the Group’s
affairs as at 30 April 2008 and of its profit for the year then ended;
the parent Company financial statements give a true and fair view, in
accordance with IFRS as adopted by the European Union as applied
in accordance with the provisions of the Companies Act 1985, of the
state of the parent Company’s affairs as at 30 April 2008;
the financial statements and the part of the Directors’ Remuneration
Report to be audited have been properly prepared in accordance with
the Companies Act 1985 and, as regards the Group financial statements,
Article 4 of the IAS Regulation; and
the information given in the Directors’ Report is consistent with the
financial statements.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
Leeds
30 June 2008
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
26/27
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FINANCIAL
STATEMENTS
28/29
Northgate AR&A 2008 Back AW:x69614_Rhouse_back_p2_cg 23/7/08 16:27 Page 3
CONSOLIDATED
INCOME STATEMENT
FOR THE YEAR ENDED 30 APRIL 2008
Revenue
Cost of sales
Gross profit
Administrative expenses (excluding amortisation)
Amortisation
Total administrative expenses
Profit from operations
Investment income
Finance costs
Profit before taxation
Taxation
Profit for the year
Notes
4,5
5
5,6
15
6
8
9
10
BALANCE
SHEETS
AS AT 30 APRIL 2008
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment: vehicles for hire
Other property, plant and equipment
2008
£000
578,462
(400,668)
177,794
(54,895)
(4,693)
2007
(restated)
£000
526,465
(356,923)
169,542
(58,564)
(3,922)
(59,588)
(62,486)
Total property, plant and equipment
118,206
3,139
(41,853)
79,492
(18,158)
61,334
107,056
3,764
(35,452)
75,368
(20,885)
54,483
Investments
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
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
12
12
86.7p
85.8p
76.1p
75.8p
STATEMENTS OF RECOGNISED
INCOME AND EXPENSE
FOR THE YEAR ENDED 30 APRIL 2008
Group
2008
£000
2007
£000
Company
2008
£000
2007
£000
Notes
Amounts attributable to equity holders of the
parent Company
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 revaluation reserve
Net foreign exchange differences on long term
borrowings held as hedges
Other foreign exchange differences recognised
directly in equity
Net fair value (losses) gains on cash flow hedges
Share options fair value amount credited (charged)
directly to equity
Actuarial (losses) gains on defined benefit pension scheme
Net current tax credit recognised directly in equity
Deferred tax on net investment hedges
Other net deferred tax charge recognised directly in equity
Net income recognised directly in equity
Profit attributable to equity holders
Total recognised income and expense for the year
32
32
28
32
32
31
37
25
25
29,221
(1,756)
–
164
–
(11)
(34,349)
1,425
–
(1,721)
3,340
(208)
–
11,192
(2,018)
5,621
61,334
66,955
628
4,471
(75)
445
1,084
–
(2,616)
3,595
54,483
58,078
–
–
–
–
–
3,182
3,340
–
–
–
(2,312)
4,210
(27,534)
(23,324)
–
(4,344)
–
4,344
–
3,450
(75)
–
1,084
–
(2,055)
2,404
11,241
13,645
Group
Company
Notes
2008
£000
2007
£000
83,152
28,475
1,006,792
81,960
75,120
26,804
860,052
68,160
1,088,752
928,212
2008
£000
–
–
–
2,889
2,889
2007
£000
–
–
–
2,950
2,950
–
–
147,895
212,279
1,200,379
1,030,136
150,784
215,229
12,073
193,088
48,763
8,709
176,760
35,039
–
979,413
7,152
–
796,749
5,036
253,924
220,508
986,565
801,785
14
15
16
17
18
19
20
Non-current assets classified as held for sale
21
30,566
21,941
–
–
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
Capital redemption reserve
Retained earnings
TOTAL EQUITY
22
23
23
25
38
26
27
28
29
30
31
32
33
34
1,484,869
1,272,585
1,137,349
1,017,014
90,182
15,728
8,414
68,570
11,973
20,340
114,324
100,883
934,357
37,082
553
770,022
38,694
555
22,905
–
4,968
27,873
929,942
1,773
–
10,139
–
14,220
24,359
765,171
–
–
971,992
809,271
931,715
765,171
1,086,316
910,154
959,588
789,530
398,553
362,431
177,761
227,484
3,527
67,972
1,207
(9,006)
67,463
7,110
3,817
40
256,423
3,560
67,230
1,043
(4,572)
67,463
5,199
1,924
–
220,584
3,527
67,972
1,371
–
63,159
6,614
–
40
35,078
3,560
67,230
1,371
–
63,159
4,203
–
–
87,961
398,553
362,431
177,761
227,484
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 30 June 2008.
They were signed on its behalf by:
P Rogerson
R L Contreras
Director
Director
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
30/31
Northgate AR&A 2008 Back AW:x69614_Rhouse_back_p2_cg 23/7/08 16:27 Page 5
CASH FLOW
STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2008
NOTESTOTHE
CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2008
Net cash from (used in) operating activities
(a)
285,932
224,765
(35,523)
(38,160)
Profit (loss) from operations
118,206
107,056
(42,293)
(8,960)
Group
Company
2008
£000
2007
£000
2008
£000
2007
£000
(a) Net cash from (used in) operating activities
Group
Company
2008
£000
2007
£000
2008
£000
2007
£000
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 & equipment
Purchases of other property, plant and equipment
Purchases of intangible assets
Payment of deferred consideration
Business combinations
Purchase of investments in subsidiary undertakings
Disposal of investments in subsidiary undertakings
2,453
–
196,113
(469,438)
3,475
(13,520)
(260)
–
(15,260)
–
–
3,145
–
188,512
(437,947)
3,283
(11,126)
(1,281)
(10,290)
(49,340)
–
–
Net cash (used in) from investing activities
(296,437)
(315,044)
Financing activities
Dividends paid
Repayments of obligations under finance leases
Repayments of bank loans and other borrowings
Increase in bank loans and other borrowings
Loans to subsidiary undertakings
Loans repaid by subsidiary undertakings
Settlement of financial instruments with subsidiary
undertaking
Proceeds from issue of share capital
Proceeds from sale of own shares
Payments to acquire own shares for share schemes
Payments to acquire own shares for cancellation
Settlement of financial instruments
Net cash from (used in) financing activities
Net increase (decrease) 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)
(18,933)
(25,082)
(30,244)
113,210
–
–
–
749
981
(5,415)
(8,166)
(3,198)
23,902
13,397
34,467
899
48,763
(16,946)
(63,740)
(175,579)
359,891
–
–
–
2,254
62
(1,303)
–
–
1,249
66,905
–
–
–
–
–
–
–
–
–
68,154
(18,933)
–
(30,244)
113,092
(71,741)
–
2,146
749
–
–
(8,166)
(3,198)
12,951
30,258
–
–
–
–
–
(10,290)
–
(78,351)
119,352
73,920
(16,946)
–
(175,579)
432,891
(942,938)
659,437
–
2,254
–
–
–
–
104,639
(16,295)
(40,881)
14,360
20,259
(152)
34,467
16,336
(9,184)
–
7,152
(5,121)
(3,981)
(82)
(9,184)
Adjustments for:
Depreciation of property, plant and equipment
Exchange differences
Amortisation of intangible assets
Gain on disposal of property, plant and equipment
Defined benefit pension charge
Share options fair value amount credited (charged)
directly to equity
Operating cash flows before movements
in working capital
(Increase) decrease in inventories
Decrease (increase) in receivables
(Decrease) increase in payables
Cash generated from (used in) operations
Income taxes paid
Interest paid
216,736
(337)
4,693
(1,540)
9
193,885
366
3,922
(356)
8
61
37,741
–
–
–
3,340
(75)
3,340
341,107
304,806
(2,408)
12,078
(15,478)
460
(16,810)
(5,838)
335,299
282,618
(13,447)
(35,920)
(22,446)
(35,407)
(1,151)
–
1,303
(839)
(687)
–
(34,836)
62
178
–
–
–
(75)
(8,795)
–
(2,686)
3,637
(7,844)
–
(30,316)
Net cash from (used in) operating activities
285,932
224,765
(35,523)
(38,160)
(b) Cash and cash equivalents
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
2008
£000
11,372
37,391
48,763
–
48,763
2007
£000
14,384
20,655
35,039
(572)
34,467
2008
£000
7,152
–
7,152
–
7,152
2007
£000
5,036
–
5,036
(14,220)
(9,184)
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
32/33
Northgate AR&A 2008 Back AW:x69614_Rhouse_back_p2_cg 23/7/08 16:27 Page 7
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2008
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
Amounts attributable to equity holders of the parent Company
Foreign exchange differences on retranslation of net assets of subsidiary undertakings
Foreign exchange difference on revaluation reserve
Net foreign exchange differences on long term borrowings held as hedges
Other foreign exchange differences recognised directly in equity
Net fair value (losses) gains on cash flow hedges
Share options fair value amount credited (charged) directly to equity
Actuarial (losses) gains on defined benefit pension scheme
Net current tax credit recognised directly in equity
Deferred tax on net investment hedges
Net deferred tax charge 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
Cost of shares purchased for cancellation
Net changes in total equity
Opening total equity as at 1 May
Closing total equity as at 30 April
Notes
32
32
32
31
38
10
25
25
13
11
26, 27
29
26
2008
£000
29,221
164
(34,349)
–
(1,721)
3,340
(208)
–
11,192
(2,018)
5,621
61,334
66,955
(18,982)
749
(4,434)
(8,166)
36,122
2007
£000
(1,756)
(11)
1,425
628
4,471
(75)
445
1,084
–
(2,616)
3,595
54,483
58,078
(16,949)
2,254
(1,241)
–
42,142
362,431
320,289
398,553
362,431
COMPANY STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2008
Amounts attributable to equity holders of the parent Company
Foreign exchange differences on retranslation of investments
in subsidiary undertakings
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 (charged) directly to equity
Net current tax credit recognised directly in equity
Net deferred tax charge recognised directly in equity
Net income recognised directly in equity
(Loss) profit attributable to equity holders
Total recognised income and expense for the year
Dividends paid
Issue of Ordinary share capital (net of expenses)
Cost of shares purchased for cancellation
Net changes in total equity
Opening total equity as at 1 May
Closing total equity as at 30 April
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
Notes
2008
£000
2007
£000
32
32
31
25
13
11
26, 27
26
–
(4,344)
–
3,182
3,340
–
(2,312)
4,210
(27,534)
(23,324)
(18,982)
749
(8,166)
(49,723)
227,484
4,344
3,450
(75)
1,084
(2,055)
2,404
11,241
13,645
(16,949)
2,254
–
(1,050)
228,534
177,761
227,484
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 86. 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 10.
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.
On 1 May 2007, the Group adopted IFRS 7 (Financial Instruments: Disclosures).
There is no impact on the income statement or equity in either year as a result of the adoption.
At the date of authorisation of these financial statements, the following relevant Standards and Interpretations, which have
not been applied in these financial statements were in issue but not yet effective:
IFRS 8
IFRIC 11
IFRIC 14
Operating segments
IFRS 2 - Group and treasury share transactions
IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
The Directors anticipate that the adoption of the Standards and Interpretations in future periods will have no material impact
on the financial statements of the Group except for additional disclosures when the relevant standards come into effect for
periods commencing on or after 1 January 2009.
2. PRINCIPAL ACCOUNTING POLICIES
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
and their interpretations adopted by the European Union (EU) and therefore comply with Article 4 of the EU IAS Regulation.
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 2007 and
30 April 2008. The results of a new subsidiary undertaking are included from the date of its 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.
34/35
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
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
5 to 13 years
5 to 10 years
2 to 4 years
Intangible assets – other
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, except in the case of certain revalued buildings, 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
Plant, equipment and fittings
Vehicles for hire
Motor vehicles
50 years
50 years or over the life of the lease, whichever is shorter
3 to 10 years
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 reflect adjustments made as a result of differences between expected and actual residual values of used
vehicles, 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 disposal 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.
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.
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.
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
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.
Current and 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 current or 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, 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
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.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
36/37
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
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 net assets 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 exchange differences 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.
In the prior year, the Company maintained certain borrowings in the same currency as the functional currency of its overseas
subsidiary undertakings, as a hedge against the net assets of the subsidiaries. These borrowings were translated into UK
Sterling using the exchange rate prevailing at the balance sheet date. Any variances were 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 hired 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. 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. The costs of these plans are charged to the income statement as
they fall due.
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
2. PRINCIPAL ACCOUNTING POLICIES (continued)
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 payments to certain employees.
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 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 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.
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.
Investment income and finance costs
Investment income and finance costs are recognised in the income statement as they fall due.
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 reflect adjustments made as a result of differences between expected and actual residual values of used
vehicles, 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 £83,152,000 (Note 14).
Taxation
The Group carries out tax planning consistent with a group of its size and makes appropriate provision, based on best
estimates, until tax computations are agreed with the tax authorities.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
38/39
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
4. REVENUE
Revenue shown in the consolidated income statement of £578,462,000 (2007 – £526,465,000) arises from the rendering
of services.
5. GEOGRAPHICAL AND BUSINESS SEGMENTS
Geographical segments
The Group’s operations are located in the United Kingdom, Republic of Ireland and Spain. These geographical locations are
the basis on which the Group reports its primary segment information.
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.
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
Income tax liabilities
Revenue
Gross profit
Administrative expenses
Amortisation
Profit from operations
Investment income
Finance costs
Profit before taxation
UK & Republic
of Ireland
2008
£000
Spain
2008
£000
Total
2008
£000
360,752
217,710
578,462
118,743
(44,346)
(2,569)
59,051
(10,549)
(2,124)
177,794
(54,895)
(4,693)
71,828
46,378
118,206
3,139
(41,853)
79,492
301,991
125,922
200,992
90,814
502,983
216,736
918,666
566,203
1,484,869
560,808
472,698
1,033,506
52,810
1,086,316
UK & Republic
of Ireland
2007
£000
Spain
(restated)
2007
£000
Total
(restated)
2007
£000
351,108
175,357
526,465
117,638
(45,925)
(2,035)
51,904
(12,639)
(1,887)
169,542
(58,564)
(3,922)
69,678
37,378
107,056
3,764
(35,452)
75,368
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
5. GEOGRAPHICAL AND BUSINESS SEGMENTS (continued)
Other Information
Capital additions
Depreciation
Balance Sheet
Segment assets
Segment liabilities (as restated)
Income tax liabilities
266,485
127,030
190,755
66,855
457,240
193,885
703,891
568,694
1,272,585
492,331
367,156
859,487
50,667
910,154
2007 segment liabilities have been restated to exclude income tax liabilities, in accordance with IAS 14.
Business segments
For management purposes, the Group has two material business segments, which are the hire of vehicles and fleet management.
As such, the Directors consider that these are the two business segments on which the Group should report.
Revenue
Segment assets
Capital additions
Revenue
Segment assets
Capital additions
Hire of
Fleet
vehicles management
2008
£000
2008
£000
Total
2008
£000
562,937
1,475,570
502,721
15,525
9,299
2
578,462
1,484,869
502,723
Hire of
Fleet
vehicles management
2007
£000
2007
£000
Total
2007
£000
512,727
1,263,974
457,228
13,738
8,611
12
526,465
1,272,585
457,240
6. 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) losses
Non-recurring property profits (below)
Staff costs
Cost of inventories recognised as an expense
Auditors’ remuneration for audit services (below)
Auditors’ remuneration for non-audit services (below)
Notes
16, 17
15
7
2008
£000
2007
£000
216,736
4,693
(337)
(1,098)
84,272
43,281
336
143
193,885
3,922
366
–
77,622
39,402
308
301
During the year, the Group made a non-recurring profit as a result of insurance proceeds received in respect of a fire at one
of the Group’s operational sites in Spain.
The above cost of inventories recognised as an expense includes movements in stock provisions which are immaterial.
The 2007 consolidated income statement has been restated to reclassify certain costs which are considered more appropriately
classified within cost of sales than administrative expenses. The impact of this restatement has been to increase cost of sales
by £11,473,000 and reduce administrative expenses by the same amount. There is no impact on profit from operations or
profit before taxation for the year ended 30 April 2007, the Group cash flow statement for the year ended 30 April 2007
or the Group balance sheet as at 30 April 2007 as a result of this restatement.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
40/41
Northgate AR&A 2008 Back AW:x69614_Rhouse_back_p2_cg 23/7/08 16:28 Page 15
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
6. PROFIT FROM OPERATIONS (continued)
8. INVESTMENT INCOME
Fees payable to the Company’s auditors for the audit of the Company’s annual accounts
Fees payable to the Company’s auditors and their associates for the audit of the
Company’s subsidiaries pursuant to legislation
Total audit fees
Other services pursuant to legislation
Tax services
Corporate finance services
Other services
Total non-audit fees
2008
£000
227
109
336
21
96
18
8
143
2007
£000
196
112
308
20
263
–
18
301
Fees payable to Deloitte & Touche LLP and their associates for non-audit services to the Company are not required to
be disclosed because the consolidated financial statements are required to disclose such fees on a consolidated basis.
A description of the work of the audit committee is set out on pages 22 to 24 and includes an explanation of how auditor
objectivity and independence is safeguarded when non-audit services are provided by the auditors.
7. STAFF COSTS
The average number of persons employed by the Group:
United Kingdom and Republic of Ireland:
Direct operations
Administration
Spain:
Direct operations
Administration
The above United Kingdom administration employee numbers include 18 (2007 – 18) in respect of the Company.
The aggregate remuneration of Group employees comprised:
Wages and salaries
Social security costs
Other pension costs
2008
£000
72,850
9,715
1,707
84,272
The above employee remuneration includes wages and salaries costs of £2,423,000 (2007 – £1,888,000), social security
costs of £324,000 (2007 – £402,000) and other pension costs of £357,000 (2007 – £462,000) in respect of the Company.
Details of Directors’ remuneration, pension contributions and share options are provided in the audited part of the
Remuneration Report on pages 16 to 21.
2008
Number
2007
Number
1,977
464
2,441
872
195
1,067
3,508
1,862
503
2,365
752
198
950
3,315
2007
£000
67,755
8,387
1,480
77,622
Interest on bank and other deposits
Change in fair value of interest rate derivatives (Note 24)
9. FINANCE COSTS
Interest on bank overdrafts and loans
Interest on obligations under finance leases
Total borrowing costs
Change in fair value of interest rate derivatives (Note 24)
Preference share dividends
10. TAXATION
Current tax:
UK corporation tax
Adjustment in respect of prior years
Foreign tax
Deferred tax:
Current year
Adjustment in respect of prior years
2008
£000
3,139
–
3,139
2008
£000
40,560
616
41,176
652
25
2007
£000
3,141
623
3,764
2007
£000
33,583
1,844
35,427
–
25
41,853
35,452
2008
£000
82
(3,679)
16,955
13,358
3,012
1,788
4,800
2007
£000
2,697
1,200
9,552
13,449
7,232
204
7,436
18,158
20,885
Corporation tax is calculated at 30% (2007 – 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% (2007 – 30%)
Tax effect of expenses that are not deductible in
determining taxable profit
Difference in taxation in overseas subsidiary undertakings
Reduction in overseas tax rate
Reduction in UK tax rate
Adjustment to tax charge in respect of prior years
Tax expense and effective tax rate for the year
2008
£000
79,492
23,848
628
(3,032)
–
(1,395)
(1,891)
18,158
%
30.0
0.8
(3.8)
–
(1.8)
(2.4)
2007
£000
75,368
22,610
346
(2,277)
(1,198)
–
1,404
22.8
20,885
%
30.0
0.4
(3.0)
(1.6)
–
1.9
27.7
In addition to the amount charged to the income statement, a net deferred tax amount of £9,174,000 has been credited
(2007 – £2,616,000 charged) directly to equity (Note 25).
On 1 April 2008, the UK corporation tax rate changed from 30% to 28%. This will have the effect of reducing the future
effective tax rate. At the same time, the rate of capital allowances, an important part of UK qualifying expenditure, fell
from 25% to 20% per annum. This will not impact the UK effective tax rate but will result in a short-term cash outflow
to the Group.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
11. DIVIDENDS
Amounts recognised as distributions to equity holders of the parent Company:
Final dividend for the year ended 30 April 2007 of 15.5p per share
Interim dividend for the year ended 30 April 2008 of 11.5p per share
Final dividend for the year ended 30 April 2006 of 14p per share
Interim dividend for the year ended 30 April 2007 of 10p per share
2008
£000
11,072
7,910
–
–
18,982
2007
£000
–
–
9,853
7,096
16,949
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
14. GOODWILL
Group
Cost:
At 1 May
Exchange differences
Business combinations (Note 35)
Adjustment in respect of subsidiary undertaking acquired in prior year
At 30 April
2008
£000
75,120
6,421
1,611
–
83,152
2007
£000
44,582
(572)
31,439
(329)
75,120
The proposed final dividend of 16.5p 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 2008.
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:
12. EARNINGS PER SHARE
(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 non-recurring property profit
Earnings for the purposes of basic and diluted earnings per share (above)
Amortisation
Non-recurring property profit (Note 6)
Earnings for the purposes of basic and diluted earnings per share
before amortisation and non-recurring property profit
Basic earnings per share before amortisation and non-recurring property profit
Diluted earnings per share before amortisation and non-recurring property profit
2008
2007
£000
£000
61,334
54,483
Number
Number
70,756,672
71,584,744
737,756
250,032
71,494,428
71,834,776
86.7p
85.8p
£000
61,334
4,693
(1,098)
76.1p
75.8p
£000
54,483
3,922
–
64,929
58,405
91.8p
90.8p
81.6p
81.3p
13. RESULT OF THE PARENT COMPANY
A loss of £27,534,000 (2007 – profit of £11,241,000) 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.
Group
Record Rent a Car S.A.
Northgate (AVR) Limited
Furgonetas de Alquiler S.A.
Fleet Technique Limited
Hampsons (Self Drive Hire) Limited
GPS Body Repairs Limited
Alquiservicios LSL S.A.
Other UK vehicle hire companies
2008
£000
35,881
27,726
11,010
3,589
996
224
458
3,268
83,152
2007
£000
31,010
27,726
9,527
3,589
–
–
–
3,268
75,120
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 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 one-year annual financial budgets approved by the
Directors and extrapolates these cash flows for the period relevant to the CGU.
With the exception of Fleet Technique Limited, which uses a growth rate of 5%, the following is applied to all CGUs:
Growth rate
Discount rate
Cash flow period
Nil
7%
10 years
The growth rate of nil is only assumed for the purpose of impairment review modelling and is less than the expected
long-term growth rate for the market.
The periods over which cash flows have been extrapolated exceed five years on the basis that economic benefit is expected
to flow to the Group over a longer period.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
15. OTHER INTANGIBLE ASSETS
16. PROPERTY, PLANT AND EQUIPMENT: VEHICLES FOR HIRE
Group
Fair value:
At 1 May 2006
Additions
Business combinations
Disposals
Exchange differences
At 1 May 2007
Additions
Business combinations
Exchange differences
At 30 April 2008
Amortisation:
At 1 May 2006
Charge for the year
Eliminated on disposals
Exchange differences
At 1 May 2007
Charge for the year
Exchange differences
At 30 April 2008
Carrying amount:
At 30 April 2008
At 30 April 2007
Brand
names
£000
Customer Non compete
agreements
£000
relationships
£000
Software
technology
£000
Other
software
£000
4,488
–
11,725
(4,165)
(46)
12,002
–
–
1,744
13,746
864
1,329
–
(9)
2,184
1,329
486
3,999
9,747
9,818
13,887
–
3,575
–
(10)
17,452
–
4,157
785
22,394
674
1,836
–
(2)
2,508
2,325
144
4,977
17,417
14,944
285
–
123
–
(1)
407
–
–
29
436
65
117
–
–
182
121
30
333
103
225
168
–
–
–
–
168
–
–
–
168
11
34
–
–
45
34
–
79
89
123
3,067
1,279
57
(94)
(5)
4,304
260
–
142
4,706
2,073
606
(65)
(4)
2,610
884
93
3,587
1,119
1,694
Total
£000
21,895
1,279
15,480
(4,259)
(62)
34,333
260
4,157
2,700
41,450
3,687
3,922
(65)
(15)
7,529
4,693
753
12,975
28,475
26,804
Group
Cost or valuation:
At 1 May 2006
Additions
Business combinations
Transfer to motor vehicles
Exchange differences
Disposals
At 1 May 2007
Additions
Business combinations
Transfer from motor vehicles
Exchange differences
Disposals
At 30 April 2008
Depreciation:
At 1 May 2006
Charge for the year
Exchange differences
Transfer to motor vehicles
Eliminated on disposals
At 1 May 2007
Charge for the year
Exchange differences
Transfer from motor vehicles
Eliminated on disposals
At 30 April 2008
Carrying amount:
At 30 April 2008
At 30 April 2007
£000
807,342
444,835
158,750
(113)
(3,465)
(323,731)
1,083,618
489,203
19,119
1,628
78,029
(400,448)
1,271,149
163,518
190,095
(217)
(61)
(129,769)
223,566
213,650
15,224
37
(188,120)
264,357
1,006,792
860,052
The carrying amount of the Group’s vehicles for hire includes an amount of £52,000 (2007 – £39,550,000) in respect of assets
held under finance lease agreements.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
17. OTHER PROPERTY, PLANT AND EQUIPMENT
17. OTHER PROPERTY, PLANT AND EQUIPMENT (continued)
Group
Cost or valuation:
At 1 May 2006
Additions
Business combinations
Transfer from vehicles for hire
Exchange differences
Disposals
At 1 May 2007
Additions
Business combinations
Transfer to vehicles for hire
Exchange differences
Disposals
At 30 April 2008
Depreciation:
At 1 May 2006
Charge for the year
Exchange differences
Transfer from vehicles for hire
Eliminated on disposals
At 1 May 2007
Charge for the year
Exchange differences
Transfer to vehicles for hire
Eliminated on disposals
At 30 April 2008
Carrying amount:
At 30 April 2008
At 30 April 2007
Cost or valuation at 30 April 2008 is represented by:
Valuation performed in 1992
Valuation performed in 2004
Additions at cost
Land &
buildings
£000
Plant,
equipment &
fittings
£000
Motor
vehicles
£000
51,263
8,150
11,936
–
(276)
(2,769)
68,304
5,899
135
–
5,564
(1,265)
78,637
5,489
1,445
1
–
(402)
6,533
976
107
–
(261)
7,355
71,282
61,771
525
3,403
74,709
78,637
9,607
2,173
1,843
–
(33)
(1,102)
12,488
5,410
313
–
1,077
(626)
18,662
6,185
2,006
6
–
(1,026)
7,171
1,746
165
–
(198)
8,884
9,778
5,317
–
–
18,662
18,662
1,341
803
–
113
–
(848)
1,409
2,211
75
(1,628)
–
(858)
1,209
301
339
–
61
(364)
337
363
–
(37)
(354)
309
900
1,072
–
–
1,209
1,209
Total
£000
62,211
11,126
13,779
113
(309)
(4,719)
82,201
13,520
523
(1,628)
6,641
(2,749)
98,508
11,975
3,790
7
61
(1,792)
14,041
3,085
272
(37)
(813)
16,548
81,960
68,160
525
3,403
94,580
98,508
Group
Land and buildings by category:
Freehold
Short leasehold
2008
£000
62,117
9,165
71,282
2007
£000
53,179
8,592
61,771
At 30 April 2008, the Group had entered into contractual commitments for the acquisition of plant, property and equipment
amounting to £66,000 (2007 – £892,000).
Certain of the above freehold properties were valued as at 30 April 1992 by Jones Lang Wooton, Chartered Surveyors,
and certain other freehold properties as at 3 May 2004 by Amercian Appraisal, Professional Valuers, on the basis of open
market value for existing use.
At 30 April 2008, under the historical cost convention, land and buildings would have been stated at £78,915,000
(2007 – £68,582,000) and related accumulated depreciation of £7,442,000 (2007 – £6,621,000).
Company
Cost:
At 1 May 2006, 1 May 2007 and 30 April 2008
Depreciation:
At 1 May 2006
Charge for the year
At 1 May 2007
Charge for the year
At 30 April 2008
Carrying amount:
At 30 April 2008
At 30 April 2007
Land &
buildings
£000
3,239
227
62
289
61
350
2,889
2,950
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
18. INVESTMENTS
Company
Cost:
At 1 May 2007
Disposal of interest in subsidiary undertaking (see below)
At 30 April 2008
Accumulated provisions:
At 1 May 2007 and 30 April 2008
Carrying amount:
At 30 April 2008
At 30 April 2007
Shares in
subsidiary
undertakings
£000
Loans
to Group
undertakings
£000
167,714
(64,384)
103,330
47,000
–
47,000
Total
£000
214,714
(64,384)
150,330
2,435
–
2,435
100,895
165,279
47,000
47,000
147,895
212,279
On 25 April 2008, the Company disposed of its interest in the share capital of Northgate (St Helier) Limited. The proceeds from
the disposal were £64,384,000 and were settled by intercompany accounts.
At 30 April 2008, the principal subsidiary undertaking of the Company was Northgate Vehicle Hire Limited, a company registered
in England and Wales, whose principal activity is the hire of vehicles.
A full list of the Company’s subsidiary undertakings was included with the Annual Return filed with the Registrar of Companies.
At 30 April 2008, the principal subsidiary undertakings of the Group were as follows:
Fleet Technique Limited
Furgonetas de Alquiler S.A.
Northgate (Europe) Limited
Northgate (Malta) Limited
Northgate (MT) Limited
Northgate (TM) Limited
Northgate Vehicle Hire (Ireland) Limited
Northgate Vehicle Hire Limited
Record Rent a Car S.A.
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
19. INVENTORIES
Inventories comprise spare parts and consumables.
20. OTHER FINANCIAL ASSETS
Trade and other receivables
Trade amounts receivable
Amounts due from subsidiary undertakings
Other taxes
Deferred tax asset (Note 25)
Financial instrument asset (Note 24)
Other debtors and prepayments
Group
Company
2008
£000
171,888
–
–
–
3,361
17,839
2007
£000
142,461
–
8,374
–
4,347
21,578
2008
£000
–
915,446
1,976
–
61,059
932
2007
£000
–
787,908
1,481
275
5,536
1,549
193,088
176,760
979,413
796,749
The average credit periods taken on goods are
2008
2007
UK
Spain
52 days
138 days
51 days
149 days
Allowances for estimated irrecoverable amounts are considered in Note 39.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
The deferred tax asset of £275,000 carried in the Company balance sheet at 30 April 2007 has been disclosed within
other financial assets, rather than separately on the face of the Company balance sheet, on the grounds that in the opinion
of the Directors, it is immaterial.
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 39.
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
21. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
These comprise vehicles held for sale in both the UK and Spain. It is anticipated that these will be disposed of during the
ordinary course of business within the next financial year.
22. OTHER FINANCIAL LIABILITIES
Trade and other payables
Trade payables
Financial instrument liability (Note 24)
Social security and other taxes
Accruals and deferred income
Group
Company
2008
£000
36,640
2,985
3,173
47,384
90,182
2007
£000
33,538
3,868
3,435
27,729
68,570
2008
£000
58
2,884
99
19,864
22,905
2007
£000
163
3,738
117
6,121
10,139
Trade payables comprise amounts outstanding for trade purchases.
The average credit period taken on
trade purchases is
2008
2007
UK
Spain
50 days
85 days
45 days
90 days
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
23. BORROWINGS
The creditors falling due after more than one year comprise bank loans, loan notes, finance lease obligations and other
borrowings.
Except as detailed in Note 39, the Directors consider that the carrying amounts of the Group’s borrowings approximate
to their fair value.
Total borrowings
Bank overdrafts
Bank loans
Loan notes
Vehicle related finance lease obligations
Deferred consideration
Property loans
Cumulative Preference shares
Other
Group
Company
2008
£000
2007
£000
2008
£000
2007
£000
–
735,970
201,142
356
519
2,668
500
1,616
572
601,326
168,628
16,104
–
2,718
500
514
–
733,268
201,142
–
–
–
500
–
14,220
596,043
168,628
–
–
–
500
–
942,771
790,362
934,910
779,391
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
23. 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
Property loans
In the third to fifth years
Bank loans
Loan notes
Property loans
Due after more than five years
Loan notes
Cumulative Preference shares
Property loans
Group
Company
2007
£000
572
2,939
15,894
–
421
514
20,340
2008
£000
–
4,968
–
–
–
–
4,968
952
210
631
628,577
–
–
1,793
628,577
2007
£000
14,220
–
–
–
–
–
14,220
–
–
–
–
597,435
–
373
99,723
31,285
–
596,043
–
–
2008
£000
–
5,504
292
519
483
1,616
8,414
629,129
64
523
629,716
101,337
31,285
1,662
134,284
597,808
131,008
596,043
169,857
500
–
168,628
500
1,293
169,857
500
–
168,628
500
–
170,357
170,421
170,357
169,128
Total borrowings
942,771
790,362
934,910
779,391
Less: Amount due for settlement within one year
(shown under current liabilities)
8,414
20,340
4,968
14,220
Amount due for settlement after one year
934,357
770,022
929,942
765,171
Bank overdrafts
Bank overdrafts are repayable on demand and are unsecured.
They are denominated in UK Sterling and Euro. Sterling denominated bank overdrafts bear interest at 1% above the Bank
of England base rate and Euro denominated bank overdrafts bear interest at 0.75% to 0.85% above EURIBOR. This exposes
the Group to cash flow interest rate risk.
Bank loans
Bank loans are unsecured and bear interest at rates of 0.425% to 0.6% above the relevant interest rate index, being LIBOR
for UK Sterling denominated debt and EURIBOR for Euro denominated debt. This exposes the Group to cash flow interest
rate risk.
In December 2007, the Company committed additional term loan facilities of £130,000,000 with five major UK and European
banks. The total facilities of £885,000,000 (2007 – £755,000,000) have commitment dates one and three years from the
agreement dates.
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
23. BORROWINGS (continued)
Loan notes
In December 2007 the Company issued fixed rate, unsecured loan notes with a total nominal value of US$62,000,000 to
investors principally based in the United States. The total of all US dollar loan notes (“the US notes”) issued by the Group
is $357,000,000 and £21,000,000 (2007 – $295,000,000 and £21,000,000). They are not publicly tradeable and have the
following maturity profile:
Value of loan notes
US$62,000,000 5 year loan notes
US$125,000,000 7 year loan notes
US$120,000,000 10 year loan notes
£21,000,000 10 year loan notes
US$50,000,000 10 year loan notes
Redemption
date
December 2012
December 2013
December 2016
December 2016
January 2017
Weighted
average
fixed interest
rate on the
US Notes
at 30 April
2008
Overall
weighted
average
fixed
interest rate
at 30 April
2008
5.52%
5.73%
5.73%
5.73%
5.73%
5.19%
5.78%
5.78%
5.78%
5.78%
Carrying
value
30 April
2008
£000
31,285
63,075
60,552
21,000
25,230
Carrying
value
30 April
2007
£000
–
62,554
60,052
21,000
25,022
201,142
168,628
The redemption of the US Notes and interest payments on the US Notes are due to the loan note holders in the same
currency as the issue currency of the US Notes. These factors expose the Group to foreign currency exchange risk. As
explained in further detail in Note 24, the Group has entered into cross currency swap financial instruments in order to mitigate
this risk. Both the weighted average fixed interest rate on the US Notes and the overall weighted average fixed interest rate
(taking into account the interest rates within the cross currency swap instruments) are shown in the table above.
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 (2007 – 1,300,000), of which 1,000,000
(2007 – 1,000,000) were allotted and fully paid at the balance sheet date.
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 2008, the average borrowing rate for vehicle related finance leases was 4.1% (2007 – 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.
Minimum
lease payments
Present value of
minimum lease payments
Group
Amounts payable under vehicle related finance leases:
Within one year
In the second 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
2008
£000
296
67
363
(7)
356
2007
£000
16,239
220
16,459
(355)
16,104
2008
£000
292
64
356
–
356
(292)
64
2007
£000
15,894
210
16,104
–
16,104
(15,894)
210
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
23. BORROWINGS (continued)
Deferred consideration
The deferred consideration of £519,000 relates to the purchase of Hampsons (Self Drive Hire) Limited (Note 35) and was
settled on 24 June 2008.
Property loans
All property loans relate to land and buildings held in Spain and are accounted for as finance lease obligations. The loans
are secured on the properties to which they relate.
The average lease term is ten years. For the year ended 30 April 2008, the average borrowing rate for property loans was
5.2% (2007 – 4.7%). All loans are on a fixed repayment basis and no arrangements have been entered into for contingent
rental payments.
Amounts payable under property loans:
Within one year
In the second 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
2008
£000
551
2,518
–
3,069
(401)
2,668
2007
£000
481
1,139
1,510
3,130
(412)
2,718
2008
£000
483
2,185
–
2,668
–
2,668
(483)
2,185
2007
£000
421
1,004
1,293
2,718
–
2,718
(421)
2,297
Other borrowings
Other borrowings of £1,616,000 (2007 – £514,000) represent Spanish debt discounting arrangements which are unsecured
and all fall due within one year.
Total borrowing facilities
The Group has various borrowing 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, were as follows:
Less than one year
In one year to five years
2008
£000
97,981
63,233
2007
£000
178,474
7,958
161,214
186,432
The total amount permitted to be borrowed by the Company and its subsidiary undertakings in terms of the Articles of
Association shall not exceed six times the aggregate of the issued share capital of the Company and Group reserves,
as defined in those Articles.
Vehicle related finance lease obligations are denominated in Sterling and Euro.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
23. BORROWINGS (continued)
Analysis of consolidated net debt
Cash at bank and in hand
Short term investments
Bank overdraft due within
one year
Bank loans
Loan notes
Vehicle related finance
lease obligations
Deferred consideration
Cumulative Preference shares
Property loans and other
borrowings
At 1 May
2007
£000
14,384
20,655
(4,922)
16,736
(572)
593
34,467
(601,326)
(168,628)
(16,104)
–
(500)
12,407
(52,300)
(30,244)
25,082
–
–
(3,232)
(422)
(755,323)
(45,477)
Business
Cash flow combinations
£000
£000
Other
non-cash
changes
£000
Foreign
exchange
movements
£000
At 30 April
2008
£000
1,011
–
(21)
990
(57)
–
(8,472)
–
–
(128)
(7,667)
–
–
–
–
–
–
–
(519)
–
–
899
–
–
899
(82,287)
(2,270)
(862)
–
–
(502)
11,372
37,391
–
48,763
(735,970)
(201,142)
(356)
(519)
(500)
(4,284)
(519)
(85,022)
(894,008)
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 2008, the gearing of the Group amounted to 311.6% (2007 – 289.9%) where net borrowings are £894,008,000
(2007 – £755,323,000) and shareholders’ funds less goodwill and the net book value of intangible assets are £286,926,000
(2007 – £260,507,000).
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 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. The credit risk associated with trade receivables in Spain is more concentrated in larger customers than the UK
and, consequently, the Group has put a credit insurance policy in place to mitigate this risk.
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 financial 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 more complex financial instruments. Further
details regarding derivative financial instruments are shown in Note 24.
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 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.
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
23. BORROWINGS (continued)
Financing and interest rate risk
The Group’s policy is to finance operating subsidiary undertakings by a combination of retained earnings, loan notes and bank
borrowings, including medium term bank loans.
Cash at bank and on deposit yields interest based principally on interest rate indices applicable to periods of less than three
months, those indices being LIBOR for Sterling denominated cash and EURIBOR for Euro denominated cash. The Group’s
exposure to interest rate fluctuations on its borrowings and deposits is managed through the use of interest rate derivatives
as detailed in Note 24. 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 2008, 72% (2007 – 66%)
of gross borrowings were at fixed or capped rates of interest, comprising £140,000,000, €425,000,000 and US$357,000,000
of derivative financial instruments, as detailed in Note 24.
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 (Note 24) and with the exception of US Dollar
denominated loan notes, as explained above.
An analysis of the Group’s borrowings by currency is given below:
Group
At 30 April 2008
Borrowings
Bank loans
Loan notes
Vehicle related finance lease obligations
Cumulative Preference shares
Deferred consideration
Property loans
Other
At 30 April 2007
Borrowings
Bank overdrafts
Bank loans
Loan notes
Vehicle related finance lease obligations
Cumulative Preference shares
Property loans
Other
Sterling
£000
Euro
£000
US Dollars
£000
Total
£000
122,931
21,000
164
500
519
–
–
613,039
–
192
–
–
2,668
1,616
–
180,142
–
–
–
–
–
735,970
201,142
356
500
519
2,668
1,616
145,114
617,515
180,142
942,771
Sterling
£000
Euro
£000
US Dollars
£000
Total
£000
572
81,069
21,000
779
500
–
–
–
520,257
–
15,325
–
2,718
514
–
–
147,628
–
–
–
–
572
601,326
168,628
16,104
500
2,718
514
103,920
538,814
147,628
790,362
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
24. DERIVATIVE FINANCIAL INSTRUMENTS
The Group’s derivative financial instruments at the balance sheet date comprise interest rate swaps, interest rate collars and
cross-currency swaps.
24. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Cross currency derivatives
Market values have been used to determine fair values of cross-currency derivatives at each balance sheet date.
Their net estimated fair values are as follows:
The estimated fair values are as follows:
Interest rate derivatives
Cross-currency derivatives
They are represented in the balance sheet as follows:
Financial instrument asset (Note 20)
Financial instrument liability (Note 22)
2008
£000
(102)
478
376
3,361
(2,985)
376
2007
£000
4,217
(3,738)
479
4,347
(3,868)
479
Interest rate derivatives
The Group’s exposure to interest fluctuations on its borrowings and deposits is managed through the use of interest rate
swaps 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. The interest rate derivatives to which
the Group is party as at 30 April 2008 are summarised below:
GBP denominated interest rate swaps
EUR denominated interest rate swaps
GBP denominated interest rate collars
Total
nominal
values
£55,000,000
€425,000,000
£85,000,000
Weighted
average
contract
rates
4.3%
3.6%
5.8% (cap)
3.8% (floor)
Weighted
average
remaining
life
0.2 years
2.8 years
0.8 years
The interest rate swaps to which the Group is party are all pay fixed, receive floating rate instruments, the fixed rates being
as indicated above.
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:
Interest rate swaps
Interest rate collars
2008
£000
(78)
(24)
(102)
2007
£000
3,840
377
4,217
All of the interest rate swaps are designated 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, a net
amount of £251,000 has been charged (2007 – £6,000 credited) to the income statement.
Interest rate collars are not hedge accounted for and, accordingly, an amount of £401,000 (2007 – £617,000 credit) has been
charged to the income statement.
The total change in fair values of interest rate derivatives charged to the income statement of £652,000 is shown within finance
costs (Note 9). In the prior year, a total change in fair value of £623,000 was credited to the income statement and is shown
within investment income (Note 8).
Sterling/US Dollar cross-currency swaps
Euro/Sterling cross-currency swap
2008
£000
4,467
(3,989)
478
2007
£000
(3,738)
–
(3,738)
Sterling/US Dollar cross-currency swaps
The Group has in issue US Dollar denominated loan notes of capital value US$357,000,000 (2007 – US$295,000,000) which
bear fixed rate interest in US Dollars. The payment of this interest and the capital repayment of the loan notes at maturity
expose the Group to foreign exchange risk. To mitigate this risk, the Group has entered into a series of Sterling/US Dollar
cross-currency swaps. The effective start dates and termination dates of these contracts are the same as the loan notes
against which hedging relationships are designated and which are shown in Note 23. During the current year, the Group
issued US Dollar denominated loan notes of total nominal value US$62,000,000 and entered into cross-currency swaps
of the same value.
The Group will have interest cash outflows in UK Sterling and interest cash inflows in US Dollars over the life of the contracts.
On the termination date of each of the contracts, the Group will pay a principal amount in UK Sterling and receive a principal
amount in US Dollars. The weighted average interest rate that the Group pays in UK Sterling is 5.87%.
All Sterling/US Dollar swaps are designated and fully effective as cash flow hedges.
Gross movement in fair values initially deferred in hedging reserve:
At 30 April 2007
Movement in fair value of hedged instruments
At 30 April 2008
Cumulative amounts recycled to the income statement:
At 30 April 2007
Movement for the year
At 30 April 2008
Net fair value deferred in hedging reserve:
At 30 April 2008
At 30 April 2007
£000
(3,738)
8,205
4,467
6,951
(2,270)
4,681
9,148
3,213
The amount recycled to the income statement represents the movement on the foreign exchange elements of the total fair
value of the derivatives. This matches the exchange difference on retranslation of the loan notes at the exchange rate prevailing
at the balance sheet date, leaving a net impact of £nil in the income statement. The net fair value remaining in the hedging
reserve represents the fair value of the interest rate element of the derivatives (Note 31).
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
24. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Euro/Sterling cross-currency swaps
During the current year, the Group entered into a Euro/Sterling cross-currency swap of total notional value €43,555,000. The
Group will have interest cash inflows in Sterling and interest cash outflows in Euro over the life of the contract. On the termination
date of the contract, the Group will pay a principal amount in Euro and receive a principal amount in UK Sterling. The interest
rate that the Group pays in Euro is 5.19%. This swap is designated as a net investment hedge and is highly effective. The
total fair value of the Euro swap is £(3,989,000) and this has been deferred to equity (Note 31). Of this, £4,171,000 has been
transferred to the currency translation reserve, representing the fair value of the foreign exchange element of the total fair value
of the derivative. The net impact is that the hedging reserve has been credited with £182,000, representing the fair value of the
interest rate element of the derivative.
Net investment hedges
The Group manages its exposure to movements in the reported results of those subsidiary undertakings whose functional
currency is Euro (“the Euro Subsidiaries”) by maintaining UK based borrowings, including relevant attributable financial
instruments, denominated in Euro in the parent Company. In accordance with IAS21, the net assets of the Euro Subsidiaries
includes goodwill attributable to those subsidiaries. The Group achieves net investment hedging through a combination of
pre-tax and post-tax net investment hedging relationships.
The hedging objective is to reduce the risk of spot retranslation foreign exchange gains or losses arising in the consolidated
results of the Group upon the translation of the Euro Subsidiaries from Euro to Sterling at each reporting date, which is the
period between each roll-over of the Euro denominated borrowings comprising the net investment hedge.
The hedges are considered fully effective in the current and prior year and the exchange differences arising on the borrowings
have been recognised directly within equity along with the exchange differences on retranslation of the net assets of the
Euro Subsidiaries.
25. 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 Revaluation
allowances of buildings
£000
£000
Intangible
assets
£000
Retirement
benefit
obligations
£000
Other
timing
differences
£000
(433)
(10,883)
Group
At 1 May 2006
(Credit) charge to income
Charge to equity
Business combinations
Exchange differences
Adjustments in respect
of prior years
At 1 May 2007
20,672
(860)
–
6,730
(140)
149
26,551
(Credit) charge to income (14,585)
–
Charge (credit) to equity
1,091
Business combinations
Exchange differences
713
Adjustments in respect
of prior years
Transfer relating to
acquired subsidiary
undertaking
(1,091)
(435)
Share
based
payment
£000
(2,347)
(479)
831
–
–
–
(1,995)
(143)
1,541
–
–
–
–
3,492
(535)
–
2,319
(33)
–
5,243
(3,506)
–
–
432
–
–
5,345
(1,692)
–
3,940
(20)
–
7,573
(1,383)
–
1,074
649
–
–
Total
£000
15,846
7,232
2,616
12,989
(193)
10,665
1,651
–
–
55
204
1,488
22,556
(10,653)
–
(106)
38,694
3,012
(9,174)
2,165
1,688
2,223
1,788
–
(1,091)
133
134
–
–
–
(166)
73
(62)
–
–
–
–
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
25. DEFERRED TAX (continued)
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 2006
Charge (credit) to income
Charge to equity
At 1 May 2007
(Credit) charge to income
Charge to equity
At 30 April 2008
Accelerated
capital
allowances
£000
Share
based
payment
£000
Other
timing
differences
£000
192
17
–
209
(170)
–
39
(1,759)
(490)
254
(1,995)
(143)
1,541
(597)
(262)
(28)
1,801
1,511
49
771
2,331
Total
£000
(1,829)
(501)
2,055
(275)
(264)
2,312
1,773
At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of the
subsidiaries for which deferred tax liabilities have not been recognised was £157,600,000 (2007 – £112,153,000). 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.
26. SHARE CAPITAL
Group and Company
Authorised:
85,000,000 Ordinary shares of 5p each
Allotted and fully paid:
70,548,045 (2007 – 71,205,252) Ordinary shares of 5p each
2008
£000
2007
£000
4,250
4,250
3,527
3,560
The Company has one class of Ordinary shares which carries no right to fixed income.
During the year the Company issued 142,793 Ordinary shares with a nominal value of £7,140 pursuant to the exercise of
options under the Group’s various share schemes, for cash consideration of £748,731. The premium on the issue of these
shares has been credited to the share premium account (Note 27).
During the year the Company purchased and cancelled 800,000 Ordinary shares with a nominal value of £40,000 for a total
cash consideration of £8,166,324. The nominal value of these shares has been credited to the capital redemption reserve
(Note 33) and the total cost of the purchases has been charged to retained earnings (Note 34).
27. SHARE PREMIUM ACCOUNT
Group and Company
At 1 May
Premium on Ordinary shares issued (Note 26)
At 30 April
2008
£000
67,230
742
67,972
2007
£000
64,998
2,232
67,230
At 30 April 2008
12,244
2,169
(597)
7,913
(155)
15,508
37,082
In the current year, the net credit to equity of £10,653,000, in respect of other timing differences, comprises a credit of
£11,192,000, which has been reflected in the translation reserve as part of a post-tax net investment hedge (Note 32) and
a charge of £539,000 in respect of derivative financial instruments which has been reflected in the hedging reserve (Note 31).
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
28. REVALUATION RESERVE
At 1 May 2006
Foreign exchange differences
At 1 May 2007
Foreign exchange differences
At 30 April 2008
29. OWN SHARES
At 1 May 2006
Purchase of own shares
Disposal of own shares
At 1 May 2007
Purchase of own shares
Disposal of own shares
At 30 April 2008
Group
£000
Company
£000
1,054
(11)
1,043
164
1,207
Group
£000
(3,331)
(1,303)
62
(4,572)
(5,415)
981
(9,006)
1,371
–
1,371
–
1,371
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 37).
The results of the trusts are consolidated into the results of the Group in accordance with SIC 12 (Consolidation – Special
Purpose Entities).
30. MERGER RESERVE
At 1 May 2006, 1 May 2007 and 30 April 2008
31. HEDGING RESERVE
At 1 May 2006
Movement in fair value of hedged interest rate derivatives
Movement in fair value of hedged foreign currency derivatives
Deferred taxation on fair value of interest rate and foreign currency derivatives
Transfer to income statement
At 1 May 2007
Movement in fair value of hedged interest rate derivatives
Movement in fair value of hedged foreign currency derivatives
Deferred taxation on fair value of interest rate and foreign currency derivatives
Transfer to income statement
Transfer to translation reserve (Note 32)
At 30 April 2008
Group
£000
67,463
Company
£000
63,159
Group
£000
2,956
1,264
(3,738)
(2,228)
6,945
5,199
(3,918)
4,216
(539)
(2,019)
4,171
7,110
Company
£000
2,554
221
(3,738)
(1,801)
6,967
4,203
(3,189)
4,217
(771)
2,154
–
6,614
The hedging reserve represents the cumulative amounts of changes in fair values of hedged interest rate and foreign currency
derivatives that are deferred in equity, as explained in Note 2 and Note 24, less amounts transferred to the income statement
and translation reserve.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
32. TRANSLATION RESERVE
At 1 May 2006
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
Other foreign exchange differences recognised directly in equity
At 1 May 2007
Foreign exchange differences on retranslation of net assets of subsidiary undertakings
Net foreign exchange differences on long term borrowings held as hedges
Deferred taxation recognised in translation reserve as part of net investment hedge
Transfer from hedging reserve (Note 31)
At 30 April 2008
The management of the Group’s foreign exchange translation risks is detailed in Note 24.
33. CAPITAL REDEMPTION RESERVE
At 1 May 2007
Cancellation of Ordinary shares (Note 26)
At 30 April 2008
34. RETAINED EARNINGS
At 1 May 2006
Profit for the year
Dividends paid
Share options fair value amount charged directly to equity
Defined benefit pension credit recognised directly in equity
Net current tax credit recognised directly in equity
Net deferred tax charge recognised directly in retained earnings
At 1 May 2007
Profit (loss) for the year
Dividends paid
Share options fair value amount credited directly to equity
Defined benefit pension charge recognised directly in equity
Net deferred tax charge recognised directly in retained earnings
Cancellation of Ordinary shares (Note 26)
At 30 April 2008
Group
£000
1,627
(1,756)
–
1,425
628
1,924
29,221
(34,349)
11,192
(4,171)
3,817
Company
£000
–
–
(4,344)
4,344
–
–
–
–
–
–
–
Group
£000
Company
£000
–
40
40
–
40
40
Group
£000
181,984
54,483
(16,949)
(75)
445
1,084
(388)
220,584
61,334
(18,982)
3,340
(208)
(1,479)
(8,166)
256,423
Company
£000
92,914
11,241
(16,949)
(75)
–
1,084
(254)
87,961
(27,534)
(18,982)
3,340
–
(1,541)
(8,166)
35,078
62/63
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
35. BUSINESS COMBINATIONS
(a) Alquiservicios LSL S.A.
On 18 July 2007 the Group purchased the trade and fixed assets of Alquiservicios LSL S.A. (“Alquiservicios”) for a cash
consideration of €7,755,000.This transaction has been accounted for under the purchase method of accounting.
Net assets acquired:
Intangible assets
Property plant and equipment: vehicles for hire
Other property, plant and equipment
Deferred tax liabilities
Goodwill
Acquisition cost
Cash outflow in the year on acquisition of Alquiservicios
Book
value
£000
Fair value
adjustments
£000
–
4,435
22
–
4,457
550
–
–
(165)
385
Fair
value
£000
550
4,435
22
(165)
4,842
391
5,233
5,233
The goodwill arising is attributable to potential future economic benefits that it is anticipated will be derived from the assets.
The purchase of Alquiservicios has no material impact on the Group turnover or profit before taxation for the period from
18 July 2007 to the balance sheet date.
(b) GPS Body Repairs Limited
On 31 August 2007 the Group purchased 100% of the issued share capital of GPS Body Repairs Limited (“GPS”) for
a cash consideration of £286,000. This transaction has been accounted for under the purchase method of accounting.
Book
value
£000
Fair value
adjustments
£000
Fair
value
£000
Net assets acquired:
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Bank overdraft
Trade and other payables
Borrowings
Goodwill
Acquisition cost
Fair value of consideration:
Cash
Net bank overdraft acquired with subsidiary undertaking
Cash outflow in the year on acquisition of GPS
219
31
222
15
(21)
(173)
(216)
77
(15)
–
–
–
–
–
–
(15)
204
31
222
15
(21)
(173)
(216)
62
224
286
286
6
292
The goodwill arising is attributable to the fair value of the workforce in place at the date of acquisition and other potential future
economic benefits that it is anticipated will be derived from the business.
GPS contributed £704,000 of turnover and a loss before tax of £139,000 for the period between 31 August 2007 and the
balance sheet date.
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
35. BUSINESS COMBINATIONS (continued)
(c) Hampsons (Self Drive Hire) Limited
On 1 November 2007 the Group purchased 100% of the issued share capital of Hampsons (Self Drive Hire) Limited (“Hampsons”)
for a total consideration of £9,939,000, including deferred consideration of £519,000. This transaction has been accounted for
under the purchase method of accounting.
Net assets acquired:
Intangible assets
Property plant and equipment: vehicles for hire
Other property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Deferred tax liabilities
Goodwill
Acquisition cost
Fair value of consideration:
Deferred consideration
Cash
Total consideration
Cash consideration
Net cash acquired with subsidiary undertaking
Cash outflow in the year on acquisition of Hampsons
Book
value
£000
Fair value
adjustments
£000
–
13,373
297
112
2,842
996
(1,843)
(8,441)
(1,091)
6,245
3,607
–
–
–
–
–
–
–
(909)
2,698
Fair
value
£000
3,607
13,373
297
112
2,842
996
(1,843)
(8,441)
(2,000)
8,943
996
9,939
519
9,420
9,939
9,420
(996)
8,424
The goodwill arising is attributable to the fair value of the workforce in place at the date of acquisition and other potential future
economic benefits that it is anticipated will be derived from the business.
Hampsons contributed £5,487,000 of turnover and £283,000 profit before tax for the period between 1 November 2007
and the balance sheet date.
The deferred consideration of £519,000 was paid on 24 June 2008. There is no material difference between the carrying
value of the deferred consideration and its fair value as at the balance sheet date.
(d) Abington Vehicle Rentals Limited
On 30 November 2007, the Group purchased the trade and vehicles for hire of Abington Vehicle Rentals Limited (“Abington”)
for a total cash consideration of £1,311,000. The vehicles for hire had a book value and fair value of £1,311,000 and no
goodwill arose on the transaction.
The purchase of Abington has no material impact on the Group turnover or profit before taxation for the period from
30 November 2007 to the balance sheet date.
If the purchases of GPS and Hampsons had been completed on the first day of the year, Group revenues for the year would
have been £590,492,000 and Group profit before taxation would have been £79,849,000.
In all of the above business combinations, 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.
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
36. OPERATING LEASE ARRANGEMENTS
As lessee
Group
Minimum lease payments under operating leases recognised
in the income statement for the year
2008
£000
2007
£000
6,094
6,134
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
2008
£000
5,442
13,704
7,117
26,263
2007
£000
4,680
11,115
7,880
23,675
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 (2007 – ten) years and rentals are fixed for an average number of four
(2007 – 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.
37. SHARE BASED PAYMENTS
The Group’s and Company’s various share incentive plans are explained on pages 18 to 21.
The Group and Company recognised total expenses of £3,340,000 (2007 – £1,634,000) related to equity-settled payment
transactions in the year.
Further details regarding the plans are outlined below.
Northgate Share Option Scheme
At 1 May
Granted during the year
Exercised during the year
Forfeited during the year
Lapsed during the year
At 30 April
Exercisable at the end of the year
2008
2007
Weighted
Number
of share
average
options exercise price
£
Weighted
Number
of share
average
options exercise price
£
387,100
155,750
(41,500)
(81,724)
–
419,626
84,000
8.60
10.78
5.99
10.28
–
9.34
6.15
369,500
120,000
(93,400)
–
(9,000)
387,100
46,000
5.16
10.37
5.11
–
4.22
8.60
5.18
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 £8.47 (2007 – £10.68). The options outstanding at 30 April 2008 had a weighted average exercise price
of £9.34 and a weighted average remaining contractual life of 7.0 years. In the current year, options were granted in October 2007
when the aggregate of the estimated fair values of the options granted was £492,000. In the prior year, options were granted in
July 2006 when the aggregate of the estimated fair values of the options granted was £280,000.
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
37. SHARE BASED PAYMENTS (continued)
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
2008
2007
£10.90
£10.78
28.1%
6.7 years
5.0%
2.6%
£10.33
£10.37
26.9%
4.6 years
4.7%
2.9%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years.
Executive Incentive Scheme
No options have been granted since 24 January 2002 under this scheme.
At 1 May
Exercised during the year
Lapsed during the year
Forfeited during the year
At 30 April
Exercisable at the end of the year
2008
2007
Weighted
Number
average
of share
options exercise price
£
Weighted
Number
average
of share
options exercise price
£
371,742
(101,293)
(2,061)
–
268,388
254,700
4.89
4.94
4.90
–
4.87
4.85
739,958
(361,091)
–
(7,125)
371,742
333,492
4.90
4.92
–
4.20
4.89
4.91
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 £8.47 (2007 – £10.68). The options outstanding at 30 April 2008 had a weighted average exercise
price of £4.87, and a weighted average remaining contractual life of 1.6 years.
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
37. 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
Forfeited during the year
At 30 April
2008
Number of
2007
Number of
share options share options
179,867
101,068
(41,452)
(22,564)
160,353
31,050
(7,876)
(3,660)
216,919
179,867
38,320 (2007 – 3,031) options were exercisable at the end of the year.
The weighted average share price at the date of exercise of options in the current year was £10.35 (2007 – £10.76).
The options outstanding at 30 April 2008 had a weighted average remaining contractual life of 3.0 years. In the current year,
options were granted in July 2007. The aggregate of the estimated fair values of the options granted on this date is £957,000.
In the prior year, options were granted in July 2006. The aggregate of the estimated fair values of the options granted on this
date is £294,000.
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
2008
2007
£10.33
£nil
31.3%
3 years
4.3%
2.7%
£10.33
£nil
26.9%
3 years
4.7%
2.9%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years.
All Employee Share Scheme
The scheme has a 12 month Accumulation period. Partnership shares are purchased by the employee at the end of the
Accumulation period from the amount contributed by the employee during that period. The Company allocates an amount
of free Matching shares equivalent to the number of Partnership shares purchased. The vesting period for Matching shares
is three years.
Matching shares are forfeited if the employee either sells the related Partnership shares or leaves the Group before the three
years have elapsed.
Details of Matching shares which had not vested at 30 April were as follows:
At 1 May
Allocated during the year
Forfeited during the year
Vested during the year
At 30 April
2008
Number of
shares
2007
Number of
shares
160,002
79,490
(30,265)
(45,179)
187,287
57,242
(15,032)
(69,495)
164,048
160,002
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
37. SHARE BASED PAYMENTS (continued)
The share price at the date of vesting for Matching shares which vested during the year was £7.03 (2007 – £11.14). The non-
vested Matching shares outstanding at 30 April 2008 had a weighted average remaining period until vesting of 1.5 years. In
the current year, Matching shares were allocated in January 2008. The aggregate of the estimated fair values of the Matching
shares allocated on this date was £542,000. In the prior year, Matching shares were allocated in January 2007. The aggregate
of the estimated fair values of the Matching shares allocated on this date was £597,000.
The inputs into the Black-Scholes model are as follows:
Weighted average share price
Weighted average vesting price
Expected volatility
Expected life
Risk free rate
Expected dividends
2008
2007
£7.81
£nil
29.1%
5 years
4.3%
2.7%
£12.06
£nil
27.0%
5 years
5.2%
2.9%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years.
Performance Share Plan
All options granted under this scheme are nil cost options. The first grant of options under this scheme occurred in May 2006.
Details of the share options outstanding during the year are as follows:
At 1 May
Granted during the year
Forfeited during the year
At 30 April
2008
Number of
share
options
113,000
143,150
(13,332)
2007
Number of
share
options
–
134,000
(21,000)
242,818
113,000
No options were exercisable at the end of either year.
The options outstanding at 30 April 2008 had a weighted average remaining contractual life of 8.7 years. In the current year,
share options were granted in July 2007. The aggregate of the estimated fair values of the options granted on this date was
£1,442,000. In the prior year, options were granted in May 2006. The aggregate of the estimated fair values
of the options granted on this date was £1,330,000.
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
2008
2007
£10.90
£nil
28.1%
3 years
5.0%
2.6%
£10.83
£nil
25.5%
3 years
4.5%
2.9%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years.
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
38. RETIREMENT BENEFIT SCHEMES
During the year the Group operated two group personal pension plans and The Willhire Pension Scheme (“the Scheme”),
which includes both defined benefit and defined contribution sections. The total pension cost to the Group of all these
arrangements was £1,707,000 (2007 – £1,480,000) of which £1,698,000 (2007 – £1,459,000) related to the defined
contribution schemes.
The Scheme
The Scheme, which is established under Trust, is financed through separate Trustee administered funds managed by
independent professional fund managers on behalf of the Trustees.
During the prior year, the Scheme was closed to both new members and to future service accrual for existing members.
Contributions to the Scheme are based upon actuarial advice following the most recent actuarial valuation of the fund.
Actuarial valuations of the Scheme were performed as at 3 February 2006 and 30 April 2006 by a Fellow of the Institute
of Actuaries, representing Watson Wyatt Limited, and at 30 April 2007 and 30 April 2008 by a Fellow of the Institute of
Actuaries, representing JLT Benefit Solutions Limited.
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.
Discount rate
Inflation rate
Salary increases
Future pension increases
Amounts recognised as costs (income) in respect of the Scheme are as follows:
Service cost
Interest cost
Expected return on plan assets
Total pension charge
Valuation at
30 April 2008
%pa
Valuation at
30 April 2007
%pa
5.9
3.8
n/a
3.7
2008
£000
9
212
(179)
42
5.5
3.4
n/a
3.3
2007
(restated)
£000
21
234
(247)
8
The charge for service cost has been included in administrative expenses.
Actuarial gains and losses have been reported directly in equity, within retained earnings. The cumulative net amount of
actuarial gains reflected directly in equity since 3 February 2006 is £593,000 (2007 – £801,000 gain).
The actual return on the scheme assets was a gain of £3,000 (2007 – loss of £236,000). There are no reimbursement rights.
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
38. RETIREMENT BENEFIT SCHEMES (continued)
The amount included in the balance sheet arising from the Group’s obligations in respect of its defined retirement benefit
scheme is as follows:
Present value of defined benefit obligations
Fair value of plan assets
Liability recognised in the balance sheet
The net movements in the deficit were as follows:
At 1 May
Pension charge recognised in the income statement
Actuarial losses (gains)
Contributions
At 30 April
Movements in the present value of the defined benefit obligations were as follows:
At 1 May
Current service cost
Interest cost
Actuarial losses (gains)
Benefits paid
At 30 April
Movements in the fair value of Scheme assets were as follows:
At 1 May
Expected return on Scheme assets
Contributions
Benefits paid
Actuarial losses
At 30 April
2008
£000
(4,055)
3,502
(553)
2008
£000
555
42
208
(252)
553
2008
£000
3,900
9
212
32
(98)
2007
£000
(3,900)
3,345
(555)
2007
£000
1,444
8
(445)
(452)
555
2007
£000
4,595
21
234
(928)
(22)
4,055
3,900
2008
£000
3,345
179
252
(98)
(176)
2007
£000
3,151
247
452
(22)
(483)
3,502
3,345
The derivation of the overall expected return on assets reflects the actual asset 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 the bond returns and
the movement in market indices since the previous measurement date.
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
38. RETIREMENT BENEFIT SCHEMES (continued)
The analysis of the Scheme assets and the expected rate of return at the balance sheet date was as follows:
Equity instruments
Debt instruments
Other
30 April 2008
30 April 2007
Expected
return
%
Fair value
of assets
£000
Expected
return
%
Fair value
of assets
£000
5.9
3.9
3.9
2,094
1,054
354
3,502
6.0
4.0
4.0
2,046
1,137
162
3,345
The Scheme 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 Scheme.
During the current year, contributions have been made of £21,000 per month in accordance with latest actuarial advice
received. The estimated amount of contributions expected to be paid to the scheme during the year ended 30 April 2009
is £252,000.
The history of experience adjustments is supplied only for financial periods since the acquisition of the Scheme 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 Scheme assets
Deficit in the Scheme
Experience adjustments on Scheme obligations:
Amount
Percentage of Scheme obligations (%)
Experience adjustments on Scheme assets:
Amount
Percentage of Scheme assets (%)
Year ended
30 April 2008
£000
Year ended
30 April 2007
£000
Period ended
30 April 2006
£000
4,055
3,502
553
3,900
3,345
555
(185)
(5.0)%
738
19.0%
4,595
3,151
1,444
48
1.5%
(176)
(5.0)%
(483)
(14.0)%
493
10.7%
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
39. FINANCIAL INSTRUMENTS
The following disclosures and analysis relate to the Group’s financial instruments, as defined by IFRS 7 (Financial
Instruments: Disclosures).
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising
the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists
of debt, which includes the borrowings disclosed in Note 23, cash and cash equivalents and equity attributable to equity
holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in Notes 26 to 34.
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations
arise. Exchange rate exposures are managed within approved policy parameters as discussed in Notes 23 and 24.
The carrying amounts of the Group’s foreign currency denominated monetary liabilities at the reporting date are disclosed
in Note 23.
Foreign currency sensitivity analysis
The Group is exposed to movements in the exchange rate between Euro and Sterling and US Dollars and Sterling, where
Sterling is the functional currency of the Group. As explained in more detail below, identical key terms between US Dollar
denominated loan note liabilities and Sterling/US Dollar cross currency derivatives mean that the profit and loss and equity
of the Group is materially insensitive to fluctuations in the exchange rate between US Dollars and Sterling.
This means that the material sensitivity of the profit or loss and equity of the Group to exchange rate movements arises due
to fluctuations in the exchange rate between Euro and Sterling only.
The following tables detail the Group’s sensitivity to a €0.10 increase and decrease in the Euro/Sterling exchange rate. A €0.10
movement in the rate in either direction is management’s assessment of the reasonably possible change in foreign exchange
rates. The sensitivity analysis includes only any outstanding foreign currency denominated monetary items and adjusts their
translation at the period end for a €0.10 change in foreign currency rates.
2008
Total equity
2007
Total equity
As stated in
annual report
30 April 2008
£000
As would be
stated if
As would be
stated if
D0.10 increase D0.10 decrease
£000
£000
398,553
396,112
400,383
As stated in
annual report
30 April 2008
£000
As would be
stated if
As would be
stated if
D0.10 increase D0.10 decrease
£000
£000
362,431
363,275
360,950
There is no material impact on the income statement in either year.
Sterling/US Dollar Cross currency derivatives
As explained in Note 24, the Group has Sterling/US Dollar cross currency derivatives to manage its exposure to foreign
exchange movements between US Dollars, the denomination of loan note liabilities, and Sterling, the functional currency
of the Group. The movement in fair value of these derivatives is a function of both the Sterling/US Dollar exchange rate and
market interest rates prevailing in the United Kingdom and United States.
As a result of the key terms of the cross currency derivatives and the loan notes, against which a hedging relationship is
designated, being identical, any gains or losses on foreign exchange included in the fair value of the Sterling/US Dollar cross
currency swaps are transferred to the income statement and are exactly offset in the income statement by an equal and
opposite amount on retranslation of the US dollar loan notes to the closing rate prevailing at the balance sheet date, leaving
a net impact of £nil on the income statement for all Sterling/US Dollar exchange rates.
The net impact on the hedging reserve, arising from these particular derivatives, therefore represents only the gain or loss on
the interest rate element of the fair value of the derivatives, as explained further in Note 24. Consequently, any fluctuation in
the rate of the US dollar has no impact on either profit and loss or equity.
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
39. FINANCIAL INSTRUMENTS (continued)
Interest rate risk management
The Group is exposed to interest rate risk, as entities within the Group borrow funds at both fixed and floating interest rates.
The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings and by the
use of interest rate swap and collar contracts. Hedging activities are reviewed regularly to align with interest rate views and
defined risk appetite, ensuring optimal hedging strategies are applied, by either positioning the balance sheet or protecting
interest expense through different interest rate cycles.
The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management
section of this note.
Interest rate sensitivity analysis
The sensitivity analyses below have been determined on the exposure to interest rates for floating rate liabilities and related
derivatives. For the floating rate liabilities, the analysis is prepared on the basis of both the average liability outstanding over
the period and average rate applicable for the period. In all instances it is assumed that any derivatives designated in hedging
relationships are 100% effective.
A 0.5% increase or decrease has been used in the analyses and represents management’s best estimate of a reasonably
possible change in interest rate.
2008
Profit before taxation
Total equity
2007
Profit before taxation
Total equity
As stated in
annual report
£000
As would be
stated if
0.5% increase
£000
As would be
stated if
0.5% decrease
£000
79,492
398,553
77,314
402,717
80,976
394,058
As stated in
annual report
£000
As would be
stated if
0.5% increase
£000
As would be
stated if
0.5% decrease
£000
75,368
362,431
73,312
365,020
76,730
359,872
Interest rate swap contracts
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest
amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing
interest rates and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the
reporting date is determined by discounting the future cash flows using the curves at the reporting date and the credit risk
inherent in the contract and is disclosed below. The average interest rate is based on the outstanding balances at the end
of the financial year.
The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding
at the reporting date:
Outstanding receive
floating pay fixed
contracts
Sterling
Less than 1 year
1 to 2 years
Euro
Less than 1 year
1 to 2 years
2 to 5 years
Average contract
fixed interest rate
Notional principal
amount
Fair value
2008
%
4.34%
–
2.27%
–
4.38%
2007
%
2008
£000
5.73%
4.34%
–
2.27%
3.97%
55,000
–
118,523
–
217,291
2007
£000
20,000
55,000
–
102,430
51,215
2008
£000
142
–
688
–
(908)
2007
£000
(82)
953
–
2,428
541
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
39. FINANCIAL INSTRUMENTS (continued)
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate
liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity
requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing
facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and
liabilities. Included in Note 23 is a description of additional undrawn facilities that the Group has at its disposal to further reduce
liquidity risk.
Liquidity and interest risk tables
The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
can be required to pay. The table includes both interest and principal cash flows. All interest cash flows and the weighted
average effective interest rate have been calculated using interest rate conditions prevailing at the balance sheet date.
2008
Weighted average
effective interest
rate
Non-interest bearing
Finance lease liability
Fixed interest rate instruments
Variable interest rate instruments
0.00%
2.84%
5.70%
5.53%
2007
Weighted average
effective interest
rate
Non-interest bearing
Finance lease liability
Fixed interest rate instruments
Variable interest rate instruments
0.00%
4.31%
5.78%
4.61%
<1 year
£000
36,640
296
11,484
8,588
57,008
<1 year
£000
33,538
16,240
9,686
4,730
64,194
2nd year
£000
3-5 years
£000
–
67
11,484
689,435
700,986
–
–
64,847
120,481
185,328
2nd year
£000
3-5 years
£000
–
220
9,687
1,794
11,701
–
–
29,035
673,610
702,645
>5 years
£000
–
–
193,734
–
Total
£000
36,640
363
281,549
818,504
193,734
1,137,056
>5 years
£000
–
–
202,007
2,035
204,042
Total
£000
33,538
16,460
250,415
682,169
982,582
The following table details the Group’s liquidity analysis for its derivative financial instruments. It includes both liabilities and
assets to illustrate how the cashflows are matched in each period.
The table has been drawn up based on the undiscounted net cash inflows (outflows) on the derivative instruments that settle
on a net basis and the undiscounted gross cash inflows (outflows) on those derivatives that require gross settlement. When
the amount payable or receivable is not fixed, the amounts disclosed have been determined by reference to the floating rates
applicable at the balance sheet date, which have then been used to project future cash flows.
2008 (£000)
Liabilities
Net settled:
Interest rate swaps
Gross settled:
Cross currency derivatives
Assets
Net settled:
Interest rate swaps
Interest rate collars
Gross settled:
Cross currency derivatives
<1 year
2nd year
3-5 years
>5 years
Total
203
230
477
–
910
(12,651)
(12,448)
778
67
12,175
13,020
(12,651)
(100,764)
(174,447)
(300,513)
(12,421)
(100,287)
(174,447)
(299,603)
298
–
12,175
12,473
578
–
96,235
96,813
–
–
1,654
67
168,026
168,026
288,611
290,332
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
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NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
39. FINANCIAL INSTRUMENTS (continued)
39. FINANCIAL INSTRUMENTS (continued)
2007 (£000)
Liabilities
Net settled:
Interest rate swaps
Gross settled:
Cross currency derivatives
Assets
Net settled:
Interest rate swaps
Interest rate collars
Gross settled:
Cross currency derivatives
<1 year
2nd year
3-5 years
>5 years
Total
(138)
(27)
(2)
–
(167)
(8,954)
(9,092)
(8,954)
(8,981)
(26,861)
(183,401)
(228,170)
(26,863)
(183,401)
(228,337)
2,549
208
8,467
11,224
465
54
8,467
8,986
75
–
–
–
3,089
262
25,400
25,475
175,111
217,445
175,111
220,796
Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on applicable
yield curves derived from quoted interest rates.
The fair value of other non-derivative financial assets and financial liabilities are determined in accordance with generally
accepted pricing models based on discounted cash flow analysis.
Except as detailed in the following table, the carrying amounts of financial assets and financial liabilities recorded at amortised
cost in the financial statements approximate their fair values or, in the case of interest rate swaps and collars and cross
currency derivatives, are held at fair value:
Financial liabilities
Loan notes
Carrying amount
Fair value
2008
£000
2007
£000
2008
£000
2007
£000
201,142
168,628
267,558
234,363
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
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.
Trade Receivables
Trade Receivables
Allowance for doubtful debt accounts
2008
£000
178,014
(6,126)
2007
£000
147,652
(5,191)
171,888
142,461
Ageing of trade accounts not impaired
Not overdue
Past due not more than two months
Past due more than two months but not more than four months
Past due more than four months but not more than six months
Past due more than six months but not more than one year
2008
£000
2007
£000
148,227
20,073
2,223
188
1,177
117,460
22,422
1,040
510
1,029
171,888
142,461
Before accepting any new customers, the Group will perform credit analysis on any new customers to assess the credit risk
on an individual basis. This ensures the Group will only deal with creditworthy customers therefore reducing the risk of financial
loss from defaults. Of the trade receivables balance at the end of the year, approximately £2,057,000 (2007 – £1,997,000) is
due from the Group’s largest customer. There are no other customers who represent more than 5 per cent of the total balance
of trade receivables.
The Group has no significant concentration of credit risk as trade receivables consist of a large number of customers, spread
across diverse industries and geographical areas in the UK and Spain.
Included in the Group’s trade receivable balance are debtors with a carrying amount of £23,661,000 (2007 – £25,001,000)
which are past due at the reporting date for which the Group has not provided as there has not been a significant change
in credit quality and the amounts are still considered recoverable.
Movement in the allowance for doubtful debts
Balance at the beginning of year
Impairment losses recognised
Amounts written off as uncollectible
Impaired losses reversed
Exchange differences
At 30 April
2008
£000
5,191
4,805
(2,736)
(1,573)
439
6,126
2007
£000
3,629
5,656
(1,944)
(2,137)
(13)
5,191
In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable
from the date credit was initially granted up to the reporting date. The concentration of creditor risk is limited due to the customer
base being large and mainly unrelated. Accordingly, the Directors believe that there is no further credit provision required in
excess of the allowance for doubtful debts.
Included in the allowance for doubtful debts are trade receivables which have been placed under liquidation of £720,000
(2007 – £490,000).
Ageing of impaired trade receivables
Not overdue
Past due not more than two months
Past due more than two months but not more than four months
Past due more than four months but not more than six months
Past due more than six months but not more than one year
2008
£000
1,089
331
1,289
536
2,881
6,126
2007
£000
954
181
1,854
57
2,145
5,191
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
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Northgate AR&A 2008 Back AW:x69614_Rhouse_back_p2_cg 23/7/08 16:28 Page 51
NOTESTOTHE
ACCOUNTS
FOR THE YEAR ENDED 30 APRIL 2008
40. RELATED PARTY TRANSACTIONS
Transactions with subsidiary undertakings
Transactions between the Company and its subsidiary undertakings, which are related parties, are as follows:
Net interest (payable) receivable
Management charges
2008
£000
(459)
300
(159)
2007
£000
11,327
300
11,627
Balances with subsidiary undertakings at the balance sheet date are shown in Notes 20 and 22.
Remuneration of key management personnel
In the current and prior year, the Directors of Northgate plc are determined to be the key management personnel of the Group
as, in the opinion of the Directors, only the Directors of Northgate plc have the power to determine the main financial and
operating policies of the Group.
In respect of the compensation of key management personnel, the short-term employee benefits, post-employment (pension)
benefits, termination benefits and details of share options granted are set out in the audited part of the Remuneration Report
on pages 17 to 21. The fair value charged to the consolidated income statement in respect of equity-settled payment
transactions with the Directors is £536,000 (2007 – £443,000). There are no other long-term benefits accruing
to key management personnel, other than as set out in the audited part of the Remuneration Report.
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.
Income statement
Revenue
578,462
526,465
372,609
339,382
355,624
IFRS
2008
£000
IFRS
2007
£000
IFRS
2006
£000
IFRS
2005
£000
UK GAAP
2004
£000
Profit from operations
Share of joint venture profit from operations
118,206
–
107,056
–
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
Balance sheet
118,206
107,056
(38,714)
–
–
79,492
(18,158)
61,334
86.7p
18,982
28.0p
(31,688)
–
–
75,368
(20,885)
54,483
76.1p
16,949
25.5p
72,598
–
72,598
(20,078)
4,964
(1,422)
56,062
(15,468)
40,594
61.1p
13,437
23.0p
76,237
–
76,237
(21,249)
–
–
54,988
(15,757)
39,231
60.7p
11,916
20.0p
55,605
4,342
59,947
(15,355)
–
–
44,592
(13,303)
31,289
50.7p
11,064
17.6p
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
IFRS
2008
£000
IFRS
2007
£000
IFRS
2006
£000
IFRS
2005
£000
UK GAAP
2004
£000
1,200,379
139,600
30,566
(971,992)
1,030,136
119,625
21,941
(809,271)
798,777
42,582
14,705
(535,775)
587,008
40,502
11,464
(413,943)
419,136
(15,929)
–
(214,900)
398,553
362,431
320,289
225,031
188,307
3,527
67,972
327,054
3,560
67,230
291,641
3,538
64,998
251,753
3,209
62,544
159,278
3,702
61,829
122,776
398,553
362,431
320,289
225,031
188,307
Net asset value per Ordinary share
564p
509p
453p
351p
293p
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
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Northgate AR&A 2008 Back AW:x69614_Rhouse_back_p2_cg 23/7/08 16:28 Page 53
NOTICE OF ANNUAL
GENERAL MEETING
NOTICE OF ANNUAL
GENERAL MEETING
(d)
(e)
this authority shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2009 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.
13. That the Regulations contained in the document submitted to the Meeting marked ‘A’ and signed by the Chairman of the
Meeting for the purposes of identification be and the same are hereby adopted as the Articles of Association of the Company
to the exclusion of and in substitution for all existing Articles of Association of the Company.
14. That the rules of the Executive Performance Share Plan (“the Plan”), in the document submitted to the Meeting marked ‘B’
and signed by the Chairman of the Meeting for the purposes of identification, be and are hereby approved and the
Directors be authorised to make such modifications to the Plan as they may consider appropriate to take account of the
requirements of best practice and for the implementation of the Plan and to adopt the Plan as so modified and to do all
such other acts and things as they may consider appropriate to implement the Plan.
The Directors of the Company consider that all the proposals to be considered at the Annual General Meeting are in the best
interests of its shareholders as a whole and they recommend that you vote in favour of them.
By Order of the Board
D Henderson
Secretary
30 June 2008
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 14 September
2008 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.
THIS NOTICE OF ANNUAL GENERAL MEETING IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you have
any doubt as to the action you should take, you are recommended to seek your own personal financial advice from your
stockbroker, bank manager, solicitor, accountant or other financial adviser authorised under the Financial Services and Markets
Act 2000. If you have sold or otherwise transferred all your ordinary shares in Northgate plc, please send this document,
together with the accompanying documents to the purchaser or transferee, or to the stockbroker, bank or other agent through
whom the sale or transfer was effected for transmission to the purchaser or transferee.
Notice is hereby given that the one hundred and tenth Annual General Meeting of Northgate plc will be held at Norflex House,
Allington Way, Darlington at 11.30 am on 16 September 2008 for the following purposes:
1. To receive and adopt the Directors’ report and audited accounts of the Company for the year ended 30 April 2008.
2. To declare a final dividend of 16.5p per Ordinary share.
3. To approve the Remuneration Report for the financial year ended 30 April 2008 set out on pages 16 to 21 of the 2008
Annual Report and Accounts.
4. To re-appoint Deloitte & Touche LLP as auditors of the Company.
5. To authorise the Audit Committee to determine the remuneration of the auditors.
6. To re-elect Mr A J Allner as a Director.
7. To re-elect Mr R L Contreras as a Director.
8. To re-elect Mr T Brown as a Director.
9. To re-elect Mr A T Noble as a Director.
As special business to consider and, if thought fit, to pass the following resolutions: numbers 10 and 14 are to be proposed
as Ordinary Resolutions and numbers 11, 12 and 13 as Special Resolutions:
10. That the Directors be and they are hereby generally and unconditionally authorised in accordance with Section 80 of the
Companies Act 1985 to exercise all the powers of the Company to allot relevant securities (within the meaning of the said
Section 80) up to an aggregate nominal amount of £722,597.75 during the period commencing on the date of the passing
of this Resolution and expiring at the conclusion of the Annual General Meeting of the Company to be held in 2009 but so
that this authority shall allow the Company to make offers or agreements before the expiry of this authority which would
or might require relevant securities to be allotted after such expiry and notwithstanding such expiry the Directors may allot
relevant securities in pursuance of such offers or agreements.
11. That, subject to the passing of Resolution 10, 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 Resolution 10 as if Section 89(1) of the Act
did not apply to any such allotment, provided that this power shall be limited to:
(a)
(b)
(c)
the allotment of equity securities in connection with an offer of securities, open for acceptance for a period fixed by the
Directors, by way of rights to holders of Ordinary shares and such other equity securities of the Company as the Directors
may determine on the register on a fixed record date in proportion to their respective holdings of such securities or in
accordance with the rights attached thereto (but subject to such exclusions or other arrangements as the Directors may
deem necessary or expedient to deal with fractional entitlements that would otherwise arise or with legal or practical
problems under the laws of, or the requirements of, any recognised regulatory body or any stock exchange in any territory
or otherwise howsoever);
the allotment of equity securities in connection with any employees’ share scheme approved by the members in general
meeting; and
the allotment (otherwise than pursuant to sub-paragraphs (a) and (b) above) of equity securities up to an aggregate
nominal amount of £175,000.
And shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2009 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.
12. 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)
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;
NORTHGATE PLC ANNUAL REPORT & ACCOUNTS 2008
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SUMMARY OF THE PRINCIPAL
TERMS OF THE EXECUTIVE
PERFORMANCE SHARE PLAN
Operation
The Remuneration Committee of the Board of Directors of the Company (“the Committee”) will supervise the operation of
the Executive Performance Share Plan (“Executive PSP”).
Eligibility
Any employee (including an executive Director) of the Company and its subsidiaries will be eligible to participate in the
Executive PSP at the discretion of the Committee. It is currently anticipated that only the Company’s most senior executives
will be considered for participation in the Executive PSP.
Grant of awards
The Committee may grant awards to acquire Ordinary shares in the Company (“Shares”) within six weeks following the
Company’s announcement of its results for any period. The Committee may also grant awards within six weeks of shareholder
approval of the Executive PSP or at any other time when the Committee considers there are exceptional circumstances which
justify the granting of awards. It is intended that the first awards will be made shortly following the adoption of the Executive PSP.
The Committee may grant awards as conditional shares, a nil (or nominal) cost option with a short exercise period or as
forfeitable shares. The Committee may also decide to grant cash-based awards of an equivalent value to share-based awards
or to satisfy share-based awards in cash.
An award may not be granted more than 10 years after shareholder approval of the Executive PSP.
No payment is required for the grant of an award. Awards are not transferable, except on death. Awards are not pensionable.
Individual limit
An employee may not receive awards in any financial year over Shares having a market value in excess of 150% of his annual
base salary in that financial year.
of an employee’s annual base salary.
In exceptional circumstances, such as recruitment or retention, this limit is increased to 250%
The current intention is that the initial grant of awards to executive Directors, to be made shortly following the Annual General
Meeting, will be over Shares having a market value of 100% of salary.
Performance conditions
The vesting of awards will be subject to performance conditions, which will be set by the Committee.
The performance conditions applying to the initial grants made to executive Directors under the Executive PSP will measure
the Company’s earnings per share (“EPS”) and return on capital employed (“ROCE”) performance over a fixed three-year
performance period (being three consecutive financial years of the Company, commencing with the Company’s 2008/09
financial year).
The vesting of two thirds of the shares under such initial awards (“Part A”) will be dependent on the EPS element of the
performance conditions, with the following vesting schedule proposed:
EPS growth over the performance period
Vesting % of Part A
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