Northgate plc
Annual report and
accounts 2011
Delivering effective fleet
solutions to businesses across
the UK and Spain.
Contents
Review
1 Highlights of the year
2 Chairman’s statement
4 Group at a glance
5 Key performance indicators
6 One Northgate
11 Operational review
14 Financial review
18 Principal risks and uncertainties
20 Board of Directors
Corporate governance
22 Report of the Directors
25 Remuneration report
30 Report of the audit and risk committee
32 Corporate governance
34 Health & safety and environment
35 Directors’ responsibilities
Accounts
36 Independent auditor’s report to the
members of Northgate plc
37 Consolidated income statement
38 Statements of comprehensive income
39 Balance sheets
40 Cash flow statements
41 Notes to the cash flow statements
42 Statements of changes in equity
43 Notes to the accounts
85 Five year financial summary
86 Notice of Annual General Meeting
92 Shareholder information
Who we are
UK: Vehicle fleet
Northgate plc is the leading light
commercial vehicle hire business in
both the UK and Spain by fleet size
and has been operating in the sector
since 1981. Our core business is the
hire of vehicles to other businesses
on variable length contracts, giving
customers the flexibility to manage
their vehicle fleet without a
long term commitment.
What we do
The business in the UK and Ireland
operates from 62 sites with a
fleet of 61,200 vehicles. In addition,
we sell former rental vehicles to
both retail and trade customers.
For customers wishing to retain
ownership, we offer a complete
fleet management solution.
We also offer an increasing range
of services and products such as
vehicle monitoring and parts
procurement, to help customers
manage their fleets effectively.
In Spain, we operate as Northgate
España following the merger of
our two operating subsidiaries in
January 2011. With 25 branches
and a combined fleet of 43,500
vehicles we are the market leaders
in light commercial vehicle hire.
2011 61,200
2010 60,900
2009 62,900
2008 68,600
2007 65,300
Spain: Vehicle fleet
2011 43,500
2010 48,900
2009 60,400
2008 62,750
2007 55,000
Group operating profit1 £m
2011 105.6
2010 82.8
2009 71.8
2008 121.8
2007 111.0
Profit before tax2 £m
2011 53.8
2010 36.5
2009 27.5
2008 83.1
2007 79.3
Highlights of the year
Operational highlights
Underlying financial highlights
Statutory financial highlights
Average utilisation
• UK 90% (2010 – 90%8)
• Spain 91% (2010 – 88%)
Underlying pricing improvement
• UK 4%
• Spain 2%
Restructuring of UK business
progressing to plan
Merger of the two Spanish
operating subsidiaries into
Northgate España
Group operating profit1
Profit from operations
+27.6%
2011: £105.6m
2010: £82.8m
+16.1%
2011: £82.6m
2010: £71.1m
Profit before taxation2
Profit before taxation
+47.4%
2011: £53.8m
2010: £36.5m
+176.0%
2011: £26.5m
2010: £9.6m
Basic earnings per share3
Basic earnings per share
+8.2%
2011: 29.0p
2010: 26.8p
Net debt4
-£68.4m
2011: £529.9m
2010: £598.3m
-4.3%
2011: 22.1p
2010: 23.1p
Net debt
-£86.0m
2011: 529.1m
2010: 615.1m
Return on capital employed7
Profit for the year
+3.5%
2011: 11.9%
2010: 8.4%
+20.7%
2011: £29.4m
2010: £24.4m
1 Highlights of the year
Northgate plc annual report and accounts 2011
For footnote references see page 17.
Chairman’s statement “ Despite the economic downturn the Group has retained a strong,
market leading position in both the UK and Spain, and has delivered
earnings growth in line with the Board’s expectations. Underlying
cash generation in 2011 was £99m leaving net debt at £530m, which
we expect to fall further in 2012. This, combined with the debt
refinancing completed during the year, leaves the Group with an
appropriate and robust capital structure.”
We now have a strong management
team in Spain and are developing our
team in the UK by a mixture of internal
promotion and external recruitment where
necessary. This has stabilised the business.
Management in both countries are now
working effectively to maximise returns.
In the past few years sales have grown
as a result of chasing volume at lower prices.
We have ceased this practice and as a
result we have lost some customers. We are
seeking to replace this business with sales
to customers who are attracted to our
flexible renting model.
In both the UK and Spain our market is
the flexible renting of vehicles. As we get
improved data we will be better able to
judge the size of the opportunity that exists
for future expansion.
UK
Our underlying operating margin11
increased to 22.0% in the year, compared
to 18.0% in 2010 and utilisation rates have
remained in line with targeted levels at 90%
(2010 – 90%8). The increase in operating
margin has been achieved through
our actions aimed at improving operating
efficiency, increasing hire rates and the
continued strength in the residual prices
for used vehicles.
During the year, the model of 20 separate
companies with their own brands and
management structure was initially replaced
with 12 business areas operating under one
Northgate Vehicle Hire brand. In line with
original plans, the 12 areas were further
reduced to seven regions in May 2011
providing the platform for a consistent
and improved customer service and
operational efficiencies.
The rebranding exercise was completed
successfully providing the UK with a
nationally recognised single brand. Brand
development will continue to ensure that
we are recognised as the market leader in
light commercial vehicle hire in the UK.
Our main rebranding focus has been vehicle
livery on our own fleet, with c.15,000
vehicles now liveried in the Northgate
Vehicle Hire branding.
I am pleased to report that the new
IT system has finally been successfully
implemented across the UK. As envisaged
this is already providing enhanced
information about the profitability of
our activities, processes and services.
Bob Mackenzie
Chairman
Against a background of continuing
economic uncertainty in the countries in
which we operate, I am pleased to report
that the Group has made further progress
with the restructuring of our UK and
Spanish operations that commenced in
summer 2010.
The focus of the Group will be to maintain
utilisation in excess of 90%, improve
operating efficiency to reduce costs
and concentrate on increasing the return
on capital employed (ROCE) above
levels previously achieved. Against all
of these measures we have delivered
improvements in the past year.
The Group’s financial results for the year
ended 30 April 2011 are summarised
as follows:
• Underlying profit before tax2 increased
by 47% to £53.8m (2010 – £36.5m);
• Underlying basic earnings per share3
of 29.0p (2010 – 26.8p), based on
shares of 133 million (2010 – 105
million);
• Net debt4 reduced by £68.4m to
£529.9m;
• ROCE7 11.9% (2010 – 8.4%); and
• Statutory profit before tax increased
to £26.5m (2010 – £9.6m).
The successful refinancing in April 2011
was another milestone in the Group’s
progress as it was able to access new
capital and secures its financial base for
the medium term. At 30 April 2011 we
had £225m headroom on our committed
debt facilities of £781m9. Net debt to
EBITDA6 has come down to 1.7x (2010 –
2.0x) and all covenant measures improved
over the year as a result of £99m of
underlying cash generation10. Net debt
was reduced by £68m during the year,
as the Group continued to strengthen
its balance sheet and position itself
for any sustained improvement in
market conditions.
2 Chairman’s statement
Northgate plc annual report and accounts 2011
A number of significant initiatives have
commenced during the year, which include:
Improving the operational efficiency and
•
productivity of our 53 workshops;
• Driver logistics management – planning
and control of the collection and delivery
of vehicles for customers. We used to
employ delivery drivers and additional
agency drivers to deliver vehicles all over
the country, however a customer will
now receive a vehicle from the nearest
depot with availability;
•
• Simplifying and reducing the costs of
internal administration and finance
through centralisation to be completed
early in the 2012 calendar year;
Improved sales and operational
planning, reducing vehicle holding costs
and increasing sales opportunities;
• Restructuring our commercial sales
organisation to improve both our
national and SME sales with a nationally
managed sales force; and
Increasing staff training and development
across the whole organisation.
•
This fundamental reorganisation of the
UK business, together with the enhanced
information about our activities, will enable
us to make sensible informed decisions
about pricing and availability thus improving
our offering to customers and increasing
our operating margin.
In addition to the £10m annualised cost
savings targeted by April 2011, the above
plans will result in a further annualised
improvement to operating profit of over
£5m from April 2012. Of these additional
£5m annualised cost savings, we will incur
total implementation costs of c.£3m in
the year ending 30 April 2012.
Spain
Our Spanish business continues to operate
in an extremely difficult and uncertain
environment. This is particularly the case in
the construction sector. One of the major
challenges our business has faced in Spain is
the reliance on this sector, and I am pleased
to report that we have reduced our reliance
on the construction sector from 55% in
2010 to 37% in 2011, which was mainly
achieved through compensating increases
in the wholesale and retail distribution,
and electrical, plumbing and equipment
maintenance service sectors.
Our underlying operating margin12 increased
to 18.0% in the year (2010 – 12.7%). In
Spain, we have significantly lower margins
compared to the UK, as we incur c.€14m
of vehicle insurance costs, which are borne
by the company and not the customer. In
the longer term, hire rates will need to
improve to recover these costs.
In times of uncertainty the importance
of strong fleet management becomes
imperative and for the first time under
our ownership the Spanish business has
achieved average utilisation for the year of
91% (2010 – 88%). Ongoing investment
made in our used vehicle disposal capability
has enabled the Spanish business to
dispose of 19,000 vehicles at increasing
residual values.
Debtor management continues to be an
area of focus, specifically large construction
debtors as government investment
programmes continue to reduce. In the
year ended 30 April 2011 the bad debt
charge at €4m was €6m less than in the year
to 30 April 2010.
From 1 January 2011, the Spanish business
was merged, with the former Fualsa and
Record businesses trading under the
Northgate brand. It has been a complex
task as there was much overlap between
the two brands at very different prices.
This has strengthened our position with
customers and provides annualised benefits
of approximately €4m from January 2011.
One-off cash costs associated with this
merger totalling €3m were incurred in the
year. Further non-cash write downs of
non-current assets of €15m have also been
recognised in the current year. These
comprise €7m write down of certain
intangible assets recognised on acquisition
and €8m of property write downs.
Refinancing
Current trading and outlook
Despite the economic downturn the
Group has retained a strong, market
leading position in both the UK and Spain,
and has delivered earnings growth in line
with the Board’s expectations. Underlying
cash generation in 2011 was £99m10
leaving net debt at £530m4, which we
expect to fall further in 2012. This,
combined with the debt refinancing
completed during the year, leaves the
Group with an appropriate and robust
capital structure.
We enter the new financial year with
a clear programme for operational
improvement. Our focus will remain on
improving returns and further progress
is planned in the coming year through
hire rate improvement, efficient fleet
management, further cost reductions
and cash generation.
The Group has begun the new financial
year in line with the Board’s expectations,
and the Board is confident the Group is
well placed to continue to deliver
significant value to shareholders.
Bob Mackenzie
Chairman
During the year the Group initiated
discussions with all its lenders and private
placement noteholders leading to
a successful renegotiation of its
borrowing facilities.
As previously announced the refinancing
comprises three elements:
• A new eight year £100m term loan
facility provided by M&G UK Companies
Financing Fund (‘M&G loan’), repayable
in three equal instalments in October
2017, April 2018 and April 2019;
• A committed bank facility with an
extended maturity of September 2014,
initially £468m in size; and
• The Group’s existing loan notes (currently
amounting to £170m equivalent at fixed
exchange rates) will remain invested until
their original maturity dates, which are
between November 2012 and December
2016, and at their existing coupon rates.
These facilities contribute to total committed
facilities of the Group of £781m providing
headroom9 of £225m at 30 April 2011.
Employees
The Group’s employees experienced a
year of considerable change as a result
of the need to reorganise both the UK and
Spanish businesses. Our ongoing recovery
continues to be as a result of their
dedication, hard work and loyalty through
this time of upheaval and economic
uncertainty. I would like to thank them
on behalf of the Board.
Dividend
The Board has again given careful
consideration to paying a dividend and,
on balance, has decided that it is not
yet prudent to pay a dividend. The
re-introduction of a dividend will
continue to be reviewed going forward.
Board Changes
On 19 May 2011 Chris Muir was appointed
Group Finance Director. His appointment
was made following an extensive search
process involving internal and external
candidates. He has an extensive working
knowledge of the business and has worked
for Northgate in a wide range of finance
positions demonstrating that he has
the capability to be an outstanding
finance director.
3 Chairman’s statement
Northgate plc annual report and accounts 2011
For footnote references see page 17.
Group at a glance
Revenue (excluding
vehicle sales)
Operating profit1
Operating margin11, 12
UK
2011 £333.9m
2010 £328.2m
2011 £73.6m
2010 £59.0m
2011 22.0%
2010 18.0%
Number of employees (closing)
2011 2,073
Closing fleet
Vehicle sales
2010 2,122
2011 61,200
2010 60,900
Spain
2011 £203.4m
2010 £235.5m
2011 £36.6m
2010 £30.0m
2011 18.0%
2010 12.7%
2011 936
2010 974
2011 43,500
2010 48,900
18,900
22,700
19,000
19,800
2011: £103m
2010: £114m
2011: £75m
2010: £72m
Vehicle purchases
18,900
18,800
13,400
9,100
2011: £201m
2010: £211m
2011: £134m
2010: £99m
2011 90%
2010 90%8
62
2011 91%
2010 88%
25
Medium vans: 40%
Small vans: 33%
Large commercial
vehicles: 13%
Cars: 10%
Buses, 4x4 and other
specialist vehicles: 4%
Ford: 38%
Mercedes: 20%
Volkswagen: 15%
Peugeot: 11%
Vauxhall: 8%
Others: 8%
Small vans: 39%
Cars: 35%
Large vans: 11%
4x4: 11%
Large commercial
and other: 4%
Peugoet: 24%
Citroen: 21%
Ford: 15%
Opel: 9%
Seat: 8%
Others: 23%
Construction: 15%
Other sectors: 85%
Construction: 37%
Other sectors: 63%
Corporate fleets
(>100): 41%
Small and medium
fleets (5 – 100): 47%
Micro-fleets (<5): 12%
Corporate fleets
(>100): 32%
Small and medium
fleets (5 – 100): 54%
Micro-fleets (<5): 14%
Average utilisation
Locations
Fleet mix
Fleet by manufacturer
Reliance on
construction customers
Customers by fleet size
For footnote references see page 17.
Operating profit above excludes corporate costs.
The movement in vehicle sales inventory is not
included in the above extracts of fleet numbers,
which would be required in order to reconcile
the movement in closing fleet. Vehicle sales
and purchases are stated on an accruals basis.
4 Group at a glance
Northgate plc annual report and accounts 2011
Key performance
indicators
“ The focus of the Group is to maintain utilisation
in excess of 90%, improve operating efficiency
to reduce costs and concentrate on increasing
the return on capital employed above levels
previously achieved.”
Target
The minimum target for both
segments is to maintain utilisation
above 90%, which is currently
being achieved.
The new IT system implemented in
the UK is providing improved and
more timely information about
utilisations, therefore a revised target
of 91% has been set going forward.
Minimum hire rate thresholds have
been set for new vehicles. Further rate
increases are targeted in the UK and
Spain through improved sales analysis
to eliminate low margin customers,
and improved recovery on recharging
of costs such as collection, delivery
and damage recovery.
The overall fleet size in the UK
and Spain is expected to remain
relatively stable in the short term
with focus remaining on maximising
utilisations and hire rates. Further
holding cost savings are targeted
through managing the mix of
vehicles purchased through each
manufacturer and maximising
disposals through higher margin
retail and semi-retail channels.
Each KPI has been targeted for
improvement to contribute to an
overall increase in ROCE of the Group.
Group ROCE is targeted to increase
above levels previously achieved.
The target is to maximise shareholder
value by increasing EPS in the
short term alongside longer term
return on equity.
Utilisation
Utilisation needs to be maintained
at a high level in order to maximise
return on capital employed whilst
holding enough vehicles to meet the
flexible demands of our customers.
Performance
UK
Average utilisation has been
maintained at the target rate of 90%.
Spain
Average utilisation has successfully
improved to 91% from 88% in the
prior year, exceeding the targeted
rate of 90%.
Hire rate
UK
Hire rates have improved by 2% across
the year, with an underlying increase
of 4% adjusted for the lightening of
fleet mix in the year.
Spain
Average rates have improved by 2%
across the year, which has been
achieved through a combination of
strong pricing controls on new
vehicles and targeted price increases
with existing customers.
The level of vehicle purchases and
sales is controlled in order to manage
fleet size and ageing. Overall
holding costs are minimised through
managing the mix and volume of
purchases from each manufacturer
and by improving the effectiveness
of vehicle sales channels.
The Group had a closing fleet of
61,200 vehicles in the UK and 43,500
vehicles in Spain.
ROCE is maximised through a
combination of managing utilisation,
hire rates, vehicle holding and
other costs.
Group ROCE7 was 11.9% in 2011
compared to 8.4% in the prior year.
Basic EPS3 increased to 29.0p from
26.8p in the prior year.
Earnings of £38.5m were 36%
higher than in the previous year.
The weighted average number of
shares was 133m, 28m higher than
the previous year which reflects the
full year impact of the equity
raising and rights issue in the
prior year.
The hire rate achieved is a key
contributor to return on capital
employed. Hire rates need to reflect
the level of flexibility and service
offered to our customers.
Fleet management
The size and age of the fleet needs
to be managed in order to maximise
utilisations and minimise the overall
holding cost of vehicles.
Return on capital
employed (ROCE)
In a capital intensive business,
ROCE is a more important measure of
performance than profitability alone,
as low margin business returns low
value to shareholders.
Earnings per share (EPS)
Basic EPS is considered to be a key
short term measure of performance
used by shareholders.
For footnote references see page 17.
5 Key performance indicators
Northgate plc annual report and accounts 2011
One Northgate
6 One Northgate
Northgate plc annual report and accounts 2011
The restructure of the UK and Spanish
business puts us in a better position to take
advantage of opportunities for future growth,
operate more efficiently and deliver high
levels of customer service.
7 One Northgate
Northgate plc annual report and accounts 2011
UK
Delivering on better
opportunities
A restructured and nationally
managed sales force has been
established. Taken together with
a more detailed analysis of our
marketplace, we are better positioned
to take advantage of profitable
opportunities in 2012. Emphasis will
be placed on key growth industries
such as telecoms, and public sector
where our relative penetration
is low but the propensity for our
product is high.
Improving shareholder value
remains central to everything we do
and the best way of achieving this
is to position our product where it
is aligned to need rather than price.
Identifying and developing new
markets, targeting SME’s and
marketing our complete fleet
solutions will enable us to deliver
whole-life cost benefits to customers
rather than simply offering them
the cheapest rate, which will create
a more sustainable and profitable
portfolio going forward.
8 One Northgate
Northgate plc annual report and accounts 2011
Centres of excellence
Leveraging from the new IT
platform, we will centralise vehicle
administration and create a financial
shared services centre, which will
simplify operations, reduce costs
and improve the overall operational
efficiency of the business. Reduced
paperwork and more focused and
timely information will improve
business decision making.
Enhanced customer experience
In 2011, we conducted 4,200 training
days for over 700 colleagues.
Investment will continue in this area
to ensure that we maintain our
position as a ‘best in class’ support
services provider. The IT and business
blueprint training, which has already
rolled out across the UK, will be
enhanced in 2012. Our long standing
commercial apprenticeship scheme
and customer experience development
project will ensure that we deliver
service efficiently and effectively
to all who engage with us.
Training days provided in 2011
4,200
The awareness of the Northgate brand is now well
established as the most recognisable commercial
vehicle hire brand in the UK. This provides a platform
for the Company to continue to make progress in
achieving its objectives.
The power of the dial
We will continue to promote and
develop our branding strategy in
2012 through investment in web and
other communications, and have a
target of 33,000 vehicles to be liveried
by 30 April 2012. The increased
awareness of the Northgate dial is
enhancing our position as the market
leader and will help us to deliver our
commercial strategy going forward.
Vehicles to be liveried by
April 2012
33,000
9 One Northgate
Northgate plc annual report and accounts 2011
Technology driving improvement
In 2012 we will maintain our
commitment to improve the
customer experience through further
investment in infrastructure and
facilities. These improvements will
build on initiatives already undertaken
in 2011 following consolidation
of the regions. With the help of
new field technologies such as
PDAs and workshop touch screens,
delivery mileage will be minimised
and workshop productivity will
be improved.
Efficient and effective
fleet management
Having vehicles in the right place
at the right time is critical. In 2012,
sales and operational planning will
be fully integrated. Through the
implementation of a new Customer
Relationship Management system,
we will be able to effectively measure
the forward pipeline of our UK
business in order to strategically plan
acquisition and disposal of our fleet.
We will plan and schedule where
best to place our non-utilised assets,
creating greater vehicle availability
and managing our customers’
requirements more efficiently and
effectively. In 2011 we completed
the redistribution of 6,500 vehicles
with a further 8,000 to 10,000
vehicles planned for 2012.
Vehicles redistributed to better
meet customer requirements
6,500
From January 2011 the Spanish business
was merged, with the former Fualsa and
Record businesses now trading under the
Northgate brand.
Better network coverage
The previous customers of Fualsa
and Record were serviced separately
by 15 and 17 branches respectively.
The consolidation of the network
from 32 to 25 sites has enabled us to
maximise operational efficiency whilst
delivering improved geographical
coverage to our customers.
The improved network coverage
has enabled 1,000 vehicles to be
redeployed across the country,
creating greater vehicle availability
and enabling us to manage customer
requirements more efficiently
and effectively.
Efficient and effective
operations
The merger has enabled further
centralisation of administrative and
support functions, which commenced
in 2009 when a single head office
was established.
The existing ERP system has enabled
information from the former
businesses to be consolidated
into one single IT platform, which
has facilitated the roll out of
standardised policies and procedures
to all employees.
This shared information has also
been leveraged upon by the
commercial sales team to identify
further opportunities going forward.
Vehicles redeployed, creating
greater vehicle availability for
customers
1,000
Spain
Improving the customer
experience
Prior to the merger there was
significant customer overlap between
Fualsa and Record. Consolidating
the two businesses has enabled hire
rates to be harmonised and customer
service to be standardised.
Customers now receive a consistent
and high level of service associated
with the Northgate brand. Feedback
has been positive, with many
customers citing the improved
geographical coverage of a combined
business as the key to this success.
A highly visible fleet
Significant progress has been
made in rebranding Northgate
España’s fleet of 43,500 vehicles and
promoting the new brand in the
market. Our new website is delivering
sales opportunities and targeted
advertising is creating visibility
of the brand to a wide audience.
A common branding and commercial
sales operation is enabling us to
pursue our strategy of diversifying
the customer base away from
construction and targeting SME’s.
This approach will create a more
stable platform for the business going
forward and generate improved
returns from our fleet.
10 One Northgate
Northgate plc annual report and accounts 2011
Operational review
“ In an environment where capital has become more scarce and
expensive, the Group has focused on improving returns on capital
employed and restoring the strength of the Group’s balance sheet.
For the year ended 30 April 2011, substantially all of our original targets
have been met resulting in an improved return on capital employed
of 11.9% (2010 – 8.4%).”
Group
Vehicle fleet and utilisation
In 2010 the Group commenced a
comprehensive programme designed to
restructure the business to enhance both
customer service and operational
performance. It was evident at the time
of the 2010 review that the focus should
move away from targeting vehicle growth
via aggressive pricing and an expanding
network, to identifying markets and
customers who are prepared to pay the
correct price for the service offering
and creating a business that does the
simple things well and has optimal
operating efficiency.
In an environment where capital has
become more scarce and expensive, the
Group has focused on improving returns
on capital employed and restoring the
strength of the Group’s balance sheet.
Bob Contreras
Chief Executive
Group return on capital employed
2011 11.9%
2010 8.4%
2009 5.8%
To ensure this objective was met, the
following areas were identified as key
in both the UK and Spain:
•
• Pricing increases;
• Cost reduction; and
•
Improved fleet management;
Improvement in vehicle
disposal capabilities.
For the year ended 30 April 2011,
substantially all of the original targets
have been met resulting in an improved
return on capital employed7 of
11.9% (2010 – 8.4%).
In addition, the Group also successfully
refinanced its borrowing facilities in the
year, improving terms and increasing the
maturity of the previous facilities. The
successful completion of the refinancing
allows the Group to continue to focus
on the improvement programme it
has initiated.
UK
Improvements achieved in pricing,
operational efficiencies and used vehicle
residuals, coupled with continued
strong fleet management have led to
an increase in operating margin11 from
18.0% to 22.0%.
11 Operational review
Northgate plc annual report and accounts 2011
The UK fleet size increased slightly to
61,200 vehicles (April 2010 – 60,900
vehicles). Vehicle utilisation for the year
averaged 90% (2010 – 90%8).
Utilisation remains a key area of focus for
the Group and the UK will be targeting an
average rate of 91% going forward.
The new IT system which was
implemented across the UK by 31 May
2011 allows us to measure utilisation daily
rather than weekly, as was the case
previously. We estimate that the daily
target rate of 91% is equivalent to some
93% under the previous weekly measure.
During the year we purchased 18,900
vehicles (2010 – 18,800) reflecting the
Group’s commitment to running a fleet
with a suitable ageing profile, efficiency
and reliability.
The average age of our fleet has increased
to 22.1 months (April 2010 – 20.8 months).
Hire rates and vehicles on hire
Average hire revenue per vehicle closed
at over 2% higher than in the prior year.
This has been impacted by consumer
demand moving towards smaller vehicles
to reduce their operational costs.
Adjusting for this mix impact the
underlying hire rate increase was some
4%. Due to the change in vehicle mix, the
UK saw no increase in its capital cost per
vehicle despite new vehicle price inflation.
Year on year closing vehicles on hire fell
by 1,000 (2010 – 600). We believe that
the increase in pricing achieved has been
a contributory factor to this reduction.
Some customers originally moved from
contract hire or acquisition to flexible
rental to benefit from the unsustainable
low rental rates rather than because it
matched their business requirements.
The higher rental price has caused them
to reconsider their mix of fixed to flexible
fleet, which has resulted in a decline
in on-hires.
This will not reduce our focus on
charging the correct price for the service
provided and all ancillary services and
costs incurred. Additionally, we will
continue to seek to attract customers
for whom flexible rental is the most
appropriate solution.
Operational review continued
UK operating margin
UK continued
2011 22.0%
2010 18.0%
2009 12.4%
UK average utilisation
2011 90%
2010 90%
2009 86%
Spain operating margin
2011 18.0%
2010 12.7%
2009 12.7%
Spain average utilisation
2011 91%
2010 88%
2009 83%
12 Operational review
Northgate plc annual report and accounts 2011
Restructuring and
operational improvement
In April 2010 we commenced a
restructuring of the UK business. The
previous 20 hire companies were initially
reduced to 12 areas, reducing further
to seven regions in May 2011, all
operating under a single brand of
Northgate Vehicle Hire.
The vehicle and site rebranding exercise
is on track with c.15,000 vehicles now
liveried in the Northgate Vehicle Hire
brand. This will continue each year as
the fleet is replaced, and we have a target
of 33,000 vehicles to be liveried by
30 April 2012.
Historically the 20 hire companies
were responsible for vehicles operating
across the UK, resulting in significant
inefficiencies due to the difficulty in
managing vehicle movements out of
their local geographic areas. In order to
eliminate this inefficiency, during the year
we have progressively reallocated fleet
into the region most suited to service the
customer involved.
During the year we have identified a
number of areas of improvement which
will continue to drive operational
efficiency and improve customer service.
These comprise:
•
Improved IT capability and systems,
which will allow greater visibility and
planning of our 53 workshops, leading
to increased efficiency and utilisation;
• Further development around driver
logistics management, which will
provide the UK with opportunities for
increasing delivery efficiency;
• The implementation of the
UK-wide Enterprise Resource Planning
(ERP) system, which allows the
Group to centralise and reduce the
costs of the UK finance and
administration function;
Improved sales and operational
planning, which reduce vehicle holding
costs and increase sales opportunities.
•
Of the £10m full year equivalent cost
savings targeted by 30 April 2011, £9m
have been achieved in the year, with the
remaining £1m to be achieved in the year
ending 30 April 2012 by establishing a
centralised finance and administrative
function. The results for the year include
£6m of this annualised saving.
In addition to these £10m annualised
cost savings, the above operational
improvements will generate ongoing full
year equivalent cost savings of some
£5m by April 2012 with total
implementation costs of c.£3m. Of these
£5m cost savings, £3m will be achieved
in the year ending 30 April 2012.
Used vehicle sales
The recovery in resale values for
used vehicles observed in the last financial
year continued in the year ended
30 April 2011.
During the year a total of 18,900
vehicles (2010 – 22,700 vehicles) were
sold, with the higher margin retail and
semi-retail channels accounting for 22%
(2010 – 19%) of those disposals.
The improvement in the values achieved
for the vehicles disposed resulted in a
decrease of £14.2m (2010 – £6.5m) in
the depreciation charge.
Depot network
As part of the ongoing operational
improvement programme, we reduced the
network of hire locations from 65 to 62
during the year. We continue to move
towards a structure of larger hubs with
a smaller number of satellite locations.
Prior to the year end, we invested in new
locations in the Midlands, which will
facilitate further rationalisation of the
network. More importantly the facilities
and their location will allow increased
planning, efficiency and utilisation of the
network and improve customer service.
The Group will continue to look for
further opportunities to invest in the
network when there is an economic
benefit of doing so.
We have also commenced a
programme of investment in our
existing locations, focusing largely on
workshop improvement. We envisage
this programme will run over the next
two years creating improved efficiency of
our workshops and customer service.
IT
The UK has completed the roll-out
of the UK-wide ERP system. This was
completed by May 2011. The ERP system
covers operations, asset management
and finance and will be used as a basis
to improve customer service and
reduce costs through further
operational efficiencies.
In line with the previous year we were
able to dispose of 19,000 vehicles
(2010 – 19,800 vehicles). The
improvement in resale values achieved
has resulted in a decrease in the
depreciation charge of €0.2m compared
to a €4.7m increase in the prior year.
Bad debts
Debtor management continues to be
an area of focus, specifically large
construction debtors as government
investment programmes continue to
reduce. The incidence of bad debt in
Spain in the year ended April 2011 was
€4.3m, a €6.0m fall from the charge in
the year ended April 2010 of €10.3m.
Ongoing improvements in controls and
processes have further improved days’
sales outstanding, falling from 109 as
at 30 April 2010 to 94 days at
30 April 2011.
Bob Contreras
Chief Executive
Spain
Restructuring
Our Spanish business has performed
well against the ongoing difficult trading
conditions. Improved fleet management,
together with improvements in our used
vehicle disposal capability, have led to
closing fleet utilisation of 91% (measured
daily on a consistent basis) and better
residual values achieved for used vehicles
when sold.
Additionally, the ongoing operational
efficiency and hire rate improvements, as
well as a reduced incidence of bad debts,
have more than offset the reduction in
vehicles on hire to improve the operating
margin12 to 18.0% (2010 – 12.7%).
Vehicle fleet and utilisation
The fleet size reduced in line with our
expectations, from 48,900 vehicles at
30 April 2010 to 43,500 at 30 April 2011.
The average utilisation for the year was
91% (2010 – 88%).
During the year we purchased 13,400
vehicles (2010 – 9,100) and the average
age of the fleet reduced from 27.2
months at 30 April 2010 to 25.0 months
at 30 April 2011.
Hire rates and vehicles on hire
Average hire revenue per rented vehicle in
the year was 2% higher than the prior
year period. This has been achieved
through a combination of strong pricing
controls on new vehicles and targeted
price increases with existing customers. As
with the UK the mix of vehicles on hire in
Spain is being impacted by customer
demand moving towards smaller vehicles.
In line with expectations, vehicles on hire
fell 4,600 in the year ended 30 April
2011, from 44,000 vehicles at 30 April
2010. The increased disposal capability
and strong operational controls allowed
Spain to reduce the fleet appropriately
and maintain strong vehicle utilisations.
From 1 January 2011 the Spanish business
was merged, with the former Fualsa and
Record businesses now trading under the
Northgate brand. Having managed the
potential negative consequences arising
from the significant customer overlap,
the merger was achieved with minimal
disruption and has resulted in an
improved customer service.
As in the UK, significant progress
has been made in rebranding fleet,
consolidating locations and promoting
the brand in the market.
Operating under one brand will
strengthen our customer service offering
and will provide annualised benefits of
c.€4m from January 2011.
Depot network
The size of the hire network in Spain has
fallen from 32 sites to 25 sites, mainly as a
result of operating under one brand. As
part of the restructuring a review was
carried out to determine which sites
would maximise operational efficiency
whilst retaining the required geographical
coverage across the country.
Of the sites now vacated, an impairment
provision of €7.8m has been charged
in the year ended 30 April 2011 to reflect
estimated current market values of
these properties.
Sector focus
As previously reported, a high proportion
of our Spanish customers have operated
in the construction industry. In the year
we have reorganised our commercial
sales operations to focus on new sectors
such as wholesale and retail distribution,
maintenance, and cleaning services, which
has enabled us to re-profile the customer
base with construction now accounting
for 37% of vehicles on hire at the end
of April 2011 compared to 55% at the
end of April 2010.
Used vehicle sales
As targeted, we have increased the
capability of our Spanish disposal
network. This has been driven by ongoing
investment in locations and resource.
Whilst Spain has seen good progress,
there is still further development
required to reach the capabilities of
our UK business.
13 Operational review
Northgate plc annual report and accounts 2011
For footnote references see page 17.
Financial review
Chris Muir
Group Finance Director
Financial reporting
Group
A summary of the Group’s underlying
financial performance for 2011 with a
comparison to 2010, is shown below:
Revenue
Profit from operations1
Net interest expense13
Profit before tax2
Profit after tax3
Basic earnings per share3
Return on capital employed7
2011
£m
715.5
105.6
(51.8)
53.8
38.5
29.0p
11.9%
2010
£m
749.6
82.8
(46.3)
36.5
28.2
26.8p
8.4%
Group revenue in 2011 decreased by
4.5% to £715.5m (2010 – £749.6m) or
3.3% at constant exchange rates.
Net underlying cash generation10 was
£99.4m (2010 – £184.6m) after net
capital expenditure of £186.1m
(2010 – £126.8m) resulting in closing
net debt4 of £529.9m (2010 – £598.3m).
On a statutory basis, operating profit,
stated after intangible amortisation
and exceptional items, has increased
to £82.6m (2010 – £71.1m) with
profit before tax increasing to £26.5m
(2010 – £9.6m). Basic earnings per share
reduced to 22.1p (2010 – 23.1p). Net
cash from operations, including net
capital expenditure on vehicles for hire,
reduced by £86.2m to £102.3m
(2010 – £188.5m), with net debt falling
by 14.0% from £615.1m at 30 April 2010
to £529.1m at 30 April 2011. Gearing
improved to 163% (2010 – 219%).
14 Financial review
Northgate plc annual report and accounts 2011
UK
The composition of the Group’s UK
revenue and profit from operations is set
out below:
Revenue
Vehicle hire
Vehicle sales
2011
£m
2010
£m
333.9
103.0
328.2
114.3
436.9
442.5
Profit from operations14
73.6
59.0
Rental revenue increased by 1.7% to
£333.9m (2010 – £328.2m) driven by an
increase in hire rates of c.2% partially offset
by a 0.3% reduction in the average number
of vehicles on hire.
An improvement in residual values of used
vehicles contributed £7.7m of the increase
in profit from operations.
The UK operating margin was as follows:
2011
2010
Operating margin11
22.0%
18.0%
The increase is due to an improvement
in hire rates and used vehicle residual values
as mentioned above, coupled with cost
savings targeted through the ongoing
restructuring of the UK business.
Spain
The revenue and operating profit
generated by our Spanish operations are
set out below:
Revenue
Vehicle hire
Vehicle sales
2011
£m
2010
£m
203.3
75.3
235.5
71.6
278.6
307.1
Profit from operations15
36.6
30.0
The reduction in average vehicles on hire of
12.7% contributed to a decrease in rental
revenue of 13.7% (10.8% at constant
exchange rates), which was partially offset
by a c.2% increase in average revenue per
rented vehicle.
An improvement in used vehicle residual
values has contributed £4.3m to the
£6.6m increase in profit from operations
with 19,000 vehicles sold (2010 – 19,800).
The Spanish operating margin was
as follows:
Operating margin12
18.0%
12.7%
2011
2010
Vehicle rental revenue and profit from
operations in 2011, expressed at constant
exchange rates, would have been higher
than reported by £6.8m and £1.2m
respectively.
Revenue per rented vehicle increased by
2% despite a lightening of the fleet mix,
which reflects targeted price increases and
an improvement in pricing controls.
The incidence of bad debt in Spain
has reduced by £5.4m to £3.7m
(2010 – £9.1m), equivalent to 1.8% of
operating margin (2010 – 3.9%) despite no
significant improvement in the economic
environment, which demonstrates a major
improvement in credit control procedures.
Corporate
Corporate costs16 were £4.6m compared
to £6.1m in the prior year reflecting
the impact of Board changes previously
announced.
Return on capital employed
Group return on capital employed7 was
11.9% compared to 8.4% in the prior year
and 5.8% in 2009. This represents a
substantial improvement over the previous
two years and underlines the Group’s
success in applying its strategy of maximising
returns through more efficient fleet
management and improved hire rates.
Group return on equity, calculated as
profit after tax (excluding intangible
amortisation, impairment of intangible
assets, exceptional administrative expenses
and exceptional finance costs) divided
by average shareholders’ funds, was 12%
(2010 – 12%).
Exceptional items
During the year £5.6m of restructuring costs
were incurred, of which £2.4m related to the
UK, £2.6m related to the merger of Fualsa
and Record in Spain and £0.6m related to
corporate costs.
As part of the merger in Spain, property
impairments of £6.9m were recognised for
sites vacated and £5.9m of intangible assets
were written down in relation to brand
names no longer used.
During the year £4.2m of exceptional
financing costs were incurred, of which
£2.7m related to unamortised financing
fees written off in relation to borrowings
which were treated as extinguished debt
upon refinancing of the Group in April
2011. Financing costs of £1.5m were also
incurred in relation to swap contracts
which were either cancelled or which no
longer qualified for hedge accounting
following the refinancing.
Interest
Net finance charges for the year
before exceptional items were £51.8m
(2010 – £46.3m).
The charge includes £9.4m of non-cash
interest, primarily from borrowing fees
amortised in the year (2010 – £5.9m).
Net cash interest has increased by £2.0m
to £42.4m, with a £15.0m increase due
to the full year impact of higher rates
since refinancing in September 2009
being largely offset by an interest saving
of £13.0m as a result of the reduction
in average net debt throughout the year.
Taxation
The Group’s underlying effective tax
charge for its UK and overseas operations
is 28% (2010 – 23%). This is higher than
the previous year, which included a £2m
tax credit in respect of prior years.
The underlying tax charge excludes the
tax on intangible amortisation and
exceptional items and a credit of £5.9m for
the recognition of previously unrecognised
deferred tax assets (2010 – £15.5m).
Also excluded from the underlying tax
charge in the year is a £4.2m credit in
relation to tax provisions which were made
on acquisition of our Spanish operations
which have been settled in the year at
a lower amount.
Including these items the Group’s
statutory effective tax charge is (11)%
(2010 – (153)%).
Earnings per share
Basic earnings per share (EPS)3, were
8% higher than the previous year at 29.0p
(2010 – 26.8p). Basic statutory earnings
per share were 22.1p (2010 – 23.1p).
Underlying earnings for the purposes
of EPS3 of £38.5m were £10.3m (36%)
15 Financial review
Northgate plc annual report and accounts 2011
higher than the previous year (2010 –
£28.2m). The weighted average number of
shares for the purposes of EPS was 133m,
28m higher than the previous year which
reflects the full year impact of the equity
raising and rights issue in the prior year.
Dividend
The Directors do not recommend the
payment of a dividend in relation to the
Ordinary shares for the year ended
30 April 2011 (2010 – £Nil).
Balance sheet
Net tangible assets at 30 April 2011 were
£324.4m (2010 – £281.1m), equivalent to a
tangible net asset value of 243.5p per share
(2010 – 211.4p per share).
Gearing5 at 30 April 2011 was 163%
(2010 – 213%) reflecting a £68m reduction
in net debt.
Cash flow
A summary of the Group’s cash flows is
shown below:
Underlying operational
cash generation
Net capital expenditure
Net taxation and
2011
£m
2010
£m
331.4
(186.1)
358.1
(126.8)
interest payments
(45.9)
(46.7)
Net underlying
cash generation10
Proceeds from issue of
share capital
Refinancing fees
Other
99.4
184.6
0.4
(10.3)
(2.6)
108.3
(31.4)
(0.7)
Net cash generated
86.9
260.8
Opening net debt4
Net cash generated
Financing fees*
Other non-cash items
Exchange differences
598.3
(86.9)
6.4
3.4
8.7
886.4
(260.8)
(18.2)
–
(9.1)
Closing net debt4
529.9
598.3
*
Financing fees paid and amortised as well as issue
of make-whole notes
Underlying operational cash generation
(as defined in the table above) of
£331.4m, coupled with tight control over
capital expenditure of £186.1m have
contributed to a £68.4m reduction in net
debt4 to a closing position of £529.9m.
A total of £343.6m was invested in new
vehicles in order to replace fleet compared
to £299.1m in the prior year. This increase
primarily related to 4,300 more units
purchased in Spain compared to the
previous year, which brought the
average age of the fleet down from 27
to 25 months. The Group’s new vehicle
outlay was partially funded by £161.2m
of cash generated from the sale of used
vehicles. Other net capital expenditure
amounted to £3.7m.
After capital expenditure, and payments of
interest and tax of £45.9m, net underlying
cash generation10 was £99.4m, compared
to £184.6m in the previous year.
Borrowing facilities
The new financing arrangements
came into effect in April 2011 and
comprise committed secured facilities of
£739m. Including local facilities in Spain
of £42m, Group facilities amounted to
£781m compared to debt (gross of £26m
of unamortised arrangement fees) of
£556m at 30 April 2011 giving headroom9
of £225m.
US loan notes bear fixed interest of 8.7%.
M&G loan interest is charged at LIBOR
+4.25%. This has been swapped into fixed
rate debt at a rate of 8.3%. A proportion of
bank debt is fixed at 5.1% giving an overall
fixed rate debt of 7.1%. Including floating
rate debt, the overall cost of the Group’s
borrowings is 6.6%.
The margin charged on bank debt is
dependent upon the Group’s net debt to
EBITDA ratio, and ranges from a maximum
of 3.25% to a minimum of 2.25%. The
net debt to EBITDA ratio at 30 April 2011
corresponds to a bank margin of 2.75%.
The Group made total borrowing
repayments of £175m in the year. This
included repayments of £89m under the
previous financing arrangements, £78m
of the M&G loan received being paid to
existing lenders and make-whole payments
of £8m to US loan noteholders.
The repayment of bank borrowings from
the receipt of monies from the Sterling M&G
loan was made against Euro denominated
bank debt. The equivalent amount of M&G
loan was swapped into Euro borrowings in
order to maintain the net investment
hedging position of the Group.
Scheduled bank repayments of £74m are
due in November 2012 before the facilities
mature in September 2014.
Financial review continued
Borrowing facilities continued
The Group’s facilities and their maturities
US loan note repayments and maturities
of £47m are due in November 2012, with
£46m maturing in December 2013 and
£77m in December 2016.
The M&G loan is repayable in three
equal instalments in October 2017, April
2018 and April 2019.
There are four financial covenants6 under
the Group’s revised facilities as follows:
1 Interest cover ratio
A minimum ratio of earnings before
interest and taxation (EBIT) to net interest
costs tested quarterly on a rolling historic
12 month basis. The covenant ratio
to be exceeded ranges between 1.50x
and 2.25x.
Interest cover at 30 April 2011 was
2.1x with EBIT headroom, all else being
equal, of c.£25m.
2 Minimum tangible net worth
A minimum tangible net worth, i.e. net
assets excluding goodwill and intangibles,
tested quarterly. This covenant has been
set at 80% of the net tangible assets
at 30 April 2010 as adjusted for 80%
of budgeted cumulative retained profits
planned at the time of refinancing.
Headroom at 30 April 2011 was c.£85m.
3 Loan to value
A maximum ratio of total consolidated
net borrowings to the book value of
vehicles for hire, vehicles held for resale,
trade receivables and freehold property,
tested quarterly. The covenant ratio which
must not be exceeded ranges between
70% and 80%.
Loan to value at 30 April 2011 was
63% giving net debt headroom, all else
being equal, of c.£154m.
4 Debt leverage cover ratio
A maximum ratio of net debt to
earnings before interest, tax, depreciation
and amortisation (EBITDA), tested
quarterly on a rolling historic 12 month
basis. The covenant ratio which must
not be exceeded ranges between
2.00x and 2.25x.
Debt leverage cover at 30 April 2011 was
1.7x with EBITDA headroom, all else being
equal, of c.£81m.
16 Financial review
Northgate plc annual report and accounts 2011
Facility
£m
Drawn Headroom
£m
£m
Maturity
Bank
US loan notes
M&G loan
Other loans
468
170
101
42
257
170
101
28
211
–
–
14
September 2014
November 2012 to December 2016
October 2017 to April 2019
Up to November 2012
781
556
225
Committed facilities (£m)
42
468
15
468
394
394
170
170
101
101
123
101
77
101
77
101
77
101
101
34
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Bank facilities
US loan notes
M&G loan
Other
Treasury
Liquidity and funding
The function of Group Treasury is to
mitigate 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.
Credit risk
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.
The Group has sufficient funding facilities
to meet its normal funding requirements
in the medium term as discussed above.
Covenants attached to those facilities as
discussed above are not restrictive to the
Group’s operations.
Capital management
The Group’s objective is to maintain a
balance sheet structure that is efficient in
terms of providing long term returns to
shareholders and safeguards the Group’s
financial position through economic cycles.
Operating subsidiary undertakings are
financed by a combination of retained
earnings, loan notes, other loans and bank
borrowings, including medium term
bank loans.
The Group can choose to adjust its
capital structure by varying the amount of
dividends paid to shareholders, by issuing
new shares or by adjusting the level of
capital expenditure. As discussed above,
gearing5 at 30 April 2011 was 163%
compared to 213% at 30 April 2010.
Interest rate management
The Group’s bank facilities and other
loan agreements incorporate variable
interest rates. The Group seeks to manage
the risks associated with fluctuating
interest rates by having in place a number
of financial instruments covering at
least 50% of its borrowings at any time.
The proportion of gross borrowings
hedged into fixed rates was 84% at
30 April 2011 (2010 – 71%).
Foreign exchange risk
The Group’s reporting currency is, and
the majority of its revenue (60%) is
generated in pounds sterling. The Group’s
principal currency translation exposure is
to the Euro, as the results of operations,
assets and liabilities of its Spanish and
Irish businesses must be translated
into Sterling to produce the Group’s
consolidated financial statements.
The average and year end exchange rates
used to translate the Group’s overseas
operations were as follows:
Average
Year end
2011
£:€
1.17
1.12
2010
£:€
1.13
1.15
The Group manages its exposure to
currency fluctuations on retranslation of
the balance sheets of those subsidiary
undertakings whose functional currency
is in Euro by maintaining a proportion of
its borrowings in the same currency.
In addition, the Group has entered into a
number of GBP/EUR cross-currency swaps
which are designated as net investment
hedges. The hedging objective is to reduce
the risk of spot retranslation of the Euro
subsidiaries from Euro to Sterling at each
reporting date. The hedges are considered
highly effective in the current and prior
year and the exchange differences arising
on the borrowings and net investment
hedges have been recognised directly
within equity along with the exchange
differences on retranslation of the net
assets of the Euro subsidiaries.
17 Financial review
Northgate plc annual report and accounts 2011
The Group has in issue US dollar
denominated loan notes which bear
fixed rate interest in US dollars. The
payment of this interest and the capital
repayment of the loan notes at scheduled
repayment dates and 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. The Group will have interest
cash outflows in pounds 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 pounds
sterling and receive a principal amount
in US dollars.
Going concern
In determining whether the Group’s
2011 accounts should be prepared on
a going concern basis the Directors
considered all factors likely to affect its
future development, performance and its
financial position, including cash flows,
liquidity position and borrowing facilities
and the risks and uncertainties relating
to its business activities in the current
economic climate.
The key risks and uncertainties of the
Group are outlined on pages 18 and 19.
Measures taken by the Directors in order
to mitigate those risks are also outlined.
The Directors have reviewed trading and
cash flow forecasts as part of their going
concern assessment, including reasonably
possible downside sensitivities, which
take into account the uncertainties in the
current operating environment.
The Group has sufficient headroom
compared to its committed borrowing
facilities and against all covenants as
detailed in this report.
Having considered all the factors above
impacting the Group’s businesses,
including reasonably possible downside
sensitivities, the Directors are satisfied
that the Group will be able to operate
within the terms and conditions of
the Group’s financing facilities for the
foreseeable future.
The Directors have a reasonable
expectation that the Company and the
Group have adequate resources to
continue in operational existence for the
foreseeable future. Accordingly, they
continue to adopt the going concern basis
in preparing the Group’s 2011 accounts.
Chris Muir
Group Finance Director
1 Stated before intangible amortisation of £4.7m (2010
– £5.0m), impairment of intangible assets of £5.9m
(2010 – £Nil) and exceptional administrative expenses
of £12.5m (2010 – £6.7m).
2 Stated before intangible amortisation of £4.7m (2010
– £5.0m), impairment of intangible assets of £5.9m
(2010 – £Nil), exceptional administrative expenses of
£12.5m (2010 – £6.7m) and exceptional finance
costs of £4.2m (2010 – £15.2m).
3 Stated before intangible amortisation of £4.7m (2010
– £5.0m), impairment of intangible assets of £5.9m
(2010 – £Nil), exceptional administrative expenses of
£12.5m (2010 – £6.7m), exceptional finance costs of
£4.2m (2010 – £15.2m) and tax on intangible
amortisation, exceptional items and exceptional tax
credit of £18.2m (2010 – £23.0m).
4 Net debt taking into account swapped exchange
rates for US loan notes and proportion of M&G loan
swapped into Euro being retranslated to Sterling at
closing exchange rates.
5 Calculated as tangible net assets divided by net
debt4,with tangible net assets being net assets less
goodwill and other intangible assets.
6 Calculated in accordance with covenant requirements
of the Group’s financing arrangements.
7 Calculated as operating profit1 divided by average capital
employed, being shareholders funds plus net debt4.
8 Utilisation rate for 2010 restated, removing free of
charge customer loans.
9 Headroom calculated as facilities of £781m less net
borrowings of £556m. Facilities and net borrowings
stated taking into account the fixed swapped
exchange rates for US loan notes and proportion of
M&G loans swapped into Euro being retranslated to
Sterling at closing exchange rates. Net borrowings
represent net debt of £530m gross of £26m of
unamortised arrangement fees and are stated after
the deduction of £97m of cash balances, which are
available to offset against borrowings.
10 Net increase in cash and cash equivalents before
financing activities.
11 Calculated as operating profit14, divided by revenue of
£333.9m (2010 – £328.2m), excluding vehicle sales.
12 Calculated as operating profit15, divided by
revenue of £203.3m (2010 – £235.5m), excluding
vehicle sales.
13 Stated before exceptional finance costs of £4.2m
(2010 – £15.2m).
14 Excluding amortisation of intangible assets of £3.2m
(2010 – £3.0m) and exceptional administrative
expenses of £2.4m (2010 – £5.8m).
15 Excluding amortisation of intangible assets of £1.4m
(2010 – £2.0m), impairment of intangible assets of
£5.9m (2010 – £Nil) and exceptional administrative
expenses of £9.4m (2010 – credit of £(0.1)m).
16 Excluding exceptional administrative expenses of
£0.6m (2010 – £1.1m).
Principal risks
and uncertainties
The operation of a public company involves a number of risks
and uncertainties across a full 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.
Economic environment
Vehicle holding costs
Impact
Mitigation
There is a link in our business between
the demand for our products and services
and the levels of economic activity in the
countries in which the Group operates.
The high level of operational gearing in
our business model means that changes
in demand can lead to higher levels of
variation in profitability.
The construction industry and other key
markets of the Group have been
particularly sensitive to the downturn
in the economic climate which has led
to a decline in the number of vehicles
rented in recent years.
The underlying macro-economic
conditions have also increased the risk
of customer failure, particularly in Spain,
which may lead to the occurrence of
increased bad debt charges.
The Group generates a large proportion
of revenue from customers in the
construction industry but is seeking
to diversify its customer base across
a range of market segments.
The overall holding cost of a vehicle is
affected by the pricing levels of new
vehicles and the disposal value of
vehicles sold.
The Group purchases substantially all of
its fleet from suppliers with no agreement
for the repurchase of a vehicle at the end
of its hire life cycle. The Group is therefore
exposed to fluctuations in residual values
in the used vehicle market.
An increase in the holding cost of
vehicles, if not recovered through hire
rate increases, would affect profitability,
shareholder return and cash generation.
Should there be a further significant
economic downturn the flexible nature
of the Group’s business model enables
vehicles to be placed with other
customers. Alternatively, utilisation can
be maintained through a combination
of a decrease in vehicle purchases and
increase in disposals, which although
affecting short term profitability,
generates cash and reduces debt levels.
An economic downturn also presents
opportunities to increase rentals to
customers wishing to benefit from the
Group’s flexible renting solutions, either
due to a lack of available finance or
an unwillingness to commit to long
term rental.
No individual customer contributes
more than five per cent of total revenue
generated, and ongoing credit analysis
is performed on new and existing
customers to assess credit risk.
Risk is managed on new pricing by
negotiating fixed pricing terms with
manufacturers a year in advance.
Flexibility is maintained to make
purchases throughout the year under
variable supply terms.
Flexibility in our business model allows
us to determine the period over which
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.
Competition and hire rates
The Group operates in highly competitive
markets with competitors often pursuing
aggressive pricing actions to increase hire
volumes. The market is also fragmented
with numerous competitors at a local and
national level.
The Group is now more strongly focused
on maximising return on capital and so
hire rates are not being reduced below
certain hurdle rates. In co-ordinating this
policy with fleet management, utilisations
are being maintained at higher rates.
As our business is highly operationally
geared, any increase or decrease in hire
rates will impact profit and shareholder
returns to a greater effect.
Our current pricing strategy is focused on
charging the correct price for the service
provided and all ancillary services offered
which will attract customers for whom
flexible rental is the most appropriate
solution but not necessarily the cheapest.
This means that the Group will be better
positioned against solely price led
competition going forward.
18 Principal risks and uncertainties
Northgate plc annual report and accounts 2011
Access to capital
IT systems
Change management
Impact
Mitigation
The Group requires capital to both replace
vehicles that have reached the end of
their useful life and for growth in the
fleet. Additionally, due to the level of the
Group’s indebtedness, a significant
proportion of the Group’s cash flow is
required to service its debt obligations.
In order to continue to access its credit
facilities the Group needs to remain in
compliance with its financial covenants
throughout the term of its facilities.
Current bank facilities are due to mature
in September 2014 with other facilities
having varying maturity dates up to April
2019. There is a risk that the Group
cannot successfully extend its facilities
past this date. Failure to access sufficient
financing or meet financial covenants
could potentially adversely affect the
prospects of the Group.
The Group’s business involves a high
volume of transactions and the need
to track assets which are located at
numerous sites.
Reliance is placed upon the proper
functioning of IT systems for the effective
running of operations. Any interruption
to the Group’s IT systems would have a
materially adverse effect on its business.
The UK and Spain businesses are currently
undertaking restructuring programmes
which seek to improve the operational
efficiency of the Group, with the aim of
increasing returns to shareholders and
placing the Group in a better position
for future expansion, or to be more
resilient to any further downturns in the
economic environment.
If these programmes are not executed
effectively, the Group will not be in a
position to achieve its objectives, and
profitability and shareholder returns
will be impacted.
Financial covenants are reviewed on a
monthly basis in conjunction with cash
flow forecasts to ensure ongoing
compliance. If there is a shortfall in
cash generated from operations and/or
available under its credit facilities
the Group would reduce its capital
requirements.
The Group believes that its existing
facilities provide adequate resources
for present requirements.
The impact of access to capital on the
wider risk of going concern is considered
on page 17.
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.
Additionally, the Group has an
appropriate business continuity plan in
the event of interruption arising from
an IT systems failure.
The Board and its advisors conducted
detailed reviews of the restructuring
strategy before it commenced, and
each project is subject to an ongoing
assessment at Board level. The
restructuring strategies have been
communicated to all employees.
Risks arising through the process are
continually monitored and mitigating
actions are taken when required.
19 Principal risks and uncertainties
Northgate plc annual report and accounts 2011
Board of Directors
“ We enter the new financial year with a
clear programme for operational improvement.
Our focus will remain on improving returns
and further progress is planned in the coming
year through hire rate improvement, efficient
fleet management, further cost reductions
and cash generation.”
1
2
3
4
5
6
1 Bob Mackenzie ACA
Chairman
2 Bob Contreras ACA
Chief Executive
3 Chris Muir ACA
Group Finance Director
4 Andrew Allner FCA
Non-executive Director
5 Jan Astrand MBA
Non-executive Director
6 Tom Brown MBA
Non-executive Director and
Senior Independent Director
20 Board of Directors
Northgate plc annual report and accounts 2011
Bob Mackenzie ACA
Andrew Allner FCA
Board Committees
Audit and Risk
• Andrew Allner (Chairman)
• Jan Astrand
• Tom Brown
Remuneration
• Tom Brown (Chairman)
• Andrew Allner
• Jan Astrand
• Bob Mackenzie
Nominations
• Bob Mackenzie (Chairman)
• Andrew Allner
• Jan Astrand
• Tom Brown
Appointed to the Board as Chairman in
February 2010. Prior to his appointment,
he was Chief Executive of Sea Containers
Ltd, including the Chairmanship of its
subsidiary GNER. He was until recently
Chairman of Dometic Holdings AB, a
Swedish based manufacturing company.
He was previously Chairman of PHS Group
plc and held senior executive board
appointments with National Parking
Corporation, BET plc, Storehouse plc and
Hanson plc. He has also acted as a senior
adviser to a number of private equity funds.
He qualified as a Chartered Accountant
with KPMG in 1978. Age 58.
Bob Contreras ACA
Appointed Chief Executive on 7 June
2010 having been Group Finance Director
since June 2008 when he joined the
Group. A Chartered Accountant, Bob
has held senior positions with Azlan
Group plc, Damovo Group SA and most
recently with Mölnlycke Healthcare
Group. Age 48.
Chris Muir ACA
Appointed to the Board as Group Finance
Director on 19 May 2011. Chris originally
joined Northgate as Group Accountant in
2003, being appointed Group Financial
Controller in March 2004 and UK Finance
Director in May 2006. Qualifying as a
Chartered Accountant in 1999, Chris
worked for Deloitte LLP from 1997 until
2003, leaving as a manager. Chris has a
first class honours degree in Economics
and Accountancy from the University
of Newcastle upon Tyne. Age 35.
Appointed to the Board as a
non-executive Director and to the Chair
of the Audit and Risk Committee in
September 2007. Andrew is currently
Chairman of Marshalls plc and also serves
as non-executive Director and Chairman
of the Audit Committee at AZ Electronic
Materials SA, the Go-Ahead Group plc
and CSR plc. He was Group Finance
Director of RHM plc, taking a lead role in
its flotation in July 2005 on the London
Stock Exchange. Prior to joining RHM plc,
Andrew was CEO of Enodis plc and has
served in senior executive positions with
Dalgety plc, Amersham International
plc and Guinness plc. He was also a
non-executive director of Moss Bros
Group plc from 2001 to 2005. A graduate
of Oxford University, he is a former
partner of Price Waterhouse and is a
Fellow of the Institute of Chartered
Accountants in England and Wales.
Age 57.
Jan Astrand MBA
Appointed to the Board as a
non-executive Director in February 2001.
Jan is also currently a non-executive
Director of Lavendon Group plc. 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. Age 64.
Tom Brown MBA
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, a Director
of a number of private companies, and
a member of the Economics Committee
of the EEF. He was previously Group Chief
Executive of United Industries plc and
before that Group Managing Director of
Fenner plc. Age 62.
21 Board of Directors
Northgate plc annual report and accounts 2011
Report of the Directors
The Directors present their report and the audited
accounts for the year ended 30 April 2011.
Results
Profit for the year after taxation was £29,393,000 (2010 –
£24,356,000).
No interim dividend was paid on the Ordinary shares.
The Directors do not recommend the payment of a final dividend on
the Ordinary shares.
Principal activities and business review
The Company is an investment holding company.
The principal subsidiaries are listed in Note 18 to the accounts.
The information that fulfils the requirements of the Business Review,
together with a description of the principal activities of the business,
can be found in the Operational Review and Financial Review on
pages 11 to 19, which are incorporated in this report by reference.
A description of the principal risks and uncertainties facing the
Company and the Group is set out on pages 18 and 19 which are
incorporated into this report by reference.
Close company status
So far as the Directors are aware the close company provisions of
the Income and Corporation Taxes Act 1988 do not apply to the
Company.
Capital structure
Details of the issued share capital, together with details of any
movements during the year are shown in Note 26. The Company
has one class of Ordinary share which carries no right to fixed
income. Each share carries the right to one vote at general meetings
of the Company.
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 cumulative Preference shares do
not entitle the holders to any further or other participation in the
profits or assets of the Company.
The percentage of the issued nominal value of the Ordinary shares is
99.255% of the total issued nominal value of all share capital.
There are no specific restrictions on the size of a holding nor on
the transfer of shares, which are both governed by the general
provisions of the Articles of Association (‘the Articles’) and prevailing
legislation. The Directors are not aware of any agreements between
holders of the Company’s shares that may result in restrictions on
the transfer of securities or on voting rights.
Details of employee share schemes are set out in the Remuneration
Report. Shares held by the Capita Trust are voted on the instructions
of the employees on whose behalf they are held. Shares in the
Guernsey Trust are voted at the discretion of the Trustees.
No person has any special rights of control over the Company’s
share capital and all issued shares are fully paid.
With regards to the appointment and replacement of Directors,
the Company is governed by its Articles of Association, the UK
Corporate Governance Code, the Companies Act and related
legislation. The Articles themselves may be amended by special
resolution of the shareholders. The powers of Directors are set out in
the Articles.
The Directors are not aware of any agreements between the
Company and its Directors or employees that provide for
compensation for loss of office or employment that occurs because
of a takeover bid.
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:
30 April 2011
29 June 2011
Standard Life
Investments Limited
17,261,848 (12.96%) 15,954,460 (11.97%)
Blackrock Inc
6,730,413 (5.05%)
6,730,413 (5.05%)
Legal & General
Group plc
6,571,010 (4.93%)
6,571,010 (4.93%)
Aviva plc
6,705,837 (5.03%)
6,557,699 (4.92%)
Artemis Investment
Management Ltd
6,452,112 (4.84%)
6,452,112 (4.84%)
In addition to the above, Capital Group notified an indirect interest
in 4,149,068 Ordinary shares of 5p each in January 2008, then
representing 5.9% of the issued Ordinary share capital. As no later
notification, post rights and consolidation has been received, it is
assumed that Capital Group, as investment managers, still retains
an interest of between 5% and 10% of the current issued Ordinary
share capital.
Directors
Details of the present Directors are listed on pages 20 and 21.
All have served throughout the year except Chris Muir who was
appointed on 19 May 2011. Paul Tallentire resigned from the Board
with effect from 4 June 2010.
Last year the Board adopted the provision in the new UK Corporate
Governance Code (which replaces the Combined Code with effect
from accounting periods beginning on or after 29 June 2010) which
requires all directors of FTSE 350 companies to be subject to annual
election. Accordingly, in addition to Chris Muir, appointed after the
year end, resolutions to re-appoint all the other Directors in office at
the date of this report will be proposed at the Annual General Meeting.
The termination provisions in respect of executive Directors’ contracts
are set out in the Remuneration Report on pages 25 to 29.
22 Report of the Directors
Northgate plc annual report and accounts 2011
The following are the interests of the Directors who were in office at
the end of the financial year in the share capital of the Company. All
interests are beneficial.
AJ Allner
JG Astrand
THP Brown
RL Contreras
RD Mackenzie
Ordinary Shares
of 50p each
30 April 2011
Ordinary Shares
of 50p each
1 May 2010
13,090
51,920
52,634
115,048
100,000
13,090
51,920
52,634
105,000
–
No Director has an interest in the Preference shares of the Company.
No changes in the above interests have occurred between 30 April
2011 and the date of this report. Chris Muir held 12,657 Ordinary
shares on his appointment to the Board on 19 May 2011.
Details of options held by the Directors under the Company’s various
share schemes are given in the Remuneration Report on pages 25
to 29.
Directors’ indemnities
As permitted by the Company’s Articles of Association, qualifying
third party indemnities for each Director of the Company were in
place throughout the year and remained in force as at the date of
signing of this report. The Company’s Articles of Association are
available on the Company’s website.
Donations
During the year the Group made charitable donations of
£5,000 (2010 – £13,000) 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 2011 the Group’s
creditor days were as shown in Note 21 to the accounts.
Employee consultation
Employees are kept informed on matters affecting them as
employees and on various issues affecting the performance of the
Group through announcements on the Group’s intranet, to which
all employees have access, formal and informal meetings at local
level and direct written communications. All employees are eligible
to participate on an equal basis in the Group’s share incentive plan,
which has been running successfully since its inception in 2000.
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 25 to 29, will be
put to shareholders for approval at the Annual General Meeting.
Power to allot shares
The present authority of the Directors to allot shares was granted at
the Annual General Meeting held in September 2010 and expires
at the forthcoming Annual General Meeting. A resolution to renew
that authority for a period expiring at the conclusion of the Annual
General Meeting to be held in 2012 will be proposed at the Annual
General Meeting. The authority will permit the Directors to allot
up to an aggregate nominal amount of £22m of share capital
which represents 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 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. The authority will be limited
to an aggregate nominal amount of £3,330,000 representing
approximately 5% of the current issued Ordinary share capital.
The Directors have no present intention of exercising this authority
and confirm their intention to follow the provisions of the Pre-
emption Group’s Statement of Principles regarding cumulative
use of such authorities within a rolling three year period. The
Principles provide that companies should not issue shares for cash
representing more than 7.5% of the Company’s issued share capital
in any rolling three year period, other than to existing shareholders,
without prior consultation with shareholders.
Length of notice of general meetings
The minimum notice period permitted by the Companies Act 2006
for general meetings of listed companies is 21 days, but the Act
provides that companies may reduce this period to 14 days (other
than for AGMs) provided that two conditions are met. The first
condition is that the Company offers a facility for shareholders to
vote by electronic means. This condition is met if the Company
offers a facility, accessible to all shareholders, to appoint a proxy
by means of a website. Please refer to Note 5 to the Notice of
Annual General Meeting on page 87 for details of the Company’s
arrangements for electronic proxy appointment. The second
condition is that there is an annual resolution of shareholders
approving the reduction of the minimum notice period from 21 days
to 14 days.
A resolution to approve 14 days as the minimum period of notice
for all general meetings of the Company other than AGMs will
be proposed at the Annual General Meeting. The approval will be
23 Report of the Directors
Northgate plc annual report and accounts 2011
Report of the Directors continued
effective until the Company’s next AGM, when it is intended that
the approval be renewed.
Deferred annual bonus plan
The Deferred Annual Bonus Plan ('the Plan') was introduced in 2003
for executive Directors and senior and middle management. Under
the Plan, part of any annual bonus is delivered in cash and part in
the form of a deferred share award which normally vests after three
years. The Plan is currently restricted to using existing shares sourced
via the Company’s employee benefit trust to satisfy the deferred
share awards. The Company would like the flexibility to also use
newly issued and treasury shares in connection with the operation
of the Plan (within standard shareholder dilution limits). Resolution
14 being put to shareholders at the 2011 AGM seeks shareholder
approval of the Plan to provide for such flexibility. A full summary of
the principal terms of the Plan is set out in the first Appendix to the
notice of AGM.
Management performance share plan
The Management Performance Share Plan (MPSP) was adopted
by the Board in 2006. Participants in the MPSP receive contingent
share awards which ordinarily vest after three years subject to the
achievement of performance conditions and continued employment.
The MPSP operates only for executives below Board level. The
MPSP is currently restricted to using existing shares sourced via the
Company’s employee benefit trust. The Company would like the
flexibility to also use newly issued and treasury shares in connection
with the operation of the MPSP (within standard shareholder
dilution limits). Resolution 15 being put to shareholders at the 2011
AGM seeks shareholder approval of the MPSP to provide for such
flexibility. A full summary of the principal terms of the MPSP is set
out in the second Appendix to the notice of AGM.
Financial instruments
Details of the Group’s use of financial instruments are given in the
Financial Review on pages 16 and 17 and in Notes 23 and 39 to
the accounts.
Auditor
In the case of each of the persons who are Directors of the
Company at the date when this report was approved:
(cid:85)(cid:202)
(cid:85)(cid:202)
so far as each of the Directors is aware, there is no relevant
audit information of which the Company’s auditor
is 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 auditor is aware of that information.
This confirmation is given and should be interpreted in accordance
with the provisions of s418 Companies Act 2006.
A resolution for the re-appointment of Deloitte LLP as auditor
of the Company will be proposed at the forthcoming Annual
General Meeting. This proposal is supported by the Audit and
Risk Committee.
By order of the Board
D Henderson
Secretary
29 June 2011
24 Report of the Directors
Northgate plc annual report and accounts 2011
Remuneration report
The Remuneration Committee has written terms
of reference which are available on the Company’s
website. Membership of the Committee is shown
on page 21.
Service contracts
The executive Directors have rolling service contracts, which may
be terminated by 12 months notice from the Company or by six
months notice from the Director. The dates of the contracts are:
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
take part in discussions relating to their own remuneration.
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 also 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.
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) 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.
The Committee believes that the policy adopted last year of
applying greater weighting to the variable elements of executive
remuneration continues to be appropriate for the business going
forward and, in incentivising the longer term performance of
the Company, provides greater alignment with the interests of
shareholders.
Following the operational restructuring of the business in the
UK (see Operational Review on pages 11 to 13), the Committee
has reviewed the remuneration structure for senior and middle
management to ensure that there is a proper balance between the
levels of management. Below middle management level, staff in the
UK generally received a salary increase of 2% in 2011. In Spain, all
staff received a CPI increase of 3%.
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.
RL Contreras
CJR Muir
27 May 2011
19 May 2011
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.
Basic salaries
In accordance with the Company’s policy of paying lower basic
salaries coupled with higher incentives, the current basic salaries
paid to the executive directors are as follows:
RL Contreras
CJR Muir
£375,000
£175,000
Basic salaries are normally 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 above numbers reflect the fact that on the first annual review
(1 May 2011) following his appointment as Chief Executive, Bob
Contreras was awarded a 7% increase in view of his performance
in this role, while still remaining below the market median for
comparably sized companies.
Chris Muir’s salary was determined on his appointment, also at a
level below the market median.
Total remuneration
The chart below shows the balance between fixed and variable
performance based pay for Bob Contreras for the year ended 30
April 2011 and projections for Bob Contreras and Chris Muir for the
year ending 30 April 2012.
Total reward for 2012 can only be estimated, because the actual
value of the cash and deferred bonus and performance shares will
not be known until the end of the relevant performance period.
We have assumed a target level of bonus of 50% of the maximum
and an expected value of 55% of the face value has been used
in respect of performance shares and 100% of the face value in
respect of deferred bonus shares.
For the year ending 30 April 2012, on target performance has been
assumed for the annual bonus scheme.
RL Contreras
CJR Muir
2011
2012
2012
350
375
84
175
175
289
90
94
94
309
175
52 44 44
144
0
200
400
600
800
1000
1200
■ Base Salary
■ Pension & Benefits
■ Annual Bonus – Cash
■ Annual Bonus – Deferred Shares
■ Performance Shares
25 Remuneration report
Northgate plc annual report and accounts 2011
Remuneration report continued
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. No such external appointments
are currently held.
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. The executive
Directors receive a pension contribution of 18% of salary.
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:
All were last reviewed on 1 May 2011. 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 companies of a comparable size.
Performance graph
As required by The Directors’ Remuneration Report Regulations
2008, 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 has been a constituent of the FTSE 250
index for the majority of the last five years, 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 2011 was 342p (30 April 2010 – 212p). The range during
the year was 153p to 347p.
Total shareholder return
160
140
120
100
80
60
40
20
)
£
(
e
u
a
V
l
0
30-Apr-06
30-Apr-07
30-Apr-08
30-Apr-09
30-Apr-10
30-Apr-11
Northgate plc
Source: Thomson Reuters
Date of appointment
Letter of appointment
FTSE 250 (Excl. Inv. Trusts) Index
RD Mackenzie
5 February 2010
4 February 2010
AJ Allner
JG Astrand
THP Brown
26 September 2007
13 February 2001
13 April 2005
22 June 2011
22 June 2011
22 June 2011
This graph shows the value, by the 30 April 2011, of £100 invested
in Northgate plc on 30 April 2006 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.
The current fees paid to the non-executive Directors are shown
below:
RD Mackenzie
Chairman
AJ Allner
JG Astrand
THP Brown
Chairman of Audit and Risk
Committee
Non-executive Director
Senior Independent Director
and Chairman of Remuneration
Committee
£160,000
£60,000†
£50,000
£68,000*
†
*
Including £10,000 in respect of his chairmanship of the Audit and Risk
Committee.
Including £8,000 in respect of his chairmanship of the Remuneration
Committee and £10,000 as Senior Independent Director.
26 Remuneration report
Northgate plc annual report and accounts 2011
Bonus
£000
Benefits*
£000
Compensation
for loss of
office
The following elements of this report have been audited:
RD Mackenzie
AJ Allner
JG Astrand
THP Brown
RL Contreras***
PJ Tallentire****
PJ Moorhouse
AT Noble
P Rogerson
SJ Smith
Salary/
fees
£000
183
46
39
45
343
41
–
–
–
–
–
–
–
–
350
–
–
–
–
–
Total emoluments excluding pension
contributions
Total pension contributions
697
–
350
–
–
–
–
–
60
3
–
–
–
–
63
–
Total
2011
£000
183
46
39
45
753
526
–
–
–
–
Total
2010
£000
44
46
45
45
552
718
679
668
87
1,148
–
–
–
–
–
482†
–
–
–
–
482
1,592
4,032
–
–
–
Pension contributions**
2010
£000
2011
£000
–
–
–
–
24
7
–
–
–
–
–
31
–
–
–
–
–
76
82
72
–
145
–
375
These benefits include: company car, private medical insurance, permanent health insurance, life assurance and payments in lieu of pension contributions.
*
** All contributions are to a defined contribution type scheme.
*** Bob Contreras, previously Group Finance Director, was appointed Chief Executive with effect from 7 June 2010.
**** To 4 June 2010.
†
As disclosed in last year’s Annual Report, Paul Tallentire ceased to be a Director of the Company on 4 June 2010. He received a payment in compensation for loss of
office of £482,000 including base salary and benefits in lieu of working his 12 month notice period. This was in accordance with his contractual entitlement on early
termination.
Share incentive plans
The Group currently operates three share-based incentive schemes.
Directors participate in the Executive Performance Share Plan (EPSP)
and Deferred Annual Bonus Plan (DABP), and below the Board other
executives participate in the Management Performance Share Plan
(MPSP) and DABP. No executive participates in all three schemes.
Expressed in face value terms, this effectively provides Directors with
a cap of 200% of basic salary for share awards each year (150%
under the EPSP and 50% under the DABP).
In line with current best practice guidelines, the Committee has
introduced clawback provisions into the rules of all three schemes
which can be invoked in the event of financial mis-statement or
fraud and which apply to all awards made from 2010 onwards.
Awards held by Directors during the year are shown in the table on
page 28.
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 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. 50% of the total bonus actually earned is paid in cash and
50% is deferred as shares. The level of bonus payable for 'on-target'
performance is 50% of salary.
The shares may be exercised by the employee after three years and
are subject to forfeiture if the employee chooses to leave 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.
Options over 520,119 deferred shares awarded to 85 executives
were outstanding at 30 April 2011.
In respect of the year ended 30 April 2011, the bonus for the
Chief Executive was calculated based on a matrix of net debt
(range £630m to £582m) and return on capital employed (ROCE)
(range 10.9% to 11.9%). These measures were representative of
the Group’s strategic priorities of strengthening the balance sheet
and improving operating efficiencies. The stretch targets were
both achieved. 50% of the bonus will be paid in cash and 50%
in deferred shares. The number of shares to be awarded will be
calculated based on the closing mid-market price on 30 June 2011,
being the date of the preliminary results announcement.
The bonus for the executive Directors in respect of the year ending
30 April 2012 will be based on a similar matrix to that described
above but with a net debt range of £494m to £463m and a ROCE
range of 12.77% to 13.50%. A minimum bonus of 50% would be
payable at 12.77% ROCE (target) and net debt of £482m.
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.
27 Remuneration report
Northgate plc annual report and accounts 2011
Remuneration report continued
At 1 May
2010
Number
granted
Market price
at grant p
Number
exercised
Date of
exercise
Exercise
Price p
Number
Lapsed
At 30 April
2011
Normally
exercisable
Executive performance
share plan
RL Contreras
49,313
130,952
–
180,265
–
–
302,593
302,593
267.5
157.5
173.5
–
Deferred annual bonus plan
RL Contreras
–
29,719
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
49,313
130,952
302,593
482,858
29,719
†Vest Sep 2011
Vest Oct 2012
Vest Aug 2013
Aug 2013 –
Aug 2015
† It is not expected that the award due to vest in September 2011 will achieve its performance targets.
Executive performance share plan
Currently only executive Directors participate in the EPSP with other
executives participating in the MPSP (see below). Awards under the
EPSP vest after three years subject to continued employment and
the satisfaction of challenging performance targets. In line with
the Committee’s policy of placing greater emphasis on variable pay
than on base salaries, grants are currently being made at 150%
of salary face value, being the maximum permitted under the
rules. Consistent with the approach used in 2009 and 2010, the
performance targets applying to the grants to be made in 2011 will
be a mixture of underlying EPS (1/3) and ROCE (2/3). 25% of each
part of the award will vest for achieving a threshold performance
target increasing to full vesting for achieving a stretch performance
target. The Committee considers that EPS and ROCE are the
most appropriate performance measures for the EPSP since they
incentivise the executives to both improve the earnings profile of the
Group and manage balance sheet efficiency (important for a capital
intensive business), both of which should flow through to superior
returns to its shareholders. Currently EPS targets are set for the third
year of the three year performance period and ROCE targets are set
for the average of the three years of the performance period.
The Committee believes that the most appropriate measure of
performance against the business plan is one based on divisional
earnings before interest or tax or Group profit before tax, as relevant
to the individual.
There is an over-riding condition that no part of an award can vest if
there has been a decrease in underlying profit before tax compared
to the prior year.
The position as at 30 April 2011 with regard to awards made under
the MPSP is as follows:-
2008
2009
2010
Total
Original award of
shares adjusted
as appropriate for
rights issue and
consolidation
Lapsed/early vesting
Remaining subject to
performance
283,486
184,750
872,638
281,615
604,664 1,760,788
474,929
8,564
98,736
591,023
596,100 1,285,859
The above awards are held by 40 executives, including 14 in Spain.
The relevant targets are:-
All employee share scheme
2009 award
2010 award
2011 award
EPS in 3rd Year
ROCE average over 3 years
Threshold
Stretch
Threshold
Stretch
18.30p
31.45p
38.50p
21.00p
37.00p
47.20p
8.70% 10.40%
10.20% 12.00%
13.50% 13.85%
In respect of the 2011 award, the threshold EPS vesting target
would require growth of 9.9% pa and the stretch target growth of
17.6% pa.
Management performance share plan
The MPSP is designed to reward achievement of, and individual
contribution to, the Group’s three year rolling business plan ('the
business plan'). The MPSP 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 is capped at 100% of salary.
Awards do not normally exceed 50% of salary.
The All Employee Share Scheme (AESS), which is approved by
HMRC 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.
28 Remuneration report
Northgate plc annual report and accounts 2011
The tenth annual cycle ended in December 2010 and resulted in 415
employees acquiring 172,767 Partnership shares at 220p each and
being allocated the same number of Matching shares. As at 30 April
2011 the Trust held 1,357,372 50p Ordinary shares that have been
allocated to employees from the first 10 cycles.
The eleventh annual cycle started in January 2011 and currently
some 390 employees are making contributions to the scheme at an
annualised rate of £375,000.
Share ownership guidelines
The executive Directors of the Company are expected to comply
with Share Ownership Guidelines. Broadly, these require executive
Directors to accumulate, over a period of five years from the date
of appointment, a holding of Ordinary shares of the Company
equivalent in value to their basic annual salary, measured annually.
It is intended that this should be achieved primarily through the
exercise and vesting of share incentive awards and that directors are
not required to go into the market to purchase shares, although any
shares so acquired would count towards meeting the guidelines.
As at 30 April 2011, the value of Bob Contreras’ shareholdings
expressed as a percentage of his basic salary on that date
was 112%.
Sourcing of shares and dilution
Shares to satisfy the requirements of the Group’s existing share
schemes are currently sourced as follows:
DABP and MPSP
To date, awards under these two schemes have been satisfied
through open market purchases by an employee benefit trust based
in Guernsey ('the Guernsey Trust'). During the year 550,000 (2010 –
300,000) Ordinary shares were purchased by the Guernsey Trust and
149,243 (2010 – 59,490 5p and 69,091 50p) were used to satisfy
the exercise of awards under the DABP and MPSP. At 30 April 2011
the Guernsey Trust held 478,758 (2010 – 78,001) Ordinary shares as
a hedge against the Group’s obligations under these schemes.
As explained more fully in the notice of the 2011 Annual General
Meeting set out on pages 86 to 91 further to a review of the DABP
and MPSP by the Committee, shareholder approval is being sought
for the DABP and MPSP in order to provide flexibility to use newly
issued and treasury shares in connection with awards.
EPSP
Shares to satisfy the vesting of awards under the EPSP may be
sourced either from new issue or through open market purchases.
No shares have yet vested from this scheme.
AESS
Shares allocated may be satisfied either by new issue or market
purchase or by a combination of the two. The total number of
shares required to satisfy the allocation made in January 2011 was
345,534 (2010 – 693,168) of which 283,085 (2010 – 346,583)
were new issue, with shares of 62,449 (2010 – 15,069) being
already held by the Capita Trust from forfeitures during the year. No
shares (2010 – 331,516) were acquired from the Guernsey Trust.
At 30 April 2011 the Capita Trust held 38,964 (2010 – 21,096)
Ordinary shares which had been forfeited as a result of early
withdrawals post January 2011.
Overall plan limits
The EPSP and AESS, and subject to shareholder approval at the
AGM, the DABP and MPSP operate within the following limits:
In any 10 calendar year period, the Company may not issue (or grant
rights to issue) more than:
(cid:85)(cid:202)
(cid:85)(cid:202)
10% of the issued Ordinary share capital under all the share
plans, and
5% of the issued Ordinary share capital under the executive
share plans (EPSP, DABP and MPSP).
The dilution position as at the date of this report is 0.59% under the
EPSP and 1.05% under the AESS.
Tom Brown
Chairman of the Remuneration Committee
29 June 2011
29 Remuneration report
Northgate plc annual report and accounts 2011
Report of the audit and risk committee
Role
The Audit and Risk Committee is appointed by, and reports to,
the Board.
The Committee’s terms of reference, which include all matters
referred to in the UK Corporate Governance Code, are reviewed
annually by the Committee and are available on the Company’s
website. In summary these include:
(cid:85)(cid:202) 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;
(cid:85)(cid:202) making recommendations to the Board regarding the
appointment of the external auditor and approving its
remuneration and terms of engagement;
(cid:85)(cid:202) monitoring the independence and objectivity of the external
auditor and developing a policy for the provision of non-audit
services by the external auditor; and
(cid:85)(cid:202) monitoring the audit process and any issues arising therefrom.
During the year, following a review of the Group’s risk
management framework, the Board extended the Committee’s
function to specifically include all aspects of Group risk and at
the same time changed the Committee’s title to ‘Audit and
Risk Committee’.
Membership
The members of the Committee, who are all independent non-
executive Directors of the Company, are:
Date of
appointment
Qualification
AJ Allner (Chairman)
26 September 2007
JG Astrand
THP Brown
6 June 2001
8 June 2005
FCA
MBA
MBA
The UK Corporate Governance 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
2011 are given on page 32.
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 auditor, are normally invited to attend
all meetings.
Activity
Since May 2010, the Committee has:
(cid:85)(cid:202)
reviewed the financial statements for the years ended 30 April
2010 and 2011, the half yearly report issued in December 2010
and Interim Management Statements issued in September
2010 and March 2011. As part of this review process, the
Committee received reports from Deloitte LLP on the full and
half year results:
(cid:85)(cid:202)
reviewed and agreed the scope of the audit work to be
undertaken by Deloitte LLP and agreed their fees;
(cid:85)(cid:202) monitored the Group’s risk management process and business
continuity procedures;
(cid:85)(cid:202)
(cid:85)(cid:202)
(cid:85)(cid:202)
(cid:85)(cid:202)
(cid:85)(cid:202)
reviewed the effectiveness of the Group’s system of
internal controls;
reviewed the Group’s whistle blowing procedures;
reviewed a report on credit control in Spain;
reviewed the Group’s depreciation policy;
reviewed the Group’s corporate taxation arrangements;
(cid:85)(cid:202) monitored the progress of a major IT project in the UK;
(cid:85)(cid:202)
reviewed a report on impairment;
(cid:85)(cid:202) monitored the Group’s going concern status; and
(cid:85)(cid:202)
reviewed its own effectiveness and terms of reference.
As part of the Group's risk management programme, and in
anticipation of the Bribery Act 2010 coming into force on 1
July 2011, a training programme for relevant employees was
implemented to promote awareness of, and compliance with, the
new legislation, including putting in place a policy on receiving
hospitality and a reporting procedure.
External auditor
The Board’s policy on non-audit services provided by the external
auditor, developed and recommended by the Committee, is:-
(cid:85)(cid:202)
(cid:85)(cid:202)
Tax compliance and other audit-related work (including in
particular Corporation Tax): this is work that, in its capacity as
auditor, it is best placed to carry out and will generally be asked
to do so. Nevertheless, where appropriate, it will be asked for a
fee quote;
Tax advisory and other 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 auditor 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 auditor, including
conducting one-to-one meetings with the audit partner.
Consequently, the Committee has recommended to the Board the
reappointment of Deloitte LLP at the Annual General Meeting.
Fees paid and payable to Deloitte LLP in respect of the year under
review are as shown in Note 6 on page 51.
30 Report of the audit and risk committee
Northgate plc annual report and accounts 2011
Internal audit
In fulfilling its duty to monitor the effectiveness of the internal audit
function, the Committee has:
(cid:85)(cid:202)
(cid:85)(cid:202)
(cid:85)(cid:202)
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 and Risk Committee
29 June 2011
31 Report of the audit and risk committee
Northgate plc annual report and accounts 2011
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 UK Corporate Governance
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 two executive and four non-executive
Directors, details of whom are shown on pages 20 and 21. 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.
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 and risk
Remuneration
No. of Meetings
RD Mackenzie
AJ Allner
JG Astrand
THP Brown
RL Contreras
10
10
10
10
10
10
4
–
4
4
4
–
9
9
9
9
9
–
All Directors in office at that time were present at the Annual
General Meeting held in September 2010.
The external auditor and the internal audit manager attended all
Audit and Risk Committee meetings.
Before appointment, non-executive Directors are required to assure
the Board that they can give the time commitment necessary to
properly fulfill 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. However,
as referred to in the Directors’ Report, the Board has decided on
early adoption of the provision in the new UK Corporate Governance
Code ('the Code') which will require all Directors of FTSE 350
companies to be subject to annual election. Accordingly, resolutions
to re-appoint all Directors currently in office will be proposed at the
Annual General Meeting.
Jan Astrand has now been in office for more than nine years, having
first been appointed to the Board in February 2001. In accordance
with Provision B.1.1 of the Code, the Board has reviewed his
independence and is satisfied that there are no relationships
or circumstances which are likely to affect his independence
of judgment.
The Board has established a Nominations Committee, which
is chaired by Bob Mackenzie. All the non-executive Directors
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 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 one occasion during the year.
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. Having conducted
this evaluation, the Chairman remains of the view that each
individual Director’s performance continues to be effective and each
demonstrates commitment to the role. 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.
Pursuant to those provisions of the Companies Act 2006 relating
to conflicts of interest and in accordance with the authority
contained in the Company’s Articles of Association, the Board has
put in place procedures to deal with the notification, authorisation,
recording and monitoring of Directors’ conflicts of interest and these
procedures have operated effectively throughout the year and to the
date of signing of this report and accounts.
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 25 to 29.
3 Accountability and audit
An assessment of the Company’s position and prospects is included
in the Chairman’s Statement and in the Operational Review and
Financial Review on pages 2 to 19.
32 Corporate governance
Northgate plc annual report and accounts 2011
Internal control
Control procedures
Provision C.2.1 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.
Corporate governance
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
accounts, are described below:
Control environment
The Group has a clearly defined organisational structure within
which individual responsibilities of line and financial management for
the maintenance of strong internal controls and the production of
accurate and timely financial management information are identified
and can be monitored. Where appropriate, the business is required
to comply with the procedures set out in written manuals.
To demonstrate the Board’s commitment to maintaining the
highest business and ethical standards and to promote a culture of
honesty and integrity amongst all staff, the Board has established a
confidential telephone service, operated by an independent external
organisation, which may be used by all staff to report any issues of
concern relating to dishonesty or malpractice within the Group. All
issues reported are investigated by senior management.
Identification of risks
The Board and the Group’s management have a clearly defined
responsibility for identifying the major business risks facing the
Group and for developing systems to mitigate and manage those
risks. The control of key risk is reviewed by the Board and the
Group’s management at their monthly meetings. The Board is
therefore able to confirm that there is an ongoing process for
identifying, evaluating and managing the significant risks faced by
the Group, that it has been in place for the year under review and
up to the date of approval of these accounts and accords with the
Turnbull guidance.
Information and communication
The Group has a comprehensive system for reporting financial
results to the Board. Each operating unit prepares monthly accounts
with a comparison against their business plan and against the
previous year, with regular review by management of variances
from targeted performance levels. A business plan is prepared by
management and approved by the Board annually. Each operating
unit prepares a two 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.
The Board and the Group’s management have adopted a schedule
of matters which are required to be brought to it for decision, thus
ensuring that it maintains full and effective control over appropriate
strategic, financial, organisational and compliance issues. Measures
taken include clearly defined procedures for capital expenditure
appraisal and authorisation, physical controls, segregation of duties
and routine and ad hoc checks.
Monitoring
The Board has delegated to executive management implementation
of the system of internal control. The Board, including the Audit and
Risk Committee, receives reports on the system of control from the
external auditor and from management. An independent internal
audit function reports bi-annually to the Audit and Risk 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
accounts in accordance with the Turnbull guidance.
Audit
An account of the work of the Audit and Risk Committee is given in
the Audit and Risk Committee Report on pages 30 to 31.
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 half and full
year results, they are invited to briefings given by the Chief Executive
and Group 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, 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.
By order of the Board
D Henderson
Secretary
29 June 2011
33 Corporate governance
Northgate plc annual report and accounts 2011
Health & safety and environment
The Board believes that good health & safety
and environmental (HS&E) performance is
synonymous with good business performance
and this objective is supported by comprehensive
strategies and initiatives approved by the Board.
The Board has designated the Chief Executive as the person
ultimately responsible for HS&E throughout the Group.
Responsibility for implementing and monitoring the Group’s HS&E
policies is devolved to operational management at our locations in
the UK and Spain.
The Company is committed to promoting and implementing only
the highest HS&E standards across all locations. Sound and robust
HS&E arrangements and risk controls therefore form a key part of
the Company’s overall business strategy. The Group’s arrangements
for HS&E governance and management systems implementation
are detailed in our policy and management arrangement manuals
available at all Group locations and on our intranet.
Common and consistent HS&E standards in accordance with
legislative and best practice requirements are applied across all
Group operations. Risk controls and procedures are continually
assessed to ensure that everything is being done to meet the highest
possible standards of HS&E requirements using comprehensive and
robust HS&E operating controls.
During the year the Group’s HS&E department carried out formal
audit reviews to measure performance of our HS&E management
system at all locations and where necessary identified improvements
and monitored compliance subsequently. The main objective of
the HS&E department is to ensure continuous improvement across
the Group and provide pragmatic and practical solutions to the
operational risks within the business to all levels of employees with a
strong focus on behavioural safety and employee involvement.
The Company provides training for employees in a wide range of
health and safety disciplines, most of which is carried out internally
by the Group’s HS&E department. In the UK, training provided is
accredited by the British Safety Council. We continue to focus our
efforts on training as we see this as being pivotal in meeting our
objective of continually raising and improving HS&E standards and
culture across all locations.
The total water usage consumption in the UK for the period was
41,650 cubic metres, a reduction of 19% from the previous period.
This reduction takes into account the implementation of waste
usage controls and a small number of site closures.
The Group is a sponsor of Brake, the road safety charity, and are
members of the British Safety Council and the Royal Society for the
Prevention of Accidents (RoSPA). For the third successive year we
received a Gold Award from RoSPA in recognition of the Group’s
HS&E arrangements in the UK. Winning this prestigious award for
three consecutive years we believe underlines our commitment to
health and safety.
During the year under review, no incidents resulting in fatality or
significant pollution occurred at any of our locations. No formal
notices were issued by enforcement authorities at any location.
Property
As at 30 April 2011, the vehicle hire business in the UK and Republic
of Ireland operated out of 62 properties, of which 20 are larger
primary sites and 42 are branches. The vast majority of these sites are
located on industrial estates, so our activities have minimal impact
on the local community of the areas in which we operate. They 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 40 to 50 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 10 to
15 people. Two of the larger sites share premises with Northgate
Vehicle Sales who have a further nine dedicated sales and retail
sites. Fleet Technique operate from offices in Gateshead and the
Group’s head office building in Darlington accommodates all central
administrative and support services. There are two stand alone body
shop facilities in Warwick and Huddersfield.
The Spanish hire business operates from 25 sites which are all of
a similar nature to those operated out of in the UK business, as
described above.
Vehicle fleet
The Company’s environmental principles are to promote and operate
processes and procedures which, so far as is reasonably practicable,
avoid or minimise the contamination of water, air or the ground
whilst maintaining a responsibility to manage those by-products and
waste materials generated by our activities, particularly from our
vehicle repair workshops.
The total fleet in the UK and Republic of Ireland at 30 April 2011
was 61,200, with an average age of 22.1 months, of which 10%
were cars and the remainder commercial vehicles. The total fleet
in Spain at 30 April 2011 was 43,500 vehicles with an average
age of 25.0 months of which 46% were cars and the remainder
commercial vehicles.
During the year 85% of hazardous wastes collected from workshops
in the UK and 78% of hazardous wastes collected from workshops
in Spain were recycled. We continue to work closely with our waste
management partners to improve waste management arrangements
and performance across the Group. The operating business in Spain
is certified to the internationally recognised Environmental Standard
ISO 14001.
Vehicles were sold after an average life of 35.2 months in the UK
and 42.8 months in Spain.
Our fleet is therefore, comprised entirely of modern vehicles. All
purchases in the year ended 30 April 2011 were either Euro IV or
Euro V compliant.
34 Health & safety and environment
Northgate plc annual report and accounts 2011
Directors' responsibilities
The Directors are responsible for preparing the
annual report and accounts in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors are required
to prepare the Group financial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by the
European Union and Article 4 of the IAS Regulation and have also
chosen to prepare the Parent Company financial statements under
IFRS as adopted by the EU. Under company law the Directors must
not approve the accounts unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and Company
and of the profit or loss of the Group for that period.
In preparing these financial statements, IAS 1 (Presentation of
Financial Statements) requires that Directors:
(cid:85)(cid:202)
(cid:85)(cid:202)
(cid:85)(cid:202)
properly select and apply accounting policies;
present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
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; and
(cid:85)(cid:202) make an assessment of the Group’s ability to continue as a
going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the Group and the Company and
enable them to ensure that the financial statements comply with
the Companies Act 2006. They are also responsible for safeguarding
the assets of the Group and 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.
Responsibility statement
We confirm that to the best of our knowledge:
(cid:85)(cid:202)
(cid:85)(cid:202)
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 management report, which is incorporated into the
Directors’ report, includes 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.
By order of the Board
Bob Contreras
Chief Executive Officer
29 June 2011
35 Directors' responsibilities
Northgate plc annual report and accounts 2011
Independent auditor's report to the members of Northgate plc
We have audited the financial statements of Northgate plc for
the year ended 30 April 2011 which comprise the consolidated
income statement, the Group and Parent Company statement of
comprehensive income, the Group and Parent Company balance
sheets, the Group and Parent Company cash flow statements, the
Group and Parent Company notes to the cash flow statements, the
Group and Parent Company statements of changes in equity and
the related notes 1 to 40. The financial reporting framework that has
been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRS) as adopted by the European
Union and, as regards the Parent Company financial statements,
as applied in accordance with the provisions of the Companies
Act 2006.
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
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 auditor’s 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 auditor
As explained more fully in the Directors’ Responsibilities statement,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require
us to comply with the Auditing Practices Board’s Ethical Standards
for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to
the Group’s and the Parent Company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and
the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the
annual report to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Opinion on financial statements
In our opinion:
(cid:85)(cid:202)
(cid:85)(cid:202)
the financial statements give a true and fair view of the state of
the Group’s and of the Parent Company’s affairs as at 30 April
2011 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in
accordance with IFRS as adopted by the European Union;
(cid:85)(cid:202)
(cid:85)(cid:202)
the Parent Company financial statements have been properly
prepared in accordance with IFRS as adopted by the European
Union and as applied in accordance with the provisions of the
Companies Act 2006; and
the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards
the group financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
(cid:85)(cid:202)
(cid:85)(cid:202)
the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies
Act 2006; and
the information given in the Directors’ Report for the financial
year for which the financial statements are prepared is
consistent with the financial statements.
Matters on which we are required to report by
exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
(cid:85)(cid:202)
(cid:85)(cid:202)
(cid:85)(cid:202)
adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
the Parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law
are not made; or
(cid:85)(cid:202) we have not received all the information and explanations we
require for our audit.
Under the Listing Rules we are required to review:
(cid:85)(cid:202)
(cid:85)(cid:202)
(cid:85)(cid:202)
the Directors’ statement, contained within the Financial Review,
in relation to going concern;
the part of the Corporate Governance Statement relating to
the Company’s compliance with the nine provisions of the June
2008 Combined Code specified for our review; and
certain elements of the report to shareholders by the Board on
Directors’ remuneration.
Christopher Powell FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Leeds, United Kingdom
29 June 2011
36 Independent auditor’s report to the
members of Northgate plc
Northgate plc annual report and accounts 2011
Consolidated income statement
For the year ended 30 April 2011
Revenue: hire of vehicles
Revenue: sale of vehicles
Total revenue
Cost of sales
Gross profit
Administrative expenses (excluding exceptional items,
impairment of intangible assets and intangible amortisation)
Exceptional administrative expenses
Impairment of intangible assets
Intangible amortisation
Total administrative expenses
Profit from operations
Interest income
Finance costs (excluding exceptional items)
Exceptional finance costs
Total finance costs
Profit before taxation
Taxation
Profit for the year
Underlying
2011
£000
537,285
178,217
Statutory
2011
£000
537,285
178,217
Underlying
2010
£000
563,698
185,875
Statutory
2010
£000
563,698
185,875
715,502
715,502
749,573
749,573
Notes
4,5
4,5
4,5
(553,083)
(553,083)
(599,045)
(599,045)
162,419
162,419
150,528
150,528
35
35
15
5,6
8
9
9,35
10
(56,772)
–
–
–
(56,772)
(12,499)
(5,892)
(4,681)
(67,709)
–
–
–
(67,709)
(6,720)
–
(4,990)
(56,772)
(79,844)
(67,709)
(79,419)
105,647
848
82,575
848
82,819
770
71,109
770
(52,649)
–
(52,649)
(4,234)
(47,048)
–
(47,048)
(15,216)
(52,649)
(56,883)
(47,048)
(62,264)
53,846
(15,305)
38,541
26,540
2,853
29,393
36,541
(8,295)
28,246
9,615
14,741
24,356
Profit for the year is wholly attributable to the owners of the Parent Company. All results arise from continuing operations.
Underlying profit excludes exceptional items and impairment of intangible assets as set out in Note 35, as well as intangible amortisation and
the taxation thereon, in order to provide a better indication of the Group’s underlying business performance.
Earnings per share
Basic
Diluted
12
12
29.0p
28.5p
22.1p
21.7p
26.8p
26.4p
23.1p
22.8p
37 Consolidated income statement
Northgate plc annual report and accounts 2011
Statements of comprehensive income
For the year ended 30 April 2011
Amounts attributable to the owners of the
Parent Company
Profit (loss) attributable to the owners
Other comprehensive income
Foreign exchange differences on retranslation of net assets of
subsidiary undertakings
Net foreign exchange differences on long term borrowings and
derivatives held as hedges
Foreign exchange difference on revaluation reserve
Net fair value gains (losses) on cash flow hedges
Deferred tax (charge) credit recognised directly in equity relating
to cash flow hedges
Actuarial losses on defined benefit pension scheme
Deferred tax credit (charge) recognised directly in equity relating
to defined benefit pension scheme
Notes
Group
2011
£000
2010
£000
Company
2011
£000
2010
£000
29,393
24,356
(18,384)
(13,118)
32
32
28
31
31
34
34
4,645
(3,929)
–
–
(3,727)
33
5,386
(1,559)
(169)
50
3,929
(35)
(14,681)
4,110
(221)
(8)
–
–
5,069
(1,467)
–
–
–
–
(14,762)
4,130
–
–
Total other comprehensive income
4,659
(10,835)
3,602
(10,632)
Total comprehensive income for the year
34,052
13,521
(14,782)
(23,750)
38 Statements of comprehensive income
Northgate plc annual report and accounts 2011
Balance sheets
As at 30 April 2011
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment: vehicles for hire
Other property, plant and equipment
Total property, plant and equipment
Derivative financial instrument assets
Deferred tax assets
Investments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instrument assets
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Short term borrowings
Total current liabilities
Net current assets (liabilities)
Non-current liabilities
Derivative financial instrument liabilities
Long term borrowings
Deferred tax liabilities
Retirement benefit obligation
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Revaluation reserve
Own shares reserve
Merger reserve
Hedging reserve
Translation reserve
Capital redemption reserve
Retained earnings
Total equity
Notes
Group
2011
£000
2010
£000
3,589
11,809
714,042
77,308
3,589
20,449
741,543
86,512
791,350
828,055
Company
2011
£000
–
–
–
2,705
2,705
2010
£000
–
–
–
2,766
2,766
2,155
10,179
–
14,622
18,409
–
2,155
1,910
147,894
14,622
2,462
147,895
819,082
885,124
154,664
167,745
21,371
124,623
–
96,885
22,933
142,175
–
85,343
–
903,532
3,301
18,937
–
960,562
–
38,737
242,879
250,451
925,770
999,299
1,061,961
1,135,575
1,080,434
1,167,044
67,419
16,712
13,578
86,687
16,439
153,349
221,696
–
–
196,015
–
152,236
97,709
256,475
221,696
348,251
145,170
(6,024)
704,074
651,048
7,684
612,434
4,233
142
8,794
547,061
17,600
539
7,684
598,515
–
–
8,794
544,955
–
–
624,493
573,994
606,199
553,749
722,202
830,469
827,895
902,000
339,759
305,106
252,539
265,044
66,616
113,508
1,363
(1,630)
67,463
(1,893)
(4,738)
40
99,030
66,475
113,269
1,330
(891)
67,463
(5,720)
(5,656)
40
68,796
66,616
113,508
1,371
–
63,159
(1,776)
–
40
9,621
66,475
113,269
1,371
–
63,159
(5,378)
–
40
26,108
339,759
305,106
252,539
265,044
14
15
16
17
23
25
18
19
20
23
21
24
22
23
22
25
38
26
27
28
29
30
31
32
33
34
Total equity is wholly attributable to the owners of the Parent Company.
The financial statements were approved by the Board of Directors and authorised for issue on 29 June 2011.
They were signed on its behalf by:
RD Mackenzie
CJR Muir
Director
Director
39 Balance sheets
Northgate plc annual report and accounts 2011
Cash flow statements
For the year ended 30 April 2011
Net cash from (used in) operations
(a)
102,260
188,525
(41,539)
(54,325)
Group
2011
£000
2010
£000
Company
2011
£000
2010
£000
Investing activities
Interest received
Dividends received from subsidiary undertakings
Proceeds from disposal of other property, plant and equipment
Purchases of other property, plant and equipment
Purchases of intangible assets
Net cash (used in) from investing activities
Financing activities
Repayments of obligations under finance leases
Repayments of bank loans and other borrowings
Debt issue costs paid
Receipt of other loan
Loans from subsidiary undertakings
Settlement of financial instruments with subsidiary undertaking
Proceeds from issue of share capital
Payments to acquire own shares for share schemes
Termination of financial instruments
848
–
3,295
(4,972)
(2,027)
(2,856)
–
(175,464)
(10,309)
100,000
–
–
380
(1,676)
(896)
770
–
1,805
(4,617)
(1,849)
(3,891)
(37)
(255,422)
(31,358)
–
–
–
108,245
(674)
–
112
45,000
–
–
–
45,112
–
(195,944)
(10,309)
100,000
85,992
–
380
(1,676)
(896)
Net cash (used in) from financing activities
(87,965)
(179,246)
(22,453)
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at 1 May
Effect of foreign exchange movements
11,439
85,343
103
5,388
80,036
(81)
(18,880)
38,737
(920)
Cash and cash equivalents at 30 April
(b)
96,885
85,343
18,937
236
56,701
–
–
–
56,937
–
(216,924)
(31,358)
–
181,680
(21,620)
108,245
(684)
–
19,339
21,951
13,215
3,571
38,737
40 Cash flow statements
Northgate plc annual report and accounts 2011
Notes to the cash flow statements
For the year ended 30 April 2011
(a) Net cash from (used in) operations
Profit (loss) from operations
Adjustments for:
Depreciation of property, plant and equipment
Impairment of intangible assets
Impairment of other property, plant and equipment
Exchange differences
Amortisation of intangible assets
Loss (gain) on disposal of property, plant and equipment
Share options fair value charge
Operating cash flows before movements in working capital
(Increase) decrease in non-vehicle inventories
Decrease in receivables
(Decrease) increase in payables
Cash generated from (used in) operations
Income taxes (paid) repaid
Interest paid
Net cash generated from (used in) operations
Purchase of vehicles
Proceeds from disposal of vehicles
Group
2011
£000
82,575
215,867
5,892
6,868
69
4,681
48
1,897
317,897
(619)
18,836
(4,729)
331,385
(3,292)
(43,445)
284,648
(343,620)
161,232
2010
£000
(As restated)
71,109
242,120
–
–
58
4,990
(491)
1,154
318,940
832
31,826
6,511
358,109
835
(48,316)
310,628
(299,144)
177,041
Company
2011
£000
2010
£000
(5,137)
(7,496)
61
–
–
–
–
–
1,897
(3,179)
–
11
3,173
5
–
(41,544)
(41,539)
–
–
62
–
–
(225)
–
–
1,154
(6,505)
–
893
(611)
(6,223)
–
(48,102)
(54,325)
–
–
Net cash from (used in) operations
102,260
188,525
(41,539)
(54,325)
(b) Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand.
41 Notes to the cash flow statements
Northgate plc annual report and accounts 2011
Statements of changes in equity
For the year ended 30 April 2011
Group
Total equity at 1 May 2009
Share options fair value charge
Share options exercised
Issue of Ordinary share capital (net of expenses)
Profit attributable to owners of the Parent Company
Purchase of own shares
Transfer of shares on vesting of share options
Other comprehensive income
Transfers between equity reserves
Total equity at 1 May 2010
Share options fair value charge
Share options exercised
Issue of Ordinary share capital
Profit attributable to owners of the Parent Company
Purchase of own shares
Transfer of shares on vesting of share options
Other comprehensive income
Transfers between equity reserves
Share
capital
and share
premium
£000
71,499
–
–
108,245
–
–
–
–
–
179,744
–
–
380
–
–
–
–
–
Own
shares
reserve
£000
(2,302)
–
–
–
–
(674)
2,085
–
–
(891)
–
–
–
–
(1,676)
937
–
–
Hedging
reserve
£000
4,851
–
–
–
–
–
–
(9,602)
(969)
(5,720)
–
–
–
–
–
–
2,616
1,211
Translation
reserve
£000
(5,656)
–
–
–
–
–
–
(969)
969
(5,656)
–
–
–
–
–
–
2,129
(1,211)
Other
reserves
£000
68,868
–
–
–
–
–
–
(35)
–
68,833
–
–
–
–
–
–
33
–
Retained
earnings
£000
45,499
1,154
(1,984)
–
24,356
–
–
(229)
–
68,796
1,897
(937)
–
29,393
–
–
(119)
–
Total equity at 30 April 2011
180,124
(1,630)
(1,893)
(4,738)
68,866
99,030
Other reserves comprise the capital redemption reserve, revaluation reserve and merger reserve.
Company
Total equity at 1 May 2009
Share options fair value charge
Issue of Ordinary share capital (net of expenses)
Loss attributable to owners of the Parent Company
Other comprehensive income
Total equity at 1 May 2010
Share options fair value charge
Issue of Ordinary share capital
Loss attributable to owners of the Parent Company
Other comprehensive income
Share
capital
and share
premium
£000
71,499
–
108,245
–
–
179,744
–
380
–
–
Revaluation
reserve
£000
1,371
–
–
–
–
1,371
–
–
–
–
Hedging
reserve
£000
5,254
–
–
–
(10,632)
(5,378)
–
–
–
3,602
Merger
reserve
£000
63,159
–
–
–
–
63,159
–
–
–
–
Total equity at 30 April 2011
180,124
1,371
(1,776)
63,159
Capital
redemption
reserve
£000
40
–
–
–
–
40
–
–
–
–
40
Retained
earnings
£000
38,072
1,154
–
(13,118)
–
26,108
1,897
–
(18,384)
–
Total
£000
182,759
1,154
(1,984)
108,245
24,356
(674)
2,085
(10,835)
–
305,106
1,897
(937)
380
29,393
(1,676)
937
4,659
–
339,759
Total
£000
179,395
1,154
108,245
(13,118)
(10,632)
265,044
1,897
380
(18,384)
3,602
9,621
252,539
42 Statements of changes in equity
Northgate plc annual report and accounts 2011
Notes to the accounts
1. General information
Northgate plc is a Company incorporated in England and Wales under the Companies Act 2006. The address of the registered office is given
on page 92. The nature of the Group’s operations and its principal activities are set out in Note 5 and in the Operational Review and Financial
Review on pages 11 to 19.
The accounts 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.
2. Principal accounting policies
Statement of compliance
The accounts have been prepared in accordance with International Financial Reporting Standards (IFRS). The accounts have also been
prepared in accordance with IFRS adopted by the European Union (EU) and therefore the Group accounts comply with Article 4 of the EU
Regulation.
Basis of preparation
The financial information has been prepared on the historical cost basis, except for the revaluation of certain financial instruments.
Going concern
The accounts continue to be prepared on a going concern basis since the Directors have a reasonable expectation that the Company and
Group have adequate resources to continue in operational existence for the foreseeable future as set out on page 17 of the Financial Review.
Changes in accounting policy
(a) New standards and interpretations becoming effective in the current financial year
The following new standards, amendments to standards and interpretations are mandatory for the financial year beginning 1 May 2010 but
have no material impact on the consolidated results or financial position of the Group.
IFRS 2
IFRS 3
IAS 27
IAS 28
IAS 31
IAS 32
IAS 39
IFRIC 17
IFRIC 18
Share-based Payment – Amendment relating to group cash-settled share-based payment transactions
Business Combinations – Comprehensive revision on applying the acquisition method
Consolidated and Separate Financial Statements – Consequential amendments arising from amendments to IFRS 3
Investments in Associates – Consequential amendments arising from amendments to IFRS 3
Interests in Joint Ventures – Consequential amendments arising from amendments to IFRS 3
Financial Instruments: Presentation – Amendments relating to classification of rights issues
Financial Instruments: Recognition and Measurement – Amendments for eligible hedged items
Distribution of Non-cash Assets to Owners
Transfer of Assets from Customers
(b) New standards and interpretations issued but not yet effective
The following relevant new standards, amendments to standards and interpretations have been issued with an effective date for financial
years beginning on or after the dates disclosed below.
IFRS 7
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 12
IAS 24
IAS 27
IFRIC 14
Financial Instruments: Disclosures – Amendments relating to the transfer of financial assets
Financial Instruments
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Fair Value Measurement
Income Taxes – Amendments relating to deferred tax and the recovery of underlying assets
Related Party Disclosures – Revised to replace existing IAS 24 to clarify and simplify the definition of a
related party, and provide exemptions for government related entities
Consolidated and Separate Financial Statements – Amendments
Prepayments of a Minimum Funding Requirement – Amendments to IFRIC 14 relating to voluntary
prepayments for minimum funding contributions
IFRIC 19
Extinguishing Financial Liabilities with Equity Instruments
1 January 2011
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2012
1 January 2011
1 July 2010
1 January 2011
1 July 2010
43 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
2.
Principal accounting policies continued
The Directors are currently assessing the impact of IFRS 9 on its results, financial position and cash flows and do not expect that there will be
any material impact on the Group’s accounts on adoption of any of the other above standards and interpretations.
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 accounts include the
accounts of the Company and its subsidiary undertakings made up to 30 April 2010 and 30 April 2011. 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 non-controlling interests is stated at the non-controlling interest's proportion
of the fair values of the assets and liabilities recognised. Subsequently any losses applicable to the non-controlling interest in excess of the
amount of non-controlling interest are allocated against the interests of the parent.
Where necessary, adjustments are made to the accounts 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, sale of used 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 hire is recognised evenly over the hire period and revenue from sales of other related goods and services is recognised
at the point of sale.
Revenue from the sale of used vehicles 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 annual or other tests for impairment. Any impairment is
recognised immediately in the income statement and is not subsequently reversed.
Intangible assets – arising on business combinations
Amortisation of intangible assets is charged to the income statement on a straight-line basis over the estimated useful lives of each intangible
asset. Intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:
Customer relationships
Brand names
Non-compete agreements
Intangible assets – other
5 to 13 years
5 to 10 years
2 to 4 years
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. Software
assets are amortised on a straight line basis over their estimated useful lives, which do not exceed three years.
Property, plant and equipment
Property, plant and equipment is stated at historical cost, less accumulated depreciation and any provision for impairment. Certain properties
were revalued prior to the adoption of IFRS. These valuations were treated as deemed cost at the time of adopting IFRS for the first time.
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 & 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
44 Notes to the accounts
Northgate plc annual report and accounts 2011
2.
Principal accounting policies continued
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
inventories 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 directly attributable 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.
On the subsequent sale or retirement of properties revalued prior to the adoption of IFRS, the attributable revaluation surplus remaining in
the revaluation reserve is transferred directly to retained earnings. The residual value, if not insignificant, is reassessed annually.
The amounts disclosed relating to the proceeds from disposal of vehicles, the accumulated depreciation relating to the transfer to inventories
of vehicles for hire and the depreciation charge of vehicles for hire as disclosed in the 2010 accounts have been restated in these accounts
to increase these amounts by £12,368,000 in order to accurately present these figures. The items affected and the restated amounts are
as follows: proceeds from disposal of vehicles of £177,041,000 and depreciation of property, plant and equipment of £242,120,000 in the
notes to the cash flow statement; depreciation of property, plant and equipment of £242,120,000 in Note 5 and Note 6; and the charge for
the year of £236,881,000 and transfer to inventories of £(249,857,000) in Note 16. There is no change to the 2010 reported profit or cash
flows of the Group.
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.
Where an impairment loss has been recognised in an earlier period, the Group reassesses whether there are any indications that such
impairment has decreased or no longer exists.
Inventories
Used vehicles held for resale 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.
Other inventories comprise spare parts and consumables and are valued at the lower of cost or net realisable value.
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
accounts 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.
45 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
2.
Principal accounting policies continued
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 except where derivatives qualify for hedge accounting, where recognition of the resultant gain or loss depends on the
nature of the items being hedged.
The fair value of cross-currency and 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. Amounts previously recognised in other comprehensive
income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognised in profit or loss, in the
same line of the income statement as the recognised hedged item. However, when the forecast transaction that is hedged results in the
recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from
equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.
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.
Changes in the fair value of derivative financial instruments that are designated and effective as net investment hedges are recognised directly
in equity and the ineffective portion is recognised in the income statement. Exchange differences arising on the net investment hedges are
transferred to the translation reserve.
Bank loans, other loan, loan notes and issue costs
Bank loans, other loan and loan notes 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 accruals basis.
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 that are
denominated in foreign currencies are retranslated at the rates prevailing at that date.
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.
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 translation reserve component of equity.
46 Notes to the accounts
Northgate plc annual report and accounts 2011
2.
Principal accounting policies continued
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 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 but 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 updates to
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 other comprehensive income.
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 operates group personal pension plans. The costs of these plans are charged to the income statement as they fall due.
Employee share schemes and share based payments
The Group has applied the requirements of IFRS 2 (Share-based Payment). 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 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.
Interest income and finance costs
Interest income and finance costs are recognised in the income statement using the effective interest rate method.
Exceptional items
Items are classified as exceptional gains or losses where they are considered by the Directors to be material and which individually or, if of a
similar type, in aggregate need to be disclosed by virtue of their size or incidence if the accounts are to be properly understood.
Dividends
Dividends on Ordinary shares are recognised 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.
47 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
2.
Principal accounting policies continued
Own shares
The Group makes open market purchases of its own shares in order to satisfy the requirements of the Group’s existing share schemes. Own
shares are recognised at cost as a reduction in shareholder equity. The carrying values of own shares are compared to their market values at
each reporting date and adjustments are made to write down the carrying value of own shares when, in the opinion of the Directors, there is
a significant market value reduction.
3. Critical accounting judgements 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 accounts.
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
inventories is in line with the open market values for those vehicles.
Under IAS 16 (Property, Plant and Equipment), 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 directly attributable 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.
Impairment of goodwill and other non-current assets
Determining whether goodwill and other non-current assets are impaired requires an estimation of their value in use in the cash generating
units. 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.
Provision for bad and doubtful debts
Trade receivables are stated in the balance sheet at their nominal value less any appropriate provision for irrecoverable amounts. In
determining whether provision is required against any trade receivable, judgment is required in estimating the likely levels of recovery. In
exercising this judgment, consideration is given to both the overall economic environment in which a debtor operates, as well as specific
indicators that the recovery of the nominal balance may be in doubt, for example days’ sales outstanding in excess of agreed credit terms or
other qualitative information in respect of a customer.
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. To the extent that tax estimates result in the recognition of deferred tax assets, those assets
are only carried in the balance sheet to the extent that it is considered that they are likely to be recovered in the short term. In the current
year, net deferred tax assets totalling £5,928,000 previously derecognised have been recognised as the recovery of those assets is now
considered probable in the short term (2010 – £15,456,000), as explained further in Note 10.
4. Revenue
Total revenue of £715,502,000 (2010 – £749,573,000) comprises revenue from the hire of vehicles of £537,285,000 (2010 – £563,698,000)
and revenue from the sale of vehicles of £178,217,000 (2010 – £185,875,000).
48 Notes to the accounts
Northgate plc annual report and accounts 2011
5. Segmental reporting
Management has determined the operating segments based upon the information provided to the executive Board of Directors which is
considered to be the chief operating decision maker. The Group is managed and reports internally, on a basis consistent with its two main
operating divisions, UK and Spain. The UK division includes operations in the Republic of Ireland. The principal activities of these divisions are
set out in the Operational Review and Financial Review.
Revenue: hire of vehicles
Revenue: sale of vehicles
Total revenue
Operating profit (loss) *
Exceptional adminisitrative expenses
Impairment of intangible assets
Intangible amortisation
Profit (loss) from operations
Interest income
Finance costs (excluding exceptional items)
Exceptional finance costs
Profit before taxation
Other information
Capital expenditure
Depreciation
Impairment of other property, plant and equipment
Impairment of intangible assets
Reportable segment assets
Derivative financial instrument assets
Income tax assets
Total assets
Reportable segment liabilities
Derivative financial instrument liabilities
Income tax liabilities
Total liabilities
UK
2011
£000
Spain
2011
£000
Corporate
2011
£000
333,935
102,964
203,350
75,253
436,899
278,603
73,617
(2,433)
–
(3,234)
67,950
36,649
(9,434)
(5,892)
(1,447)
19,876
–
–
–
(4,619)
(632)
–
–
(5,251)
206,416
124,415
–
–
135,300
91,391
6,868
5,892
639,295
410,332
–
61
–
–
–
455,841
237,732
–
Total
2011
£000
537,285
178,217
715,502
105,647
(12,499)
(5,892)
(4,681)
82,575
848
(52,649)
(4,234)
26,540
341,716
215,867
6,868
5,892
1,049,627
2,155
10,179
1,061,961
693,573
7,684
20,945
722,202
49 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
5.
Segmental reporting continued
Revenue: hire of vehicles
Revenue: sale of vehicles
Total revenue
Operating profit (loss) *
Exceptional administrative expenses
Intangible amortisation
Profit (loss) from operations
Interest income
Finance costs (excluding exceptional items)
Exceptional finance costs
Profit before taxation
Other information
Capital expenditure
Depreciation (as restated)
Reportable segment assets
Derivative financial instrument assets
Income tax assets
Total assets
Reportable segment liabilities
Derivative financial instrument liabilities
Income tax liabilities
Total liabilities
UK
2010
£000
328,198
114,321
442,519
58,970
(5,779)
(2,977)
50,214
Spain
2010
£000
235,500
71,554
307,054
29,983
127
(2,013)
28,097
Corporate
2010
£000
–
–
–
(6,134)
(1,068)
–
(7,202)
214,015
136,057
101,718
106,001
643,024
459,520
–
62
–
487,332
300,304
–
Total
2010
£000
563,698
185,875
749,573
82,819
(6,720)
(4,990)
71,109
770
(47,048)
(15,216)
9,615
315,733
242,120
1,102,544
14,622
18,409
1,135,575
787,636
8,794
34,039
830,469
* operating profit (loss) stated before intangible amortisation, impairment of intangible assets and exceptional items is the measure used by
the executive Board of Directors to assess segment performance.
Revenue from sale of vehicles is included as revenue in accordance with IAS 16 which requires used vehicle assets to be classified as
inventories. Used vehicle sales are included within UK and Spain operating segments, which reflects the level at which the executive Board of
Directors allocate resources and review performance of the Group.
There is no significant intersegment trading.
Fleet Technique was previously reported as a separate operating segment of the Group. Due to an ongoing restructuring of the UK business
the operations of Fleet Technique have become integrated into the UK segment and as such the results are no longer reported separately
to the executive Board of Directors. Consequently, Fleet Technique is no longer regarded as a separate operating segment. The comparative
information for the year ended 30 April 2010 has been adjusted to reflect this change.
Geographical information
Revenues are attributed to countries on the basis of the company’s location. 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.
United Kingdom & Republic of Ireland
Spain
Revenue
2011
£000
436,899
278,603
Non-current
assets
2011
£000
475,413
331,335
715,502
806,748
Revenue
2010
£000
442,519
307,054
749,573
Non-current
assets
2010
£000
486,026
366,067
852,093
There are no external customers from whom the Group derives more than 10 per cent of total revenue. Non-current assets exclude financial
instrument assets and deferred tax assets.
50 Notes to the accounts
Northgate plc annual report and accounts 2011
6. Profit from operations
Profit from operations is stated after charging:
Depreciation of property, plant and equipment (as restated)
Impairment of other property, plant and equipment
Amortisation of intangible assets
Impairment of intangible assets
Net foreign exchange losses
Exceptional administrative expenses (excluding impairment of assets)
Staff costs
Cost of inventories recognised as an expense (as restated)
Net impairment of trade receivables
Auditor’s remuneration for audit services (below)
Auditor’s remuneration for non-audit services (below)
Notes
16, 17
17, 35
15
15, 35
35
7
39
2011
£000
2010
£000
215,867
6,868
4,681
5,892
69
5,631
84,356
210,681
5,457
405
149
242,120
–
4,990
–
58
6,720
91,185
229,820
12,065
356
355
The above cost of inventories recognised as an expense includes movements in stock provisions which are immaterial.
The disclosure of cost of inventories recognised as an expense in the prior year has been restated by £17,981,000 from £211,839,000 to
£229,820,000 to include all attributable costs to sell vehicles held for resale. There is no change to the profit of the Group.
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and its associates for the audit of the
Company’s subsidiaries pursuant to legislation
Total audit fees
Other services pursuant to legislation
Tax services
Other services
Total non-audit fees
2011
£000
240
165
405
21
64
64
149
2010
£000
226
130
356
21
250
84
355
In addition to the amounts shown above, fees payable to Deloitte LLP in their capacity as Reporting Accountants in connection with the
placing and rights issue amounting to £Nil (2010 – £500,000) were charged to the share premium account.
Fees payable to Deloitte 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 and Risk Committee is set out on pages 30 to 31 and includes an explanation of how auditor
objectivity and independence is safeguarded when non-audit services are provided by the auditor.
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
2011
Number
2010
Number
1,599
480
2,079
830
136
966
1,664
493
2,157
841
118
959
3,045
3,116
The above United Kingdom administration employee numbers include 21 (2010 – 21) in respect of the Company.
51 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
7.
Staff costs continued
The aggregate remuneration of Group employees comprised:
Wages and salaries
Social security costs
Other pension costs
2011
£000
2010
£000
72,936
9,995
1,425
84,356
78,609
10,628
1,948
91,185
Wages and salaries include £2,306,000 (2010 – £4,226,000) and pension costs include £Nil (2010 – £151,000) in respect of redundancies
and loss of office. The above employee remuneration includes wages and salaries costs of £3,414,000 (2010 – £5,110,000), social security
costs of £354,000 (2010 – £501,000) and other pension costs of £99,000 (2010 – £552,000) 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 25 to 29.
8.
Interest income
Interest on bank and other deposits
9. Finance costs
Interest on bank overdrafts and loans
Amortisation of arrangement fees
Amortisation of terminated cross-currency derivatives
Cross-currency derivatives ineffectiveness (Note 23)
Change in fair value of cross-currency derivatives (Note 23)
Change in fair value of interest rate derivatives (Note 23)
Preference share dividends
Interest on obligations under finance leases
Finance costs (excluding exceptional items)
Exceptional finance costs
Financing fees written off on extinguishment of debt (Note 35)
Termination of Euro interest rate swaps (Note 23)
Termination of cross-currency swaps (Note 23)
De-designation of Sterling interest rate derivatives (Note 23)
Make-whole premium on US loan notes (Note 35)
Covenant deferral fees (Note 35)
Write off of unamortised fees relating to bilateral debt facilities (Note 35)
Other financing fees (Note 35)
Total exceptional finance costs
2011
£000
848
2010
£000
770
2011
£000
43,241
9,777
(608)
(202)
416
–
25
–
52,649
2,728
473
423
610
–
–
–
–
4,234
56,883
2010
£000
41,046
6,123
(405)
–
–
253
25
6
47,048
–
–
–
–
8,842
2,199
3,751
424
15,216
62,264
Included in interest on bank overdrafts and loans in the current year is a foreign exchange gain of £Nil (2010 £252,000) (Note 23).
52 Notes to the accounts
Northgate plc annual report and accounts 2011
10. Taxation
Current tax:
UK corporation tax
Adjustment in respect of prior years
Foreign tax
Deferred tax:
Origination and reversal of timing differences
Adjustment in respect of prior years
Net recognition of deferred tax assets
UK rate adjustment
2011
£000
5,593
(4,241)
642
1,994
1,091
102
(5,928)
(112)
2010
£000
–
(564)
1,208
644
2,085
(2,014)
(15,456)
–
(4,847)
(15,385)
(2,853)
(14,741)
Corporation tax is calculated at 28% (2010 – 28%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated
at the rates prevailing in those respective jurisdictions.
The net credit 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 28% (2010 – 28%)
Tax effect of expenses that are not deductible in determining taxable profit
Tax effect of income not taxable in determining taxable profit
Difference in taxation in overseas subsidiary undertakings
Recognition of deferred tax assets (below)
Reduction in UK tax rate
Adjustment to tax charge in respect of prior years
Tax credit and effective tax rate for the year
2011
£000
26,540
7,431
440
(615)
70
(5,928)
(112)
(4,139)
(2,853)
%
28.0
1.6
(2.3)
0.3
(22.3)
(0.4)
(15.6)
(10.7)
2010
£000
9,615
2,692
131
–
470
(15,456)
–
(2,578)
(14,741)
%
28.0
1.3
–
4.9
(160.7)
–
(26.8)
(153.3)
In addition to the amount credited to the income statement, a net deferred tax amount of £1,509,000 has been charged (2010 – £4,102,000
credited) directly to equity (Note 25).
The underlying tax charge of £15,305,000 (2010 - £8,295,000) excludes exceptional tax credits of £16,818,000 (2010 - £21,598,000) as set
out in Note 35, and tax credits on intangible amortisation of £1,340,000 (2010 - £1,438,000).
Deferred tax assets of £5,928,000 previously derecognised have been recognised in the current year as the recovery of those assets is now
considered probable in the short term on the basis of anticipated future profits (2010 – £15,456,000).
On 1 April 2011 the UK Corporation tax rate changed from 28% to 26%. Accordingly, the tax disclosures reflect deferred tax measured on
the new 26% rate. The rate is also proposed to be 23% by 1 April 2014. It has not been possible to quantify the full anticipated effect of the
further 3% reduction, although this will further reduce the Group's future tax charge and reduce the deferred tax liabilities and assets of the
Group and of the Company accordingly.
11. Dividends
No dividends were paid in the year (2010 - £Nil). The Directors do not propose a final dividend for the year ended 30 April 2011.
53 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
12. Earnings per share
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 the owners of the Parent Company
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
13. Result of the parent company
Underlying
2011
£000
Statutory
2011
£000
Underlying
2010
£000
Statutory
2010
£000
38,541
29,393
28,246
24,356
Number
Number
Number
Number
133,029,317 133,029,317 105,374,935
105,374,935
2,306,309
2,306,309
1,605,626
1,605,626
135,335,626 135,335,626 106,980,561
106,980,561
29.0p
28.5p
22.1p
21.7p
26.8p
26.4p
23.1p
22.8p
A loss of £18,384,000 (2010 – £13,118,000) is dealt with in the accounts of the Company. The Directors have taken advantage of the
exemption available under s408(3) of the Companies Act 2006 and not presented an income statement for the Company alone.
14. Goodwill
Group
Carrying value:
At 1 May 2010 and 30 April 2011
2011
£000
2010
£000
3,589
3,589
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units that are expected to benefit from the
business combination. The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might
be impaired.
Goodwill relates to the acquisition of Fleet Technique Limited, the business of which has now been integrated into the UK business. As a
result there are now only two cash generating units - the UK and Spain. The test for impairment of goodwill has been carried out as part of
the impairment assessment of the UK business based on risk-adjusted cash flow forecasts derived from a two year business plan approved
by the Directors in April 2011 with a growth rate of 2% over a 10 year period, including terminal values, and a discount rate of 10%. The
recoverable amount was in excess of the current book value and accordingly, no provision for impairment has been recognised.
54 Notes to the accounts
Northgate plc annual report and accounts 2011
15. Other intangible assets
Group
Cost:
At 1 May 2009
Additions
Disposals
Exchange differences
At 1 May 2010
Additions
Disposals
Exchange differences
At 30 April 2011
Amortisation:
At 1 May 2009
Charge for the year
Impairment charge (Note 35)
Impairment reversal (Note 35)
Disposals
Exchange differences
At 1 May 2010
Charge for the year
Impairment (Note 35)
Disposals
Exchange differences
At 30 April 2011
Carrying amount:
At 30 April 2011
At 30 April 2010
Brand
names
£000
Customer
relationships
£000
Non-compete
agreements
£000
Software
technology
£000
Other
software
£000
15,439
–
(246)
(378)
14,815
–
(15,166)
351
23,141
–
(450)
(166)
22,525
–
–
155
–
22,680
7,137
1,340
215
(215)
(246)
(184)
8,047
747
5,892
(15,166)
480
–
–
6,768
8,888
2,662
85
(85)
(450)
(74)
11,026
2,594
–
–
122
13,742
8,938
11,499
464
–
(461)
(3)
–
–
–
–
–
405
70
–
–
(461)
(14)
–
–
–
–
–
–
–
–
168
–
–
–
168
–
(168)
–
–
118
33
–
–
–
–
151
17
–
(168)
–
–
–
17
Total
£000
45,006
1,849
(1,157)
(587)
45,111
2,027
(15,441)
541
5,794
1,849
–
(40)
7,603
2,027
(107)
35
9,558
32,238
4,583
885
–
–
–
(30)
5,438
1,323
–
(107)
33
21,131
4,990
300
(300)
(1,157)
(302)
24,662
4,681
5,892
(15,441)
635
6,687
20,429
2,871
2,165
11,809
20,449
55 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
16. Property, plant and equipment: vehicles for hire
Group
Cost:
At 1 May 2009
Additions
Transfer to motor vehicles
Exchange differences
Transfer to inventories
At 1 May 2010
Additions
Transfer to motor vehicles
Exchange differences
Transfer to inventories
At 30 April 2011
Depreciation:
At 1 May 2009
Charge for the year (as restated)
Exchange differences
Impairment charge (Note 35)
Impairment reversal (Note 35)
Transfer to motor vehicles
Transfer to inventories (as restated)
At 1 May 2010
Charge for the year
Exchange differences
Transfer to motor vehicles
Transfer to inventories
At 30 April 2011
Carrying amount:
At 30 April 2011
At 30 April 2010
£000
1,287,728
309,538
(374)
(15,064)
(420,103)
1,161,725
334,916
(385)
11,315
(353,896)
1,153,675
439,074
236,881
(5,807)
11,000
(11,000)
(109)
(249,857)
420,182
211,622
4,827
(186)
(196,812)
439,633
714,042
741,543
At 30 April 2011, the Group had entered into contractual commitments for the acquisition of vehicles for hire amounting to £33,699,000
(2010 – £39,650,000).
56 Notes to the accounts
Northgate plc annual report and accounts 2011
17. Other property, plant and equipment
Group
Cost:
At 1 May 2009
Additions
Transfer from vehicles for hire
Exchange differences
Disposals
At 1 May 2010
Additions
Transfer from vehicles for hire
Exchange differences
Transfer to other debtors and prepayments
Disposals
At 30 April 2011
Depreciation:
At 1 May 2009
Charge for the year
Exchange differences
Impairment charge (Note 35)
Impairment reversal (Note 35)
Transfer from vehicles for hire
Disposals
At 1 May 2010
Charge for the year
Impairment charge (Note 35)
Exchange differences
Transfer from vehicles for hire
Disposals
At 30 April 2011
Carrying amount:
At 30 April 2011
At 30 April 2010
Land and buildings by category:
Freehold and long leasehold
Short leasehold
Land &
buildings
£000
88,458
1,716
–
(1,315)
(1,659)
87,200
2,593
–
1,166
–
(3,360)
Plant,
equipment
& fittings
£000
22,884
2,220
–
(318)
(2,020)
22,766
1,418
–
153
(856)
(3,471)
Motor
vehicles
£000
900
410
374
–
(363)
1,321
762
385
–
–
(699)
Total
£000
112,242
4,346
374
(1,633)
(4,042)
111,287
4,773
385
1,319
(856)
(7,530)
87,599
20,010
1,769
109,378
9,059
2,581
(49)
–
–
–
(823)
10,768
1,730
6,868
112
–
(1,142)
13,128
2,388
(121)
300
(300)
–
(1,854)
13,541
2,152
–
71
–
(2,582)
18,336
13,182
138
270
–
–
–
109
(51)
466
363
–
–
186
(463)
552
22,325
5,239
(170)
300
(300)
109
(2,728)
24,775
4,245
6,868
183
186
(4,187)
32,070
69,263
76,432
6,828
9,225
1,217
77,308
855
86,512
2011
£000
2010
£000
60,647
8,616
69,263
68,891
7,541
76,432
At 30 April 2011, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to
£123,000 (2010 – £23,000)
57 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
17. Other property, plant and equipment continued
Company
Cost:
At 1 May 2009, 1 May 2010 and 30 April 2011
Depreciation:
At 1 May 2009
Charge for the year
At 1 May 2010
Charge for the year
At 30 April 2011
Carrying amount:
At 30 April 2011
At 30 April 2010
18. Investments
Company
Cost:
At 1 May 2010
Liquidation of subsidiary undertaking
At 30 April 2011
Accumulated provisions:
At 1 May 2010 and 30 April 2011
Carrying amount:
At 30 April 2011
At 30 April 2010
Land &
buildings
£000
3,239
411
62
473
61
534
2,705
2,766
Shares in
subsidiary
undertakings
£000
Loans
to subsidiary
undertaking
£000
Total
£000
103,330
(1)
47,000
–
150,330
(1)
103,329
47,000
150,329
2,435
–
2,435
100,894
47,000
147,894
100,895
47,000
147,895
A full list of the Company’s subsidiaries was included with the Annual Return filed with the Registrar of Companies.
At 30 April 2011, the principal subsidiary undertakings of the Group were as follows, all of which are wholly owned and are registered in
England and Wales unless otherwise stated:
Fleet Technique Limited*
GPS Body Repairs Limited*
Northgate (CB) Limited*
Northgate España Renting Flexible S.A.* (previously known as Furgonetas de Alquiler S.A., incorporated in Spain)
Northgate (Europe) Limited
Northgate (Malta) Limited* (incorporated in Malta)
Northgate (MT) Limited* (incorporated in Malta)
Northgate (TM) Limited
Northgate Vehicle Hire Limited
During the year Furgonetas de Alquiler S.A. completed a legal merger with Record Rent a Car S.A. (a subsidiary undertaking incorporated in
Spain). Subsequently, Record Rent a Car S.A. was liquidated.
*interest held indirectly by the Company
58 Notes to the accounts
Northgate plc annual report and accounts 2011
19. Inventories
Vehicles held for resale
Spare parts and consumables
20. Trade and other receivables
Trade receivables
Amounts due from subsidiary undertakings
Other taxes
Other debtors and prepayments
The average credit period given on trade sales is
Group
2011
£000
16,095
5,276
21,371
2010
£000
18,406
4,527
22,933
Group
Company
2011
£000
110,915
–
–
13,708
2010
£000
130,070
–
–
12,105
2011
£000
–
901,347
2,142
43
2010
£000
–
958,366
2,163
33
124,623
142,175
903,532
960,562
2011
2010
UK
Spain
42 days
94 days
45 days
109 days
Allowances for estimated irrecoverable amounts and the Group’s credit risk are considered in Note 39.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value due to their short term nature.
21. Trade and other payables
Trade payables
Amounts due to subsidiary undertakings
Social security and other taxes
Accruals and deferred income
Trade payables comprise amounts outstanding for trade purchases.
The average credit period taken on trade purchases is
Group
Company
2011
£000
33,623
–
5,703
28,093
67,419
2010
£000
44,601
–
6,922
35,164
2011
£000
801
211,518
77
9,300
2010
£000
301
184,588
140
10,986
86,687
221,696
196,015
2011
2010
UK
Spain
49 days
105 days
49 days
121 days
The Directors consider that the carrying amount of trade and other payables approximates to their fair value due to their short term nature.
59 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
22. Borrowings
Borrowings comprise bank loans, loan notes, property loans 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.
Bank loans
Loan notes
Other loan
Cumulative Preference shares
Property loans
Debt discounting and confirming facilities
The borrowings are repayable as follows:
On demand or within one year
(shown within current liabilities)
Bank loans
Loan notes
Property loans
Debt discounting and confirming facilities
In the second year
Bank loans
Loan notes
Property loans
In the third to fifth years
Bank loans
Loan notes
Property loans
Due after more than five years
Loan notes
Other loan
Cumulative Preference shares
Group
2011
£000
360,974
161,718
97,506
500
1,952
3,362
2010
£000
473,367
223,324
–
500
3,206
13
Company
2011
£000
338,791
161,718
97,506
500
–
–
2010
£000
473,367
223,324
–
500
–
–
626,012
700,410
598,515
697,191
Group
2011
£000
2010
£000
Company
2011
£000
2010
£000
9,209
–
1,007
3,362
112,309
39,927
1,100
13
13,578
153,349
–
–
–
–
–
112,309
39,927
–
–
152,236
87,236
46,392
710
–
–
1,666
74,262
46,392
–
134,338
1,666
120,654
–
–
–
–
264,529
43,150
235
361,058
89,734
440
264,529
43,150
–
361,058
89,734
–
307,914
451,232
307,679
450,792
72,176
97,506
500
93,663
–
500
72,176
97,506
500
170,182
94,163
170,182
93,663
–
500
94,163
Total borrowings
626,012
700,410
598,515
697,191
Less: Amount due for settlement within one year
(shown within current liabilities)
13,578
153,349
–
152,236
Amount due for settlement after one year
612,434
547,061
598,515
544,955
Bank loans, loan notes and the other loan would become repayable in full in the event of a change in control of the Group.
Bank loans
Bank loans are secured and bear interest at rates of 1.20% to 3.25% (2010 - 0.75% to 3.25%) above the relevant interest rate index, being
LIBOR for UK Sterling denominated debt and EURIBOR for Euro denominated debt.
60 Notes to the accounts
Northgate plc annual report and accounts 2011
22. Borrowings continued
Loan notes
In 2006 and 2007, the Company issued unsecured loan notes to investors principally based in the United States. The total of the loan notes
(‘the US Notes’) issued by the Group was US$357,000,000 and £21,000,000. During the year, the Group has repaid $73,463,000 and
£3,820,000 respectively (2010 - $39,141,000 and £2,302,000). In addition, and in accordance with the terms of the US Notes, make-whole
notes amounting to $7,530,000 and £456,000 were issued (2010 - $4,981,000 and £297,000), all of which on their issue had a maturity of
September 2012 and otherwise had the same terms as the related loan notes. During the year, all make-whole notes were repaid in full. The
US Notes are not publicly tradeable are now secured and have the following maturity profile:
Value of loan notes
$40,755,000 (2010: $55,203,000) 5 year loan notes
Redemption date
November 2012
$90,136,000 (2010: $111,295,000) 7 year loan notes
December 2013
$89,318,000 (2010: $106,843,000) 10 year loan notes
December 2016
£15,631,000 (2010: £18,698,000) 10 year loan notes
December 2016
$36,698,000 (2010: $44,518,000) 10 year loan notes
December 2016
Weighted
average
fixed interest
rate on the
US Notes
7.72%
(2010 – 7.72%)
7.86%
(2010 – 7.86%)
7.99%
(2010 – 7.99%)
7.89%
(2010 – 7.89%)
7.99%
(2010 – 7.99%)
Overall
weighted
average
fixed
interest rate
8.19%
(2010 – 8.15%)
8.99%
(2010 – 8.87%)
8.91%
(2010 – 8.82%)
7.89%
(2010 – 7.89%)
8.89%
(2010 – 8.80%)
$Nil (2010: $4,981,000) make-whole notes
September 2012
(2010 – 7.90%)
(2010 – 8.72%)
£Nil (2010: £297,000) make-whole notes
September 2012
(2010 – 7.89%)
(2010 – 7.89%)
Unamortised finance fees relating to the US Dollar denominated
loan Notes
Unamortised finance fees relating to the Sterling denominated
loan Notes
Carrying
value
30 April
2011
£000
24,453
54,082
53,591
15,631
22,018
–
–
Carrying
value
30 April
2010
£000
36,184
72,951
70,034
18,698
29,181
3,265
297
(7,267)
(6,639)
(790)
(647)
161,718
223,324
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 23, 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.
Other loan
During the year, the Company entered into an eight year £100,000,000 secured term loan which is repayable in three equal instalments
in October 2017, April 2018 and April 2019. Interest is payable at 4.25% above LIBOR. The loan is stated net of unamortised finance fees
incurred in relation to entering into this loan agreement.
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 cumulative 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 (2010 – 1,300,000), of which 1,000,000 (2010 –
1,000,000) were allotted and fully paid at the balance sheet date.
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 remaining lease term is two years (2010 - two years). At 30 April 2011, the average borrowing rate for property loans was 2.1%
(2010 – 1.5%). All loans are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
61 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
22. Borrowings continued
Amounts payable under property loans:
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
Minimum
lease payments
Present value of
minimum lease payments
2011
£000
2010
£000
2011
£000
1,040
975
2,015
(63)
1,952
1,146
2,140
3,286
(80)
3,206
1,007
945
1,952
–
1,952
2010
£000
1,100
2,106
3,206
–
3,206
(1,007)
945
(1,100)
2,106
Debt discounting and confirming facilities
Spanish debt discounting and confirming facilities of £3,362,000 (2010 – £13,000) are unsecured and all fall due within one year. At 30
April 2011, the amount drawn entirely related to supplier confirming facilities on which the Group pays no interest. It is common practice in
Spain for businesses to have a bank facility which enables their suppliers to be paid earlier than under normal credit terms. When this is the
case the supplier pays to Northgate España’s bank a discount fee for early settlement. When invoices fall due for payment, Northgate España
settles such invoices with its bank. At 30 April 2010, the drawn amount entirely related to debt discounting facilities on which interest was
chargeable at a range of 0.5% to 1.25% above EURIBOR.
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, are as follows:
Less than one year
In one year to five years
2011
£000
14,135
113,866
2010
£000
10,444
144,197
128,001
154,641
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.
Analysis of consolidated net debt
An analysis of movements in the Group’s consolidated net debt is as follows:
Cash at bank and in hand
Bank loans
Loan notes
Other loan
Cumulative Preference shares
Property loans and other borrowings
At 1 May
2010
£000
85,343
(473,367)
(223,324)
–
(500)
(3,219)
Cash flow
£000
11,439
129,067
53,123
(98,756)
–
2,339
(615,067)
97,212
Other
non-cash
changes
£000
–
(11,090)
(6,832)
1,250
–
(3,362)
(20,034)
Foreign
exchange
movements
£000
103
(5,584)
15,315
–
–
(1,072)
At 30 April
2011
£000
96,885
(360,974)
(161,718)
(97,506)
(500)
(5,314)
8,762
(529,127)
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. At 30 April 2011, the gearing of the Group amounted to 163.1%
(2010 – 218.8%) where net borrowings are £529,127,000 (2010 – £615,067,000) and shareholders’ funds less goodwill and the net book
value of intangible assets are £324,361,000 (2010 – £281,068,000).
62 Notes to the accounts
Northgate plc annual report and accounts 2011
22. Borrowings continued
Financial instruments (see also Note 39)
Financial assets
The Group’s principal financial assets are bank balances and cash, and trade and other receivables.
The Group’s credit risk is primarily attributable to its trade receivables. 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, as in the UK
the Group has a credit insurance policy in place to mitigate this risk.
Treasury policies and the management of risk
The function of Group Treasury is to mitigate 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 23.
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.
Financing and interest rate risk
The Group’s policy is to finance operating subsidiary undertakings by a combination of retained earnings, loan notes, other loans and bank
borrowings, including medium term bank loans.
Cash at bank and on deposit yield 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 23. 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 2011, 84% (2010 – 71%) of gross borrowings were at fixed or capped rates of interest,
comprising £100,000,000 and €212,832,000 of interest rate swaps, $256,907,000 of US Dollar/Sterling cross-currency swaps and
£15,631,000 of Sterling denominated loan notes (2010 – £63,000,000 and €200,000,000 of interest rate swaps, $322,840,000 of US
Dollar/Sterling cross-currency swaps and forward contracts and £18,995,000 of Sterling denominated loan notes), as detailed in Note 23.
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 23) 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 2011
Bank loans
Loan notes
Other loan
Cumulative Preference shares
Property loans
Confirming facilities
Sterling
£000
47,170
14,841
97,506
500
–
–
Euro
£000
US Dollars
£000
Total
£000
313,804
–
–
–
1,952
3,362
–
146,877
–
–
–
–
360,974
161,718
97,506
500
1,952
3,362
160,017
319,118
146,877
626,012
63 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
22. Borrowings continued
Group
At 30 April 2010
Bank loans
Loan notes
Cumulative Preference shares
Property loans
Debt discounting facilities
Sterling
£000
Euro
£000
US Dollars
£000
Total
£000
75,782
18,348
500
–
–
94,630
397,585
–
–
3,206
13
–
204,976
–
–
–
473,367
223,324
500
3,206
13
400,804
204,976
700,410
Net borrowings analysed by currency, taking into account swapped exchange rates for the US loan notes and the proportion of the other
loan swapped into Euro being retranslated to Sterling at closing exchange rates, are as follows:
Group
At 30 April 2011
Cash at bank and in hand
Bank loans
Loan notes
Other loan
Cumulative Preference shares
Property loans
Confirming facilities
Group
At 30 April 2010
Cash at bank and in hand
Bank loans
Loan notes
Cumulative Preference shares
Property loans
Debt discounting facilities
Sterling
£’000
Euro
£’000
Total
£’000
45,798
(47,170)
(138,115)
(13,848)
(500)
–
–
51,087
(313,804)
(23,623)
(84,365)
–
(1,952)
(3,362)
96,885
(360,974)
(161,738)
(98,213)
(500)
(1,952)
(3,362)
(153,835)
(376,019)
(529,854)
Sterling
£’000
Euro
£’000
Total
£’000
55,064
(75,782)
(174,832)
(500)
–
–
30,279
(397,585)
(31,716)
–
(3,206)
(13)
85,343
(473,367)
(206,548)
(500)
(3,206)
(13)
(196,050)
(402,241)
(598,291)
At 30 April 2011, the gearing of the Group reflecting the above fixed swapped exchange rates amounted to 163.4% (2010 – 212.9%)
where net borrowings are £529,854,000 (2010 – £598,291,000) and shareholders’ funds less goodwill and the net book value of intangible
assets are £324,361,000 (2010 – £281,068,000).
23. Derivative financial instruments
The Group’s derivative financial instruments at the balance sheet date comprise interest rate swaps and cross-currency swaps.
Their net estimated fair values are as follows:
Interest rate derivatives
Cross-currency derivatives and Sterling/US Dollar forward contracts
They are represented in the balance sheet as follows:
Non-current derivative financial instrument assets
Current derivative financial instrument assets
Non-current derivative financial instrument liabilities
Group
Company
2011
£000
(5,377)
(152)
(5,529)
2,155
–
(7,684)
(5,529)
2010
£000
(6,893)
12,721
5,828
14,622
–
(8,794)
5,828
2011
£000
(5,377)
3,149
(2,228)
2,155
3,301
(7,684)
(2,228)
2010
£000
(6,893)
12,721
5,828
14,622
–
(8,794)
5,828
64 Notes to the accounts
Northgate plc annual report and accounts 2011
23. Derivative financial instruments continued
Interest rate derivatives
The Group’s exposure to interest fluctuations on its borrowings and deposits is managed through the use of interest rate derivatives. 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 was party as at 30 April 2011 and 30 April 2010 are
summarised below:
30 April 2011
Sterling denominated interest rate swaps
Euro denominated interest rate swaps
30 April 2010
Sterling denominated interest rate swaps
Euro denominated interest rate swaps
Total
nominal
values
Weighted
average fixed
contract net pay
rates
Weighted
average
remaining
life
£100,000,000
€212,832,000
4.45%
2.35%
10.0 years
1.4 years
£63,000,000
€200,000,000
2.44%
2.35%
2.4 years
2.4 years
As part of the debt refinancing undertaken by the Group in April 2011 the following interest rate derivative transactions occurred:
(cid:85)(cid:202)
(cid:85)(cid:202)
(cid:85)
(cid:85)
£100,000,000 Sterling interest rate swaps with a weighted average fixed contract pay rate of 3.62% and weighted average maturity of
10.0 years commenced.
£63,000,000 Sterling interest rate swaps were de-designated from a relationship with the Sterling denominated term loan which was
repaid in full. On the date of de-designation, these swaps had a weighted average remaining life of 1.4 years and the net amount
deferred into equity at that date of £610,000 was expensed in the income statement (Note 9). On the same day, £63,000,000
Sterling interest rate swaps with a weighted average fixed contract receive rate of 1.13% and weighted average maturity of 1.4 years
commenced.
€87,168,000 Euro interest rate swaps were closed out at a cash cost of £473,000. At that time, these swaps were in a hedging
relationship with the Euro term loan. The notional amount closed out was the amount of Euro term loan which was repaid and
cancelled on that date. At that time, these swaps had a weighted average remaining life of 1.4 years and the net amount deferred into
equity at that date of £473,000 was expensed in the income statement (Note 9)
€152,832,000 of Euro interest rate swaps were entered into. These swaps will commence in September 2012 and will terminate in
September 2014. The weighted average fixed contract pay rate is 3.12%.
In September 2009, £63,000,000 and €200,000,000 of interest rate swaps, with a weighted average fixed contract pay rate of 2.44% and
2.35% respectively and weighted average maturity of 3.1 years commenced. In addition, forward starting interest rate swaps amounting
to €100,000,000 with a weighted average fixed contract pay rate of 2.35% commenced on 30 July 2010. In July 2011, £38,000,000 and
€60,000,000 of interest rate swaps will mature with weighted average fixed contract pay rate of 2.44% and 2.35% respectively.
All the Group’s interest rate swaps were designated as cash flow hedges and their fair value to the point of either maturity or termination,
along with changes in fair value in the current year, were deferred in equity. To the extent that the interest rate swaps were not 100%
effective, a net amount of £Nil (2010 – £Nil) has been credited to the income statement.
The total change in fair values of interest rate derivatives charged to the income statement of £Nil (2010 – £253,000) is shown within finance
costs (Note 9).
Cross-currency derivatives
Market values have been used to determine fair values of cross-currency derivatives at each balance sheet date.
The estimated fair values are as follows:
Sterling/US Dollar cross-currency swaps
Sterling/US Dollar forward contracts
Euro/Sterling cross-currency swaps
2011
£000
882
–
(1,034)
2010
£000
12,708
161
(148)
(152)
12,721
Sterling/US Dollar cross-currency swaps
The Group has in issue US Dollar denominated loan notes of capital value $256,907,000 (2010 – $322,840,000) 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 22.
65 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
23. Derivative financial instruments continued
The Group will have interest cash outflows in 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 Sterling and receive a principal amount in US Dollars. The weighted
average interest rate that the Group pays in Sterling is 8.83% (2010 – 8.73%).
All the Group’s Sterling/US Dollar cross-currency swaps entered into in September 2009 are designated and are highly effective as cash flow
hedges and their fair value to the point of either maturity or termination, along with changes in fair value in the current year, are deferred in
equity. To the extent that the cross-currency swaps were not 100% effective, a net amount of £202,000 (2010 – £Nil) has been credited to
the income statement (Note 9).
In June 2010, cross-currency swaps with a notional amount of $20,584,000 were entered into as a result of a number of prepayments of
the US Dollar denominated loan notes. At that time, these swaps had a weighted average life of 4.7 years and a weighted average contract
Sterling receive rate of 7.72%. The positive change in fair value between that date and 30 April 2011 was taken to the income statement.
At the same time, cross-currency swaps with a notional amount of $5,433,000 were entered into as a result of the issuance of make-whole
notes in connection with the US Dollar denominated loan notes. At that time, these swaps had a weighted average life of 2.3 years and a
weighted average contract Sterling pay rate of 8.09%. The negative change in fair value between that date and 30 April 2011 was taken to
the income statement.
The total amount charged in the income statement in relation to the change in fair value of Sterling/US Dollar cross-currency swaps was
£416,000 (2010 – £Nil).
In April 2011, cross-currency swaps with a notional amount of $6,122,000 were closed out at a cash cost of £376,000. At that time, these
swaps had a weighted average remaining life of 1.4 years and a weighted average contract Sterling pay rate of 8.17%. These cross-currency
swaps were not in a hedging relationship and therefore this cost was expensed in the income statement (Note 9).
At the same time, cross-currency swaps with a notional amount of $9,347,000 were entered into as a result of a number of prepayments of
the US Dollar denominated loan notes. At that time, these swaps had a weighted average life of 2.3 years and a weighted average contract
Sterling receive rate of 8.32%.
In September 2009, all cross-currency swaps in existence at that time, were terminated when their fair value was £33,562,000 and was
applied to reduce borrowings with the respective counterparty banks. The negative change in fair value between 1 May 2009 and this date
of £31,466,000 was deferred into equity. On the same day, new cross-currency swaps commenced to maintain the Group’s hedging of the
US Dollar denominated loan notes. The positive change in fair value of £12,708,000 between that date and 30 April 2010 was deferred
into equity.
The £161,000 fair value of the forward contracts was also deferred to equity at 30 April 2010.
During the year, $29,755,000 of swaps matured.
Euro/Sterling cross-currency swaps
The Group also has Euro/Sterling cross-currency swaps of total notional value €124,635,000 (2010 – €37,765,000). 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 Sterling. The interest rate that the Group pays in Euro is 8.19%
(2010 – 8.15%).
In June 2010, cross-currency swaps with a notional amount of €2,915,000 commenced. At that time, these swaps had a weighted average
life of 2.2 years and a weighted average contract Euro receive rate of 7.12%. The positive change in fair value between that date and 30
April 2011 was deferred into equity.
At the same time, cross-currency swaps with a notional amount of €502,000 commenced. At that time, these swaps had a weighted
average life of 2.3 years and a weighted average contract Euro pay rate of 7.53%. The negative change in fair value between that date and
30 April 2011 was deferred into equity.
In April 2011, cross-currency swaps with a notional amount of €97,011,000 commenced. At that time, these swaps had a weighted average
life of 3.4 years and a weighted average contract Euro pay rate of 8.23%. The negative change in fair value between that date and 30 April
2011 was deferred into equity.
In April 2011, cross-currency swaps with a notional amount of €575,000 were closed out at a cash cost of £47,000. At that time, these
swaps had a weighted average remaining life of 1.5 years and a weighted average contract Euro pay rate of 7.60%. This cost was expensed
in the income statement (Note 9).
At the same time, cross-currency swaps with a notional amount of €3,602,000 commenced. At that time, these swaps had a weighted
average life of 1.6 years and a weighted average contract Euro receive rate of 8.70%.
During the year €3,551,000 of swaps matured.
66 Notes to the accounts
Northgate plc annual report and accounts 2011
23. Derivative financial instruments continued
Gross movement in fair values initially deferred in hedging reserve:
At 30 April 2010
Movement in fair value of hedged instruments
At 30 April 2011
Cumulative amounts recycled to the income statement:
At 30 April 2010
Movement for the year
At 30 April 2011
Cumulative amounts recycled to the currency translation reserve:
At 30 April 2010
Movement for the year
At 30 April 2011
Net fair value deferred in hedging reserve:
At 30 April 2011
At 30 April 2010
Sterling/
US Dollar
£000
46,431
(11,987)
Euro/
Sterling
£000
(8,953)
(886)
34,444
(9,839)
(47,009)
14,930
(32,079)
–
–
–
2,365
(578)
28
(8)
20
8,452
1,211
9,663
(156)
(473)
Amounts recycled to the income statement from the hedging reserve represent the movements on the foreign exchange elements of the
total fair value of the Sterling/US Dollar swaps. 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 gross exchange difference on retranslation of
the loan notes at the exchange rate prevailing at the balance sheet date was a gain of £15,315,000 (2010 - £11,654,000). In addition, the
amount includes the amortisation of the interest legs of the terminated swaps over their residual life. The amount recycled to the translation
reserve represents the movement on the foreign exchange elements of the total fair value of the derivative subsequent to the designation of
the Euro/Sterling swap as a net investment hedge. The net fair value remaining in the hedging reserve represents the fair value of the interest
rate element of the derivatives (Note 31).
Net investment hedges
The Group manages its exposure to currency fluctuations on retranslation of the balance sheets of those subsidiary undertakings whose
functional currency is in Euro by maintaining a proportion of its borrowings in the same currency. In addition, the Group has entered into a
number of Sterling/Euro cross-currency swaps which are designated as net investment hedges. The hedging objective is to reduce the risk of
spot retranslation of the Euro subsidiaries from Euro to Sterling at each reporting date. Exchange differences arising on the borrowings and
net investment hedges have been recognised directly within equity along with the exchange differences on retranslation of the net assets of
the Euro subsidiaries.
Between 1 May 2009 and 11 September 2009, exchange differences on the retranslation of Euro borrowings exceeded the exchange
differences arising on the retranslation of the balance sheets of the Euro denominated subsidiary undertakings by £252,000. This amount
was credited to finance costs in the prior year (Note 9). Subsequent to 11 September 2009, exchange differences on the retranslation
of Euro borrowings were less than the exchange differences arising on the retranslation of the balance sheets of the Euro denominated
subsidiary undertakings.
Except as stated above, the hedges are considered highly effective in the current and prior year.
Company current derivative financial asset
At 30 April 2011, the Company held Sterling/Euro cross-currency swaps with a subsidiary undertaking which had a fair value of £3,301,000
(2010 – £Nil) and weighted average remaining life of one year with a weighted average Euro interest receivable of 2.79% and weighted
average GBP interest payable of 2.23%.
24. Current tax
The current tax creditor of £16,712,000 at 30 April 2011 (2010 – £16,439,000) includes a total amount of £13,997,000 (2010 –
£13,422,000) that is considered unlikely to give rise to a cash outflow within 12 months of the balance sheet date but is shown in the
balance sheet as a current liability in order to satisfy the requirements of IAS 1.
The expected cash outflow in respect of corporate tax in the 12 months following the 30 April 2011 balance sheet date is, therefore, £2,715,000.
67 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
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:
Group
At 1 May 2009
(Credit) charge to income
Recognition of deferred
tax assets (Note 10)
Charge (credit) to equity
Exchange differences
Adjustments in respect of
prior years
Transfer to current tax
At 1 May 2010
Charge (credit) to income
Recognition of deferred
tax assets (Note 10)
(Credit) charge to equity
Exchange differences
Adjustment to UK tax
rate (credited) charged to
income
Adjustment to UK tax
rate (credited) charged to
equity
Adjustments in respect
of prior years
Transfer to current tax
Accelerated
capital
allowances
£000
(3,604)
(7,768)
(13,023)
–
(31)
(2,422)
17,821
(9,027)
174
–
–
(7)
(8)
–
(157)
8,834
Revaluation
of buildings
£000
1,925
(49)
Share
based
payment
£000
(202)
51
Intangible
assets
£000
6,556
(1,397)
Retirement
benefit
obligations
£000
(130)
(29)
–
–
(12)
–
–
–
–
–
–
–
–
–
(82)
–
–
1,864
(35)
(151)
(1,004)
5,077
(2,737)
–
–
11
–
–
–
–
–
(30)
(97)
83
(139)
–
–
–
–
–
–
–
206
–
–
8
–
–
–
(151)
158
–
(47)
–
–
(3)
–
–
Losses
£000
(9,157)
5,499
(2,433)
–
196
–
–
(5,895)
8,667
(5,928)
–
(161)
–
–
–
–
Other
timing
differences
£000
36,865
5,778
–
(4,110)
(108)
408
(31,359)
7,474
(4,132)
–
1,512
(46)
49
47
Total
£000
32,253
2,085
(15,456)
(4,102)
(37)
(2,014)
(13,538)
(809)
1,091
(5,928)
1,465
(233)
(112)
44
53
(10,400)
102
(1,566)
At 30 April 2011
(191)
1,743
(1,072)
2,377
(43)
(3,317)
(5,443)
(5,946)
Deferred tax is represented in the balance sheet as follows:
At 30 April 2011
Deferred tax assets
Deferred tax liabilities
Net deferred tax
assets (liabilities)
At 30 April 2010
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
(liabilities)
304
113
–
1,743
1,072
–
–
2,377
191
(1,743)
1,072
(2,377)
9,287
260
–
1,864
151
–
–
5,077
43
–
43
151
–
3,317
–
5,443
–
10,179
4,233
3,317
5,443
5,946
5,895
–
2,925
10,399
18,409
17,600
9,027
(1,864)
151
(5,077)
151
5,895
(7,474)
809
In the current year, the net charge to equity of £1,559,000 (2010 – £4,110,000 credit), in respect of other timing differences relates to
derivative financial instruments which has been reflected in the hedging reserve (Note 31).
There are no deferred tax assets not recognised in the balance sheet (2010 – £6,045,000 not recognised in respect of unutilised tax losses of
£20,150,000). All of the losses previously not recognised related to unused tax losses where recoverability was not considered probable in the
short term.
Net deferred tax assets of £5,443,000 (2010 – £7,474,000 liabilities) classified as other timing differences relate to movements on fair values
of interest rate and foreign currency derivatives, other timing differences in relation to tax payable in various tax jurisdictions in which the
Group operates and other timing differences within the UK.
68 Notes to the accounts
Northgate plc annual report and accounts 2011
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 2009
Charge (credit) to income
Credit to equity
At 1 May 2010
Credit to income
Charge to equity
Change in UK tax rate charged to income
Change in UK tax rate charged to equity
At 30 April 2011
26. Share capital
Group and Company
Allotted and fully paid:
133,232,518 (2010 – 132,949,433) Ordinary shares of 50p each
Share
based
payment
£000
(202)
51
–
(151)
(1,004)
–
83
–
Other
timing
differences
£000
1,822
(3)
(4,130)
(2,311)
–
1,409
6
58
Total
£000
1,620
48
(4,130)
(2,462)
(1,004)
1,409
89
58
(1,072)
(838)
(1,910)
2011
£000
2010
£000
66,616
66,475
The Company has one class of Ordinary share which carries no right to fixed income. In January 2011, 283,085 50p Ordinary shares were
issued in connection the All Employee Share Scheme for a cash consideration of £380,000.
27. Share premium account
Group and Company
At 1 May
Premium on Ordinary shares issued
Share issue expenses
At 30 April
2011
£000
113,269
239
–
2010
£000
67,972
51,988
(6,691)
113,508
113,269
In the prior year, share issue expenses comprised underwriting and other fees directly attributable to the placing and rights issue.
28. Revaluation reserve
At 1 May 2009
Foreign exchange differences
At 1 May 2010
Foreign exchange differences
At 30 April 2011
29. Own shares reserve
At 1 May 2009
Purchase of own shares
Transfer of shares on vesting of share options
At 1 May 2010
Purchase of own shares
Transfer of shares on vesting of share options
At 30 April 2011
Group
£000
1,365
(35)
1,330
33
1,363
Group
£000
(2,302)
(674)
2,085
(891)
(1,676)
937
(1,630)
Company
£000
1,371
–
1,371
–
1,371
Company
£000
–
–
–
–
–
–
–
69 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
29. Own shares reserve continued
The own shares reserve represents shares held by employee trusts in order to meet commitments under the Group’s various share schemes
(Note 37). At 30 April 2011 the Guernsey Trust held 478,758 (2010 – 78,001) 50p ordinary shares and the Capita Trust held 38,964 (2010 –
21,096) 50p ordinary shares.
The results of the trusts are consolidated into the results of the Group in accordance with SIC 12 (Consolidation – Special Purpose Entities).
The total value paid for the shares held at 30 April 2011 is £1,872,000 (2010 – £1,823,000).
30. Merger reserve
At 1 May 2010 and 30 April 2011
31. Hedging reserve
At 1 May 2009
Movement in fair value of hedged interest rate derivatives
Movement in fair value of hedged foreign currency derivatives
Deferred tax on fair value of interest rate and foreign currency derivatives
Amortisation of terminated interest rate derivatives (below)
Transfer to income statement
Transfer to translation reserve (Note 32)
At 1 May 2010
Movement in fair value of hedged interest rate derivatives
Movement in fair value of hedged foreign currency derivatives
Deferred tax on fair value of interest rate and foreign currency derivatives
Amortisation of terminated interest rate derivatives (below)
Transfer to income statement
De-designation of GBP interest rate swaps
Transfer to translation reserve (Note 32)
Group
£000
67,463
Company
£000
63,159
Group
£000
4,851
(6,893)
(17,575)
4,110
(405)
11,161
(969)
(5,720)
1,516
(12,873)
(1,559)
(608)
15,530
610
1,211
Company
£000
5,254
(6,893)
(18,597)
4,130
(400)
11,128
–
(5,378)
1,516
(11,987)
(1,467)
(600)
15,530
610
–
At 30 April 2011
(1,893)
(1,776)
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 23, less amounts transferred to the income statement and other components
of equity.
In the prior year, certain US Dollar/Sterling cross-currency swaps were terminated. Prior to their termination, these instruments were
all designated in cash flow hedging relationships. In accordance with the provisions of IAS 39 (Financial Instruments: Recognition and
Measurement) in respect of early termination of cash flow hedges, this value remained deferred in equity to be amortised to the income
statement over the remaining life of the originally designated cash flow hedge. An amount of £600,000 (2010 – £400,000) was credited to
the income statement in this regard, recognised within finance costs.
70 Notes to the accounts
Northgate plc annual report and accounts 2011
32. Translation reserve
At 1 May 2009
Foreign exchange differences on retranslation of net assets of subsidiary undertakings
Net foreign exchange differences on long term borrowings held as hedges
Foreign exchange element of fair value movement of hedged derivatives transferred
from hedging reserve (Note 31)
At 1 May 2010
Foreign exchange differences on retranslation of net assets of subsidiary undertakings
Net foreign exchange differences on long term borrowings held as hedges
Foreign exchange element of fair value movement of hedged derivatives transferred
from hedging reserve (Note 31)
At 30 April 2011
Group
£000
(5,656)
(3,929)
2,960
969
(5,656)
4,645
(2,516)
(1,211)
(4,738)
Company
£000
–
–
–
–
–
–
–
–
–
The translation reserve represents the aggregate of the cumulative exchange differences arising from the retranslation of the balance sheets
of the Euro based subsidiary undertakings and the cumulative exchange differences arising from long term borrowings held as hedges and
the foreign exchange element of fair value movements of hedged derivatives.
The management of the Group’s foreign exchange translation risks is detailed in Note 23.
33. Capital redemption reserve
At 1 May 2009, 1 May 2010 and 30 April 2011
34. Retained earnings
At 1 May 2009
Profit (loss) for the year
Share options exercised
Share options fair value charge
Defined benefit pension charge recognised directly in equity
Net deferred tax charge recognised directly in equity
At 1 May 2010
Profit (loss) for the year
Share options exercised
Share options fair value charge
Defined benefit pension charge recognised directly in equity
Net deferred tax credit recognised directly in equity
Group
£000
40
Company
£000
40
Group
£000
45,499
24,356
(1,984)
1,154
(221)
(8)
68,796
29,393
(937)
1,897
(169)
50
Company
£000
38,072
(13,118)
–
1,154
–
–
26,108
(18,384)
–
1,897
–
–
At 30 April 2011
99,030
9,621
71 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
35. Exceptional items
During the year, the Group recognised exceptional items in the income statement made up as follows:
Restructuring costs
Impairment of Spanish property assets
Net property losses
Exceptional administrative expenses
Impairment of Spanish intangible assets
Exceptional impairment of intangible assets
Financing fees written off on extinguishment of debt
De-designation of Sterling interest rate swaps
Termination of Euro interest rate swaps
Termination of cross-currency swaps
Covenant deferral fees
Make-whole premium on US loan notes
Write off of unamortised fees relating to bilateral debt facilities
Other financing fees
Exceptional finance costs
Total pre-tax exceptional items
Tax credit on exceptional items
Net recognition of deferred tax assets (Note 10)
Exceptional tax credit relating to prior year items
Exceptional tax credit
Restructuring costs
2011
£000
5,583
6,868
48
12,499
5,892
5,892
2,728
610
473
423
–
–
–
–
4,234
22,625
(6,653)
(5,928)
(4,237)
2010
£000
6,324
–
396
6,720
–
–
–
–
–
–
2,199
8,842
3,751
424
15,216
21,936
(6,142)
(15,456)
–
(16,818)
(21,598)
During the year, the Group incurred total exceptional restructuring costs of £5,583,000 (2010 – £6,324,000), of which £3,011,000 (2010 –
£6,065,000) arose in the United Kingdom and £2,572,000 (2010 – £259,000) in Spain.
Impairment of Spanish property assets
As part of the restructuring process in Spain, certain properties have been vacated. These properties have been written down to their
recoverable amount, incurring a charge of £6,868,000 (2010 – £Nil).
Net property losses
Net property losses were £48,000 (2010 – £396,000), of which £54,000 losses (2010 – £782,000 losses) arose in the United Kingdom and
£6,000 profit (2010 – £386,000 profit) arose in Spain.
Impairment of Spanish intangible assets
As part of the restructuring process in Spain, the two trading brands, Fualsa and Record, were merged under the Northgate brand. This
resulted in a write down of intangible brand names that had been created on acquisition of the Spanish businesses of £5,892,000 (2010 –
£Nil).
Financing fees written off on extinguishment of debt
Details relating to the refinancing of the Group, which was completed during April 2011, are set out in the Financial Review on pages 14
to 19. As part of this refinancing, a new eight year term loan facility was provided by M&G UK Companies Financing Fund and an element
of these new funds was used to repay part of the existing bank and loan note borrowings of each lender at the date of the refinancing.
In accordance with IAS 39, the element of existing bank and loan note borrowings that has been repaid is treated as extinguished.
Unamortised financing fees of £2,728,000 (2010: £Nil) have been written of in relation to the element of existing debt that was extinguished.
De-designation of Sterling interest rate swaps
As explained in Note 23, in April 2011, £63,000,000 Sterling interest rate swaps were de-designated from a relationship with the Sterling
denominated term loan which was repaid in full. At that time, the net amount deferred into equity of £610,000 (2010 – £Nil) was expensed
in the income statement.
72 Notes to the accounts
Northgate plc annual report and accounts 2011
35. Exceptional items continued
Termination of Euro interest rate swaps
As explained in Note 23, in April 2011, €87,168,000 Euro interest rate swaps were closed out at a cash cost of £473,000. At that time, these
swaps were in a hedging relationship with the Euro term loan. The notional amount closed out was the amount of Euro term loan which was
repaid and cancelled on that date. The net amount deferred into equity at that date of £473,000 (2010 – £Nil) was expensed in the income
statement.
Termination of cross-currency swaps
As explained in Note 23, in April 2011, cross-currency swaps with a notional amounts of $6,122,000 and €575,000 were closed out at
a total cash cost of £423,000 (2010 – £Nil) . These cross currency swaps were not in a hedging relationship and therefore this cost was
expensed in the income statement.
Covenant deferral fees
In the early part of the prior year, the Group was engaged in renegotiating the terms of certain of its borrowings. As a result, the Group
incurred fees of £Nil (2010 – £2,199,000) payable to certain lenders to defer testing of covenants at 31 July 2009.
Make-whole premium on US loan notes
As part of the refinancing of its borrowings in September 2009, the Group incurred fees of £Nil (2010 – £8,842,000) in relation to make-
whole notes issued to the US loan noteholders, which arose from amortisation of the existing notes during the year and in respect of future
scheduled borrowing amortisations.
Unamortised fees
Unamortised financing fees of £Nil (2010 – £3,751,000) were written off in respect of the borrowing facilities replaced in September 2009.
Other financing fees
Other financing fees of £Nil (2010 – £424,000) were payable relating to the refinancing of borrowings in September 2009.
Impairment of assets
The Group tests its cash generating units (CGUs) annually for impairment, or more frequently if there are indications that assets 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.
In accordance with IAS 36, the impairment of each CGU recorded in 2009 was allocated firstly against goodwill and then to the extent
that the impairment exceeded the book value of the goodwill, the excess impairment was then allocated against the remaining assets
of the CGU on a pro-rata basis with the exception of assets already carried at their recoverable amount or otherwise excluded from the
scope of the Standard.
In addition to the annual test of impairment referred to above, and as required by IAS 36, in the current year there has been an assessment
as to whether there has been any indication that the impairment loss recognised in an earlier year has decreased or no longer exists. This
assessment was based on risk-adjusted cash flow forecasts derived from a two year business plan approved by the Directors in April 2011
using growth rates of 1% to 3% over a 10 year period, including terminal values, using a discount rate of 10% for the UK CGU and 10%
for the Spanish CGU.
It was concluded that there were no indicators of additional impairment or reversal of impairment previously charged for both the UK CGU
and Spanish CGU.
In the prior year, an assessment was performed to determine whether there had been any indication that the impairment loss recognised in
2009 had decreased or no longer existed. This assessment was based on risk-adjusted cash flow forecasts derived from a two year business
plan approved by the Directors in April 2010 using growth rates of 1% to 4% over a 10 year period, including terminal values, using a
discount rate of 7% for the UK CGUs and 7% for the Spanish CGUs.
It was concluded that there were no indicators of additional impairment or reversal of impairment previously charged for the UK CGUs. In
respect of Record Rent a Car S.A. and Alquiservicios LSL S.A., there was an aggregate reversal of £11,600,000 (of which £11,000,000 related
to vehicles for hire, £300,000 to other intangible assets and £300,000 to other property, plant and equipment). In respect of Furgonetas de
Alquiler S.A., there was an additional impairment charge of £11,600,000 (of which £11,000,000 related to vehicles for hire, £300,000 to
other intangible assets and £300,000 to other property, plant and equipment).
73 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
36. Operating lease arrangements
As lessee
Group
Minimum lease payments under operating leases recognised in the income statement for the year
2011
£000
6,172
2010
£000
8,845
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
2011
£000
4,756
10,434
17,497
32,687
2010
£000
6,128
14,707
25,172
46,007
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 13 years (2010 – 13 years) and rentals are fixed for an average number of seven years
(2010 – six years).
As lessor
The revenue of the Group is principally 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 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 in the Remuneration Report on pages 25 to 29.
The Group and Company recognised total expenses of £1,897,000 (2010 – £1,154,000) related to equity-settled share-based payment
transactions in the year.
Further details regarding the plans are outlined below.
Northgate Share Option Scheme
At 1 May
Forfeited during the year
At 30 April
Exercisable at the end of the year
2011
Number
of share
options
103,890
(91,567)
12,323
12,323
2011
Weighted
average
exercise price
£
21.08
21.31
19.39
19.39
2010
Number
of share
options
181,237
(77,347)
103,890
46,467
2010
Weighted
average
exercise price
£
20.18
18.96
21.08
19.39
No share options were granted or exercised in the current or prior year. The options outstanding at 30 April 2011 have a weighted average
remaining contractual life of 4.4 years (2010 – 6.4 years).
Executive Incentive Scheme
At 1 May
Lapsed during the year
At 30 April
Exercisable at the end of the year
2011
Number
of share
options
10,492
(6,683)
3,809
3,809
2011
Weighted
average
exercise price
£
9.41
9.34
9.53
9.53
2010
Number
of share
options
122,544
(112,052)
10,492
10,492
2010
Weighted
average
exercise price
£
10.18
10.26
9.41
9.41
74 Notes to the accounts
Northgate plc annual report and accounts 2011
37. Share based payments continued
No share options were granted or exercised in the current or prior year. The options outstanding at 30 April 2011 had a weighted average
remaining contractual life of 0.2 years (2010 – 1.2 years).
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
2011
Number of
share options
168,469
433,812
(81,932)
(230)
2010
Number of
share options
220,241
25,396
(74,472)
(2,696)
520,119
168,469
35,955 (2010 – 12,374) 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 £2.31 (2010 – £2.28).
The options outstanding at 30 April 2011 had a weighted average remaining contractual life of 3.2 years (2010 – 3.0 years). In the current
year, options were granted in August 2010. The aggregate of the estimated fair values of the options granted on this date was considered to
be £827,000. In the prior year, options were granted in October 2009. The aggregate of the estimated fair values of the options granted on
this date was £51,000.
The inputs into the Black-Scholes model were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividends
2011
2010
£1.83
£Nil
136.8%
3 years
2.0%
0.0%
£2.78
£Nil
133.1%
3 years
2.7%
10.7%
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
2011
Number of
shares
590,776
172,767
(64,690)
(72,904)
2010
Number of
shares
447,333
346,584
(114,611)
(88,530)
625,949
590,776
The share price at the date of vesting for matching shares during the year was £2.98 (2010 – £2.26). The non-vested matching shares
outstanding at 30 April 2011 had a weighted average remaining period until vesting of 1.6 years (2010 – 1.9 years). In the current year,
matching shares were allocated in January 2011. The aggregate of the estimated fair values of the matching shares allocated on this date
was £502,000. In the prior year, matching shares were allocated in January 2010. The aggregate of the estimated fair values of the matching
shares allocated on this date was £750,000.
75 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
37. Share based payments continued
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
2011
2010
£2.91
£Nil
136.8%
5 years
2.3%
0.0%
£2.17
£Nil
134.7%
5 years
2.9%
0.0%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years.
Management Performance Share Plan
All options granted under this scheme are nil cost options.
Details of the share options outstanding during the year are as follows:
At 1 May
Granted during the year
Exercised during the year
Forfeited during the year
At 30 April
2011
Number of
share
options
1,057,562
604,664
(80,107)
(296,260)
2010
Number of
share
options
352,961
872,638
(22,705)
(145,332)
1,285,859
1,057,562
No options were exercisable at the end of either year. The weighted average share price at the date of exercise of options in the current year
was £2.31 (2010 – £2.28).
The options outstanding at 30 April 2011 had a weighted average remaining contractual life of 1.7 years (2010 – 2.2 years). In the
current year, share options were granted in July 2010. The aggregate of the estimated fair values of the options granted on this date was
£1,105,000. In the prior year, share options were granted in October 2009. The aggregate of the estimated fair values of the options granted
on this date was £1,379,000.
The inputs into the Black-Scholes model were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividends
2011
2010
£1.83
£Nil
136.8%
3 years
2.0%
0.0%
£2.78
£Nil
133.1%
3 years
2.7%
10.7%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years.
Executive Performance Share Plan
All options granted under this scheme are nil cost options.
Details of the share options outstanding during the year are as follows:
At 1 May
Granted during the year
Lapsed during the year
At 30 April
2011
Number of
share
options
532,173
302,593
(351,908)
2010
Number of
share
options
363,506
330,952
(162,285)
482,858
532,173
76 Notes to the accounts
Northgate plc annual report and accounts 2011
37. Share based payments continued
No options were exercisable at the end of either year.
The options outstanding at 30 April 2011 had a weighted average remaining contractual life of 1.8 years (2010 – 2.5 years). In the current
year, share options were granted in July 2010. The aggregate of the estimated fair values of the options granted on this date was £553,000.
In the prior year, share options were granted in October 2009. The aggregate of the estimated fair values of the options granted on this date
was £666,000.
The inputs into the Black-Scholes model were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividends
2011
2010
£1.83
£Nil
136.8%
3 years
2.0%
0.0%
£2.78
£Nil
133.1%
3 years
2.7%
10.7%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years.
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 operating pension cost to the Group of all these arrangements was £1,425,000
(2010 – 1,948,000) all of which 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.
The Scheme is 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. The most recent
actuarial valuation of the Scheme was performed at 6 April 2010 by JLT Pension Capital Strategies.
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 and the following principal assumptions set out below.
Discount rate
Inflation rate
Salary increases
Future pension increases
Life expectancy of retirees in current year
Life expectancy of retirees 25 years hence
2011
Valuation
% pa
5.3
3.5
n/a
3.4
23 to 26 years
25 to 28 years
2010
Valuation
% pa
5.5
3.7
n/a
3.6
22 to 25 years
23 to 26 years
The Directors do not consider that the Group is materially sensitive to changes in these key assumptions.
Amounts recognised as costs (income) in respect of the Scheme are as follows:
Interest cost
Expected return on plan assets
Total pension charge
2011
£000
244
(171)
73
2010
£000
229
(125)
104
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 £94,000 (2010 – £263,000).
The actual return on the scheme assets was a gain of £235,000 (2010 – £664,000). There are no reimbursement rights.
77 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
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 Scheme 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
Contributions
At 30 April
Movements in the present value of the defined benefit obligations were as follows:
At 1 May
Interest cost
Actuarial losses
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 gains
At 30 April
2011
£000
(4,832)
4,690
(142)
2011
£000
539
73
169
(639)
142
2011
£000
4,501
244
233
(146)
4,832
2011
£000
3,962
171
639
(146)
64
4,690
2010
£000
(4,501)
3,962
(539)
2010
£000
465
104
221
(251)
539
2010
£000
3,659
229
760
(147)
4,501
2010
£000
3,194
125
251
(147)
539
3,962
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.
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
2011
Expected
return
%
5.0
3.0
3.0
2011
Fair value
of assets
£000
1,657
2,782
251
4,690
2010
Expected
return
%
5.0
3.0
3.0
2010
Fair value
of assets
£000
1,559
2,148
255
3,962
78 Notes to the accounts
Northgate plc annual report and accounts 2011
38. Retirement benefit schemes continued
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 totalled £639,000 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 2012 is £510,000.
The history of experience adjustments for the last five years is as follows:
Funded status:
Present value of defined benefit obligation
Fair value of Scheme assets
Deficit in the Scheme
2011
£000
2010
£000
2009
£000
2008
£000
2007
£000
(4,832)
4,690
(142)
(4,501)
3,962
(539)
(3,659)
3,194
(465)
(4,055)
3,502
(553)
(3,900)
3,345
(555)
Experience adjustments on Scheme obligations:
Amount
Percentage of Scheme obligations (%)
Experience adjustments on Scheme assets:
Amount
Percentage of Scheme assets (%)
35
0.7%
64
1.3%
65
1.4%
(59)
(1.6)%
(185)
(4.6)%
738
18.9%
539
13.6%
(609)
(19.1)%
(176)
(5.0)%
(483)
(14.4)%
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 22, 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 22 and 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 and in Note 23, 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 not materially
sensitive 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 (2010 – €0.10) increase and decrease in the Euro/Sterling exchange rate.
A €0.10 (2010 – €0.10) movement in the rate in either direction is management’s assessment of the reasonably possible change in foreign
exchange rates in the near term. The sensitivity analysis includes only any outstanding foreign currency denominated monetary items and
adjusts their translation at the period end for a €0.10 (2010 – €0.10) change in foreign currency rates.
2011
Total equity
As stated in
annual report
As would be
stated if
€0.10 increase
As would be
stated if
€0.10 decrease
£000
£000
£000
339,759
336,891
343,190
79 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
39. Financial instruments continued
2010
Total equity
There is no material impact on the income statement in either year.
Sterling/US Dollar Cross-currency derivatives
As stated in
annual report
£000
As would be
stated if
€0.10 increase
As would be
stated if
€0.10 decrease
£000
£000
305,106
304,250
306,564
As explained in Note 23, 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 23. Consequently, any fluctuation in the rate of the US Dollar has no
impact on either profit and loss or equity.
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 1.0% (2010 – 1.0%) increase or decrease has been used in the analyses and represents management’s best estimate of a reasonably
possible change in interest rate in the near term.
2011
Profit before taxation
Total equity
2010
Profit before taxation
Total equity
As stated in
annual report
As would be
stated if
1.0% increase
As would be
stated if
1.0% decrease
£000
£000
£000
26,540
24,982
28,098
339,759
338,638
340,880
As stated in
annual report
£000
9,615
As would be
stated if
1.0% increase
£000
4,999
As would be
stated if
1.0% decrease
£000
14,231
305,106
301,783
308,429
80 Notes to the accounts
Northgate plc annual report and accounts 2011
39. Financial instruments continued
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
In the second year
In the third to fifth years inclusive
After five years
Euro
In the second year
In the third to fifth years inclusive
Outstanding pay floating receive
fixed contracts
Sterling
In the second year
Liquidity risk management
Average contract
fixed interest rate
Notional principal
amount
Fair value
2011
%
2.44%
–
3.62%
2.35%
–
2010
%
2011
£000
–
2.44%
–
63,000
–
100,000
2010
£000
–
63,000
–
–
2.35%
212,832
–
–
174,060
2011
£000
(610)
–
(2,336)
(2,455)
–
2010
£000
–
(1,060)
–
–
(5,833)
1.13%
–
63,000
–
24
–
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 22 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.
2011
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
Weighted
average
effective
interest
rate
0.00%
7.89%
4.53%
<1 year
£000
36,985
13,438
30,827
2nd year
£000
–
60,642
107,080
3-5 years
£000
–
72,780
312,470
>5 years
£000
–
82,378
110,989
Total
£000
36,985
229,238
561,366
81,250
167,722
385,250
193,367
827,589
81 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
39. Financial instruments continued
2010
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
Weighted
average
effective
interest
rate
0.00%
7.89%
3.74%
<1 year
£000
44,601
118,573
67,658
230,832
2nd year
£000
–
23,090
9,144
32,234
3-5 years
£000
–
314,429
201,111
>5 years
£000
–
111,570
–
Total
£000
44,601
567,662
277,913
515,540
111,570
890,176
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.
2011
Liabilities
Net settled:
Interest rate swaps
Gross settled:
Cross-currency derivatives
Assets
Gross settled:
Cross-currency derivatives
2010
Liabilities
Net settled:
Interest rate swaps
Gross settled:
Cross-currency derivatives
Assets
Gross settled:
Cross-currency derivatives
<1 year
£000
2nd year
£000
3-5 years
£000
>5 years
£000
Total
£000
4,749
4,935
11,853
11,678
33,215
20,861
24,733
99,271
92,312
237,177
25,610
29,668
111,124
103,990
270,392
18,934
22,795
96,274
91,940
229,943
18,934
22,795
96,274
91,940
229,943
<1 year
£000
2nd year
£000
3-5 years
£000
>5 years
£000
Total
£000
5,829
5,022
1,908
–
12,759
33,844
39,673
15,236
20,258
126,632
128,540
92,975
92,975
268,687
281,446
34,893
34,893
14,885
14,885
131,938
131,938
99,662
99,662
281,378
281,378
Fair value of financial instruments
The Group is required to analyse financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1
to 3 based on the degree to which fair value is observable:
(cid:85)(cid:202)
(cid:85)(cid:202)
(cid:85)(cid:202)
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for
the asset or liability either directly (i.e. prices) or indirectly (i.e. derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
82 Notes to the accounts
Northgate plc annual report and accounts 2011
39. Financial instruments continued
All the financial instruments below are categorised as Level 2.
The fair values of financial assets and financial liabilities are determined as follows:
(cid:85)(cid:202) Derivative financial instruments are measured at the present value of future cash flows estimated and discounted based on applicable
yield curves derived from quoted interest rates; and
(cid:85)(cid:202)
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 cross-currency derivatives, are held at fair value:
Financial liabilities
Loan notes
Credit risk management
Carrying amount
Fair value
2011
£000
2010
£000
2011
£000
2010
£000
161,718
223,324
193,867
255,090
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 receivables. 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 (maximum exposure to credit risk)
Allowance for doubtful receivables
Ageing of trade receivables 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
2011
£000
2010
£000
133,125
(22,210)
147,150
(17,080)
110,915
130,070
2011
£000
2010
£000
93,843
15,155
1,461
456
112,112
14,610
2,688
660
110,915
130,070
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 enables the Group only to 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 £781,000 (2010 – £2,203,000) is due from the Group’s largest customer. There are
no other customers who represent more than five 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 receivables balance are debtors with a carrying amount of £17,072,000 (2010 – £17,958,000) 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.
83 Notes to the accounts
Northgate plc annual report and accounts 2011
Notes to the accounts continued
39. Financial instruments continued
Movement in the allowance for doubtful receivables
At 1 May
Impairment losses recognised
Amounts written off as uncollectible
Impaired losses reversed
Exchange differences
At 30 April
2011
£000
2010
£000
17,080
9,040
(787)
(3,583)
460
22,210
7,949
14,400
(2,663)
(2,335)
(271)
17,080
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 credit 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
receivables.
Included in the allowance for doubtful receivables are trade receivables which have been placed under liquidation of £456,000 (2010 –
£43,000).
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
2011
£000
2010
£000
789
431
4,868
314
15,808
22,210
1,005
387
2,267
463
12,958
17,080
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
Trade receivables (Note 20), cash and cash equivalents and trade payables (Note 21) are shown at amortised cost. All other financial
instruments are at fair value.
The Company has no trade receivables and no intercompany receivables past due date.
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
Management charges
2011
£000
(4,682)
–
(4,682)
2010
£000
(2,612)
300
(2,312)
Balances with subsidiary undertakings at the balance sheet date are shown in Notes 20 and 21.
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. There are
other senior executives in the Group who are able to influence the Company in the achievement of its goals. However, in the opinion of the
Directors, only the Directors of the Company have significant authority for planning, directing and controlling the activities 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 27 to 29. The
fair value charged to the income statement in respect of equity-settled share-based payment transactions with the Directors is £251,000
(2010 – £130,000). 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.
84 Notes to the accounts
Northgate plc annual report and accounts 2011
Five year financial summary
Based on the consolidated accounts for years ended 30 April and adjusted to reflect the effect of subsequent changes in accounting policy.
Income statement
Revenue: hire of vehicles
537,285
563,698
609,645
578,462
526,465
2011
£000
2010
£000
2009
£000
2008
£000
2007
£000
Profit (loss) from operations
Net finance costs
Profit (loss) before taxation
Taxation
Profit (loss) for the year
Basic earnings (loss) per Ordinary share
Dividends
Dividends per Ordinary share
82,575
71,109
(117,531)
118,206
107,056
(56,035)
26,540
2,853
(61,494)
9,615
14,741
(78,083)
(195,614)
9,912
29,393
24,356
(185,702)
22.1p
–
–
23.1p
–
–
(572.6)p
19,359
25.0p
(38,714)
79,492
(18,158)
61,334
188.6p
18,982
60.9p
(31,688)
75,368
(20,885)
54,483
165.5p
16,949
55.5p
Balance sheet
Assets employed
Non-current assets
Net current assets (liabilities)
Non-current liabilities
Financed by
Share capital
Share premium account
Reserves
2011
£000
2010
£000
2009
£000
2008
£000
2007
£000
819,082
145,170
(624,493)
885,124
(6,024)
(573,994)
983,173
172,373
(972,787)
1,209,207
164,221
(974,875)
1,034,896
136,806
(809,271)
339,759
305,106
182,759
398,553
362,431
66,616
113,508
159,635
66,475
113,269
125,362
3,527
67,972
111,260
3,527
67,972
327,054
3,560
67,230
291,641
339,759
305,106
182,759
398,553
362,431
Net asset value per Ordinary share
255p
229p
563p
1,227p
1,107p
85 Five year financial summary
Northgate plc annual report and accounts 2011
Notice of Annual General Meeting
Notice is hereby given that the one hundred and thirteenth Annual
General Meeting of Northgate plc (‘the Company‘) will be held at
Rockliffe Hall Hotel, Hurworth on Tees, County Durham DL2 2DU
at 11.00a.m. on 13 September 2011 for the purpose of considering
and, if thought fit, passing the following resolutions of which
resolutions 1 to 11 and 14 and 15 will be proposed as ordinary
resolutions and resolutions 12 and 13 will be proposed as special
resolutions:
To receive the Directors’ report and audited accounts of the
Company for the year ended 30 April 2011.
To receive and approve the Remuneration Report for the
financial year ended 30 April 2011 set out on pages 25 to 29 of
the 2011 Annual Report and Accounts.
To re-appoint Deloitte LLP as auditor of the Company to hold
office until the conclusion of the next Annual General Meeting.
To authorise the Audit and Risk Committee to determine the
remuneration of the auditor.
To re-elect Mr RD Mackenzie as a Director.
To re-elect Mr AJ Allner as a Director.
To re-elect Mr JG Astrand as a Director.
To re-elect Mr THP Brown as a Director.
1.
2.
3.
4.
5.
6.
7.
8.
9.
12. That subject to the passing of Resolution 11 the Board be and it
is hereby empowered pursuant to s570 of the Companies Act
2006 to allot equity securities (within the meaning of s560 of
the said Act) for cash pursuant to the authority conferred by the
previous resolution as if sub-section (1) of s561 of the said Act
did not apply to any such allotment provided that this power
shall be limited:
a.
to the allotment of equity securities in connection with a
rights issue in favour of Ordinary shareholders where the
equity securities respectively attributable to the interests
of all Ordinary shareholders are proportionate (as nearly as
may be) to the respective numbers of Ordinary shares held
by them; and
b.
to the allotment (otherwise than pursuant to sub-
paragraph i. above) of equity securities up to an aggregate
nominal value of £3,330,000
and shall expire on the date of the next annual general meeting
of the Company after the passing of this resolution save
that the Company may before such expiry make an offer or
agreement which would or might require equity securities to
be allotted after such expiry and the Board may allot equity
securities in pursuance of such an offer or agreement as if the
power conferred hereby had not expired.
To re-elect Mr RL Contreras as a Director.
13. That a general meeting, other than an annual general meeting,
10. To elect Mr CJR Muir as a Director.
11. That the Board be and it is hereby generally and unconditionally
authorised pursuant to s551 of the Companies Act 2006:
a.
b.
to exercise all powers of the Company to allot shares in
the Company and to grant rights to subscribe for or to
convert any security into shares in the Company up to an
aggregate nominal amount of £22,000,000 provided that
this authority shall expire on the date of the next annual
general meeting of the Company after the posting of this
resolution save that the Company may before such expiry
make an offer or agreement which would or might require
shares to be allotted or rights to subscribe for or convert
securities into shares to be granted after such expiry and
the Board may allot shares or grant rights to subscribe for
or convert securities into shares in pursuance of such an
offer or agreement as if the authority conferred hereby had
not expired; and further
to exercise all powers of the Company to allot equity
securities (within the meaning of s560 of the said Act)
in connection with a rights issue in favour of Ordinary
shareholders where the equity securities respectively
attributable to the interests of all Ordinary shareholders
are proportionate (as nearly as may be) to the respective
numbers of Ordinary shares held by them up to a further
aggregate nominal amount of £22,000,000 provided that
this authority shall expire on the date of the next annual
general meeting of the Company after the passing of this
resolution save that the Company may before such expiry
make an offer or agreement which would or might require
equity securities to be allotted after such expiry and the
Board may allot equity securities in pursuance of such an
offer or agreement as if the authority conferred hereby had
not expired.
may be called on not less than 14 clear days’ notice.
14. That the rules of the Deferred Annual Bonus Plan ('the Plan')
referred to in the notes and the first Appendix to this notice of
AGM and produced to this Meeting and, for the purposes of
identification, initialled by the Chairman, be approved and the
Directors hereby be authorised to:
a.
b.
make such modifications to the Plan as they may consider
appropriate to take account of the requirements of HMRC
and 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
operate the Plan; and
establish further plans based on the Plan but modified to
take account of local tax, exchange control or securities
laws in overseas territories, provided that any shares made
available under such further plans are treated as counting
against the limits on individual or overall participation in
the Plan.
15. That the rules of the Management Performance Share Plan
(MPSP) referred to in the notes and the second Appendix to
this notice of AGM and produced to this Meeting and, for
the purposes of identification, initialled by the Chairman, be
approved and the Directors hereby be authorised to:
a.
make such modifications to the MPSP as they may consider
appropriate to take account of best practice and for the
implementation of the MPSP and to adopt the MPSP as so
modified and to do all such other acts and things as they
may consider appropriate to operate the MPSP; and
86 Notice of Annual General Meeting
Northgate plc annual report and accounts 2011
b.
establish further plans based on the MPSP but modified
to take account of local tax, exchange control or securities
laws in overseas territories, provided that any shares made
available under such further plans are treated as counting
against the limits on individual or overall participation in
the MPSP.
The Directors of the Company consider that all the proposals set out
in the above Resolutions are in the best interests of the Company
and of the shareholders as a whole. They unanimously recommend
that you vote in favour of them as they intend to do in respect
of their own beneficial holdings which amount in aggregate to
345,349 shares representing approximately 0.26% of the issued
Ordinary share capital of the Company.
29 June 2011
By Order of the Board
D Henderson
Secretary
Registered office:
Norflex House
Allington Way
Darlington
DL1 4DY
NOTES
1. A member entitled to attend and vote at the Meeting may
appoint another person(s) (who need not be a member of the
Company) to exercise all or any of his rights to attend, speak
and vote at the Meeting. A member can appoint more than one
proxy in relation to the Meeting, provided that each proxy is
appointed to exercise the rights attaching to different shares
held by him.
2. A proxy form which may be used to make this appointment and give proxy
instructions accompanies this notice. Details of how to appoint a proxy are
set out in the notes to the proxy form. As an alternative to completing a hard
copy proxy form, proxies may be appointed by using the electronic proxy
appointment service in accordance with the procedures set out in Note 5
below. CREST members may appoint proxies using the CREST electronic
proxy appointment service (see Note 6 below). In each case the appointment
must be received by the Company not less than 48 hours before the time of
the Meeting.
3. A copy of this notice has been sent for information only to persons who have
been nominated by a member to enjoy information rights under section 146 of
the Companies Act 2006 ('a Nominated Person'). The rights to appoint a proxy
can not be exercised by a Nominated Person: they can only be exercised by the
member. However, a Nominated Person may have a right under an agreement
between him and the member by whom he was nominated to be appointed as
a proxy for the Meeting or to have someone else so appointed. If a Nominated
Person does not have such a right or does not wish to exercise it, he may have
a right under such an agreement to give instructions to the member as to the
exercise of voting rights.
4. To be entitled to attend and vote, whether in person or by proxy, at the
Meeting, members must be registered in the register of members of the
Company 48 hours before the time of the Meeting (or, if the Meeting is
adjourned, 48 hours before the adjourned Meeting). Changes to entries on the
register after this time shall be disregarded in determining the rights of persons
to attend or vote (and the number of votes they may cast) at the Meeting or
adjourned meeting.
5. Shareholders wishing to appoint a proxy online should visit www.
capitashareportal.com and follow the instructions on screen. (If you have not
already registered with The Share Portal you will need to identify yourself with
your personal Investor Code (see Attendance Card)). To be valid your proxy
appointment(s) and instructions should reach Capita Registrars no later than 48
hours before the time set for the Meeting.
6. CREST members who wish to appoint a proxy or proxies by utilising the CREST
electronic proxy appointment service may do so by utilising the procedures
described in the CREST Manual on the Euroclear website (www.euroclear.com/
CREST). CREST Personal Members or other CREST sponsored members, and
those CREST members who have appointed a voting service provider(s), should
refer to their CREST sponsor or voting service provider(s), who will be able to
take the appropriate action on their behalf. In order for a proxy appointment
made by means of CREST to be valid, the appropriate CREST message ('a
CREST Proxy Instruction') must be properly authenticated in accordance with
Euroclear UK & Ireland Limited’s (EUI) specifications and must contain the
information required for such instructions, as described in the CREST Manual.
The message regardless of whether it constitutes the appointment of a proxy or
an amendment to the instruction given to a previously appointed proxy must,
in order to be valid, be transmitted so as to be received by the issuer’s agent (ID
RA10) by the latest time(s) for receipt of proxy appointments specified in the
notice of meeting. For this purpose, the time of receipt will be taken to be the
time (as determined by the timestamp applied to the message by the CREST
Applications Host) from which the issuer’s agent is able to retrieve the message
by enquiry to CREST in the manner prescribed by CREST. The Company may
treat as invalid a CREST Proxy Instruction in the circumstances set out in
regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
7. A member of the Company which is a corporation may authorize a person
or persons to act as its representative(s) at the AGM. In accordance with the
provisions of the Companies Act 2006, each such representative may exercise
(on behalf of the corporation) the same powers as the corporation could
exercise if it were an individual member of the Company, provided that they do
not do so in relation to the same shares. It is no longer necessary to nominate a
designated corporate representative.
8. Members satisfying the thresholds in section 527 of the Companies Act 2006
can require the Company to publish a statement on its website setting out
any matter relating to (a) the audit of the Company’s accounts (including the
auditor’s report and the conduct of the audit) that are to be laid before the
Meeting; or (b) any circumstances connected with an auditor of the Company
ceasing to hold office since the last Annual General Meeting, that the members
propose to raise at the Meeting. The Company cannot require the members
requesting the publication to pay its expenses. Any statement placed on the
website must also be sent to the Company’s auditors no later than the time
it makes its statement available on the website. The business which may be
dealt with at the Meeting includes any statement that the Company has been
required to publish on its website.
9. The Company must cause to be answered at the Meeting any question
relating to the business being dealt with at the Meeting which is put by a
member attending the Meeting, except in certain circumstances, including
if it would interfere unduly with the preparation for the Meeting or if it is
undesirable in the interests of the Company or the good order of the Meeting
that the question be answered or if to do so would involve the disclosure of
confidential information.
10. As at 22 June 2011 (being the latest practicable date prior to the publication
of this notice), the Company’s issued share capital consists of 133,232,518
Ordinary shares of 50 pence each, carrying one vote each and 1,000,000
preference shares of 50 pence each, which do not carry any rights to vote
on the above resolutions. Therefore the total voting rights in the Company
are 133,232,518.
11. The contents of this notice of meeting, details of the total number of shares in
respect of which members are entitled to exercise voting rights at the Meeting,
the total voting rights that members are entitled to exercise at the Meeting and,
if applicable, any members’ statements, members’ resolutions or members’
matters of business received by the Company after the date of this notice will
be available on the Company’s website: www.northgateplc.com.
12. A copy of the draft rules of the Deferred Annual Bonus Plan and the
Management Performance Share Plan will be available for inspection at the
Company’s registered offices and at Hewitt New Bridge Street, 11 Devonshire
Square, London, EC2M 4YR, during normal business hours on any weekday
(Saturdays, Sundays and English public holidays excepted) until the close of the
Annual General Meeting and at the place of the Annual General Meeting for at
least 15 minutes prior to and during the Annual General Meeting.
13. You may not use any electronic address provided in this notice of meeting
to communicate with the Company for any purposes other than those
expressly stated.
14. Under sections 338 and 338A of the 2006 Act, members meeting the threshold
requirements in those sections have the right to require the Company (i) to give,
to members of the Company entitled to receive notice of the Meeting, notice
of a resolution which those members intend to move (and which may properly
be moved) at the Meeting; and/or (ii) to include in the business to be dealt
with at the Meeting any matter (other than a proposed resolution) which may
properly be included in the business at the Meeting. A resolution may properly
be moved, or a matter properly included in the business, unless (a) (in the case
of a resolution only) it would, if passed, be ineffective (whether by reason
of any inconsistency with any enactment or the Company’s constitution or
otherwise); (b) it is defamatory of any person; or (c) it is frivolous or vexatious.
A request made pursuant to this right may be in hard copy or electronic form,
must identify the resolution of which notice is to be given or the matter to be
included in the business, must be authenticated by the person(s) making it
and must be received by the Company not later than 1 August 2011, being
the date 6 clear weeks before the Meeting, and (in the case of a matter to be
included in the business only) must be accompanied by a statement setting out
the grounds for the request.
87 Notice of Annual General Meeting
Northgate plc annual report and accounts 2011
Notice of Annual General Meeting continued
First Appendix to notice of AGM
Summary of the principal terms of the Deferred
Annual Bonus Plan
Operation
The Remuneration Committee of the Board of Directors of the
Company ('the Committee’) will continue to supervise the operation
of the Deferred Annual Bonus Plan (‘the Plan’).
Eligibility
Any employee (including an executive Director) of the Company and
its subsidiaries is eligible to participate in the Plan at the discretion of
the Committee.
Under current policy, only the Company’s Executive Directors and
senior and middle management are selected to participate in the
Plan.
The Plan is used to facilitate the deferral of a portion of annual
bonus in shares at the discretion of the Committee.
Grant of deferred awards
To give effect to any deferred share element of bonus, the
Committee may grant awards (‘Awards’) to acquire Ordinary
shares in the Company within six weeks following the Company’s
announcement of its results for any period. The Committee may
also grant Awards within six weeks of the removal of any regulation
which had previously prevented the grant of awards or at any
other time when the Committee considers there are exceptional
circumstances which justify such grant.
Subject to shareholder approval, the terms of the Plan will provide
that an Award may not be granted more than 10 years after the Plan
is approved by shareholders.
Awards under the Plan are structured as nil cost options. 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 50 per cent of his annual
base salary in that financial year or such other percentage as the
Committee may determine from time to time having regard to total
bonus maximum set by the Committee.
(ii)
(iii)
(iv)
the business for whom the individual works makes a loss due
to poor risk management; or
there has been material misrepresentation regarding the
Company’s performance; or
exceptional circumstances exist, such as gross misconduct by
the individual.
Leaving employment
As a general rule, an Award will lapse upon a participant ceasing
to hold employment within the Company’s group, unless the
Committee decides otherwise. However, if a participant ceases to
be an employee because of his death, ill-health, redundancy or his
employing company is sold out of the Company’s group, then his
Award may be exercised within six months from the date of such
cessation (12 months in the case of death). The Award will lapse if it
is not exercised within this period.
Corporate events
In the event of a takeover, scheme of arrangement or winding up of
the Company all Awards will vest early.
If an offer to roll-over awards is made in the context of a takeover or
internal re-organisation then Awards will be replaced by equivalent
new awards over shares in a new holding company unless the
Committee decides that Awards should vest on the basis which
would apply in the case of a takeover.
Participants’ rights
Awards will not confer any shareholder rights until the Awards have
been exercised and the participants have received their shares.
Rights attaching to Shares
Any shares allotted when an Award is exercised will rank equally
with shares then in issue (except for rights arising by reference to a
record date prior to their allotment).
Variation of capital
In the event of any increase or variation of the share capital of the
Company, a capitalisation issue, a reduction in capital, a rights issue,
a sub-division or consolidation of shares, the payment of a capital
dividend, a demerger or a similar event involving the Company, the
Committee may make such adjustments to the number of shares in
respect of which any Award is subject as it considers appropriate.
Vesting of awards
Overall Plan limits
Awards normally vest three years after grant provided the participant
is still employed in the Company’s group. Awards are then normally
exercisable up until the day before the tenth anniversary of grant
unless they lapse earlier.
Claw-back
In line with institutional investor guidelines and best practice, a claw-
back provision has been included in the Plan rules.
In relation to Awards granted on or after 28 April 2010, the
Committee may decide to claw-back value under an Award from an
individual if the Award was granted or vests over a higher number of
shares than would otherwise have been the case because:
(i)
in determining the value of the Award the Company relied on
accounts which were incorrect or required to be restated; or
Subject to shareholder approval, the Plan may operate over new
issue shares, treasury shares or shares purchased in the market.
In any 10 calendar year period, the Company may not issue (or grant
rights to issue) more than:
(a)
(b)
10 per cent of the issued Ordinary share capital of the Company
under the Plan and any other employee share plan adopted by
the Company; and
5 per cent of the issued Ordinary share capital of the Company
under the Plan and any other executive share plan adopted by
the Company.
Treasury shares will count as new issue shares for the purposes
of these limits unless institutional investors decide that they need
not count.
88 Notice of Annual General Meeting
Northgate plc annual report and accounts 2011
HMRC approved schedule to the Plan
HMRC approval is being sought for a schedule to the Plan which,
if approved by HMRC, will provide for linked tax approved market
value options to be granted in connection with Awards under
and subject to the material terms of the Plan for the purposes of
improving the tax efficiency of the grants in the UK. Any grants
made under the schedule will not impact on the overall gross value
of the Awards that may vest under the Plan for a participant.
Alterations to the Plan
The Committee may, at any time, amend the Plan in any respect,
provided that, subject to shareholder approval for the Plan, the prior
approval of shareholders is obtained for any amendments that are
to the advantage of participants in respect of the rules governing
eligibility, limits on participation, the overall limits on the issue of
shares or the transfer of treasury shares, the basis for determining a
participant’s entitlement to, and the terms of, the shares or cash to
be acquired and the adjustment of awards.
The requirement to obtain such prior approval of shareholders
will not, however, apply to any minor alteration made to benefit
the administration of the Plan, to take account of a change in
legislation or to obtain or maintain favourable tax, exchange control
or regulatory treatment for participants or for any company in the
Company’s group.
89 Notice of Annual General Meeting
Northgate plc annual report and accounts 2011
Notice of Annual General Meeting continued
Second Appendix to notice of AGM
Claw-back
Summary of the principal terms of the
Management Performance Share Plan
In line with institutional investor guidelines and best practice, a
claw-back provision has been included in the MPSP rules.
Operation
The Remuneration Committee of the Board of Directors of the
Company (‘the Committee’) will continue to supervise the operation
of the Management Performance Share Plan (MPSP).
Eligibility
Any employee of the Company and its subsidiaries (other than an
executive Director of the Company) is eligible to participate in the
Plan at the discretion of the Committee.
Grant of awards
The Committee may grant awards (‘Awards’) to acquire Ordinary
shares in the Company within six weeks following the Company’s
announcement of its results for any period. The Committee may
also grant Awards at any other time when the Committee considers
there are exceptional circumstances which justify the granting
of Awards.
The Committee may grant Awards as conditional shares or nil cost
options. 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, although it does not currently intend to do so.
Subject to shareholder approval, the terms of the MPSP will provide
that an Award may not be granted more than 10 years after
shareholder approval of the MPSP.
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 100 per cent of his annual
base salary in that financial year. In exceptional circumstances,
such as recruitment or retention, this limit can be increased as the
Committee decides.
Performance conditions
The vesting of Awards will be subject to such performance
conditions (if any) as the Committee determines appropriate.
Details of the performance conditions that have applied to date
under the MPSP are set out in the Directors Remuneration Report
section of the Company’s Report and Accounts.
In relation to Awards granted on or after 28 April 2010, the
Committee may decide to claw-back value from an individual if the
Award was granted or vests over a higher number of shares than
would otherwise have been the case because:
(i)
(ii)
(iii)
(iv)
in determining the value of the Award the Company relied on
accounts which were incorrect or required to be restated; or
the business for whom the individual works makes a loss due to
poor risk management; or
there has been material misrepresentation regarding the
Company’s performance; or
exceptional circumstances exist, such as gross misconduct by
the individual.
Leaving employment
As a general rule, an Award will lapse upon a participant ceasing
to hold employment within the Company’s group. However, if a
participant ceases to be an employee because of his death, injury,
disability, his employing company or the business for which he works
being sold out of the Company’s group or in other circumstances at
the discretion of the Committee, then his Award will vest when he
leaves. The extent to which an Award will vest in these situations will
depend upon two factors: (i) the extent to which any performance
conditions have been satisfied by reference to the date of cessation;
and (ii) the pro-rating of the Award to reflect the reduced period of
time between its grant and vesting, although the Committee can
decide not to pro-rate an Award if it regards it as inappropriate to do
so in the particular circumstances.
Corporate events
In the event of a takeover or winding up of the Company (not being
an internal corporate reorganisation) all Awards will vest early subject
to: (i) the extent that any performance conditions have been satisfied
at that time; and (ii) the pro-rating of the Awards to reflect the
reduced period of time between their grant and vesting, although
the Committee can decide not to pro-rate an Award if it regards it as
inappropriate to do so in the particular circumstances.
In the event of an internal corporate reorganisation Awards will be
replaced by equivalent new awards over shares in a new holding
company unless the Committee decides that Awards should vest on
the basis which would apply in the case of a takeover.
Vesting of Awards
Participants’ rights
Awards normally vest three years after grant to the extent that any
applicable performance conditions have been satisfied and provided
the participant is still employed in the Company’s group. In the case
of Awards structured as conditional shares the appropriate number
of vested shares will be released as soon as practicable following the
vesting of an Award. In the case of Awards structured as options,
further to vesting, such Awards are then exercisable up until the day
before the tenth anniversary of grant with the appropriate number
of vested shares transferred at the time of exercise, unless they
lapse earlier.
Awards will not confer any shareholder rights until the Awards
have vested or the options have been exercised as relevant and the
participants have received their shares.
Rights attaching to Shares
Any shares allotted when an Award vests or is exercised will rank
equally with shares then in issue (except for rights arising by
reference to a record date prior to their allotment).
Variation of capital
In the event of any variation of the Company’s share capital or in
the event of a demerger, payment of a special dividend or similar
event which materially affects the market price of the shares, the
90 Notice of Annual General Meeting
Northgate plc annual report and accounts 2011
Committee may make such adjustment as it considers appropriate to
the number of shares subject to an Award.
Overall MPSP limits
Subject to shareholder approval, the MPSP may operate over new
issue Shares, treasury Shares or Shares purchased in the market.
In any 10 calendar year period, the Company may not issue (or grant
rights to issue) more than:
(a)
(b)
10 per cent of the issued Ordinary share capital of the Company
under the MPSP and any other employee share plan adopted by
the Company; and
5 per cent of the issued Ordinary share capital of the Company
under the MPSP and any other executive share plan adopted by
the Company.
Treasury Shares will count as new issue shares for the purposes
of these limits unless institutional investors decide that they need
not count.
Alterations to the MPSP
The Committee may, at any time, amend the MPSP in any respect,
provided that, subject to shareholder approval of the MPSP, the prior
approval of shareholders is obtained for any amendments that are
to the advantage of participants in respect of the rules governing
eligibility, limits on participation, the overall limits on the issue of
Shares or the transfer of treasury Shares, the basis for determining a
participant’s entitlement to, and the terms of, the Shares or cash to
be acquired and the adjustment of Awards.
The requirement to obtain such prior approval of shareholders
will not, however, apply to any minor alteration made to benefit
the administration of the MPSP, to take account of a change in
legislation or to obtain or maintain favourable tax, exchange control
or regulatory treatment for participants or for any company in the
Company’s group. Shareholder approval will also not be required
for any amendments to any performance condition applying to
an Award.
Overseas Plans
The shareholder resolution to approve the MPSP will allow the Board
to establish further plans for overseas territories, any such plan to
be similar to the MPSP, but modified to take account of local tax,
exchange control or securities laws, provided that any shares made
available under such further plans are treated as counting against
the limits on individual and overall participation in the MPSP.
91 Notice of Annual General Meeting
Northgate plc annual report and accounts 2011
Shareholder information
Classification
Information concerning day to day movements in the price of the Company’s Ordinary shares is available on Cityline (09068 123456) code
2722.
The Company’s listing symbol on the London Stock Exchange is NTG.
The Company’s joint corporate brokers are RBS Hoare Govett Limited and Oriel Securities Limited and the Company’s Ordinary shares are
traded on SETSmm.
Financial calendar
December
Publication of Half Yearly Report
January
March
July
September
Payment of interim dividend (if applicable)
Publication of Interim Management Statement
Announcement of year end results
Report and accounts posted to shareholders
Annual General Meeting
Payment of final dividend (if applicable)
Publication of Interim Management Statement
Secretary and registered office
D Henderson FCIS
Norflex House
Allington Way
Darlington
DL1 4DY
Tel: 01325 467558
The Group’s website address is www.northgateplc.com
Registrars
Capita Registrars
Shareholder Adminstration Support
34 Beckenham Road
Beckenham
Kent
BR3 9ZA
Tel: 0871 6640300 (calls cost 10p per minute plus network extras)
Overseas: (+44) 208 6393399
92 Shareholder information
92 Shareholder information
Northgate plc annual report and accounts 2011
Northgate plc annual report and accounts 2011
Northgate plc
Norflex House, Allington Way
Darlington DL1 4DY
Telephone
01325 467558
Fax
01325 363204
www.northgateplc.com