Northgate plc
Norflex House, Allington Way
Darlington DL1 4DY
Telephone
01325 467558
Fax
01325 363204
Web
northgateplc.com
Northgate plc
Annual report and accounts 2012
A flexible approach to business
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Contents
Highlights of the year
Chairman’s statement
Review
1
2
3 Our business model
4 Our strategy and key performance indicators
6
10 Operational review
16 Financial review
20 Principal risks and uncertainties
22 Corporate social responsibility
24 Board of Directors
Northgate at a glance
Corporate governance
26 Report of the Directors
28 Remuneration report
33 Report of the audit and risk committee
34 Corporate governance
36 Directors’ responsibilities
Accounts
37
Independent auditor’s report to the members
of Northgate plc
38 Consolidated income statement
39 Statements of comprehensive income
40 Balance sheets
41 Cash flow statements
42 Notes to the cash flow statements
43 Statements of changes in equity
44 Notes to the accounts
83 Five year financial summary
84 Notice of annual general meeting
86 Shareholder information
Who we are
Why choose flexible rental?
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 a non-contract
basis, giving customers
the flexibility to manage their
vehicle fleet without a long
term commitment.
Decision
Flexible
Contract hire
Purchase
No capital or contractual
commitment
No mileage penalties
No residual market risk
Ability to flex vehicle size
Inclusive of maintenance
24/7 support
No early termination costs
Available at additional cost
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Highlights of the year
Operational highlights
Financial highlights
• Underlying pricing improvement
of 4% in the UK and stable pricing
in Spain since April 2011
• Average utilisation of 89% in the
UK and 90% in Spain
• Strong used vehicle markets in both
the UK and Spain
• Restructuring of businesses in
the UK and Spain now
substantially complete
• Continued investment in the UK
infrastructure, improving branches
to the ‘One Northgate’ standard
• Introduction of the Van Monster
retail sales brand to Spain
• Continuing sector diversification
in Spain
• Successful centralisation of
administrative functions across
the UK, with a newly formed
Customer Support Centre delivering
enhanced customer service
2012
2011
change
Return on capital employed1
13.1%
11.9%
+1.2%
Underlying profit before taxation (£m)2
59.7
53.8
+10.9%
Profit before taxation (£m)
46.0
26.5
+73.6%
Underlying basic earnings per share3
31.5p
29.0p
+8.6%
Basic earnings per share
30.4p
22.1p
+37.6%
Net debt (£m)4
Dividend per share
371.3
529.9
-158.6
3.0p
–
ROCE1
2012: 13.1%
2011: 11.9%
2010: 8.4%
2009: 5.8%
Gearing5
2012: 105%
2011: 163%
2010: 213%
2009: 571%
UK vehicle fleet
2012: 52,900
2011: 61,200
2010: 60,900
2009: 62,900
Spanish vehicle fleet
2012: 38,400
2011: 43,500
2010: 48,900
2009: 60,400
All footnotes are located on page 19.
1
Northgate plc
Annual report and accounts 2012
Highlights of the year
Chairman’s statement
With the majority of the restructuring
completed the Group will continue
its strong disciplines of asset
management, cash generation and
cost control whilst at the same time
maximising profitable growth where
the appropriate return exists.
operations can focus on
maximising profitable business
opportunities going forward.
The balance sheet of the Group
continues to strengthen with net
debt4 reducing by £158.6m in
the year from £529.9m to
£371.3m. At 30 April 2012 we
had £276m of headroom6 on
our committed debt facilities of
£668m. Net debt to EBITDA7 has
reduced to 1.3x (2011 – 1.7x)
and all covenant measures
improved over the year as a
result of £138m of underlying
cash generation8. The Group’s
profitability and cash generation
has reduced gearing5 to 105%
from 571% in 2009. As a result
we are pleased to announce
that the Group is returning to
the payment of a dividend.
Our management teams in the
UK and Spain have strengthened
each business and are working
effectively to maximise
returns for shareholders and
realise the objectives of the
Group’s strategy.
UK
Our operating margin9 increased
to 23.2% in the year, compared
to 22.0% in 2011. This increase
has been achieved through
actions aimed at improving
operating efficiency, increasing
hire rates and the continued
strength in the residual values of
used vehicles.
Our previous model of 20
separate companies was further
reduced to five regions in March
2012. In addition, the
implementation of the new IT
system has enabled the UK to
establish a centralised Customer
Support Centre and a Financial
Shared Services Centre based in
Darlington. This will provide the
platform for a consistent and
Bob Mackenzie
Chairman
I am pleased to report that
despite a continuing background
of economic uncertainty in the
countries in which we operate,
the Group has maintained its
market leading position and
substantially completed the
restructuring of our UK and
Spanish operations which
commenced in summer 2010.
We now operate under the
Northgate brand in both the UK
and Spain and are concentrating
on increasing the awareness of
our brand in both countries.
The focus of the Group in the
year has been to maintain
industry leading levels of
utilisation, improve operating
efficiency to reduce costs and
concentrate on increasing the
Return on Capital Employed
(ROCE). Against all of these
measures we have performed
well with ROCE1 increasing to
13.1% in the year (2011 –
11.9%).
Our management team has
done an excellent job in moving
to one brand, rationalising
depots and operations, installing
new IT systems in the UK,
generating cash and
strengthening the balance sheet.
We now have a solid base from
which both our UK and Spanish
improved customer service and
further operational efficiencies
going forward.
During the year the Commercial
area of the business was also
restructured, and a number of
improvement programmes were
initiated in the final quarter of
the financial year, the main
focus being to increase the skills,
resource and support within the
sales team. The success of these
initiatives is central to the
objective of returning the
business to growth at
appropriate levels of return.
Spain
As widely publicised the Spanish
economy continues to be an
extremely difficult environment
in which to operate. Despite this
our operating margin10 increased
to 19.1% in the year (2011 –
18.0%) and utilisation was
maintained above 90%. It is
testament to the strength and
commitment of our Spanish
management team that despite
hire revenue falling by £20.5m,
the underlying operating profit
fall was limited to £1.7m.
Given the dire economic
situation in Spain, which has
been exacerbated by the Euro
crisis, we have continued to
concentrate on cash generation.
Over the last four years capital
employed in Spain has been
reduced from e829m to e388m
with net debt falling from
e556m to e172m.
We have successfully replaced
the former Fualsa and Record
brands and now trade as
Northgate, which is enjoying
growing brand awareness. Our
business in Spain has
implemented a new commercial
structure which is targeting
increased new business wins
across a range of sectors to
offset declines historically seen
in its traditional markets, whilst
maintaining its concentration on
cash generation.
Employees
The improvements delivered and
our confidence in the future
performance of the Group
would not be possible without
the people we have working
with us. The Group has
experienced two years of
considerable change and this
would not have been possible
without their dedication, hard
work and loyalty. I would like to
thank them on behalf of the
Board.
Dividend
The Group has reduced net
debt4 by £532m over the past
four years. In recognition of the
higher returns within the
business, the sustained
improvement in performance
and our confidence in the long
term future of the Group, the
Board recommends the
re-introduction of a dividend for
the current financial year of
3.0p. This would represent a
cash outflow to the Group of
£4m and is in respect of the
full year.
It is the Board’s intention to
maintain a sustainable
dividend policy with the aim of
increasing returns to
shareholders over time, whilst
taking into account both the
underlying profitability, cash
generation and cash
requirements of the Group.
Going forward we would
expect to pay one-third of the
total dividend at the interim
stage and two-thirds as a
final dividend.
Current trading and
outlook
The Group retains its strong,
market leading position in both
the UK and Spain. With the
majority of the restructuring
completed the Group will
continue its strong disciplines of
asset management, cash
generation and cost control
whilst at the same time
maximising profitable growth
where the appropriate
return exists.
Whilst this will be challenging in
the awful economic situation
Europe finds itself, the Board is
confident that the dedication
and hard work shown by all our
employees over the past two
years provides the Group with a
strong platform upon which
to build.
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 deliver significant
value to shareholders.
Bob Mackenzie
Chairman
2
Northgate plc
Annual report and accounts 2012
Chairman’s statement
Our business model
We constantly strive to improve our
range of services, challenging our
business model regularly as we seek
to deliver operational and financial
benefits throughout the
buy-manage-sell fleet life cycle.
Manage
Buy
Buy
Our customers can choose from
the widest range of vehicle makes
and models available in our sector,
with the flexibility to switch vehicle
types as their needs evolve. In
order to achieve this, we partner
with a range of manufacturers.
Pricing is negotiated directly and
the purchasing mix is managed
in order to minimise the overall
holding cost of vehicles to the
business. The volume of purchases
is balanced against vehicle sales
in order to manage fleet age,
condition and vehicle utilisation to
an optimal level.
Manage
With over 30 years experience in
the fleet management sector, we
are in the best position to partner
our customers and complement
their fleet requirements, whether
this is by providing a single short
term hire or a fully outsourced fleet
management solution.
Vehicle hire is at the heart of
our business. We offer a fully
flexible product which allows
customers to tailor vehicles to
their exact requirements and
manage the size and composition
of their fleet without penalty. Our
national network of branches
and workshops in the UK and
Spain provide 24/7 support with
replacement vehicles on hand to
keep customers on the move. We
offer a range of ancillary services
which enable customers to enjoy
operational benefits through
efficient fleet management,
with our fully outsourced fleet
management service providing the
ultimate solution.
Internally we aim to deliver the
very best service levels whilst
maintaining operating efficiency
and vehicle utilisation in order
to maximise return on capital
employed.
Sell
In order to provide the best possible
service to our customers we
maintain a modern fleet. When
vehicles reach the end of their
hire lives we aim to minimise their
overall holding costs through the
effective use of our retail and trade
sales channels.
As we are not affiliated to any
single manufacturer, we offer our
customers the best available range
of quality used commercial vehicles
in the market.
Sell
1
We offer the widest range of
vehicles to hire in the market,
which can be tailored exactly to our
customers’ requirements.
2
Our national network of branches
keeps us close to our customers
wherever they are working.
3
Our ‘Van Monster’ retail sales
network offers the biggest range of
quality used light commercial
vehicles for sale in the market.
2
3
3
Northgate plc
Annual report and accounts 2012
Our business model
1
1
Our strategy and key performance indicators
In a challenging trading environment
the strategy of the Group has
remained clear: to deliver market
leading levels of customer service,
focus on improving operational
efficiency, and create a resilient and
sustainable business for the future.
This strategy, delivered through
‘One Northgate’ has realised an
improved return on capital employed
of 13.1% with further improvements
targeted going forward.
Asset management
Utilisation was maintained close to our 90% target in the UK and Spain
The minimum target for both segments is to maintain utilisation
The overall holding cost of vehicles needs to be minimised and utilisation
needs to be maintained at a high level in order to maximise return on
capital employed (ROCE) whilst holding enough vehicles to meet the
flexible demands of our customers.
Pricing
Underlying hire rates improved by 4% in the UK and remained stable
Minimum hire rate thresholds have been set for new vehicles so that the
The hire rate achieved is a key contributor to ROCE. Hire rates need to
reflect the level of flexibility and service offered to our customers.
Customer service
We have various measures of assessing customer service, with the
Whilst trading conditions are expected to remain challenging, the
In order to grow the business our product must deliver the highest
possible levels of customer service to set us apart from our competitors.
Performance
Target
despite a reduction in vehicles on hire of 7,400 in the UK and 5,400 in
above 90%.
A total of 25,200 vehicles were sold in the UK and 16,800 in Spain at
mix of purchases and improving the quality and volume of vehicles sold
improved residual values. Vehicle purchases were balanced against these
through higher margin retail sales channels.
The holding cost of vehicles will be minimised through managing the
disposals to manage the average fleet age to 21.4 months in the UK
and 21.8 months in Spain at 30 April 2012.
Spain.
in Spain.
fleet is grown at rates that are beneficial to ROCE. Further improvements
are targeted through the recovery of other costs incurred.
substantial completion of restructuring in each business provides a stable
platform for growth going forward. Growth will only be pursued where
profitable opportunities exist.
overall indicator being the number of vehicles on hire.
Through the implementation of our ‘One Northgate’ strategy, we have
made significant progress in the year to raise the level and consistency of
customer service delivered across the Group. Vehicles on hire have reduced
in the year, reflecting the difficult trading environment in the markets in
which we operate.
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.
ROCE is maximised through a combination of managing utilisation, hire
Each KPI has been targeted for improvement to contribute to an overall
rates, vehicle holding costs and improvements in operational efficiency.
increase in ROCE of the Group. Group ROCE is targeted to increase above
Group ROCE1 for the year increased to 13.1% (2011 – 11.9%).
levels previously achieved.
Earnings per share (EPS)
Basic EPS3 increased to 31.5p from 29.0p in the prior year.
The target is to maximise shareholder value by increasing EPS in the short
Basic EPS is considered to be a key short term measure of performance.
Earnings3 of £41.9m were 9% higher than in the previous year.
The weighted average number of shares was 133.2m, 0.2m higher than
the previous year.
term alongside longer term return on equity.
One Northgate
The objective of One Northgate is
to provide an industry leading
service experience that is delivered
consistently to our customers
across the UK and Spain.
Not just a rebrand
The initial phase of One
Northgate, rebranding our
previous hire companies in the UK
and Spain as Northgate has been
successfully achieved. Whilst this
has improved awareness of the
Northgate brand, the key to
achieving One Northgate is to
raise expectations of the high
levels of customer service that
underpin our name.
A consistent and high
level of customer service
An organisation matched
to the customers’ needs
The key to One Northgate is
delivering a consistently high
level of customer service. All of
our fleet has to meet a minimum
‘rentable standard’ and the
established ‘ready-to-rent’ line
means that an increased number
and range of vehicles is available
to customers at short notice.
Improvements in workshop
planning systems, the increased
availability of mobile technicians,
and delivery drivers using PDA’s
have all helped to maximise the
time that customers’ vehicles
are on the road, and internally
have improved the efficiency of
our operations.
The re-organisation of the UK and
Spanish businesses has continued
to ensure that we are closer to the
customer and can provide a base
that will create a resilient and
sustainable business for the
future. From March 2012 we
began to operate from five
regions in the UK, supported by a
newly formed Customer Support
Centre and Financial Shared
Services Centre, which now gives
us greater focus on our key assets,
namely our customers, employees
and our fleet.
Investing in the future
A significant investment in the
network infrastructure began this
year with the opening of new
branches in Grantham and
Cannock, and significant
refurbishment of eight branches
across the UK. The new blueprint
equips workshops with the latest
technology, and improves
customer facilities to increase
efficiency and enhance the
customer experience. Further
investment is planned for 2013.
4
Northgate plc
Annual report and accounts 2012
Our strategy and
key performance indicators
Asset management
The overall holding cost of vehicles needs to be minimised and utilisation
needs to be maintained at a high level in order to maximise return on
capital employed (ROCE) whilst holding enough vehicles to meet the
flexible demands of our customers.
Pricing
The hire rate achieved is a key contributor to ROCE. Hire rates need to
reflect the level of flexibility and service offered to our customers.
Customer service
In order to grow the business our product must deliver the highest
possible levels of customer service to set us apart from our competitors.
value to shareholders.
Earnings per share (EPS)
Basic EPS is considered to be a key short term measure of performance.
Performance
Target
Utilisation was maintained close to our 90% target in the UK and Spain
despite a reduction in vehicles on hire of 7,400 in the UK and 5,400 in
Spain.
A total of 25,200 vehicles were sold in the UK and 16,800 in Spain at
improved residual values. Vehicle purchases were balanced against these
disposals to manage the average fleet age to 21.4 months in the UK
and 21.8 months in Spain at 30 April 2012.
Underlying hire rates improved by 4% in the UK and remained stable
in Spain.
We have various measures of assessing customer service, with the
overall indicator being the number of vehicles on hire.
Through the implementation of our ‘One Northgate’ strategy, we have
made significant progress in the year to raise the level and consistency of
customer service delivered across the Group. Vehicles on hire have reduced
in the year, reflecting the difficult trading environment in the markets in
which we operate.
The minimum target for both segments is to maintain utilisation
above 90%.
The holding cost of vehicles will be minimised through managing the
mix of purchases and improving the quality and volume of vehicles sold
through higher margin retail sales channels.
Minimum hire rate thresholds have been set for new vehicles so that the
fleet is grown at rates that are beneficial to ROCE. Further improvements
are targeted through the recovery of other costs incurred.
Whilst trading conditions are expected to remain challenging, the
substantial completion of restructuring in each business provides a stable
platform for growth going forward. Growth will only be pursued where
profitable opportunities exist.
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
ROCE is maximised through a combination of managing utilisation, hire
rates, vehicle holding costs and improvements in operational efficiency.
Group ROCE1 for the year increased to 13.1% (2011 – 11.9%).
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.
Basic EPS3 increased to 31.5p from 29.0p in the prior year.
Earnings3 of £41.9m were 9% higher than in the previous year.
The weighted average number of shares was 133.2m, 0.2m higher than
the previous year.
The target is to maximise shareholder value by increasing EPS in the short
term alongside longer term return on equity.
Growing the business
Our product is suited well to the
current economic climate with
many businesses facing
uncertainty and looking for a way
to operate more efficiently.
Commercial operations in the UK
and Spain have been restructured
to make sure that we are focused
in the right areas. We know the
importance of listening; not only
to make sure that we understand
our customers’ needs but to
make sure that we don’t miss any
opportunity for them to share in
the benefits that Northgate can
offer their business.
1
Our centralised Customer Support
Centre and Financial Shared
Service Centre have been
successfully launched in the year,
delivering a more consistent and
efficient service to our customers.
2
Investment in our UK workshop
infrastructure began this year with
the refurbishment of eight sites.
Further investment will continue
into 2013.
3
Commercial operations have been
restructured in the UK and Spain
to provide a platform for growth.
3
3
11
2
2
5
Northgate plc
Annual report and accounts 2012
Our strategy and
key performance indicators
Northgate at a glance
UK
Our UK business operates over
52,000 vehicles from 62 locations,
servicing over 4,000 customers
ranging from blue chip corporations
and public sector organisations to
small and medium sized enterprises
and owner operators. We directly
fleet manage 13,000 vehicles and
host over 100,000 vehicles on our
fleet management portal.
Operating profit13
2012: £74.4m
2011: £73.6m
Operating margin9
2012: 23.2%
2011: 22.0%
Number of employees closing
2012: 1,869
2011: 2,073
Closing fleet
2012: 52,900
2011: 61,200
Locations
2012: 62
2011: 62
Fleet mix
Medium vans 41%
Small vans 34%
Large commercial vehicles 13%
Cars 8%
Buses, 4x4 and other
specialist vehicles 4%
Vehicle sales
Number of vehicles
2012: 25,200
2011: 18,900
Vehicle purchases
Number of vehicles
2012: 16,500
2011: 18,900
Revenue from vehicles sold
2012: £136m
2011: £103m
Investment in new vehicles
2012: £187m
2011: £201m
Locations: 62
Fleet by manufacturer
Ford 37%
Mercedes 20%
Volkswagen 16%
Peugeot 15%
Vauxhall 4%
Others 8%
Customers by fleet size
Corporate fleets (>100) 41%
Small and medium fleets
(10 – 100) 36%
Micro-fleets (<10) 23%
6
Northgate plc
Annual report and accounts 2012
Northgate at a glance
Spain
Our business in Spain operates over
38,000 vehicles from 23 locations
with over 4,000 customers varying
in size and operating in a range
of sectors. Our 900 employees
work hard to support the widest
range of commercial vehicle hire
solutions available across the largest
geographical branch network in
Spain.
Operating profit14
2012: £35.0m
2011: £36.6m
Operating margin10
2012: 19.1%
2011: 18.0%
Number of employees closing
2012: 915
2011: 936
Closing fleet
2012: 38,400
2011: 43,500
Locations
2012: 23
2011: 25
Fleet mix
Small vans 38%
Cars 39%
Large vans 9%
4x4 10%
Large commercial and other 4%
Vehicle sales
Number of vehicles
2012: 16,800
2011: 19,000
Vehicle purchases
Number of vehicles
2012: 11,900
2011: 13,400
Revenue from vehicles sold
2012: £67m
2011: £75m
Investment in new vehicles
2012: £118m
2011: £134m
Locations: 23
Fleet by manufacturer
Citroen 23%
Peugeot 22%
Ford 14%
Opel 11%
Seat 6%
Others 24%
Customers by fleet size
Small and medium fleets
(10 – 100) 41%
Corporate fleets (>100) 33%
Micro-fleets (<10) 26%
7
Northgate plc
Annual report and accounts 2012
Northgate at a glance
Not shown: two locations in the Canary Islands
On the road with our customers
Northgate partners over 8,000
customers in the UK and Spain,
operating across a range of sectors
from owner operators to corporate
customers with fleets of over 500
vehicles. With such a variety of
customers, we must deliver a service
which complements the needs of each
business. No single day is the same
for Northgate or any of its partners.
8
Northgate plc
Annual report and accounts 2012
roadside, a depot is never too
far away, and with our ‘ready to
rent’ line, a replacement vehicle
will always be available to get
customers back on the road.
UK 04:12
Whilst the majority of maintenance
work is scheduled, our team of
mobile technicians are on call 24/7
to deal with the unexpected. This
proves invaluable to Toby Walker,
one of our customers in Bolton.
One of our technicians responds to
his call after he realises that the van
lights have been on all night, and
he is back on the road within an
hour, making it to site on time.
On average we deal with
1,500 roadside incidents each
month and have a 83% ‘first time
fix’ rate, getting customers back
on the road within 80 minutes.
For those few instances where
the vehicle can’t be fixed at the
99
Northgate plc
Annual report and accounts 2012
Spain where profitable
opportunities exist. Whilst this
will not be easy within the
economic environment in which
the Group operates, we are
confident that the Group is well
positioned, both operationally
and financially to achieve this.
The reasons why flexible renting
provides an attractive business
proposal for our customers are
still as relevant as they have
always been, namely:
•
•
Avoiding the risk of
operational interruption,
flexible rental provides a
business tool that minimises
the cost of downtime and
limits exposure if trading
conditions change either in
the short, medium or long
term; and
Avoiding the capital outlay of
purchasing assets, coupled
with the lack of flexibility,
commitment and risk that
outright purchase or contract
hire creates.
Our customers benefit from an
unrivalled network footprint,
specialist knowledge, insight
and fleet management
capabilities that arise due to the
Group’s scale and the wealth of
knowledge that it contains.
Group
The key to the performance
improvements noted over the
past two years has been in
creating a business that does the
simple things well and has
optimal operating efficiency. The
Group has moved away from
targeting vehicle growth via
aggressive pricing and is now
focused on pursuing markets
and customers where the
flexible rental offering is right
for them.
With the ongoing difficulties in
the economies in which we
operate the primary focus of the
Group has been to improve
returns on capital employed and
to strengthen the Group’s
balance sheet.
Over the two years the Group
has seen progress in the
following key areas:
• Fleet management;
• Pricing increases;
• Cost reduction; and
•
Improvement in vehicle
disposal capabilities.
As a result of this, an improved
return on capital employed1 of
13.1% (2011 – 11.9%) has
been achieved for the year
ended 30 April 2012.
Going forward, the success of
the Group is dependent upon a
return to growth of our
businesses in both the UK and
Operational review
Going forward, the success of the
Group is dependent upon a return to
growth of our businesses in both the
UK and Spain where profitable
opportunities exist. Whilst this will
not be easy within the economic
environment in which the Group
operates, we are confident that the
Group is well positioned, both
operationally and financially to
achieve this.
Bob Contreras
Chief Executive
Spain 06:08
Every morning brings an element
of the unexpected to add to the
deliveries and orders planned into
the schedule. Sofía Rodríguez based
in Madrid is managing a project in
Pamplona, and realises one of her
drivers has made three separate
trips back to the warehouse as the
VW caddy is not big enough for
the current project. After calling
Northgate she finds out that a
replacement Ford Transit can be
delivered straight to site from the
local branch, saving the cost of
downtime and wasted journeys to
the warehouse.
10
Northgate plc
Annual report and accounts 2012
Operational review
ROCE1
2012: 13.1%
2011: 11.9%
2010: 8.4%
2009: 5.8%
UK
Improvements achieved in
pricing, operational efficiencies
and used vehicle residuals have
led to an increase in operating
margin9 from 22.0% to 23.2%.
Vehicle fleet and
utilisation
In the year the UK fleet size
reduced by 8,300 to 52,900
vehicles (2011 – 61,200
vehicles). Despite this fall, our
asset management strength
ensured that average utilisation
rates for the year ended 30 April
2012 fell by only 1% to 89%
(2011 – 90%).
In response to the reduction in
the vehicle fleet the UK reduced
vehicle purchases by 2,400 to
16,500 in the year ended 30
April 2012 (2011 – 18,900).
With improved fleet profiling the
UK saw a reduction in its
average fleet age from 22.1
months at 30 April 2011 to 21.4
months at 30 April 2012,
reflecting the Group’s
commitment to running a fleet
with a suitable ageing profile,
efficiency and reliability.
Hire rates and vehicles
on hire
Average hire revenue per vehicle
closed 3% higher than in the
prior year. As experienced in the
year ended 30 April 2011 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 4%
as targeted.
Year on year closing vehicles on
hire fell by 7,400 (2011 –
1,000). The reduction in vehicles
on hire has been caused by a
number of factors:
•
•
•
Customer demand has been
impacted as a direct
consequence of the
economic conditions;
We have seen returns from
specific industries, in
particular businesses
impacted by the reduction in
energy tariffs and grants; and
The increase in pricing
achieved has resulted in
some customers who were
previously attracted to
unsustainably low flexible
rental rates revising their fleet
mix towards fixed contract
rental, whilst ignoring the
benefits that a flexible
solution provides.
During the year a restructuring
of the commercial operations in
the UK has been undertaken.
This has led to the
implementation of a number of
key initiatives that are targeted
at improving the skills, resources
and support that contributes to
the commercial offering and
delivery. Given the challenging
Our workshop network is
undergoing a huge investment
programme to equip it with the
latest technology to deal with
anything from fast-fit to major
intervention repairs. Our technicians
are among the best in the UK,
trained to the highest standards so
customers can be assured that their
vehicles are not only the most
modern and fuel efficient but are
also very well maintained.
UK 07:08
Our workshops are busy places,
but we expect that with thousands
of vehicles needing routine
maintenance. Work is now
scheduled through our Central
Administration team so vehicles are
off the road for the least amount of
time.
Pete Johnston, an electrical
contractor in Grantham receives a
text message from Northgate
letting him know that his Peugeot
Partner is due in for a routine
service. Even when he is waiting at
the depot the progress of the job
can be viewed on one of our live
planners.
11
Northgate plc
Annual report and accounts 2012
Operational review
Operational review continued
UK operating margin9
2012: 23.2%
2011: 22.0%
2010: 18.0%
2009: 12.4%
UK continued
trading conditions it is clear that
the UK business needs to
continue to identify and deliver
any business opportunities
where flexible rental is the
most appropriate solution for
the customer.
Restructuring and
operational improvement
April 2012 saw the UK business
reach an important milestone.
The restructuring, which
commenced in summer 2010, is
now substantially complete. In
March 2012 the previous 20 hire
companies the Group operated
under were further reduced to
five regions. All now operate
under the single brand of
Northgate Vehicle Hire.
During the year a number of key
initiatives were implemented
which has driven operational
efficiency and will help
improve customer service.
These comprised:
•
Improved IT capability and
systems, which allows
greater visibility and planning
of our 53 workshops,
leading to increased
efficiency and utilisation;
•
•
•
Further development around
driver logistics management,
which provides the UK with
opportunities for increasing
delivery efficiency;
Improved sales and
operational planning, which
reduces vehicle holding costs
and increases sales
opportunities; and
Centralised customer support
and finance which will
enhance our customer
service offering.
The above operational
improvements have delivered
£7m of full year equivalent cost
savings at April 2012. The
savings exceeded the original
target by £2m. The year ended
30 April 2012 benefitted from
£4m of these savings, with the
year ending 30 April 2013
seeing the remaining
£3m benefit.
Since the year end all of these
initiatives have become
embedded and are now part of
the day to day business for the
UK. Continued efficiencies will
be targeted. The UK now has a
solid foundation on which to
grow efficiently and provide
improved customer service.
Northgate Vehicle Monitoring has
over 4,000 units on hire across
250 customers. Installations can be
made from any of our 62 locations,
and with all our mobile support
units fitted with vehicle monitoring
units, it allows a faster response
time to any assistance calls.
UK 10:43
It’s financial year end for
Helen Roberts, a Finance Manager
in Sheffield. It has been a difficult
year and the recent rises in fuel
costs have been a real challenge
for her domestic repairs business.
That is why her Operations
Manager Paul asked for Northgate’s
help to install vehicle monitoring
in their fleet of 200 vehicles. With
instant access to the location of
their vehicles 24/7, the nearest
vehicle is always sent to the next
job. The result: a significant 20%
saving in fuel costs and 15%
reduction in overtime in the first
year.
12
Northgate plc
Annual report and accounts 2012
Operational review
UK utilisation
2012: 89%
2011: 90%
2010: 90%
2009: 86%
UK continued
Used vehicle sales
existing sites continue to be
reviewed for:
In response to the reduced
vehicles on hire the UK
maximised cash flow generation
by reducing purchases and
disposing of fleet until the
desired utilisation level
was achieved.
A total of 25,200 vehicles (2011
– 18,900 vehicles) were sold
during the year. Higher margin
retail and semi retail channels
accounted for 19% (2011 –
22%) of disposals. Whilst the
overall percentage has reduced,
the absolute number of vehicles
sold through these channels has
increased by 17%, showing
good progress in this area. This
has been achieved mainly as a
result of the improvements in
the asset management
and maintenance regimes
of vehicles.
The strong resale values for used
vehicles observed in the last
financial year continued in the
year ended 30 April 2012. The
improvement in the values
achieved and the increase in
number of vehicles disposed
resulted in a decrease of £22.5m
(2011 – £14.2m) in the
depreciation charge.
Depot network
In line with the operational
improvement programme
•
Suitability, including location,
size and functionality; and
•
Condition and efficiency.
In the current year four smaller
sites have been closed,
facilitated by the opening of two
new larger sites. The larger sites
allow for greater customer
service and operational
efficiencies. Ireland has also seen
two new sites open, driven by
an increase in demand outside
of the Dublin area. The number
of hire locations at April 2012
was 62.
The UK continues to roll out the
site refurbishment programme
to existing locations, with eight
sites completed in the year. This
investment focuses largely on
workshop improvement and
early indications are that
efficiency in the sites has
improved following the
refurbishments. This programme
will continue over the next
12 months.
The Group will continue to look
for further opportunities to
invest in the network where
there is an economic benefit in
doing so. This will include
opportunities to establish a
presence in areas of the
country where we do not
currently operate.
Van Monster now operates from
five separate sites in Spain and
eight locations in the UK offering
a range of the best quality
ex-hire vehicles from our fleet.
Spain 14:12
After three separate trips to the
garage in the last four months,
Javier Ruiz is finally persuaded by
his business partner Eduardo that it
is time to trade in their van which
they have owned for 12 years after
having to turn down another job
with the van being off the road.
Eduardo has heard about the new
Van Monster showroom that has
recently opened in Bilbao and
surprised by the range of quality
used vehicles on offer he quickly
finds a great deal on an 18 month
old Citroën Berlingo. No more
wasted time at the garage for Javier
and his customers are impressed
too.
13
Northgate plc
Northgate plc
Annual report and accounts 2012
Annual report and accounts 2012
Operational review
Operational review continued
Spain operating margin10
2012: 19.1%
2011: 18.0%
2010: 12.7%
2009: 12.7%
Spain
Our Spanish business has
experienced another difficult
year with no notable
improvement in trading
conditions. In this challenging
economic environment strong
asset management remains
critical and we are pleased to
report that vehicle utilisation for
the year ended 30 April 2012
was 90% (2011 – 91%).
Continued strong fleet
management, cost control,
debtor management and
improved used vehicle values
have offset some of the fall in
revenue, helping to improve the
operating margin10 to 19.1%
(2011 – 18.0%).
Vehicle fleet and
utilisation
The fleet size reduced from
43,500 vehicles at 30 April 2011
to 38,400 at 30 April 2012. The
average utilisation for the year
was 90% (2011 – 91%).
During the year we purchased
11,900 vehicles (2011 – 13,400)
and the average age of the fleet
reduced from 25.0 months at 30
April 2011 to 21.8 months at 30
April 2012.
Hire rates and vehicles
on hire
Average hire revenue per rented
vehicle in the year was 1%
lower than the prior year. As in
the UK the mix of vehicles on
hire in Spain is being impacted
by customer demand moving
towards smaller vehicles.
Excluding this mix impact the
revenue per rented vehicle is in
line with the prior year.
Vehicles on hire fell 5,400 in the
year ended 30 April 2012, from
39,400 vehicles at 30 April
2011. With further
improvements to the vehicle
disposal infrastructure and
strong operational controls,
Spain was able to reduce the
fleet appropriately and maintain
strong vehicle utilisations.
Depot network
The network infrastructure
continued to be reviewed
throughout the year with two
sites being closed in order to
tighten operational efficiency
without the loss of geographical
coverage, leaving the closing
number of sites at 23.
Spain
16:32
The flexibility of our product is the
main reason why many customers
choose Northgate over contract
hire or ownership. Álvaro López
manages the fleet of one of
our large logistics customers in
Saragossa. It’s a seasonal business,
so when he receives notification
that a large contract has just been
successfully completed, the ten
vans on hire from Northgate are
returned at no additional cost.
This is why he chooses to partner
Northgate, because when the next
order comes in (large or small),
Álvaro knows that Northgate will
be on hand to supply the vehicles
that he needs at short notice.
14
Northgate plc
Annual report and accounts 2012
Operational review
Spain utilisation
2012: 90%
2011: 91%
2010: 88%
2009: 83%
Bad debts
The improvement noted last
year in debtor management
continued during the year. The
incidence of bad debt in Spain in
the year ended 30 April 2012
was €3.2m, a €1.1m reduction
on the charge in the year ended
30 April 2011 of €4.3m and
€7.1m less than the charge
noted in the year ended 30 April
2010.
Days’ sales outstanding also
continue to reduce due to
improvements in customer
profiling, controls and processes,
falling from 94 days as at 30
April 2011 to 71 days at
30 April 2012.
Spain continued
Sector focus
Spain continues to diversify
away from customers operating
in the construction industry,
with this sector’s vehicles on
hire accounting for 34% of
vehicles on hire at 30 April 2012
compared to 37% at
30 April 2011.
Used vehicle sales
Over the past two years
significant progress has been
made in Spain regarding the
vehicle sales capability and
routes to market. This has been
complemented by the change in
customer sector concentration
coupled with an improved
vehicle maintenance regime.
During the year Spain disposed
of 16,800 vehicles (2011 –
19,000 vehicles). The continued
improvement in resale values
achieved has resulted in a
reduction in the depreciation
charge of €4.9m compared to
a €0.2m reduction in the
prior year.
based rental agreements. On return
of vehicles, any damage can
be logged and sent directly to
the customer, improving the
communication between
Northgate and its customers.
UK
21:51
Nick Jones has been a Northgate
customer in Cannock for ten years.
When one of his vans reaches the
end of its hire life, he is happy to
choose a brand new Mercedes
Sprinter especially as it is tailored
exactly to his needs, with livery,
ladder racks and a towbar installed.
The van is delivered directly to
site, where foreman Keith signs
the driver’s PDA meaning that he
can get on with his job with no
paperwork to worry about losing
on the way back to the office.
Handheld PDA’s are now used
by all our delivery drivers, enabling
jobs to be scheduled in real time,
and replace the previous paper
15
Northgate plc
Annual report and accounts 2012
Operational review
Financial review
Group return on capital employed
was 13.1% compared to 11.9%
in the prior year and 8.4% in
2010. This represents a substantial
improvement over the previous two
years and underlines the Group’s
success in applying its strategy of
maximising returns through strong
fleet management and operational
efficiency.
Chris Muir
Group Finance Director
Committed facilities £m
26
387
319
319
163
120
92
92
77
92
77
92
77
92
92
61
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Other
Bank facilities
USPP notes
M&G
16
Northgate plc
Annual report and accounts 2012
Financial review
Group
A summary of the Group’s underlying financial performance for 2012, with
a comparison to 2011, is shown below:
Revenue
Operating profit11
Net interest expense12
Profit before tax2
Profit after tax3
Basic earnings per share3
Return on capital employed1
2012
£m
706.7
105.2
(45.4)
59.7
41.9
31.5p
13.1%
2011
£m
715.5
105.6
(51.8)
53.8
38.5
29.0p
11.9%
Group revenue in 2012 decreased by 1.2% to £706.7m (2011 – £715.5m)
or 1.4% at constant exchange rates.
Net underlying cash generation8 was £138.2m (2011 – £99.4m) after net
capital expenditure of £133.8m (2011 – £186.1m) resulting in closing net
debt4 of £371.3m (2011 – £529.9m). Gearing5 improved to 105%
(2011 – 163%).
On a statutory basis, operating profit has increased to £94.5m (2011 –
£82.6m) with profit before tax increasing to £46.0m (2011 – £26.5m). Basic
earnings per share increased to 30.4p (2011 – 22.1p). Net cash from
operations, including net capital expenditure on vehicles for hire, increased
by £43.5m to £145.8m (2011 – £102.3m), with net debt falling by 27.2%
from £529.1m at 30 April 2011 to £385.3m at 30 April 2012. Gearing
improved to 109% (2011 – 163%).
UK
The composition of the Group’s UK revenue and operating profit is set out
below:
Revenue
Vehicle hire
Vehicle sales
Operating profit13
2012
£m
320.8
136.3
457.1
74.4
2011
£m
333.9
103.0
436.9
73.6
Hire revenue reduced by 4% to £320.8m (2011 - £333.9m) driven by a 7%
reduction in the average number of vehicles on hire, partially offset by a 3%
increase in hire rates.
An improvement in residual values and increased volume of used vehicle
sales contributed £8.3m of the increase in operating profit.
The UK operating margin was as follows:
Operating margin9
2012
23.2%
2011
22.0%
The UK operating profit margin9 has increased to 23.2% (2011 – 22.0%).
This is due to an improvement in hire rates and used vehicle contribution as
mentioned above, coupled with cost savings achieved through the
restructuring of the UK business.
Given the continuing strength of used vehicle residual values, UK
depreciation rates on vehicles for hire have been reduced by 1%, taking
effect from 1 May 2012. Based on the composition of the fleet as at 30 April
2012 this is expected to reduce the depreciation charge by £5m in the year
ending 30 April 2013, which will reverse over four years as the current fleet
is sold.
Spain
Taxation
The revenue and operating profit generated by our Spanish operations are
set out below:
The Group’s underlying effective tax charge for its UK and overseas
operations is 30% (2011 – 28%).
Revenue
Vehicle hire
Vehicle sales
Operating profit14
2012
£m
182.9
66.7
249.6
35.0
2011
£m
203.3
75.3
278.6
36.6
The underlying tax charge excludes the tax on intangible amortisation and
exceptional items.
Also excluded from the underlying tax charge in the year is a £11.5m credit
following settlement with the UK tax authorities on an outstanding tax
matter and a charge of £2.9m to reflect the change in UK tax rates.
Including these items the Group’s statutory effective tax charge is 12%
(2011 – (11)%).
Hire revenue reduced by 10% due to the reduction in average vehicles on
hire (10.5% at constant exchange rates).
An improvement in used vehicle residual values has contributed £4.2m to
operating profit in the year with 16,800 vehicles sold (2011 – 19,000).
The Spanish operating margin was as follows:
Operating margin10
2012
19.1%
2011
18.0%
Earnings per share
Basic earnings per share (EPS)3, were 9% higher than the previous year at
31.5p (2011 – 29.0p). Basic statutory earnings per share were 30.4p
(2011 – 22.1p).
Underlying earnings for the purposes of calculating EPS3 of £41.9m were
£3.4m (9%) higher than the previous year (2011 – £38.5m). The weighted
average number of shares for the purposes of calculating EPS was 133.2m,
0.2m higher than the previous year.
Vehicle hire revenue and operating profit14 in 2012, expressed at constant
exchange rates, would have been lower than reported by £0.9m and
£0.2m respectively.
Adjusting for the change in mix of the fleet, revenue per rented vehicle
remained stable, which demonstrates good pricing discipline in a difficult
trading environment.
The incidence of bad debt in Spain has reduced by £1.0m to £2.7m (2011
– £3.7m), equivalent to 1.5% of rental revenue (2011 – 1.8%) despite no
significant improvement in the economic environment, which demonstrates
an ongoing improvement in debtor management.
Corporate
Corporate costs15 were £4.2m compared to £4.6m in the prior year.
Return on capital employed
Group return on capital employed1 was 13.1% compared to 11.9% in the
prior year and 8.4% in 2010. This represents a substantial improvement over
the previous two years and underlines the Group’s success in applying its
strategy of maximising returns through strong fleet management and
operational efficiency.
Dividend
The Directors recommend the payment of a dividend of 3.0p per share in
relation to the Ordinary shares for the year ended 30 April 2012 (2011 –
£Nil). Subject to approval by shareholders, the dividend will be paid on 21
September 2012 to ordinary shareholders on the register as at 17 August
2012. The dividend is covered 10 times.
Balance sheet
Net tangible assets at 30 April 2012 were £353.0m (2011 – £324.4m),
equivalent to a tangible net asset value of 264.9p per share (2011 – 243.5p
per share).
Gearing5 at 30 April 2012 was 105% (2011 – 163%) reflecting a £159m
reduction in net debt4. This demonstrates significant progress in
strengthening the balance sheet from a gearing level of 571% at 30 April
2009 and 213% at 30 April 2010.
Cash flow
A summary of the Group’s cash flows is shown below:
2012
£m
312.9
(133.8)
(40.9)
138.2
–
(0.1)
(2.6)
135.5
529.9
(135.5)
4.5
2.3
(29.9)
371.3
2011
£m
331.4
(186.1)
(45.9)
99.4
0.4
(10.3)
(2.6)
86.9
598.3
(86.9)
6.4
3.4
8.7
529.9
Group return on equity, calculated as profit after tax (excluding intangible
amortisation, impairment of intangible assets and exceptional items) divided
by average shareholders’ funds, was 11.9% (2011 – 12.0%).
Underlying operational cash generation
Net capital expenditure
Net taxation and interest payments
Exceptional items
During the year £7.0m of restructuring costs were incurred, of which £5.4m
related to the UK, £1.5m related to Spain and £0.1m related to corporate
costs. Other exceptional items totalled £(0.3)m.
During the year £3.0m of financing costs were incurred in relation to interest
rate swap contracts which were cancelled.
Interest
Net finance charges for the year before exceptional items were £45.4m
(2011 – £51.8m).
Net underlying cash generation8
Proceeds from issue of share capital
Refinancing fees
Other
Net cash generated
Opening net debt4
Net cash generated
Financing fees paid and amortised
Other non-cash items
Exchange differences
The charge includes £6.6m of non-cash interest, primarily from borrowing
fees amortised in the year (2011 – £9.4m).
Closing net debt4
The net cash interest charge has reduced by £3.6m to £38.8m, with a
£7.5m saving as a result of the reduction in average net debt throughout
the year being partially offset by a £3.8m increased cost as a consequence of
higher borrowing rates for the Group in the year and a £0.1m increase due
to the impact of exchange rates.
17
Northgate plc
Annual report and accounts 2012
Financial review
Financial review continued
Underlying operational cash generation (as outlined in the table above) of
£312.9m, coupled with tight control over capital expenditure of £133.8m
have contributed to a £158.6m reduction in net debt4 to a closing position
of £371.3m.
A total of £306.3m was invested in new vehicles in order to replace fleet
compared to £343.6m in the prior year. The Group’s new vehicle outlay was
partially funded by £180.3m of cash generated from the sale of used
vehicles. Other net capital expenditure amounted to £7.8m.
After capital expenditure, and payments of interest and tax of £40.9m, net
underlying cash generation8 was £138.2m, compared to £99.4m in the
previous year.
Borrowing facilities
The Group’s financing arrangements comprise committed secured facilities
of £668.3m as detailed below. As at 30 April 2012 £392.6m debt gross of
£21.3m of unamortised arrangement fees was drawn against these facilities
giving headroom of £275.7m6.
The Group’s facilities and their maturities are shown below:
Facility
£m
Drawn Headroom
£m
£m
Maturity
Bank
US loan notes
M&G loan
Other loans
386.5
163.1
92.1
26.6
114.7
163.1
92.1
22.7
271.8
Sept-14
– Nov-12 to Dec-16
– Oct-17 to Apr-19
Up to Nov-12
3.9
668.3
392.6
275.7
US loan notes bear fixed interest of 8.8%. M&G loan interest is charged at
LIBOR +4.25%. This has been swapped into fixed rate debt at a rate of
8.2%. A proportion of bank debt is fixed at 5.1% giving an overall rate of
7.3% on our fixed rate debt. Including floating rate debt, the overall cost of
the Group’s borrowings is 7.1%.
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 2012 corresponds to a
bank margin of 2.50%.
The Group made total borrowing repayments of £223m in the year.
Scheduled bank repayments of £68m are due in November 2012 before the
facilities mature in September 2014.
US note repayments and maturities of £45m are due in November 2012,
with £43m maturing in December 2013 and £75m 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 covenants7 under the Group’s 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 2.00x and 2.25x.
Interest cover at 30 April 2012 was 2.4x (2011 – 2.1x) with EBIT headroom,
all else being equal, of £17m.
2. Minimum tangible net worth
A minimum tangible net worth (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 2012 was £99m (2011 – £85m).
18
Northgate plc
Annual report and accounts 2012
Financial review
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
is 70%.
Loan to value at 30 April 2012 was 53% (2011 – 63%) giving net debt
headroom, all else being equal, of £132m.
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 is 2.00x.
Debt leverage cover at 30 April 2012 was 1.3x (2011 – 1.7x) with EBITDA
headroom, all else being equal, of £97m.
Treasury
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. Our credit exposure is limited
to banks which maintain an A rating. Individual aggregate credit exposures
are also limited accordingly.
Liquidity and funding
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 2012
was 105% compared to 163% at 30 April 2011.
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 96% at 30 April
2012 (2011 – 71%).
1 Calculated as operating profit11 divided by
average capital employed, being
shareholders funds plus net debt4.
2
3
Stated before intangible amortisation of
£4.0m (2011 – £4.7m), exceptional
administrative expenses of £6.7m (2011
– £12.5m), impairment of intangible
assets of £Nil (2011 – £5.9m) and
exceptional finance costs of £3.0m
(2011 – £4.2m).
Stated before intangible amortisation of
£4.0m (2011 – £4.7m), exceptional
administrative expenses of £6.7m (2011
– £12.5m), impairment of intangible
assets of £Nil (2011 – £5.9m), exceptional
finance costs of £3.0m (2011 – £4.2m)
and tax on intangible amortisation,
exceptional items and exceptional tax
credit of £12.3m (2011 – £18.2m).
4 Net debt taking into account swapped
exchange rates for US loan notes and
M&G loan swapped into Euro being
retranslated to Sterling at closing
exchange rates.
5 Calculated as net debt4 divided by
tangible net assets with tangible net
assets being net assets less goodwill and
other intangible assets.
6 Headroom calculated as facilities of
£668m less net borrowings of £392m.
Facilities and net borrowings stated
taking into account the fixed swapped
exchange rates for US loan notes and
M&G loan swapped into Euro being
retranslated to Sterling at closing
exchange rates. Net borrowings represent
net debt4 of £371m gross of £21m of
unamortised arrangement fees and are
stated after the deduction of £10m of
cash balances, which are available to
offset against borrowings.
7 Calculated in accordance with covenant
requirements of the Group’s financing
arrangements.
8 Net increase in cash and cash equivalents
before financing activities and partial
recovery of acquisition cost of subsidiary
undertaking.
9 Calculated as operating profit13 divided by
revenue of £320.8m (2011– £333.9m),
excluding vehicle sales.
10 Calculated as operating profit14 divided by
revenue of £182.9m (2011 – £203.3m),
excluding vehicle sales.
11 Stated before intangible amortisation of
£4.0m (2011 – £4.7m), exceptional
administrative expenses of £6.7m (2011
– £12.5m) and impairment of intangible
assets of £Nil (2011 – £5.9m).
12 Stated before exceptional finance costs of
£3.0m (2011 – £4.2m).
13 Excluding amortisation of intangible
assets of £3.1m (2011 – £3.2m) and
exceptional administrative expenses of
£5.7m (2011 – £2.4m).
14 Excluding amortisation of intangible
assets of £0.9m (2011 – £1.4m),
exceptional administrative expenses of
£1.7m (2011 – £9.4m) and impairment of
intangible assets of £Nil (2011 – £5.9m).
15 Excluding exceptional administrative
expenses of £(0.7)m (2011 – £0.6m).
Treasury continued
Foreign exchange risk
The Group’s reporting currency is, and the majority of its revenue (64%) 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
2012
£ : €
1.17
1.23
2011
£ : €
1.17
1.12
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. 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.
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 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.
Going concern
In determining whether the Group’s 2012 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 borrowings facilities and the risks and
uncertainties relating to its business activities in the current economic
climate.
The principal risks and uncertainties of the Group are outlined on pages 20
and 21. 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 2012 accounts.
19
Northgate plc
Annual report and accounts 2012
Financial review
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
Eurozone
Vehicle holding costs
Competition and hire rates Access to capital
Impact
Impact
Impact
Impact
Impact
IT systems
Impact
Change management
Impact
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 returns
and cash generation.
The Group operates in and
generates 35% of its revenue in
Spain, where the functional
currency is the Euro. The risks of
trading in this country are assessed
in the ‘Economic Environment’ risk.
Of the Group’s net assets, £294m
(2011 - £366m) are located in
Spain, against which the Group
holds £240m (2011 - £356m) of
Euro denominated borrowings
providing a net investment hedge.
There is a possibility that Spain may
leave the Euro. If this occurred and
Spain were to reintroduce its own
national currency, the Group could
be materially affected by a
weakening of this currency and
higher volatility on trading results
when translated into sterling. Local
net assets could depreciate while
the Group’s Euro debt located in
the UK could appreciate.
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 Group operates in Spain,
where austerity measures have
been implemented. These
measures could impact on future
trading volumes. 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 construction industry in Spain
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 Spanish business 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 Group operates in highly
The Group requires capital to both
The Group’s business involves a
The UK and Spain businesses have
competitive markets with
replace vehicles that have reached
high volume of transactions and
undertaken restructuring
competitors often pursuing
the end of their useful life and for
the need to track assets which are
programmes to improve the
aggressive pricing actions to
growth in the fleet. Additionally,
located at numerous sites.
operational efficiency of the Group.
increase hire volumes. The market
due to the level of the Group’s
is also fragmented with numerous
indebtedness, a significant
competitors at a local and
proportion of the Group’s cash
national level.
As our business is highly
operationally geared, any increase
or decrease in hire rates will impact
profit and shareholder returns to a
greater effect.
Reliance is placed upon the proper
Following the successful execution
functioning of IT systems for the
of the programmes, the new
effective running of operations.
processes and procedures need to
Any interruption to the Group’s IT
be embedded into the business
systems could have a materially
and applied consistently, otherwise
adverse affect on its business.
the Group will not be in a position
to achieve its objectives, and
profitability and shareholder
returns could be impacted.
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.
Mitigation
Mitigation
Mitigation
Mitigation
Mitigation
Mitigation
Mitigation
The Board has conducted a
detailed review of the impact of
possible scenarios that may arise
from the Eurozone crisis and the
risks are being continually
monitored. In order to minimise the
Group’s net exposure to the
Spanish currency, regular dividend
payments of cash flow generated
from the Spanish business have
been implemented, and
consideration is being given to
increasing the level of funding to
the Spanish business from locally
denominated borrowings.
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.
As the Group is focused on
Financial covenants are reviewed
Prior to any material systems
The Board and its advisors
maximising return on capital, all
on a monthly basis in conjunction
changes being implemented the
conducted detailed reviews of the
hire rates must exceed certain
with cash flow forecasts to ensure
Board approves a project plan. The
restructuring strategy before it
hurdle rates.
ongoing compliance. If there is a
project is then led by a member of
commenced, and the results of
Our current pricing strategy is
focused on charging the correct
price for the service provided and all
ancillary services offered which will
shortfall in cash generated from
the executive team, with an
each project continue to be
operations and/or available under
ongoing implementation review
monitored at Board level. The new
its credit facilities the Group would
being carried out by internal audit
processes and procedures have
reduce its capital requirements.
and external consultants where
been communicated to all
attract customers for whom flexible
The Group believes that its existing
rental is the most appropriate
facilities provide adequate
solution but not necessarily the
resources for present requirements.
cheapest. This means that the
Group will be better positioned
against solely price led competition
going forward.
The impact of access to capital on
the wider risk of going concern is
considered on page 19.
appropriate. The objective is always
employees and risks arising are
to minimise the risk that business
continually monitored and
interruption could occur as a result
mitigating actions are taken
of the system changes.
when required.
Additionally, the Group has an
appropriate business continuity
plan in the event of interruption
arising from an IT systems failure.
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 or outright purchase.
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.
20
Northgate plc
Annual report and accounts 2012
Principal risks and uncertainties
Economic environment
Eurozone
Vehicle holding costs
Competition and hire rates Access to capital
Impact
Impact
Impact
Impact
Impact
There is a link in our business
The Group operates in and
The overall holding cost of a
between the demand for our
generates 35% of its revenue in
vehicle is affected by the pricing
products and services and the levels
Spain, where the functional
levels of new vehicles and the
of economic activity in the
currency is the Euro. The risks of
disposal value of vehicles sold.
countries in which the Group
trading in this country are assessed
operates. The high level of
in the ‘Economic Environment’ risk.
operational gearing in our business
Of the Group’s net assets, £294m
model means that changes in
(2011 - £366m) are located in
demand can lead to higher levels
Spain, against which the Group
of variation in profitability.
holds £240m (2011 - £356m) of
The Group operates in Spain,
where austerity measures have
Euro denominated borrowings
providing a net investment hedge.
been implemented. These
There is a possibility that Spain may
measures could impact on future
leave the Euro. If this occurred and
trading volumes. The underlying
Spain were to reintroduce its own
macro-economic conditions have
national currency, the Group could
also increased the risk of customer
be materially affected by a
failure, particularly in Spain, which
weakening of this currency and
may lead to the occurrence of
higher volatility on trading results
increased bad debt charges.
when translated into sterling. Local
net assets could depreciate while
the Group’s Euro debt located in
the UK could appreciate.
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 returns
and cash generation.
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.
As our business is highly
operationally geared, any increase
or decrease in hire rates will impact
profit and shareholder returns to a
greater effect.
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.
IT systems
Impact
Change management
Impact
The Group’s business involves a
high volume of transactions and
the need to track assets which are
located at numerous sites.
The UK and Spain businesses have
undertaken restructuring
programmes to improve the
operational efficiency of the Group.
Reliance is placed upon the proper
functioning of IT systems for the
effective running of operations.
Any interruption to the Group’s IT
systems could have a materially
adverse affect on its business.
Following the successful execution
of the programmes, the new
processes and procedures need to
be embedded into the business
and applied consistently, otherwise
the Group will not be in a position
to achieve its objectives, and
profitability and shareholder
returns could be impacted.
Mitigation
Mitigation
Mitigation
Mitigation
Mitigation
Mitigation
Mitigation
Should there be a further
The Board has conducted a
Risk is managed on new pricing by
significant economic downturn the
detailed review of the impact of
negotiating fixed pricing terms
flexible nature of the Group’s
possible scenarios that may arise
with manufacturers a year in
business model enables vehicles to
from the Eurozone crisis and the
advance. Flexibility is maintained to
be placed with other customers.
risks are being continually
make purchases throughout the
Alternatively, utilisation can be
monitored. In order to minimise the
year under variable supply terms.
maintained through a combination
Group’s net exposure to the
of a decrease in vehicle purchases
Spanish currency, regular dividend
and increase in disposals, which
payments of cash flow generated
although affecting short term
from the Spanish business have
profitability, generates cash and
been implemented, and
consideration is being given to
increasing the level of funding to
the Spanish business from locally
denominated borrowings.
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.
As the Group is focused on
maximising return on capital, all
hire rates must exceed certain
hurdle rates.
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.
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 19.
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.
The Board and its advisors
conducted detailed reviews of the
restructuring strategy before it
commenced, and the results of
each project continue to be
monitored at Board level. The new
processes and procedures have
been communicated to all
employees and risks arising are
continually monitored and
mitigating actions are taken
when required.
Additionally, the Group has an
appropriate business continuity
plan in the event of interruption
arising from an IT systems failure.
The construction industry in Spain
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 Spanish business 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.
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 or outright purchase.
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.
21
Northgate plc
Annual report and accounts 2012
Principal risks and uncertainties
Corporate social responsibility
Our corporate
responsibility
At Northgate we understand
that we have a wider obligation
to run our business in a responsible
and sustainable way for all our
stakeholders. We believe that
supporting the communities in
which we operate and providing
a safe environment for our
employees is integral to the overall
performance of the Group.
How we manage corporate
responsibility
Taking corporate responsibility
and sustainability seriously is of the
utmost importance to Northgate.
Sound and robust health & safety
and environmental (HS&E)
arrangements and risk controls
therefore form a key part of the
Group’s overall business strategy.
The Group’s arrangements for
HS&E governance and management
systems are monitored by the
Audit and Risk Committee who
have designated the Chief Executive
as the person ultimately responsible
for implementing best practice
throughout the Group.
Common and consistent 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.
Health & safety
Our approach to health & safety
is simple: to ensure that no harm
comes to anyone engaged
with Northgate.
We realise that excellence in
health & safety can only be
achieved if it forms part of every
individual’s responsibility within
the Group. Our ‘Safe & Sound’
initiative was rolled out this
year to create an environment
of openness and awareness, where
all colleagues feel able to identify
and raise concerns about working
practices and conditions. The
Group provides training for
employees in a wide range of
health & safety disciplines, most of
which is carried out internally by
the Group’s HS&E department,
which in the UK is accredited by
the British Safety Council.
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 subsequently
monitored compliance. 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 main way that health & safety
across the business is monitored is
by the Accident Frequency Rate
(AFR) during the course of our
work. The AFR is calculated as the
number of accidents reportable
under the Reporting of Injuries,
Diseases and Dangerous
Occurences Regulations 1995
(RIDDOR) per 100,000 employee
hours worked. Although the
legislation in Spain defines
reportable accidents under different
rules to the UK, the data reported is
in line with RIDDOR.
The AFR’s during the current year
are as follows:
2012
1.2
5.5
2.5
UK
Spain
Group
Ethics
Northgate holds the highest
levels of ethical standards and
communicates this to all employees
by way of the Group’s Code of
Business Conduct, which covers the
Bribery Act, competition, conflicts
of interest, insider information,
confidentiality, gifts and
entertainment, discrimination,
harassment and fair dealing with
customers and suppliers.
In addition, the Group’s
Whistleblowing Policy and
Procedure enables every Group
employee to have a voice and a
means by which they may draw
concerns to our attention.
Our employees
As a Group we value our
employees as we understand
that they are the key resource
required to deliver the high levels
of customer service that maintains
our competitive advantage.
At 30 April 2012 we had 2,800
employees across the Group,
1,900 in the UK and 900 in Spain.
We recognise that our
employees depend on us and
we continually work on improving
their engagement and motivation
as the key to delivering high
levels of customer service. Our
employees are rewarded through
a combination of competitive
pay and incentive programmes
which enable them to share in
the progress towards the
Group’s objectives.
22
Northgate plc
Annual report and accounts 2012
Corporate social responsibility
1
2
3
Our employees continued
The Group’s policy is to recruit
the best available people who
are aligned with and embody our
core values of professionalism,
teamwork and can-do attitude
and these values apply throughout
the Group regardless of seniority
of position.
Northgate is committed to
equality, judging applications for
employment neither by race,
nationality, gender, age, disability,
sexual orientation nor political bias.
Investing in the training and
development of our workforce
not only improves the quality and
standard of our service delivery
but enables a high level of retention
and allows everyone to contribute
to their full potential. Regular
training programmes are operated
and a suite of ’off-the-shelf’
training courses are now available
to employees in the UK.
In the UK, the company
continues to work with two
vehicle manufacturers to recruit
apprentices. Over the past two
years, 42 new workshop
apprentices have been recruited,
and it is planned to recruit a further
30 in the financial year to April
2013. A new colleague induction
programme has also been
introduced in the UK.
Regular communication with our
employees is vital in ensuring that
we all share in the common goals
and values of the Group. Our
intranet provides daily updates on
the progress of the Group and is
supplemented by ‘Driven’ our
quarterly magazine. The Chief
Executive also hosts quarterly
briefing updates, with an invitation
to all staff to directly raise any
issues concerning them.
Environment
Northgate is committed to taking
reasonable actions to minimise
the risk of adverse impact on the
environment from our business.
We achieve this by adopting a set
of environmental principles to
promote and operate processes
and procedures which 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.
During the year 100% of hazardous
waste streams collected from
vehicle repair workshops in the UK
and 87% of hazardous waste
streams collected from vehicle
repair 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. In
the UK Northgate Plc were awarded
the internationally recognised
Environmental Standard ISO 14001
during this period. The operating
business in Spain also maintained
its accreditation to ISO 14001
Standard.
As at 30 April 2012, the UK
business operated from a total of
78 locations including 62 rental
sites. The Spanish business operates
from a total of 30 locations
including 23 rental sites. 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.
Our customers and
suppliers
Northgate recognises the need
to support our customers in
managing a sustainable business.
We work with our suppliers to
make a fleet available to our
customers comprised entirely
of modern vehicles, achieving
the highest levels of exhaust
emission standards.
In Spain we are one of the first
businesses to offer hire of electric
vehicles to our customers and our
vehicle monitoring systems in the
UK have enabled certain customers
to reduce fuel costs by up to 15%
by reviewing the usage of their
fleets and identifying training needs
to educate employees on more fuel
efficient driving methods.
As at 30 April 2012 the UK fleet of
52,900 vehicles had an average age
of 21.4 months. The total fleet in
Spain was 38,400 vehicles with an
average age of 21.8 months. All
vehicles purchased in the year
ended 30 April 2012 met the latest
Euro V standards.
Our community
We are a responsible
employer, neighbour and member
of the local community and
therefore operate our business in
a way that continuously improves
our relationship with employees,
customers, neighbours and the
environment.
The Group is a sponsor of Brake,
the road safety charity, and is a
member of the British Safety
Council and the Royal Society for
the Prevention of Accidents
(RoSPA). For the fourth 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 four consecutive years
underlines our commitment to
corporate social responsibility.
1 All vehicles purchased in
the year met the latest
environmental Euro
V standards.
2 A bodyshop technician at our
Valencia site in Spain.
3 Our Safe & Sound initiative was
rolled out this year to all
employees in the UK.
4 These electric vehicles delivered
to our airport management
customer in Madrid in the year
form part of our electric vehicle
fleet in Spain.
23
Northgate plc
Annual report and accounts 2012
Corporate social responsibility
44
Board of Directors
The Board is confident that the
dedication and hard work shown
by all our employees over the past
two years provides the Group with a
strong platform upon which to build.
Bob Mackenzie ACA
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 49.
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 59.
Left to right
Board committees
Bob Mackenzie ACA
Chairman
Bob Contreras ACA
Chief Executive
Chris Muir ACA
Group Finance Director
Andrew Allner FCA
Non-executive Director
Jan Astrand MBA
Non-executive Director
Tom Brown MBA (Oxon),
MBA IMD
Non-executive Director
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
24
Northgate plc
Annual report and accounts 2012
Board of Directors
Chris Muir ACA
Andrew Allner FCA
Jan Astrand MBA
Tom Brown MA (Oxon), MBA IMD
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 36.
Appointed to the Board as a
non-executive Director in April
2005 and appointed Senior
Independent Director in June 2007.
Tom is a Director of a number of
private companies, and a member
of the Economics Committee of the
EEF. He was previously Chairman
of Chamberlin plc, Group Chief
Executive of United Industries plc
and before that Group Managing
Director of Fenner plc. In all he has
served on the boards of UK quoted
companies for some 25 years,
following executive roles with GKN
plc and a period consulting with
McKinsey & Co Inc. Age 63.
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, 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 and before that he
was Chief Financial Officer of
Commodore International Ltd
based in the US. Age 65.
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 Senior
Independent Director and Chairman
of the Audit Committee at AZ
Electronic Materials SA and the
Go-Ahead Group plc and serves
as non-executive Director and
Chairman of the Audit Committee
at 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 58.
25
Northgate plc
Annual report and accounts 2012
Board of Directors
Report of the Directors
The Directors present their report and the audited accounts for the year
ended 30 April 2012.
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.
Results
Profit for the year after taxation was £40,468,000 (2011 – £29,393,000).
Interests in shares
No interim dividend was paid on the Ordinary shares.
The Directors recommend the payment of a final dividend of 3.0p per
share on the Ordinary shares. This dividend, if approved, will be paid on
21 September 2012 to shareholders on the register at close of business on
17 August 2012.
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 10 to 21, 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 20 and 21 which are incorporated into this
report by reference.
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 2012
26 June 2012
Standard Life Investments Limited
10,658,099 (8.00%)
10,852,029 (8.14%)
Aberforth Partners
7,481,552 (5.62%)
7,481,552 (5.62%)
Artemis Investment Management Ltd
7,115,776 (5.34%)
7,115,776 (5.34%)
Blackrock Inc
6,730,413 (5.05%)
6,730,413 (5.05%)
Legal & General Group plc
6,698,272 (5.03%)
6,698,272 (5.03%)
Aviva plc
6,582,482 (4.94%)
6,672,204 (5.01%)
Henderson Global Investors Ltd
6,642,934 (4.99%)
6,665,585 (5.00%)
Royal London Asset Management Ltd
4,117,374 (3.09%)
4,117,374 (3.09%)
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.
Close company status
Directors
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.
Details of the present Directors are listed on pages 24 and 25. All have served
throughout the year except Chris Muir who was appointed on 19 May 2011.
Resolutions to re-appoint each of the 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 28 to 32.
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
CJR Muir
*On date of appointment.
Ordinary Shares
of 50p each
30 April 2012
Ordinary Shares
of 50p each
1 May 2011
13,090
51,920
52,634
116,608
100,000
17,493
13,090
51,920
52,634
115,048
100,000
12,657*
No Director has an interest in the Preference shares of the Company.
No changes in the above interests have occurred between 30 April 2012 and
the date of this report.
Details of options held by the Directors under the Company’s various share
schemes are given in the Remuneration Report on pages 28 to 32.
No person has any special rights of control over the Company’s share capital
and all issued shares are fully paid.
Directors’ indemnities
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.
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.
26
Northgate plc
Annual report and accounts 2012
Report of the Directors
Donations
During the year the Group made charitable donations of £3,000
(2011 – £5,000) 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 2012 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 28 to 32, 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 2011 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 2013 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.
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 6 to the Notice of Annual
General Meeting on page 86 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 effective until the Company’s
next AGM, when it is intended that the approval be renewed.
It is the Board’s intention that this authority would not be used as a matter of
routine, but only when merited by the circumstances of the meeting and in
the best interests of shareholders.
Authority for the Company to purchase its own shares
The Directors propose to reinstate the general authority of the Company to
make market purchases of its own shares to a total of 13,300,000 Ordinary
shares (representing approximately 10% of the issued Ordinary share
capital) and within the price constraints set out in the special resolution to be
proposed at the Annual General Meeting.
There is no present intention to make any purchase of own shares and, if
granted, the authority would only be exercised if to do so would result in an
improvement in earnings per share for remaining shareholders.
Financial instruments
Details of the Group’s use of financial instruments are given in the Financial
Review on pages 18 and 19 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:
•
•
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
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
D Henderson
Secretary
26 June 2012
27
Northgate plc
Annual report and accounts 2012
Report of the Directors
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 24.
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 New
Bridge Street (NBS) (an Aon plc company) on remuneration matters and share
scheme implementation. NBS is appointed by the Committee. Neither NBS
nor any other Aon plc company undertakes other work for the Company or
the Group. The terms of engagement between the Committee and NBS 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 its current policy 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 further restructuring of the business in the UK (see Operational
Review on pages 10 to 15), the Committee has endorsed the implementation
of a common grading structure for all levels of management and staff below
the main board, with defined and consistent pay and benefits, which provides
a rational approach to remuneration. This will aid the Committee in ensuring
that there is a proper balance across the Group, especially when conducting
the annual salary review.
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.
The Committee has been following the proposals and recommendations of
the Department for Business Innovation and Skills on executive remuneration
and will consider their implications for the Company during the course of the
year.
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:
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
£200,000
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.
In line with the majority of management and staff in both the UK and Spain,
Bob Contreras has received no increase in basic pay this year.
On his appointment in May 2011, Chris Muir’s salary was set significantly
below market level. In recognition of this and of his performance in the role
to date, his basic salary has therefore been increased by 14% from £175,000
to £200,000 with effect from 1 May 2012. This increase has moved him
partially towards the market rate. Subject to performance, further increases
may be made in subsequent years.
28
Northgate plc
Annual report and accounts 2012
Remuneration report
Total remuneration
The chart below shows the balance between fixed and variable performance
based pay for Bob Contreras and Chris Muir for the year ended 30 April 2012
and projections for the year ending 30 April 2013.
For 2012 an expected value of 55% of the face value has been used in
respect of the performance shares awarded in that year.
Total reward for 2013 can only be estimated, because the actual value of
the cash and deferred bonus will not be known until the end of the relevant
performance period. 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 2013, on target performance has been assumed
for the annual bonus scheme.
The original dates of appointment to the Board and of their current letters of
appointment are:
RD Mackenzie
AJ Allner
JG Astrand
THP Brown
Date of appointment
Letter of appointment
5 February 2010
26 September 2007
13 February 2001
13 April 2005
4 February 2010
22 June 2011
22 June 2011
22 June 2011
The current fees paid to the non-executive Directors are shown below:
RD Mackenzie
AJ Allner
JG Astrand
THP Brown
Chairman
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*
RL Contreras
2012
2013
375
375
96 94 94
309
96
165
165
309
* Including £8,000 in respect of his Chairmanship of the Remuneration Committee and £10,000 as Senior
† Including £10,000 in respect of his Chairmanship of the Audit and Risk Committee.
Independent Director.
CJR Muir
2012
175 52
77 77
144
2013
200
56 50 50
165
•
•
•
•
•
Base salary
Pension & benefits
Annual bonus – cash
Annual bonus – deferred shares
Performance Shares
For comparison purposes, Chris Muir’s remuneration for 2012 has been
assumed to be for a full year.
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 incentive
or pension schemes. Non-executive Directors do not have contracts of service
with the Company and their appointments are terminable without notice.
No fees were increased on review this year. 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 Schedule 8 of the Large and Medium-sized Companies and
Groups (Accounts and Reports) 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 2012 was
199p (30 April 2011 – 342p). The range during the year was 190p to 342p.
Total shareholder return
)
£
(
e
u
a
V
l
120
100
80
60
40
20
0
30-Apr-07
30-Apr-08
30-Apr-09
30-Apr-10
30-Apr-11
30-Apr-12
Northgate plc
FTSE 250 (Excl. Inv. Trusts) Index
Source: Thomson Reuters
This graph shows the value, by the 30 April 2012, of £100 invested in
Northgate on 30 April 2007 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.
29
Northgate plc
Annual report and accounts 2012
Remuneration report
Remuneration Report continued
The following parts of this report have been audited:
Pension contributions**
RD Mackenzie
AJ Allner
JG Astrand
THP Brown
RL Contreras
CJR Muir***
PJ Tallentire
Total emoluments excluding
pension contributions
Total pension contributions
Salary/
fees
£000
160
60
50
68
375
166
–
879
–
Bonus
£000
Benefits*
£000
–
–
–
–
330
154
–
484
–
–
–
–
–
61
19
–
80
–
Total
2012
£000
160
60
50
68
766
339
–
Total
2011
£000
183
46
39
45
753
–
526
1,443
–
1,592
–
2012
£000
–
–
–
–
35
30
–
–
65
2011
£000
–
–
–
–
24
–
7
–
31
* 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.
*** From 19 May 2011
In addition to the fees shown above, paid in respect of his office as a Director
of the Company, Jan Astrand also received fees of €129,600 (2011 - €Nil)
in respect of his consultancy work in Spain referred to in the Corporate
Governance Report on pages 34 and 35.
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.
mid-market price on 27 June 2012, being the date of the preliminary results
announcement.
The bonus for the executive Directors in respect of the year ending 30 April
2013 will comprise three elements reflecting the Group’s near term priorities:
1. UK Marginal Contribution (MC). MC is defined as all revenue except from
the sale of used vehicles, less the depreciation charge on hire vehicles.
A UK MC of £192,524k pays zero bonus, £199,767k pays one third of
annual salary, with a straight line in between.
2. Spain. Performance to be measured against personal targets tailored to
the particular situation in that country, with a maximum bonus of one
third of annual salary.
3. Group ROCE. 13.1% pays zero bonus, 14.4% pays one third of annual
salary, with a straight line in between.
No element of bonus will be paid unless Group operating profit is at least
95% of the Group operating profit for the year ending 30 April 2013,
included within the Group’s three year rolling business plan (‘the business
plan’).
Awards held by Directors during the year are shown in the table on page 31.
Executive performance share plan
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 deferred shares may be received 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.
Awards over 592,839 deferred shares awarded to 72 executives were
outstanding at 30 April 2012.
In respect of the year ended 30 April 2012, bonuses for the two executive
Directors were calculated based on a matrix of net debt (range £494m
to £463m) and ROCE (range 12.77% to 13.50%). These measures were
representative of the Group’s strategic priorities of strengthening the
balance sheet and improving operating efficiencies. The net debt and
ROCE achievements result in bonuses equating to 88% of the maximum.
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
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 recent years,
the performance targets applying to the grants to be made in 2012 will be
a mixture of underlying EPS and return on capital employed. 50% of the
award will apply to each measure to closely reflect the importance the Board
places on balance sheet management. 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 relevant targets are:
2009 award
2010 award
2011 award
2012 award†
EPS in 3rd Year
ROCE average over 3 years
Threshold
Stretch
Threshold
Stretch
18.30p
31.45p
38.50p
CPI +3%
21.00p
37.00p
47.20p
CPI +11%
8.70%
10.20%
13.50%
13.75%
10.40%
12.00%
13.85%
14.41%
†
The EPS targets will be calculated by applying the compound annual growth to the 2012 actual EPS of 31.5p
The performance targets for the 2009 award were achieved in full.
30
Northgate plc
Annual report and accounts 2012
Remuneration report
Directors’ interests in share awards
At 1 May
2011
Number
granted
Market
price at
grant p
Number
exercised
Date of
exercise
Exercise
price p
Share price
on date of
exercise p
Gross gain
on exercise
£
Number At 30 April
2012
lapsed
Normally
exercisable
Executive performance share plan
RL Contreras
49,313
130,952
302,593
–
–
–
–
171,546
482,858
171,546
267.5
157.5
173.5
327.9
CJR Muir
–
80,054
327.9
482,858
251,600
Management performance share plan
CJR Muir
3,360*
9,602*
28,571*
25,936*
67,469*
706.0
292.0
157.5
173.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
49,313
–
–
–
–
130,952
302,593
171,546
49,313
605,091
Sep 2011
Oct 2012
Aug 2013
Jul 2014 – Jul 2021
–
80,054
Jul 2014 – Jul 2021
49,313
685,145
3,360
–
–
2,318
–
9,602
28,571
23,618
5,678
61,791
Jul 2011
Jul 2012
Oct 2012
Jul 2013
Deferred annual bonus plan
Following changes made to the Rules of the DABP by the Committee, awards can now be granted in two forms: (i) a nil cost option over a number of shares (a 'Deferred Award') or (ii) a nil cost option over
a fixed value of shares (a 'Linked Deferred Award') granted in association with a HMRC Approved Option (an 'Option').
The value of a Linked Deferred Award is capped at the value required in respect of the exercise price of the associated Option. When calculating the maximum value of the shares under a Linked Deferred
Award that may be granted under such award the value of the shares under the associated Option is not counted. All DABP awards ordinarily become exercisable on the third anniversary of their grant.
Related Linked Deferred Awards and Options must be exercised at the same time unless the Option has been waived. In the table below, the awards made during the year were made under the revised
Rules.
RL Contreras
29,719
–
CJR Muir
9,149
(with capped
value of
£30,000)1
9,1492
44,2203
–
–
–
29,719
53,369
3,274*
15,873*
9,337*
–
–
–
7,295
(with capped
value of
£23,920)1
7,2952
–
–
28,484
7,295
58,203
60,664
–
–
327.9
–
–
–
–
–
327.9
–
–
–
–
–
–
–
–
325.5
10,657
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,274
12.07.11
–
–
–
–
–
–
–
–
3,274
3,274
–
–
–
–
–
–
–
–
–
–
–
–
29,719
Aug 2013 – Aug 2015
9,149
(with capped
value of
£30,000)
9,149
44,220
83,088
Aug 2014 – Aug 2021
Aug 2014 – Aug 2021
Aug 2014 – Aug 2021
–
Jul 2011 – Jul 2013
15,873
9,337
Oct 2012 – Oct 2014
Aug 2013 – Aug 2015
7,295
(with capped
value of
£23,920)
Aug 2014 – Aug 2021
7,295
Aug 2014 – Aug 2021
32,505
115,593
These awards were made prior to his appointment to the Board
*
1 Linked Deferred Award
2 Option associated with the relevant Linked Deferred Award
3 Deferred Award
Management performance share plan
The MPSP is designed to reward achievement of, and individual contribution
to, 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 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. The Committee
has discretion to alter the performance targets to take account of any
significant event occurring after the grant of an award but prior to vesting.
There is an overriding condition that no part of an award can vest if there has
been a decrease in profit before tax compared to the prior year.
31
Northgate plc
Annual report and accounts 2012
Remuneration report
Remuneration Report continued
The position as at 30 April 2012 with regard to awards made under the MPSP is as follows:
2008
2009
2010
2011
Total
Original award of shares adjusted as appropriate for
rights issue and consolidation
Lapsed
Early vesting
Remaining subject to performance
The above awards are held by 40 executives, including 14 in Spain.
283,486
218,672
–
64,814
872,638
313,078
148,577
410,983
604,664
89,083
8,538
507,043
362,372
24,670
–
337,702
2,123,160
645,503
157,115
1,320,542
All employee share scheme
Sourcing of shares and dilution
The All Employee Share Scheme ('the AESS'), which is approved by HM
Revenue and Customs under Schedule 8 Finance Act 2000, was introduced in
2000 to provide employees at all levels with the opportunity to acquire shares
in the Company on preferential terms. The Board believes that encouraging
wider share ownership by all staff will have longer term benefits for the
Company and for shareholders. The AESS operates under a trust deed, the
Trustees being Capita IRG Trustees Limited ('the Capita Trust').
To participate in the AESS, which operates on a yearly cycle, employees are
required to make regular monthly savings (on which tax relief is obtained), by
deduction from pay, for a year at the end of which these payments are used
to buy shares in the Company ('Partnership shares').
For each Partnership share acquired, the employee will receive one additional
free share ('Matching shares'). Matching shares will normally be forfeited if,
within three years of acquiring the Partnership shares, the employee either
sells the Partnership shares or leaves the Group. After this three year period
Partnership and Matching shares may be sold, although there are significant
tax incentives to continue holding the shares in the scheme for a further
two years. Those employees who are most committed to the Company will
therefore receive the most benefit.
The eleventh annual cycle ended in December 2011 and resulted in 343
employees acquiring 167,499 Partnership shares at 192p each and being
allocated the same number of Matching shares. As at 30 April 2012 the
Capita Trust held 1,305,864 50p Ordinary shares that have been allocated to
employees from the first eleven cycles.
The twelfth annual cycle started in January 2012 and currently some 350
employees are making contributions to the scheme at an annualised rate of
£315,000.
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 2012, the value of Bob Contreras’ shareholding expressed as a
percentage of his basic salary on that date was 62% and of Chris Muir, 20%.
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 300,000 (2011 – 550,000) Ordinary shares
were purchased by the Guernsey Trust and 254,717 (2011 – 149,243) were
used to satisfy the exercise of awards under the DABP and MPSP. At 30 April
2012 the Guernsey Trust held 265,868 (2011 – 478,758) Ordinary shares as a
hedge against the Group’s obligations under these schemes.
The rules of both these schemes were amended last year to also allow new
issue and treasury shares to be used to satisfy the vesting and exercise of
awards, but to date the Board have chosen not to do so.
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
Awards 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 2012 was 334,998 (2011 – 345,534) of which
258,173 were transferred from the Guernsey Trust, with the balance of
76,825 (2011 – 62,449) being shares already held by the Capita Trust from
forfeitures during the year.
At 30 April 2012 the Capita Trust held 23,715 (2011 – 38,964) Ordinary
shares which had been forfeited as a result of early withdrawals post January
2012.
Overall plan limits
All the above schemes operate within the following limits:
In any 10 calendar year period, the Company may not issue (or grant rights to
issue) more than:
a)
10% of the issued Ordinary share capital under all the share plans; and
b)
5% of the issued Ordinary share capital under the executive share plans
(EPSP, DABP and MPSP).
The dilution position as at 30 April 2012 was 2.16% under the EPSP, MPSP
and DABP and 2.63% under the AESS.
Tom Brown
Chairman of the Remuneration Committee
26 June 2012
32
Northgate plc
Annual report and accounts 2012
Remuneration report
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 ('the Code'), are reviewed annually
by the Committee and are available on the Company’s website. In summary
these include:
•
•
reviewed a report on completeness of income;
reviewed the Group’s depreciation policy and agreed a change in the
rates applicable to the UK vehicles for hire from 1 May 2012;
•
reviewed the Group’s corporate taxation arrangements;
• monitored and reviewed the activities of the Group’s internal audit
department;
• 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;
•
reviewed a report on impairment;
• monitored the Group’s going concern status;
• making recommendations to the Board regarding the appointment
of the external auditor and approving its remuneration and terms of
engagement;
•
•
reviewed the Group’s Eurozone contingency planning measures; and
reviewed its own effectiveness and terms of reference.
• monitoring the independence and objectivity of the external auditor
and developing a policy for the provision of non-audit services by the
external auditor;
• monitoring the audit process and any issues arising therefrom; and
•
all aspects of Group risk.
Membership
The members of the Committee, who are all non-executive Directors of the
Company, are:
Date of appointment
Qualification
AJ Allner (Chairman)
JG Astrand
THP Brown
26 September 2007
6 June 2001
8 June 2005
FCA
MBA
MA (Oxon), MBA IMD
The 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.
Whereas Andrew Allner and Tom Brown are considered to be independent,
as is stated in the report on Corporate Governance on pages 34 and 35, Jan
Astrand is not currently considered to be independent in terms of the Code.
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 2012 are given on
page 34.
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 2011, the Committee has:
•
reviewed the financial statements for the years ended 30 April 2011
and 2012, the half yearly report issued in December 2011 and Interim
Management Statements issued in September 2011 and March 2012.
As part of this review process, the Committee received reports from
Deloitte LLP on the full and half year results;
•
reviewed and agreed the scope of the audit work to be undertaken by
Deloitte LLP and agreed their fees;
• monitored the Group’s risk management process and business
continuity procedures;
•
•
reviewed the effectiveness of the Group’s system of internal controls;
reviewed the Group’s whistle blowing procedures;
External auditor
The Board’s policy on non-audit services provided by the external auditor,
developed and recommended by the Committee, is:
•
•
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; and
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.
Internal audit
In fulfilling its duty to monitor the effectiveness of the internal audit function,
the Committee has:
•
•
•
•
reviewed the adequacy of the resources of the internal audit department
for both the UK and Spain;
ensured that the head of internal audit has direct access to the
Chairman of the Board and to all members of the Committee;
conducted a one-to-one meeting with the head of internal audit,
approved the internal audit programme, and reviewed half-yearly
reports by the head of internal audit;
approved, post year end, the appointment of a new head of internal
audit in order to strengthen this function.
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
26 June 2012
33
Northgate plc
Annual report and accounts 2012
Report of the audit and risk committee
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 24 and 25.
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
CJR Muir
9
9
9
9
8
9
9
4
–
4
4
4
–
–
5
5
5
5
5
–
–
All Directors in office at that time were present at the Annual General
Meeting held in September 2011.
The external auditor attended all Audit and Risk Committee meetings. The
head of internal audit attended three 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.
In accordance with the provisions of the Code, resolutions to re-appoint all
Directors currently in office will be proposed at the Annual General Meeting.
During the year, Jan Astrand, who was first appointed to the Board in
February 2001, was appointed as non-executive Chairman of the Board of
our Spanish subsidiary, Northgate España Renting Flexible S.A., in order to
reintroduce direct representation on that Board. It is a role for which Jan is
ideally suited, as he is permanently resident in Spain and fluent in Spanish.
The appointment is for an initial term of one year from December 2011. He
receives no additional remuneration for this appointment.
In addition, he was asked and agreed to undertake a project to implement a
margin improvement programme in Spain focusing on certain key areas of
the business where he would be able to draw on his extensive knowledge of
the business in the UK. This project commenced in November 2011 and Jan’s
involvement is expected to last for one year. He is being remunerated on a
consultancy basis for this work. Details of the fees paid in the year are shown
in Note 40 on page 82.
The Board considers that both the above appointments are in the best
interests of the Company and of the shareholders and, whilst Jan cannot
be considered to be independent in terms of the Code or by the National
Association of Pension Funds, the Board is satisfied that they do not affect his
independence of judgment when carrying out his duties as a Director of the
Company.
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.
Diversity
The Board has considered the recommendations of the Davies Review
into Women on Boards in the light of the provisions of both section B.2 of
the Code, with which we are compliant, and of our existing policies and
procedures. The Board recognises the benefits of diversity at all levels of the
business and in order to reinforce the Board’s commitment to equality, we
have recently endorsed a new Equal Opportunities Policy (which may be
found on our website). Whilst the overriding criteria for Board appointments
will always be based on merit, so as to encourage an appropriate balance
of skills, experience and knowledge on the Board at all times, for all future
appointments we will only use executive search firms who have committed
to the Voluntary Code of Conduct on gender diversity. At the same time
the Board recognises that, particularly given the nature of its business, the
development of a pool of suitably qualified candidates may take time to
achieve and therefore do not believe it is appropriate to set targets, however
aspirational, at the present time.
Currently, 27% of our total UK workforce and 8% of our senior
management in the UK are female.
34
Northgate plc
Annual report and accounts 2012
Corporate governance
2 Directors’ remuneration
The Company’s policy on remuneration and details of the remuneration of
each Director are given in the Remuneration Report on pages 28 to 32.
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 21.
Internal control
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 risks is
reviewed by the Board and the Group’s management at their monthly
meetings. The Board is therefore able to confirm that there is an ongoing
process for identifying, evaluating and managing the significant risks faced by
the Group, that it has been in place for the year under review and up to the
date of approval of these accounts and accords with the Turnbull guidance.
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.
Control procedures
The Board and the Group’s management have adopted a schedule of matters
which are required to be brought to it for decision, thus ensuring that it
maintains full and effective control over appropriate strategic, financial,
organisational and compliance issues. Measures taken include clearly defined
procedures for capital expenditure appraisal and authorisation, physical
controls, segregation of duties and routine and ad hoc checks.
Monitoring
The Board has delegated to executive management implementation of
the system of internal control. The Board, including the Audit 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
Report of the Audit and Risk Committee on page 33.
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 with the exception of those relating to Board
and Committee composition. The Code states that at least half the Board,
excluding the Chairman, should be comprised of independent non-executive
directors: as referred to above, since November 2011, only two out of the
five relevant Directors have been independent. Similarly, the Code states
that both the Audit and Remuneration Committees should comprise at least
three independent non-executive directors, whereas there are currently two.
The Board recognises that, whilst Jan Astrand has ceased to be independent
for very good reasons, the composition of the Board does not now have
the balance expected under the Code and the Nomination Committee is
therefore conducting a search for an additional independent non-executive
director, which will restore the Company to full compliance with the Code.
By order of the Board
D Henderson
Secretary
26 June 2012
35
Northgate plc
Annual report and accounts 2012
Corporate governance
Directors’ responsibilities
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:
•
•
•
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
• 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:
•
•
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
26 June 2012
36
Northgate plc
Annual report and accounts 2012
Directors’ responsibilities
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 2012 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 other matters prescribed by the Companies Act
2006
In our opinion:
•
•
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:
•
•
•
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
• we have not received all the information and explanations we require
for our audit.
Under the Listing Rules we are required to review:
•
•
•
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 UK Corporate
Governance 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
Opinion on financial statements
26 June 2012
In our opinion:
•
•
•
•
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 2012 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;
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.
37
Northgate plc
Annual report and accounts 2012
Consolidated income statement
For the year ended 30 April 2012
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
Operating profit
Interest income
Finance costs (excluding exceptional items)
Exceptional finance costs
Total finance costs
Profit before taxation
Taxation
Profit for the year
Notes
4,5
4,5
4,5
35
35
15
5,6
8
9
9,35
10
Underlying
2012
£000
503,659
203,039
Statutory
2012
£000
503,659
203,039
706,698
706,698
Underlying
2011
£000
537,285
178,217
715,502
Statutory
2011
£000
537,285
178,217
715,502
(540,915)
(540,915)
(553,083)
(553,083)
165,783
165,783
162,419
162,419
(60,607)
–
–
–
(60,607)
(6,702)
–
(3,996)
(60,607)
(71,305)
105,176
165
(45,610)
–
94,478
165
(45,610)
(3,046)
(45,610)
(48,656)
59,731
(17,803)
45,987
(5,519)
41,928
40,468
(56,772)
–
–
–
(56,772)
105,647
848
(52,649)
–
(52,649)
53,846
(15,305)
38,541
(56,772)
(12,499)
(5,892)
(4,681)
(79,844)
82,575
848
(52,649)
(4,234)
(56,883)
26,540
2,853
29,393
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
31.5p
30.8p
30.4p
29.7p
29.0p
28.5p
22.1p
21.7p
38
Northgate plc
Annual report and accounts 2012
Consolidated income statement
For the year ended 30 April 2012
Statements of comprehensive income
For the year ended 30 April 2012
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
Deferred taxation on disposal of revalued property
Foreign exchange difference on revaluation reserve
Net fair value (losses) gains on cash flow hedges
Deferred tax credit (charge) recognised directly in equity
relating to cash flow hedges
Actuarial losses on defined benefit pension scheme
Deferred tax credit recognised directly in equity relating
to defined benefit pension scheme
Total other comprehensive income
Total comprehensive income for the year
Notes
Group
2012
£000
2011
£000
Company
2012
£000
2011
£000
40,468
29,393
(2,957)
(18,384)
32
32
28
31
31
34
34
(16,711)
13,486
5
(120)
(16,188)
3,834
(227)
60
(15,861)
24,607
4,645
(3,727)
–
33
5,386
(1,559)
(169)
50
4,659
34,052
–
–
–
–
(14,201)
3,360
–
–
(10,841)
(13,798)
–
–
–
–
5,069
(1,467)
–
–
3,602
(14,782)
39
Northgate plc
Annual report and accounts 2012
Statements of comprehensive income
For the year ended 30 April 2012
Balance sheets
As at 30 April 2012
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
Derivative financial instrument liabilities
Current tax liabilities
Short term borrowings
Total current liabilities
Net current (liabilities) assets
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
2012
£000
2011
£000
3,589
11,809
714,042
77,308
791,350
2,155
10,179
–
Company
2012
£000
–
–
–
2,643
2,643
11,249
5,198
122,894
3,589
9,591
623,103
74,452
697,555
11,249
1,691
–
723,675
819,082
141,984
22,213
97,278
–
9,707
129,198
21,371
124,623
–
96,885
242,879
–
882,710
–
964
883,674
2011
£000
–
–
–
2,705
2,705
2,155
1,910
147,894
154,664
–
903,532
3,301
18,937
925,770
852,873
1,061,961
1,025,658
1,080,434
63,188
1,046
4,150
135,558
203,942
67,419
–
16,712
13,578
97,709
394,345
1,631
–
113,654
509,630
(74,744)
145,170
374,044
15,951
259,487
7,357
–
282,795
486,737
366,136
66,616
113,508
1,189
(685)
67,463
(14,247)
(7,963)
40
140,215
7,684
612,434
4,233
142
624,493
722,202
339,759
66,616
113,508
1,363
(1,630)
67,463
(1,893)
(4,738)
40
99,030
15,951
259,273
–
–
275,224
784,854
240,804
66,616
113,508
1,371
–
63,159
(12,617)
–
40
8,727
366,136
339,759
240,804
221,696
–
–
–
221,696
704,074
7,684
598,515
–
–
606,199
827,895
252,539
66,616
113,508
1,371
–
63,159
(1,776)
–
40
9,621
252,539
14
15
16
17
23
25
18
19
20
23
21
23
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 26 June 2012.
They were signed on its behalf by:
RD Mackenzie
CJR Muir
Director
Director
40
Northgate plc
Annual report and accounts 2012
Balance sheets
As at 30 April 2012
Cash flow statements
For the year ended 30 April 2012
Net cash from (used in) operations
(a)
145,826
102,260
(39,688)
(41,539)
Group
2012
£000
2011
£000
Company
2012
£000
2011
£000
Investing activities
Interest received
Partial recovery of acquisition cost of subsidiary
undertaking
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 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
165
775
–
1,876
(7,705)
(1,982)
(6,871)
(222,592)
(86)
–
–
–
–
(293)
(3,046)
848
–
–
3,295
(4,972)
(2,027)
(2,856)
(175,464)
(10,309)
100,000
–
–
380
(1,676)
(896)
77
–
45,000
–
–
–
112
–
45,000
–
–
–
45,077
45,112
(213,852)
(86)
–
214,160
(18,950)
–
(293)
(3,046)
(195,944)
(10,309)
100,000
85,992
–
380
(1,676)
(896)
Net cash used in financing activities
(226,017)
(87,965)
(22,067)
(22,453)
Net (decrease) increase in cash and cash
equivalents
Cash and cash equivalents at 1 May
Effect of foreign exchange movements
Cash and cash equivalents at 30 April
(87,062)
96,885
(116)
9,707
11,439
85,343
103
96,885
(16,678)
18,937
(1,295)
964
(18,880)
38,737
(920)
18,937
41
Northgate plc
Annual report and accounts 2012
Cash flow statements
For the year ended 30 April 2012
Notes to the cash flow statements
For the year ended 30 April 2012
(a) Net cash from (used in) operations
Group
Company
Operating profit (loss)
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 on disposal of property, plant and equipment
Share options fair value charge
Operating cash flows before movements in working capital
Decrease (increase) in non-vehicle inventories
Decrease in receivables
(Decrease) increase in payables
Cash generated from (used in) operations
Income taxes paid
Interest paid
Net cash generated from (used in) operations
Purchase of vehicles
Proceeds from disposal of vehicles
2012
£000
94,478
192,729
–
–
25
3,996
443
2,063
293,734
229
22,456
(3,538)
312,881
(2,582)
(38,487)
271,812
(306,311)
180,325
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
2012
£000
(4,207)
62
–
–
–
–
–
2,063
(2,082)
–
329
(1,403)
(3,156)
–
(36,532)
(39,688)
–
–
Net cash from (used in) operations
145,826
102,260
(39,688)
2011
£000
(5,137)
61
–
–
–
–
–
1,897
(3,179)
–
11
3,173
5
–
(41,544)
(41,539)
–
–
(41,539)
42
Northgate plc
Annual report and accounts 2012
Notes to the cash flow statements
For the year ended 30 April 2012
Statements of changes in equity
For the year ended 30 April 2012
Group
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
Total equity at 1 May 2011
Share options fair value charge
Share options exercised
Transfer on disposal of revalued property
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
179,744
–
–
380
–
–
–
–
–
180,124
–
–
–
–
–
–
–
–
Own
shares
reserve
£000
(891)
–
–
–
–
(1,676)
937
–
–
(1,630)
–
–
–
–
(293)
1,238
–
–
Hedging
reserve
£000
Translation
reserve
£000
(5,720)
–
–
–
–
–
–
2,616
1,211
(1,893)
–
–
–
–
–
–
(1,478)
(10,876)
(5,656)
–
–
–
–
–
–
2,129
(1,211)
(4,738)
–
–
–
–
–
–
(14,101)
10,876
Other
reserves
£000
68,833
–
–
–
–
–
–
33
–
68,866
–
–
(54)
–
–
–
(120)
–
Retained
earnings
£000
68,796
1,897
(937)
–
29,393
–
–
(119)
–
99,030
2,063
(1,238)
54
40,468
–
–
(162)
–
Total
£000
305,106
1,897
(937)
380
29,393
(1,676)
937
4,659
–
339,759
2,063
(1,238)
–
40,468
(293)
1,238
(15,861)
–
Total equity at 30 April 2012
180,124
(685)
(14,247)
(7,963)
68,692
140,215
366,136
Other reserves comprise the capital redemption reserve, revaluation reserve and merger reserve.
Company
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
Total equity at 1 May 2011
Share options fair value charge
Loss attributable to owners of the Parent Company
Other comprehensive income
Share
capital
and share
premium
£000
179,744
–
380
–
–
180,124
–
–
–
Revaluation
reserve
£000
1,371
–
–
–
–
1,371
–
–
–
Hedging
reserve
£000
(5,378)
–
–
–
3,602
(1,776)
–
–
(10,841)
Merger
reserve
£000
63,159
–
–
–
–
63,159
–
–
–
Capital
redemption
reserve
£000
40
–
–
–
–
40
–
–
–
Retained
earnings
£000
26,108
1,897
–
(18,384)
–
9,621
2,063
(2,957)
–
Total
£000
265,044
1,897
380
(18,384)
3,602
252,539
2,063
(2,957)
(10,841)
Total equity at 30 April 2012
180,124
1,371
(12,617)
63,159
40
8,727
240,804
43
Northgate plc
Annual report and accounts 2012
Statements of changes in equity
For the year ended 30 April 2012
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 86. 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 10 to 21.
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 IAS 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 19 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 2011 but have no material
impact on the consolidated results or financial position of the Group.
IFRS 7
IAS 24
IAS 27
IFRIC 14
Financial Instruments: Disclosures – Amendments relating to the transfer of financial assets
Related Party Disclosures (revised 2009)
Consolidated and Separate Financial Statements – Amendments
Prepayments of a Minimum Funding Requirement – Amendments to IFRIC 14 relating to voluntary prepayments for existing funding
contributions
IFRIC 19
Extinguishing Financial Liabilities with Equity Instruments
Improvements to IFRS 2010
(b) New standards and interpretations issued but not yet effective
The following relevant new standards, amendments to standards and interpretations were in issue (and in some cases have not yet been adopted by the EU)
with an effective date for financial years beginning on or after the dates disclosed below.
IFRS 7
IFRS 7
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 1
IAS 12
IAS 19
IAS 27
IAS 28
IAS 32
Financial Instruments: Disclosures – Transfers of financial assets
Financial Instruments: Disclosures – Offsetting financial assets and financial liabilities
Financial Instruments
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Fair Value Measurement
1 July 2011
1 January 2013
1 January 2015
1 January 2013
1 January 2013
1 January 2013
1 January 2013
Presentation of Financial Statements – Amendments relating to the disclosures of other comprehensive income
1 July 2012
Income Taxes – Amendments for deferred tax and recovery of underlying assets.
Employee Benefits (amended)
Consolidated and Separate Financial Statements – Cost of an Investment in a Subsidiary, Jointly Controlled
Entity or Associate
Investments in Associates and Joint Ventures
Financial Instruments: Presentation – Offsetting financial assets and financial liabilities
1 January 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
Improvements to IFRS 2011
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.
44
Northgate plc
Annual report and accounts 2012
Notes to the accounts
2. Principal accounting policies (continued)
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 2011 and 30 April 2012. 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 acquisition 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
5 to 13 years
5 to 10 years
2 to 4 years
Intangible assets – other
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. Software assets are amortised
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
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.
45
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
2. Principal accounting policies (continued)
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.
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. If an impairment no longer exists, an impairment reversal is recognised in the income statement to the extent required.
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.
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.
46
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
2. Principal accounting policies (continued)
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.
Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand.
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. 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. 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.
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.
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.
47
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
2. Principal accounting policies (continued)
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.
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 judgments and key sources of estimation uncertainty
In the process of applying the Group’s accounting policies, which are described in Note 2, the Directors have made the following judgments that have the most
significant effect on the amounts recognised in the 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.
48
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
3. Critical accounting judgements and key sources of estimation uncertainty (continued)
Impairment of goodwill and other non-current assets
Determining whether goodwill and other non-current assets are impaired or whether the reversal of a previously recognised impairment is necessary 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 £Nil previously
derecognised have been recognised as the recovery of those assets is now considered probable in the short term (2011 – £5,928,000), as explained further in
Note 10.
4. Revenue
Total revenue of £706,698,000 (2011 – £715,502,000) comprises revenue from the hire of vehicles of £503,659,000 (2011 – £537,285,000) and revenue from
the sale of vehicles of £203,039,000 (2011 – £178,217,000).
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
Underlying operating profit (loss) *
Exceptional administrative expenses
Intangible amortisation
Operating profit (loss)
Interest income
Finance costs (excluding exceptional items)
Exceptional finance costs
Profit before taxation
Other information
Capital expenditure
Depreciation
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
2012
£000
320,772
136,312
Spain
2012
£000
182,887
66,727
457,084
249,614
74,402
(5,670)
(3,135)
65,597
34,989
(1,724)
(861)
32,404
Corporate
2012
£000
–
–
–
(4,215)
692
–
(3,523)
194,697
110,933
510,448
120,259
81,734
329,485
306,477
151,756
–
62
–
–
Total
2012
£000
503,659
203,039
706,698
105,176
(6,702)
(3,996)
94,478
165
(45,610)
(3,046)
45,987
314,956
192,729
839,933
11,249
1,691
852,873
458,233
16,997
11,507
486,737
49
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
5. Segmental reporting (continued)
Revenue: hire of vehicles
Revenue: sale of vehicles
Total revenue
Underlying operating profit (loss) *
Exceptional administrative expenses
Impairment of intangible assets
Intangible amortisation
Operating profit (loss)
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
333,935
102,964
436,899
73,617
(2,433)
–
(3,234)
67,950
Spain
2011
£000
203,350
75,253
278,603
36,649
(9,434)
(5,892)
(1,447)
19,876
206,416
124,415
–
–
639,295
135,300
91,391
6,868
5,892
410,332
455,841
237,732
Corporate
2011
£000
–
–
–
(4,619)
(632)
–
–
(5,251)
–
61
–
–
–
–
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
* Underlying 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.
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
2012
£000
457,084
249,614
Non-current
assets
2012
£000
429,714
281,021
706,698
710,735
Revenue
2011
£000
436,899
278,603
715,502
Non-current
assets
2011
£000
475,413
331,335
806,748
There are no external customers from whom the Group derives more than 10 per cent of total revenue. Segment assets and liabilities exclude derivative
financial instrument assets and liabilities and current and deferred tax assets and liabilities, since these balances are not included in the segments’ assets and
liabilities as reviewed by the chief operating decision maker.
50
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
6. Operating profit
Operating profit is stated after charging:
Depreciation of property, plant and equipment (Notes 16 and 17)
Impairment of other property, plant and equipment (Notes 17 and 35)
Amortisation of intangible assets (Note 15)
Impairment of intangible assets (Notes 15 and 35)
Net foreign exchange losses
Exceptional administrative expenses (excluding impairment of assets - Note 35)
Staff costs (Note 7)
Cost of inventories recognised as an expense
Net impairment of trade receivables (Note 39)
Auditor’s remuneration for audit services (below)
Auditor’s remuneration for non-audit services (below)
The above cost of inventories recognised as an expense includes movements in stock provisions which are immaterial.
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
2012
£000
192,729
–
3,996
–
25
6,702
82,834
248,665
4,961
397
171
2012
£000
240
157
397
21
95
55
171
2011
£000
215,867
6,868
4,681
5,892
69
5,631
84,356
210,681
5,457
405
149
2011
£000
240
165
405
21
64
64
149
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 page 33 and includes an explanation of how auditor objectivity and independence is
safeguarded when non-audit services are provided by the auditor.
51
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
7. Staff costs
The average number of persons employed by the Group:
United Kingdom and Republic of Ireland:
Direct operations
Administration
Spain:
Direct operations
Administration
The aggregate remuneration of Group employees comprised:
Wages and salaries
Social security costs
Other pension costs
2012
Number
2011
Number
1,514
481
1,995
800
123
923
1,599
480
2,079
830
136
966
2,918
3,045
2012
£000
71,870
9,557
1,407
82,834
2011
£000
72,936
9,995
1,425
84,356
Wages and salaries include £5,319,000 (2011 – £2,306,000) in respect of redundancies and loss of office.
Details of Directors’ remuneration, pension contributions and share options are provided in the audited part of the Remuneration Report on pages 28 to 32.
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)
Interest rate derivatives ineffectiveness (Note 23)
Change in fair value of cross-currency derivatives (Note 23)
Change in fair value of interest rate derivatives (Note 23)
Amortisation of de-designated Sterling interest rate swaps
Preference share dividends
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)
Total exceptional finance costs
52
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
2012
£000
165
2012
£000
38,991
7,799
(605)
459
(28)
(147)
(453)
(431)
25
45,610
–
3,046
–
–
3,046
2011
£000
848
2011
£000
43,241
9,777
(608)
(202)
–
416
–
–
25
52,649
2,728
473
423
610
4,234
48,656
56,883
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
2012
£000
1,897
(11,505)
488
(9,120)
12,044
(285)
–
2,880
14,639
5,519
2011
£000
5,593
(4,241)
642
1,994
1,091
102
(5,928)
(112)
(4,847)
(2,853)
Corporation tax is calculated at 25.83% (2011 – 28.00%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the
rates prevailing in those respective jurisdictions.
The net charge/(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 25.83% (2011 – 28.00%)
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 charge/(credit) and effective tax rate for the year
2012
£000
45,987
11,880
4,396
(652)
(1,195)
–
2,880
(11,790)
5,519
%
25.8
9.6
(1.4)
(2.6)
–
6.3
(25.6)
12.0
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)
In addition to the amount charged to the income statement, a net deferred tax amount of £3,899,000 has been credited (2011 – £1,509,000 charged) directly
to equity (Note 25).
The underlying tax charge of £17,803,000 (2011 – £15,305,000) excludes exceptional tax credits of £11,216,000 (2011 – £16,818,000) as set out in Note 35,
and tax credits on intangible amortisation of £1,068,000 (2011 – £1,340,000).
There has been no recognition of deferred tax assets previously derecognised (2011 – £5,928,000).
On 1 April 2012 the UK Corporation tax rate changed from 26% to 24%. Accordingly, the tax disclosures reflect deferred tax measured on the new 24% rate.
The rate is proposed to be reduced further to 23% by 1 April 2014. It has not been possible to quantify the full anticipated effect of the further 1% 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 (2011 - £Nil). The Directors propose a final dividend of 3.0p for the year ended 30 April 2012 (2011 - £Nil), which is subject
to approval at the Annual General Meeting and has not been included as a liability as at 30 April 2012.
53
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
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
2012
£000
Statutory
2012
£000
Underlying
2011
£000
Statutory
2011
£000
41,928
40,468
38,541
29,393
Number
Number
Number
Number
133,232,518
133,232,518
133,029,317
133,029,317
3,074,242
3,074,242
2,306,309
2,306,309
136,306,760
136,306,760
135,335,626
135,335,626
31.5p
30.8p
30.4p
29.7p
29.0p
28.5p
22.1p
21.7p
A loss of £2,957,000 (2011 – £18,384,000) 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 2011 and 30 April 2012
2012
£000
2011
£000
3,589
3,589
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from the business
combination. The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The Group has two cash generating units: the UK and Spain. The Group tests its 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 addition to the annual test of impairment, and as required by IAS 36, there has also been an assessment as to whether there has been any indication that an
impairment loss recognised in an earlier year has decreased or no longer exists.
The impairment assessment was based on risk-adjusted cash flow forecasts derived from a two year business plan approved by the Directors in April 2012 using
growth rates of 1% to 2% over a 10 year period, including terminal values, using a discount rate of 10.3% for the UK CGU and 11.7% for the Spanish CGU.
The projected terminal value is calculated based on the Gordon Growth Model assuming cash flows are generated into perpetuity.
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, the impairment 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.
The impairment assessment is sensitive to changes in the key assumptions used, most notably the discount rate and growth rates. A sensitivity analysis has
been performed on the UK CGU and Spanish CGU. Based on this sensitivity analysis, no reasonably possible changes to the assumptions used for the UK CGU
resulted in an additional impairment charge being required. The Spanish CGU had headroom of £0.5m at the balance sheet date. An increase in the discount
rate of 0.02% would eliminate the headroom in the Spanish CGU.
54
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
15. Other intangible assets
Group
Cost:
At 1 May 2010
Additions
Disposals
Exchange differences
At 1 May 2011
Additions
Disposals
Exchange differences
At 30 April 2012
Amortisation:
At 1 May 2010
Charge for the year
Impairment charge (Note 35)
Disposals
Exchange differences
At 1 May 2011
Charge for the year
Disposals
Exchange differences
At 30 April 2012
Carrying amount:
At 30 April 2012
At 30 April 2011
Brand
names
£000
Customer
relationships
£000
Software
technology
£000
Other
software
£000
14,815
–
(15,166)
351
–
–
–
–
–
8,047
747
5,892
(15,166)
480
–
–
–
–
–
–
–
22,525
–
–
155
22,680
–
–
(571)
22,109
11,026
2,594
–
–
122
13,742
2,212
–
(435)
15,519
6,590
8,938
168
–
(168)
–
–
–
–
–
–
151
17
–
(168)
–
–
–
–
–
–
–
–
Total
£000
45,111
2,027
(15,441)
541
32,238
1,982
(408)
(693)
7,603
2,027
(107)
35
9,558
1,982
(408)
(122)
11,010
33,119
5,438
1,323
–
(107)
33
6,687
1,784
(357)
(105)
24,662
4,681
5,892
(15,441)
635
20,429
3,996
(357)
(540)
8,009
23,528
3,001
2,871
9,591
11,809
55
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
16. Property, plant and equipment: vehicles for hire
Group
Cost:
At 1 May 2010
Additions
Transfer to motor vehicles
Exchange differences
Transfer to inventories
At 1 May 2011
Additions
Transfer to motor vehicles
Exchange differences
Transfer to inventories
At 30 April 2012
Depreciation:
At 1 May 2010
Charge for the year
Exchange differences
Transfer to motor vehicles
Transfer to inventories
At 1 May 2011
Charge for the year
Exchange differences
Transfer to motor vehicles
Transfer to inventories
At 30 April 2012
Carrying amount:
At 30 April 2012
At 30 April 2011
At 30 April 2012, the Group had entered into contractual commitments for the acquisition of vehicles for hire amounting to £27,784,000
(2011 – £33,699,000).
£000
1,161,725
334,916
(385)
11,315
(353,896)
1,153,675
305,401
(223)
(40,036)
(454,236)
964,581
420,182
211,622
4,827
(186)
(196,812)
439,633
188,443
(15,292)
(93)
(271,213)
341,478
623,103
714,042
56
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
17. Other property, plant and equipment
Group
Cost:
At 1 May 2010
Additions
Transfer from vehicles for hire
Exchange differences
Transfer to other debtors and prepayments
Disposals
At 1 May 2011
Additions
Transfer from vehicles for hire
Exchange differences
Disposals
At 30 April 2012
Depreciation:
At 1 May 2010
Charge for the year
Impairment charge (Note 35)
Exchange differences
Transfer from vehicles for hire
Disposals
At 1 May 2011
Charge for the year
Exchange differences
Transfer from vehicles for hire
Disposals
At 30 April 2012
Carrying amount:
At 30 April 2012
At 30 April 2011
Land and buildings by category:
Freehold and long leasehold
Short leasehold
Land &
buildings
£000
87,200
2,593
–
1,166
–
(3,360)
87,599
3,092
–
(4,366)
(4,590)
Plant,
equipment
& fittings
£000
22,766
1,418
–
153
(856)
(3,471)
20,010
3,541
–
(811)
(5,872)
Motor
vehicles
£000
1,321
762
385
–
–
(699)
1,769
940
223
–
(551)
Total
£000
111,287
4,773
385
1,319
(856)
(7,530)
109,378
7,573
223
(5,177)
(11,013)
81,735
16,868
2,381
100,984
10,768
1,730
6,868
112
–
(1,142)
18,336
1,831
(818)
–
(2,796)
16,553
65,182
69,263
13,541
2,152
–
71
–
(2,582)
13,182
1,940
(358)
–
(5,613)
9,151
7,717
6,828
466
363
–
–
186
(463)
552
515
–
93
(332)
828
1,553
1,217
2012
£000
59,984
5,198
65,182
24,775
4,245
6,868
183
186
(4,187)
32,070
4,286
(1,176)
93
(8,741)
26,532
74,452
77,308
2011
£000
60,647
8,616
69,263
At 30 April 2012, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to £309,000
(2011 – £123,000).
57
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
17. Other property, plant and equipment (continued)
Company
Cost:
At 1 May 2010, 1 May 2011 and 30 April 2012
Depreciation:
At 1 May 2010
Charge for the year
At 1 May 2011
Charge for the year
At 30 April 2012
Carrying amount:
At 30 April 2012
At 30 April 2011
18. Investments
Company
Cost:
At 1 May 2010 and 1 May 2011
Capital reduction of subsidiary undertaking
At 30 April 2012
Accumulated provisions:
At 1 May 2010, 1 May 2011 and 30 April 2012
Carrying amount:
At 30 April 2012
At 30 April 2011
Land &
buildings
£000
3,239
473
61
534
62
596
2,643
2,705
Total
£000
150,329
(25,000)
Shares in
subsidiary
undertakings
£000
Loans
to subsidiary
undertaking
£000
103,329
(25,000)
47,000
–
78,329
47,000
125,329
2,435
–
2,435
75,894
100,894
47,000
122,894
47,000
147,894
A full list of the Company’s subsidiaries was included with the Annual Return filed with the Registrar of Companies.
At 30 April 2012, 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*
Northgate (CB) Limited*
Northgate (CB2) Limited*
Northgate España Renting Flexible S.A.* (incorporated in Spain)
Northgate (Europe) Limited
Northgate (Malta) Limited* (incorporated in Malta)
Northgate (MT) Limited* (incorporated in Malta)
Northgate Vehicle Hire (Ireland) Limited* (incorporated in the Republic of Ireland)
Northgate Vehicle Hire Limited
*interest held indirectly by the Company
19. Inventories
Vehicles held for resale
Spare parts and consumables
58
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Group
2012
£000
17,771
4,442
22,213
2011
£000
16,095
5,276
21,371
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
2012
£000
84,930
–
–
12,348
97,278
2011
£000
110,915
–
–
13,708
124,623
UK
Spain
Company
2012
£000
–
880,854
1,827
29
882,710
2012
42 days
71 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
2012
£000
23,446
–
9,655
30,087
63,188
2011
£000
33,623
–
5,703
28,093
67,419
UK
Spain
2012
£000
34
381,936
97
12,278
394,345
2012
48 days
78 days
The Directors consider that the carrying amount of trade and other payables approximates to their fair value due to their short term nature.
22. Borrowings
Borrowings comprise bank loans, loan notes, property loans, preference shares 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.
2011
£000
–
901,347
2,142
43
903,532
2011
42 days
94 days
2011
£000
801
211,518
77
9,300
221,696
2011
49 days
105 days
Bank loans
Loan notes
Other loan
Cumulative Preference shares
Property loans
Confirming facilities
Group
2012
£000
129,282
161,002
97,752
500
862
5,647
395,045
2011
£000
360,974
161,718
97,506
500
1,952
3,362
626,012
Company
2012
£000
113,673
161,002
97,752
500
–
–
372,927
2011
£000
338,791
161,718
97,506
500
–
–
598,515
59
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
22. Borrowings (continued)
The borrowings are repayable as follows:
On demand or within one year
(shown within current liabilities)
Bank loans
Loan notes
Property loans
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
Total borrowings
Less: Amount due for settlement within one year
(shown within current liabilities)
Amount due for settlement after one year
Group
2012
£000
83,312
45,951
648
5,647
2011
£000
9,209
–
1,007
3,362
Company
2012
£000
67,703
45,951
–
–
135,558
13,578
113,654
–
42,717
214
42,931
45,970
72,334
–
118,304
–
97,752
500
98,252
395,045
135,558
259,487
87,236
46,392
710
134,338
264,529
43,150
235
307,914
72,176
97,506
500
170,182
626,012
13,578
612,434
–
42,717
–
42,717
45,970
72,334
–
118,304
–
97,752
500
98,252
372,927
113,654
259,273
2011
£000
–
–
–
–
–
74,262
46,392
–
120,654
264,529
43,150
–
307,679
72,176
97,506
500
170,182
598,515
–
598,515
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 1.50% to 2.75% (2011 – 1.20% to 3.25%) above the relevant interest rate index, being LIBOR for Sterling
denominated debt and EURIBOR for Euro denominated debt.
60
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
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 $7,070,000 and £Nil respectively (2011 – $73,463,000
and £3,820,000). In addition, and in accordance with the terms of the US Notes, during the prior year, make-whole notes amounting to $7,530,000 and
£456,000 were issued, 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
prior year, all make-whole notes were repaid in full. The US Notes are not publicly tradeable, are secured and have the following maturity profile:
Value of loan notes
Maturity date
$37,201,000 (2011: $40,755,000) 5 year loan notes
November 2012
$86,620,000 (2011: $90,136,000) 7 year loan notes
December 2013
$89,318,000 (2011: $89,318,000) 10 year loan notes
December 2016
£15,631,000 (2011: £15,631,000) 10 year loan notes
December 2016
$36,698,000 (2011: $36,698,000) 10 year loan notes
December 2016
Unamortised finance fees relating to the US Dollar
denominated loan Notes
Unamortised finance fees relating to the Sterling
denominated loan Notes
Weighted
average
fixed interest
rate on the
US Notes
7.72%
(2011 – 7.72%)
7.86%
(2011 – 7.86%)
7.99%
(2011 – 7.99%)
7.89%
(2011 – 7.89%)
7.99%
(2011 – 7.99%)
Overall
weighted
average
fixed
interest rate
8.19%
(2011 – 8.19%)
9.02%
(2011 – 8.99%)
8.91%
(2011 – 8.91%)
7.89%
(2011 – 7.89%)
8.89%
(2011 – 8.89%)
Carrying
value
30 April
2012
£000
22,867
53,245
54,904
15,631
22,558
Carrying
value
30 April
2011
£000
24,453
54,082
53,591
15,631
22,018
(7,202)
(7,267)
(1,001)
(790)
161,002
161,718
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
The other loan is 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 (2011 – 1,300,000), of which 1,000,000 (2011 – 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 one year (2011 – two years). At 30 April 2012, the average borrowing rate for property loans was 2.8% (2011 – 2.1%). All
loans are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
61
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
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
2012
£000
664
220
884
(22)
862
2011
£000
1,040
975
2,015
(63)
1,952
2012
£000
648
214
862
–
862
(648)
214
2011
£000
1,007
945
1,952
–
1,952
(1,007)
945
Confirming facilities
Spanish confirming facilities of £5,647,000 (2011 – £3,362,000) are unsecured and all fall due within one year. 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. The Group pays no
interest on confirming.
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
2012
£000
3,946
261,998
265,944
2011
£000
14,135
113,866
128,001
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
2011
£000
96,885
(360,974)
(161,718)
(97,506)
(500)
(5,314)
Cash flow
£000
(87,062)
217,050
4,457
–
–
1,085
(529,127)
135,530
Other
non-cash
changes
£000
–
(4,443)
147
(246)
–
(2,285)
(6,827)
Foreign
exchange
movements
£000
(116)
19,085
(3,888)
–
–
5
15,086
At 30 April
2012
£000
9,707
(129,282)
(161,002)
(97,752)
(500)
(6,509)
(385,338)
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 2012, the gearing of the Group amounted to 109.2% (2011 – 163.1%) where net
borrowings are £385,338,000 (2011 – £529,127,000) and shareholders’ funds less goodwill and the net book value of intangible assets are £352,956,000
(2011 – £324,361,000).
62
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
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 rating agencies. Deals are authorised only with banks with which dealing mandates have been agreed and which maintain an 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 2012, 96%
(2011 – 71%) of gross borrowings were at fixed or capped rates of interest, comprising £100,000,000 and €152,832,000 of interest rate swaps,
$249,837,000 of US Dollar/Sterling cross-currency swaps, £15,631,000 of Sterling denominated loan notes, £500,000 of preference shares and £5,647,000 of
confirming facilities (2011 – £100,000,000 and €212,832,000 of interest rate swaps, $256,907,000 of US Dollar/Sterling cross-currency swaps, £15,631,000
of Sterling denominated loan notes, £500,000 of preference shares and £3,362,000 of confirming facilities), 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 2012
Bank loans
Loan notes
Other loan
Cumulative Preference shares
Property loans
Confirming facilities
Sterling
£000
–
14,630
97,752
500
–
–
Euro
£000
US Dollars
£000
Total
£000
129,282
–
–
–
862
5,647
–
146,372
–
–
–
–
129,282
161,002
97,752
500
862
5,647
112,882
135,791
146,372
395,045
63
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
22. Borrowings (continued)
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
–
–
160,017
Euro
£000
313,804
–
–
–
1,952
3,362
319,118
US Dollars
£000
–
146,877
–
–
–
–
146,877
Total
£000
360,974
161,718
97,506
500
1,952
3,362
626,012
Net borrowings analysed by currency, taking into account swapped exchange rates for the US loan notes and the other loan swapped into Euro being
retranslated to Sterling at closing exchange rates, are as follows:
Group
At 30 April 2012
Cash at bank and in hand
Bank loans
Loan notes
Other loan
Cumulative Preference shares
Property loans
Confirming facilities
Group
At 30 April 2011
Cash at bank and in hand
Bank loans
Loan notes
Other loan
Cumulative Preference shares
Property loans
Confirming facilities
Sterling
£’000
Euro
£’000
Total
£’000
8,382
–
(132,122)
–
(500)
–
–
1,325
(129,282)
(22,780)
(89,815)
–
(862)
(5,647)
9,707
(129,282)
(154,902)
(89,815)
(500)
(862)
(5,647)
(124,240)
(247,061)
(371,301)
Sterling
£’000
Euro
£’000
Total
£’000
45,798
(47,170)
(138,115)
(13,848)
(500)
–
–
(153,835)
51,087
(313,804)
(23,623)
(84,365)
–
(1,952)
(3,362)
(376,019)
96,885
(360,974)
(161,738)
(98,213)
(500)
(1,952)
(3,362)
(529,854)
At 30 April 2012, the gearing of the Group reflecting the above fixed swapped exchange rates amounted to 105.2% (2011 – 163.4%) where net borrowings
are £371,301,000 (2011 – £529,854,000) and shareholders’ funds less goodwill and the net book value of intangible assets are £352,956,000
(2011 – £324,361,000).
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
They are represented in the balance sheet as follows:
Non-current derivative financial instrument assets
Current derivative financial instrument (liabilities) assets
Non-current derivative financial instrument liabilities
Group
2012
£000
(16,314)
10,566
(5,748)
11,249
(1,046)
(15,951)
(5,748)
2011
£000
(5,377)
(152)
(5,529)
2,155
–
(7,684)
(5,529)
Company
2012
£000
(16,314)
9,981
(6,333)
11,249
(1,631)
(15,951)
(6,333)
2011
£000
(5,377)
3,149
(2,228)
2,155
3,301
(7,684)
(2,228)
64
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
23. Derivative financial instruments (continued)
Interest rate derivatives
The Group’s exposure to interest fluctuations on its borrowings 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 2012 and 30 April 2011 are summarised below:
30 April 2012
Sterling denominated interest rate swaps
Euro denominated interest rate swaps
30 April 2011
Sterling denominated interest rate swaps
Euro denominated interest rate swaps
Total
nominal
values
Weighted
average fixed
contract net pay
rates
£100,000,000
e152,832,000
£100,000,000
e212,832,000
4.45%
2.35%
4.45%
2.35%
Weighted
average
remaining
life
9.0 years
0.4 years
10.0 years
1.4 years
During the year, the following transactions relating to interest rate derivatives occurred:
•
£38,000,000 and e60,000,000 of interest rate swaps with a weighted average fixed contract pay rate of 2.44% and 2.35% respectively matured.
• e59,000,000 of interest rate swaps due to commence in September 2012 with a weighted average fixed contract pay rate of 3.13% and a remaining
weighted average life of 2.4 years were cancelled at a cash cost of £3,046,000 (Notes 9 and 35). This was in connection with a voluntary prepayment of
the bank term debt; and
•
£38,000,000 of interest rate swaps with a weighted average fixed contract receive rate of 1.13% matured.
As part of the debt refinancing undertaken by the Group in April 2011 the following interest rate derivative transactions occurred in the prior year:
•
•
•
£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;
e87,168,000 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); and
• e152,832,000 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%.
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 £28,000
(2011 – £Nil) has been credited to the income statement (Note 9).
The total change in fair values of interest rate derivatives credited to the income statement of £453,000 (2011 – £Nil) 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
Euro/Sterling cross-currency swaps
2012
£000
2,702
7,864
10,566
2011
£000
882
(1,034)
(152)
Sterling/US Dollar cross-currency swaps
The Group has in issue US Dollar denominated loan notes of capital value $249,837,000 (2011 – $256,907,000) 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.
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 8.86% (2011 – 8.83%).
65
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
23. Derivative financial instruments (continued)
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 £459,000 has been charged (2011 – £202,000 credited) to the income statement (Note 9).
In February 2012, cross-currency swaps with a total notional amount of $7,070,000 were entered into in connection with a voluntary prepayment offer to the
note holders. At that time, these swaps had a weighted average life of 1.3 years and a weighted average contract Sterling receive rate of 8.08%. The change in
fair value between that date and 30 April 2012 has been taken to the income statement.
In the prior year, the following transactions occurred:
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 change in fair value from that date has been 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 change in fair value from that date was taken to the income statement.
A total amount of £147,000 was credited in the income statement (2011 – £416,000 charged) in relation to the change in fair value of Sterling/US Dollar
cross-currency swaps (Note 9).
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%.
Euro/Sterling cross-currency swaps
The Group also has Euro/Sterling cross-currency swaps of total notional value e141,780,000 (2011 – e124,635,000). 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 8.18% (2011 – 8.19%).
In August 2011, cross-currency swaps with a notional amount of e17,145,000 commenced. At that time, these swaps had a weighted average life of 3.1 years
and a weighted average contract Euro pay rate of 7.90%. The change in fair value from that date has been deferred into equity.
In the prior year, the following transactions occurred:
In June 2010, cross-currency swaps with a notional amount of e2,915,000 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 change in fair value from that date has been deferred into equity.
At the same time, cross-currency swaps with a notional amount of e502,000 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 change in fair value from that date has been deferred into equity.
In April 2011, cross-currency swaps with a notional amount of e97,011,000 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 change in fair value from that date has been deferred into equity.
In April 2011, cross-currency swaps with a notional amount of e575,000 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 e3,602,000 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 eNil (2011 – e3,551,000) of swaps matured.
66
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
23. Derivative financial instruments (continued)
Gross movement in fair values initially deferred in hedging reserve:
At 30 April 2011
Movement in fair value of hedged instruments
At 30 April 2012
Cumulative amounts recycled to the income statement:
At 30 April 2011
Movement for the year
At 30 April 2012
Cumulative amounts recycled to the currency translation reserve:
At 30 April 2011
Movement for the year
At 30 April 2012
Net fair value deferred in hedging reserve:
At 30 April 2012
At 30 April 2011
Sterling/
US Dollar
£000
34,444
2,280
36,724
(32,079)
(4,633)
(36,712)
–
–
–
12
2,365
Euro/
Sterling
£000
(9,839)
8,898
(941)
20
(8)
12
9,663
(10,876)
(1,213)
(2,142)
(156)
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 loss of £3,887,000 (2011 – gain of £15,315,000). 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.
The hedges are considered highly effective in the current and prior year.
Company current derivative financial asset
At 30 April 2012, the Company held Sterling/Euro cross-currency swaps with a subsidiary undertaking which had a fair value of £(585,000)
(2011 – £3,301,000) and weighted average remaining life of one year (2011 – one year) with a weighted average Euro interest receivable rate of 2.02%
(2011 – 2.79%) and weighted average GBP interest payable rate of 2.50% (2011 – 2.23%).
24. Current tax
The current tax creditor of £4,150,000 at 30 April 2012 (2011 – £16,712,000) includes a total amount of £3,664,000 (2011 – £13,997,000) 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.
67
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
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 2010
Charge (credit) to income
Recognition of deferred tax assets (Note 10)
Charge to equity
Exchange differences
Adjustment to UK tax rate (credited) charged
to income
Adjustment to UK tax rate charged to equity
Adjustments in respect of prior years
Transfer to current tax
At 1 May 2011
Charge (credit) to income
Credit to equity
Exchange differences
Adjustment to UK tax rate charged (credited)
to income
Adjustment to UK tax rate charged to equity
Adjustments in respect of prior years
Transfer from current tax
Accelerated
capital
allowances
£000
Revaluation
of buildings
£000
(9,027)
174
–
–
(7)
(8)
–
(157)
8,834
(191)
34,185
–
(1,433)
2,855
–
(42)
506
1,864
(35)
–
–
11
(97)
–
–
–
1,743
(136)
(5)
(38)
(95)
–
–
–
Share
based
payment
£000
(151)
(1,004)
–
–
–
83
–
–
–
(1,072)
(51)
–
–
86
–
–
–
Intangible
assets
£000
5,077
(2,737)
–
–
(30)
(139)
–
206
–
2,377
(605)
–
(38)
(41)
–
–
–
Other
timing
differences
£000
7,323
(3,974)
–
1,465
(46)
49
44
53
(10,400)
(5,486)
847
(4,267)
287
75
373
384
97
Losses
£000
(5,895)
8,667
(5,928)
–
(161)
–
–
–
–
(3,317)
(22,196)
–
1,491
–
–
(627)
–
Total
£000
(809)
1,091
(5,928)
1,465
(233)
(112)
44
102
(1,566)
(5,946)
12,044
(4,272)
269
2,880
373
(285)
603
At 30 April 2012
35,880
1,469
(1,037)
1,693
(24,649)
(7,690)
5,666
Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. The analysis of the deferred tax balances after offset is as
follows:
At 30 April 2012
Deferred tax assets
Deferred tax liabilities
Net deferred tax liabilities
At 30 April 2011
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
(1,691)
7,357
5,666
(10,179)
4,233
(5,946)
In the current year, the net credit to equity of £3,894,000 (2011 – £1,509,000 charge), in respect of other timing differences included £3,834,000
(2011 - £1,559,000 charge) relating to derivative financial instruments which has been reflected in the hedging reserve (Note 31).
There are no deferred tax assets which are not recognised in the balance sheet. Deferred tax assets of £24,649,000 (2011 – £3,317,000) have been recognised
in the balance sheet in respect of losses, as it is considered probable that there will be sufficient future taxable profits against which these losses will be utilised.
Net deferred tax assets of £7,690,000 (2011 – £5,486,000) classified as other timing differences relate to movements on fair values of interest rate and foreign
currency derivatives, retirement benefit obligations, 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
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
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:
Share
based
payment
£000
(151)
(1,004)
–
83
–
(1,072)
(51)
–
86
–
Other
timing
differences
£000
(2,311)
–
1,409
6
58
(838)
34
(3,692)
3
332
Total
£000
(2,462)
(1,004)
1,409
89
58
(1,910)
(17)
(3,692)
89
332
(1,037)
(4,161)
(5,198)
2012
£000
2011
£000
66,616
66,616
2012
£000
113,508
–
113,508
Group
£000
1,330
33
1,363
(54)
(120)
1,189
Group
£000
(891)
(1,676)
937
(1,630)
(293)
1,238
(685)
2011
£000
113,269
239
113,508
Company
£000
1,371
–
1,371
–
–
1,371
Company
£000
–
–
–
–
–
–
–
Company
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 1 May 2011
(Credit) charge to income
Credit to equity
Change in UK tax rate charged to income
Change in UK tax rate charged to equity
At 30 April 2012
26. Share capital
Group and Company
Allotted and fully paid:
133,232,518 (2011 – 133,232,518) Ordinary shares of 50p each
27. Share premium account
Group and Company
At 1 May
Premium on Ordinary shares issued
At 30 April
28. Revaluation reserve
At 1 May 2010
Foreign exchange differences
At 1 May 2011
Transfer to retained earnings on disposal of revalued property
Foreign exchange differences
At 30 April 2012
29. Own shares reserve
At 1 May 2010
Purchase of own shares
Transfer of shares on vesting of share options
At 1 May 2011
Purchase of own shares
Transfer of shares on vesting of share options
At 30 April 2012
69
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
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 2012 the Guernsey Trust held 265,868 (2011 – 478,758) 50p ordinary shares and the Capita Trust held 23,715 (2011 – 38,964) 50p ordinary shares. The
total number of shares held by these employee trusts represents 0.2% of the alloted and fully paid share capital of the Group.
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 2012 is £685,000 (2011 – £1,872,000).
30. Merger reserve
At 1 May 2010, 1 May 2011 and 30 April 2012
31. Hedging reserve
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 foreign currency derivatives (below)
Transfer to income statement
De-designation of GBP interest rate swaps
Transfer to translation reserve (Note 32)
At 1 May 2011
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 foreign currency derivatives (below)
Transfer to income statement
Transfer to translation reserve (Note 32)
Group
£000
67,463
Group
£000
(5,720)
1,516
(12,873)
(1,559)
(608)
15,530
610
1,211
(1,893)
(11,368)
11,176
3,834
(605)
(4,515)
(10,876)
Company
£000
63,159
Company
£000
(5,378)
1,516
(11,987)
(1,467)
(600)
15,530
610
–
(1,776)
(11,368)
2,280
3,360
(598)
(4,515)
–
At 30 April 2012
(14,247)
(12,617)
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 an earlier 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 £598,000 (2011 – £600,000) was credited to the income statement in this regard, recognised within finance costs.
32. Translation reserve
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 1 May 2011
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 2012
Group
£000
(5,656)
4,645
(2,516)
(1,211)
(4,738)
(16,711)
2,610
10,876
(7,963)
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.
70
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
33. Capital redemption reserve
At 1 May 2010, 1 May 2011 and 30 April 2012
34. Retained earnings
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
At 1 May 2011
Profit (loss) for the year
Transfer from revaluation reserve on disposal of revalued property
Deferred taxation on disposal of revalued property
Share options exercised
Share options fair value charge
Defined benefit pension charge recognised directly in equity
Net deferred tax credit recognised directly in equity
At 30 April 2012
35. Exceptional items
During the year, the Group recognised exceptional items in the income statement made up as follows:
Restructuring costs
Partial recovery of acquisition cost of subsidiary undertaking
Impairment of Spanish property assets
Net property losses
Exceptional administrative expenses
Impairment of Spanish intangible assets
Exceptional impairment of intangible assets
Termination of Euro interest rate swaps
Financing fees written off on extinguishment of debt
De-designation of Sterling interest rate swaps
Termination of cross-currency swaps
Exceptional finance costs
Total pre-tax exceptional items
Tax credit on exceptional items
Exceptional tax credit relating to prior year items (Note 10)
Exceptional tax charge to recognise change in UK tax rate (Note 10)
Net recognition of deferred tax assets (Note 10)
Exceptional tax credit
Group
£000
40
Group
£000
68,796
29,393
(937)
1,897
(169)
50
99,030
40,468
54
5
(1,238)
2,063
(227)
60
140,215
2012
£000
7,034
(775)
_
443
6,702
_
_
3,046
_
_
_
3,046
9,748
(2,591)
(11,505)
2,880
–
(11,216)
Company
£000
40
Company
£000
26,108
(18,384)
–
1,897
–
–
9,621
(2,957)
–
–
–
2,063
–
–
8,727
2011
£000
5,583
_
6,868
48
12,499
5,892
5,892
473
2,728
610
423
4,234
22,625
(6,653)
(4,237)
_
(5,928)
(16,818)
Restructuring costs
During the year, the Group incurred total exceptional restructuring costs of £7,034,000 (2011 – £5,583,000), of which £5,562,000 (2011 – £3,011,000) arose
in the United Kingdom and £1,472,000 (2011 – £2,572,000) in Spain.
Partial recovery of acquisition cost of subsidiary undertaking
During the year, the Group received an exceptional credit of £775,000 (2011- £Nil) relating to the partial recovery of the cost of a previous acquisition.
71
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
35. Exceptional items (continued)
Impairment of Spanish property assets
As part of the restructuring process in Spain in the prior year, certain properties were vacated. These properties were written down to their recoverable amount,
incurring a charge of £6,868,000 in the prior year.
Net property losses
Net property losses were £443,000 (2011 – £48,000), of which £191,000 (2011 – £54,000) arose in the United Kingdom and £252,000 (2011 – £6,000 profit)
arose in Spain.
Impairment of Spanish intangible assets
In the prior year 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 in the prior year.
Termination of Euro interest rate swaps
As explained in Note 23, during the year, €59,000,000 (2011 – €87,168,000) Euro interest rate swaps were closed out at a cash cost of £3,046,000
(2011– £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 £3,046,000 (2011 – £473,000) was expensed in
the income statement.
Financing fees written off on extinguishment of debt
As part of the refinancing of the Group during April 2011, an 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 was repaid was treated as extinguished. Unamortised financing fees of £2,728,000
were written off in the prior year in relation to the element of existing debt that was extinguished.
De-designation of Sterling interest rate swap
During April 2011, £63,000,000 Sterling interest rate swaps were de-designated from a relationship with the Sterling denominated term loan. The net amount
deferred into equity of £610,000 was expensed in the income statement in the prior year.
Termination of cross-currency swaps
During April 2011, cross-currency swaps with notional amounts of $6,122,000 and €575,000 were closed out at a total cash cost of £423,000. These
cross-currency swaps were not in a hedging relationship and therefore this cost was expensed in the income statement in the prior year.
36. Operating lease arrangements
As lessee
Group
Minimum lease payments under operating leases recognised in the income statement for the year
2012
£000
5,224
2011
£000
6,172
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
2012
£000
4,367
11,683
17,145
33,195
2011
£000
4,756
10,434
17,497
32,687
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 (2011 – 13 years) and rentals are fixed for an average term of seven years (2011 – seven 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.
72
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
37. Share based payments
The Group’s and Company’s various share incentive plans are explained in the Remuneration Report on pages 28 to 32.
The Group and Company recognised total expenses of £2,063,000 (2011 – £1,897,000) 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
2012
Number
of share
options
12,323
(12,323)
–
–
2012
Weighted
average
exercise price
£
19.39
19.39
–
–
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
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 4.4 years.
Executive incentive scheme
At 1 May
Lapsed during the year
At 30 April
Exercisable at the end of the year
2012
Number
of share
options
3,809
(3,809)
–
–
2012
Weighted
average
exercise price
£
9.53
9.53
–
–
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
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.
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
A total of 74,591 (2011 – 35,955) 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 £3.24 (2011 – £2.31).
2012
Number of
share options
520,119
260,080
(153,344)
(34,016)
592,839
2011
Number of
share options
168,469
433,812
(81,932)
(230)
520,119
73
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
37. Share based payments (continued)
The options outstanding at 30 April 2012 had a weighted average remaining contractual life of 3.5 years (2011 – 3.2 years). In the current year, options were
granted in August 2011. The aggregate of the estimated fair values of the options granted on this date was considered to be £652,000. In the prior year,
options were granted in August 2010. The aggregate of the estimated fair values of the options granted on this date was £827,000.
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
2012
2011
£2.70
£Nil
133.2%
3 years
1.5%
2.5%
£1.83
£Nil
136.8%
3 years
2.0%
0.0%
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
2012
Number of
shares
625,949
167,499
(255,999)
(61,733)
475,716
2011
Number of
shares
590,776
172,767
(64,690)
(72,904)
625,949
The share price at the date of vesting for matching shares during the year was £2.10 (2011 – £2.98). The non-vested matching shares outstanding at 30 April
2012 had a weighted average remaining period until vesting of 1.6 years (2011 – 1.6 years). In the current year, matching shares were allocated in January
2012. The aggregate of the estimated fair values of the matching shares allocated on this date was £297,000. In the prior 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.
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
2012
2011
£2.09
£Nil
117.7%
5 years
1.0%
3.2%
£2.91
£Nil
136.8%
5 years
2.3%
0.0%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years.
74
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
37. Share based payments (continued)
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
2012
Number of
share
options
1,285,859
362,372
(87,786)
(239,903)
2011
Number of
share
options
1,057,562
604,664
(80,107)
(296,260)
1,320,542
1,285,859
A total of 64,814 (2011 – Nil) 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 £2.58 (2011 – £2.31).
The options outstanding at 30 April 2012 had a weighted average remaining contractual life of 1.2 years (2011 – 1.7 years). In the current year, share options
were granted in July 2011. The aggregate of the estimated fair values of the options granted on this date was £925,000. In the prior 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.
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
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
2012
2011
£2.76
£Nil
133.3%
3 years
1.9%
2.5%
£1.83
£Nil
136.8%
3 years
2.0%
0.0%
2012
Number of
share
options
482,858
251,600
(49,313)
2011
Number of
share
options
532,173
302,593
(351,908)
685,145
482,858
A total of 130,952 (2011 – Nil) options were exercisable at the end of the year.
The options outstanding at 30 April 2012 had a weighted average remaining contractual life of 0.7 years (2011 – 1.8 years). In the current year, share options
were granted in July 2011. The aggregate of the estimated fair values of the options granted on this date was £643,000. In the prior 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.
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
2012
2011
£2.76
£Nil
133.3%
3 years
1.9%
2.5%
£1.83
£Nil
136.8%
3 years
2.0%
0.0%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years.
75
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
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 £1,407,000 (2011 – £1,425,000) 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 - RPI
Inflation rate - CPI
Salary increases
Future pension increases
Life expectancy of retirees in current year
Life expectancy of retirees 25 years hence
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
2012
Valuation
% pa
4.6
3.1
2.4
n/a
2.4
23 to 26 years
25 to 28 years
2011
Valuation
% pa
5.3
3.5
n/a
n/a
3.4
23 to 26 years
25 to 28 years
2012
£000
231
(165)
66
2011
£000
244
(171)
73
Actuarial gains and losses have been reported directly in equity, within retained earnings. The cumulative net amount of actuarial losses reflected directly in
equity since 3 February 2006 is £133,000 (2011 – £94,000 gain).
The actual return on the scheme assets was a gain of £280,000 (2011 – £235,000). There are no reimbursement rights.
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
Asset (liability) recognised in the balance sheet
The asset recognised in the balance sheet is included within other debtors and prepayments (Note 20).
The net movements in the surplus (deficit) were as follows:
At 1 May
Pension charge recognised in the income statement
Actuarial losses
Contributions
At 30 April
2012
£000
(4,402)
4,477
75
2012
£000
(142)
(66)
(227)
510
75
2011
£000
(4,832)
4,690
(142)
2011
£000
(539)
(73)
(169)
639
(142)
76
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
38. Retirement benefit schemes (continued)
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
2012
£000
4,832
231
342
(1,003)
4,402
2012
£000
4,690
165
510
(1,003)
115
4,477
2011
£000
4,501
244
233
(146)
4,832
2011
£000
3,962
171
639
(146)
64
4,690
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
2012
Expected
return
%
3.9
1.9
1.9
2012
Fair value
of assets
£000
813
3,530
134
4,477
2011
Expected
return
%
5.0
3.0
3.0
2011
Fair value
of assets
£000
1,657
2,782
251
4,690
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 £510,000 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 2013 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
Surplus (deficit) in the Scheme
Experience adjustments on Scheme
obligations:
Amount
Percentage of Scheme obligations (%)
Experience adjustments on Scheme
assets:
Amount
Percentage of Scheme assets (%)
2012
£000
(4,402)
4,477
75
(75)
(1.7)%
115
2.6%
2011
£000
(4,832)
4,690
(142)
35
0.7%
64
1.4%
2010
£000
(4,501)
3,962
(539)
65
1.4%
539
13.6%
2009
£000
(3,659)
3,194
(465)
(59)
(1.6)%
(609)
(19.1)%
2008
£000
(4,055)
3,502
(553)
(185)
(4.6)%
(176)
(5.0)%
77
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
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 (2011 – €0.10) increase and decrease in the Euro/Sterling exchange rate.
A €0.10 (2011 – €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 (2011 – €0.10) change in foreign currency rates.
2012
Total equity
2011
Total equity
As stated in
annual report
£000
As would be
stated if
m0.10 increase
£000
As would be
stated if
€0.10 decrease
£000
366,136
363,577
369,146
As stated in
annual report
£000
339,759
As would be
stated if
€0.10 increase
£000
336,891
As would be
stated if
€0.10 decrease
£000
343,190
There is no material impact on the income statement in either year.
Sterling/US Dollar cross-currency derivatives
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.
The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.
78
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
39. Financial instruments (continued)
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% (2011 – 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.
2012
Profit before taxation
Total equity
2011
Profit before taxation
Total equity
As stated in
annual report
£000
As would be
stated if
1.0% increase
£000
As would be
stated if
1.0% decrease
£000
45,987
45,022
46,952
366,136
365,421
366,850
As stated in
annual report
£000
26,540
339,759
As would be
stated if
1.0% increase
£000
24,982
338,638
As would be
stated if
1.0% decrease
£000
28,098
340,880
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 less than one year
In the second year
After five years
Euro
In less than one year
In the second year
In the third to fifth years inclusive*
Outstanding pay floating receive fixed
contracts
Sterling
In less than one year
In the second year
Average contract
fixed interest rate
2012
%
2.44%
–
3.62%
2.35%
–
3.12%
2011
%
–
2.44%
3.62%
–
2.35%
–
Notional principal
amount
2012
£000
25,000
–
100,000
152,832
–
76,416
2011
£000
–
63,000
100,000
–
212,832
–
Fair value
2012
£000
(152)
–
(12,251)
(894)
–
(3,036)
2011
£000
–
(610)
(2,336)
–
(2,455)
–
1.13%
–
25,000
–
–
1.13%
–
63,000
19
–
–
24
* commencing September 2012 and maturing September 2014
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for
the management of the Group’s short, medium and long term funding and liquidity requirements. The Group manages liquidity risk by maintaining adequate
reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities. Included in Note 22 is a description of additional undrawn facilities that the Group has at its disposal to further reduce liquidity
risk.
79
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
Notes to the accounts (continued)
39. Financial instruments (continued)
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.
2012
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
2011
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
Weighted
average
effective
interest
rate
0.00%
7.89%
4.46%
Weighted
average
effective
interest
rate
0.00%
7.89%
4.53%
<1 year
£000
29,093
58,102
93,106
2nd year
£000
–
52,947
8,022
3-5 years
£000
–
94,894
73,714
>5 years
£000
–
500
106,140
Total
£000
29,093
206,443
280,982
180,301
60,969
168,608
106,640
516,518
<1 year
£000
36,985
13,438
30,827
81,250
2nd year
£000
–
60,642
107,080
167,722
3-5 years
£000
–
72,780
312,470
385,250
>5 years
£000
–
82,378
110,989
193,367
Total
£000
36,985
229,238
561,366
827,589
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.
2012
Liabilities
Net settled:
Interest rate swaps
Gross settled:
Cross-currency derivatives
Assets
Gross settled:
Cross-currency derivatives
2011
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
4,472
4,110
8,436
8,242
25,260
64,592
69,064
62,396
62,396
59,047
63,157
59,818
59,818
81,860
90,296
82,251
82,251
–
205,499
8,242
230,759
–
–
204,465
204,465
<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
25,610
18,934
18,934
24,733
29,668
22,795
22,795
99,271
111,124
92,312
103,990
96,274
96,274
91,940
91,940
237,177
270,392
229,943
229,943
80
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
39. Financial instruments (continued)
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:
•
•
•
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).
All the financial instruments below are categorised as Level 2.
The fair values of financial assets and financial liabilities are determined as follows:
•
•
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
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
Carrying amount
2012
£000
2011
£000
Fair value
2012
£000
2011
£000
161,002
161,718
173,316
173,874
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group’s credit risk is primarily attributable to its trade 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
2012
£000
2011
£000
105,308
(20,378)
84,930
2012
£000
63,363
17,789
2,361
1,417
133,125
(22,210)
110,915
2011
£000
93,843
15,155
1,461
456
84,930
110,915
Before accepting any new customers, the Group will perform credit analysis 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
£1,688,000 (2011 – £781,000) is due from the Group’s largest customer. There are no 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 £21,567,000 (2011 – £17,072,000) 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.
81
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
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
2012
£000
22,210
9,364
(5,319)
(4,403)
(1,474)
20,378
2011
£000
17,080
9,040
(787)
(3,583)
460
22,210
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 £260,000 (2011 – £456,000).
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
2012
£000
1,605
862
4,926
733
12,252
20,378
2011
£000
789
431
4,868
314
15,808
22,210
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 £5,868,000 (2011- £4,682,000) net interest payable.
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.
During the year, consultancy fees of £111,000 (2011 – £Nil) were paid by Northgate España Renting Flexible S.A to JG Astrand. The details of the consultancy
are set out in the Corporate Governance report on pages 34 and 35.
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 28 to 32. The fair value charged to the income statement
in respect of equity-settled share-based payment transactions with the Directors is £418,000 (2011 – £251,000). 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.
82
Northgate plc
Annual report and accounts 2012
Notes to the accounts
continued
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
Operating profit (loss)
Net finance costs
Profit (loss) before taxation
Taxation
Profit (loss) for the year
Basic earnings (loss) per Ordinary share
Dividends
Dividends per Ordinary share
2012
£000
503,659
94,478
(48,491)
45,987
(5,519)
40,468
30.4p
–
–
2011
£000
2010
£000
2009
£000
537,285
563,698
609,645
82,575
(56,035)
26,540
2,853
29,393
22.1p
–
–
71,109
(61,494)
9,615
14,741
24,356
23.1p
–
–
(117,531)
(78,083)
(195,614)
9,912
(185,702)
(572.6)p
19,359
25.0p
2008
£000
578,462
118,206
(38,714)
79,492
(18,158)
61,334
188.6p
18,982
60.9p
Balance sheet
Assets employed
Non-current assets
Net current (liabilities) assets
Non-current liabilities
Financed by
Share capital
Share premium account
Reserves
Net asset value per Ordinary share
2012
£000
2011
£000
2010
£000
2009
£000
2008
£000
723,675
(74,744)
(282,795)
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)
366,136
339,759
305,106
182,759
398,553
66,616
113,508
186,012
366,136
275p
66,616
113,508
159,635
339,759
255p
66,475
113,269
125,362
305,106
229p
3,527
67,972
111,260
182,759
563p
3,527
67,972
327,054
398,553
1,227p
83
Northgate plc
Annual report and accounts 2012
Five year financial summary
Notice of Annual General Meeting
3.
4.
5.
6.
7.
8.
9.
Notice is hereby given that the one hundred and fourteenth Annual General
Meeting of Northgate plc (‘the Company‘) will be held at Norflex House,
Allington Way, Darlington DL1 4DY at 11.30 a.m. on 19 September 2012
for the purpose of considering and, if thought fit, passing the following
resolutions of which resolutions 1 to 12 will be proposed as ordinary
resolutions and resolutions 13,14 and 15 will be proposed as special
resolutions:
1.
To receive the Directors’ report and audited accounts of the Company
for the year ended 30 April 2012.
2. To declare a final dividend of 3.0p per Ordinary share
To receive and approve the Remuneration Report for the financial year
ended 30 April 2012 set out on pages 28 to 32 of the 2012 Annual
Report and Accounts.
a.
b.
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
to the allotment (otherwise than pursuant to sub-paragraph (a)
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-appoint Deloitte LLP as auditor of the Company to hold office until
the conclusion of the next Annual General Meeting.
14.
That a general meeting, other than an annual general meeting, may be
called on not less than 14 clear days’ notice.
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.
10. To re-elect Mr RL Contreras as a Director.
11. To re-elect Mr CJR Muir as a Director.
12.
That the Board be and it is hereby generally and unconditionally
authorised pursuant to s551 of the Companies Act 2006 (‘the Act’) 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:
a.
b.
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 passing 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
up to a further aggregate nominal amount of £22,000,000,
provided that (i) they are equity securities (within the meaning of
s560(1) of the Act) and (ii) are offered 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 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.
13.
That subject to the passing of Resolution 12 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 Act) for cash
pursuant to the authority conferred by the previous resolution as if
sub-section (1) of s561 of the Act did not apply to any such allotment
provided that this power shall be limited:
15.
That the Company be generally and unconditionally authorised to make
market purchases (within the meaning of s693(4) of the Companies Act
2006) of Ordinary shares of 50p each of the Company on such terms
and in such manner as the Directors may from time to time determine,
provided that:
a.
b.
c.
d.
e.
the maximum number of Ordinary shares hereby authorised to be
acquired is 13,300,000 representing approximately 10% of the
issued Ordinary share capital of the Company as at 26 June 2012;
the minimum price which may be paid for any such Ordinary share
is 50p;
the maximum price (excluding expenses) which may be paid for
any such Ordinary share is an amount equal to 105% of the
average of the middle market quotations for an Ordinary share in
the Company as derived from The London Stock Exchange Daily
Official List for the five business days immediately preceding the
day on which such share is contracted to be purchased;
the authority hereby conferred shall expire at the end of the next
Annual General Meeting of the Company after the passing of this
resolution unless previously renewed, varied or revoked by the
Company in general meeting; and
the Company may make a contract to purchase its Ordinary shares
under the authority hereby conferred prior to the expiry of such
authority, which contract will or may be executed wholly or partly
after the expiry of such authority, and may purchase its Ordinary
shares in pursuance of any such contract.
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 351,745 shares representing
approximately 0.26% of the issued Ordinary share capital of the Company.
26 June 2012
By Order of the Board
D Henderson
Secretary
Registered office:
Norflex House
Allington Way
Darlington
DL1 4DY
84
Northgate plc
Annual report and accounts 2012
Notice of Annual General Meeting
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 auditor 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.
10. 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.
11. As at 26 June 2012 (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.
12. 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.
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 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 7 August 2012, 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.
Notice of Annual General Meeting (continued)
NOTES
1.
2.
3.
4.
5.
6.
7.
A member entitled to attend and vote at the Annual General Meeting (‘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.
A proxy does not need to be a member of the Company but must attend the
Meeting to represent you. Your proxy could be the Chairman, another director of
the Company or another person who has agreed to attend to represent you. Your
proxy must vote as you instruct and must attend the meeting for your vote to be
counted. Appointing a proxy does not preclude you from attending the Meeting and
voting in person.
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 6 below. CREST members may
appoint proxies using the CREST electronic proxy appointment service (see Note 7
below). In each case the appointment must be received by the Company not less
than 48 hours before the time of the Meeting.
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 Act (‘a Nominated Person’). The rights to appoint a proxy cannot 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.
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.
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.
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.
8.
A member of the Company which is a corporation may authorise a person or persons
to act as its representative(s) at the Meeting. In accordance with the provisions of
the Act, 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.
9.
Members satisfying the thresholds in section 527 of the Act can require the Company
to publish a statement on its website setting out any matter relating to (a) the audit
85
Northgate plc
Annual report and accounts 2012
Notice of Annual General Meeting
continued
Shareholder information
Classification
Information concerning day to day movements in the price of the Company’s Ordinary shares is available on Cityline 09058 171690.
The Company’s listing symbol on the London Stock Exchange is NTG.
The Company’s joint corporate brokers are Jefferies International 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
June
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 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
86
Northgate plc
Annual report and accounts 2012
Shareholder information
Shareholder information
continued
Contents
Highlights of the year
Chairman’s statement
Review
1
2
3 Our business model
4 Our strategy and key performance indicators
6
10 Operational review
16 Financial review
20 Principal risks and uncertainties
22 Corporate social responsibility
24 Board of Directors
Northgate at a glance
Corporate governance
26 Report of the Directors
28 Remuneration report
33 Report of the audit and risk committee
34 Corporate governance
36 Directors’ responsibilities
Accounts
37
Independent auditor’s report to the members
of Northgate plc
38 Consolidated income statement
39 Statements of comprehensive income
40 Balance sheets
41 Cash flow statements
42 Notes to the cash flow statements
43 Statements of changes in equity
44 Notes to the accounts
83 Five year financial summary
84 Notice of annual general meeting
86 Shareholder information
Who we are
Why choose flexible rental?
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 a non-contract
basis, giving customers
the flexibility to manage their
vehicle fleet without a long
term commitment.
Decision
Flexible
Contract hire
Purchase
No capital or contractual
commitment
No mileage penalties
No residual market risk
Ability to flex vehicle size
Inclusive of maintenance
24/7 support
No early termination costs
Available at additional cost
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Northgate plc
Norflex House, Allington Way
Darlington DL1 4DY
Telephone
01325 467558
Fax
01325 363204
Web
northgateplc.com
Northgate plc
Annual report and accounts 2012
A flexible approach to business
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